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Edited Transcript of SYN earnings conference call or presentation 27-Feb-19 9:30pm GMT

Q4 2018 Synthetic Biologics Inc Earnings Call

ANN ARBOR Apr 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Synthetic Biologics Inc earnings conference call or presentation Wednesday, February 27, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Steven A. Shallcross

Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director

* Vince Wacher

Synthetic Biologics, Inc. - Head of Product and Corporate Development

* Vincent I. Perrone

Synthetic Biologics, Inc. - Director of Corporate Communication

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Conference Call Participants

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* James Francis Molloy

Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst

* Katherine Xu

William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research, Partner & Biotechnology Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to Synthetic Biologics 2018 Year-end Investor Conference Call. (Operator Instructions) Please note, this event is being recorded.

At this time, I would like to turn the call over to Vincent Perrone, Director, Corporate Communication, at Synthetic Biologics. Vincent?

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Vincent I. Perrone, Synthetic Biologics, Inc. - Director of Corporate Communication [2]

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Thank you, Brandon, and good afternoon, everyone. Welcome to Synthetic Biologics 2018 Year-end Investor Conference Call. Today, I am joined by our Chief Executive and Financial Officer, Steven Shallcross; Dr. Michael Kaleko, Senior Vice President, Research and Development; and Dr. Vince Wacher, Head of Product and Corporate Development. Synthetic Biologics issued a press release this afternoon which provided operational highlights and reported our financial results for the period ending December 31, 2018. The press release can be found on the Investor Relations section of our website.

During our call today, we'll provide an operational update on our GI and microbiome-focused clinical programs and summarize our financial results. We'll take questions after our prepared remarks. In addition to the phone line, this call is being streamed live via webcast which will be archived on our website, www.syntheticbiologics.com, for 90 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, believes, estimates and similar expressions. These statements are based on 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 on 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 would like to turn the call over to Steve.

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [3]

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Thanks, Vincent. Good afternoon, everyone, and thank you for joining our 2018 year-end call. I'm happy to be with all of you this evening and I look forward to sharing important and exciting updates on our strategy and progress for advancing our late-stage and emerging clinical programs during today's call. 2018 was, no doubt, a transformative and productive year for the company. We announced several key advancements for our portfolio of clinical programs targeting critical unmet needs in the prevention of life-threatening gut microbiome infections and GI disorders.

Of particular note, we expanded our relationship with Cedars-Sinai Medical Center in the form of an agreement to conduct a Phase IIb clinical study of SYN-010. We announced the completion of our End-of-Phase-2 meeting with the FDA and confirmed key elements of the Phase III clinical trial to support marketing approval for SYN-004 for the prevention of C. difficile infection. We began our evaluation of a potential secondary and more focused indication for SYN-004 in the prevention of acute graft versus host disease, or aGVHD, in allogeneic hematopoietic cell transplant recipients, and we made significant advancements for our SYN-020 intestinal alkaline phosphatase program which is currently in preclinical studies.

These and other initiatives undertaken during 2018 have embedded us to realign our clinical programs to what we believe to be clear and achievable developmental paths. And with the steps we have taken at the end of the fourth quarter to fortify our long-term financial footing, we have created a strong foundation upon which to execute our strategy to advance and showcase the value of our late-stage clinical asset. With that backdrop, I'd like to share more detailed update on our lead clinical development programs.

So let's begin with an update on SYN-010 first. Much has been said about the current state of the IBS-C marketplace, which is often viewed as crowded with products that have largely the same therapeutic mode of action and provide temporary relief often at the cost of significant adverse side effects namely diarrhea. With this landscape has emerged a clear recognition of the need for novel therapeutics like SYN-010 to provide chronic long-term relief for both constipation and IBS-C. Unlike currently approved and marketed therapies for IBS-C, SYN-010 is designed to treat and target the underlying cause of this disease, whereas other therapies provide limited relief by targeting the symptoms.

A growing body of clinical evidence continues to support the theory that excess methane production in the GI tract caused by the organism M. smithii, may be the primary causative factor for IBS-C. SYN-010's unique mechanism of action is intended to target M. smithii and inhibit its ability to produce excessive amounts of methane without eradicating the microorganism from the GI tract. This is intended to treat the cause of IBS-C symptoms without the negative side effects of diarrhea often associated with over-the-counter and prescription therapies. SYN-010 is designed to be a chronic treatment, is intended to normalize bowel movements over time, and importantly, reduce the abdominal pain and bloating often experienced as a result of this disease state.

In 2018, we were excited to announce the expansion of our relationship with our research partner, Cedars-Sinai Medical Center, in the form of an agreement to co-fund an investigator-sponsored Phase IIb clinical study of SYN-010. The distinguished team of the Medically Associated Science and Technology program at Cedars-Sinai is currently conducting the study, which is designed as a 12-week, single-site, randomized, placebo-controlled clinical trial evaluating 2 dose strengths of SYN-010 in approximately 150 patients with IBS-C. Enrollment for this study began in January and is currently proceeding as expected. We anticipate top line data readout during the second half of 2019.

Importantly, this trial was designed to address specific questions about dose response and length of treatment that were not clearly answered in our exploratory Phase II clinical trials. As you may recall, in 2017, the FDA agreed that SYN-010 dose response could be evaluated as part of a pivotal Phase IIb/III adaptive clinical trial where the Phase IIb portion might enable identification of a single SYN-010 dose strength to be used in subsequent Phase III studies.

By partnering with Cedars-Sinai, we have in essence separated the Phase IIb component from the larger Phase IIb/III study, allowing us to generate meaningful data at a significantly lower cost than if we were to have generated this data on our own. This in turn may enable us to move forward with a revised Phase III clinical program for SYN-010, enabling a single dose strength, a reduced overall number of patients and potentially lead to significantly lower clinical development costs for future registration studies.

Of equal importance, we believe that the successful completion of this trial will allow us to reopen discussions with prospective partners who found data from our previously completed Phase IIa study compelling but not conclusive enough to justify the significant capital investment required to complete the clinical trials necessary for product registration.

Switching gears now to SYN-004 or ribaxamase. Ribaxamase is our first-in-class therapeutic intervention designed to protect the gut microbiome from antibiotic-mediated dysbiosis. Ribaxamase is designed to be taken in conjunction with certain IV beta-lactam antibiotics. Its novel mechanism of action acts by degrading residual antibiotic excreted into the GI tract before it can disrupt the natural balance of the gut microbiome.

It has been well established that the prolonged use of antibiotics significantly increases the risk of developing gastrointestinal infections like CDI as well as the emergence and spread of antimicrobial-resistant genes. Damage to the gut microbiome by these antibiotics is a significant risk factor for developing CDI. In the U.S. alone, more than 600,000 cases of CDI and approximately 49,000 CDI-related deaths are reported each year.

Data from our previously completed Phase IIb proof-of-concept clinical study demonstrated that ribaxamase was successful in reducing the risk of developing beta-lactam-induced CDI by more than 71%.

Last quarter, we announced the successful completion of an End-of-Phase-2 meeting with the FDA, during which we confirmed key elements of the Phase III clinical program to support a marketing application for ribaxamase for the prevention of CDI. The proposed ribaxamase Phase III clinical program will entail a single global, event-driven clinical trial with a fixed maximum number of patients for total enrollment and will evaluate the potential efficacy and safety of ribaxamase in a broad patient population by enrolling patients with a variety of underlying infections treated with a range of IV beta-lactam antibiotics. As expected, the primary efficacy end point of the Phase III trial will be the reduction in the incidence of CDI compared to placebo. We also confirmed that the FDA agreed to a separate co-primary safety end point of noninferiority in mortality between the ribaxamase treatment group and placebo at 3 months post-randomization.

As we have previously shared, given the significant capital requirements associated with this Phase III trial, we do not intend to move this trial forward without a partner to help fund it. As interested potential partners have so far proven reluctant to commit to funding this large Phase III trial, we have been keenly focused on identifying the ideal pathway for advancing SYN-004 on our own in a more specialized patient population where preservation of the gut microbiome is a key element to positive clinical outcomes. We've received highly positive feedback from key opinion leaders and potential pharma partners on this concept of a more narrow indication for ribaxamase, and we believe it will help us to overcome the financial and clinical development risk concerns that have been shared with us by potential partners.

Now I'll turn the call over the Dr. Vince Wacher, Head of Product and Corporate Development, who will share the details on the clinical rationale and the next steps for this new clinical indication for ribaxamase. Vince?

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Vince Wacher, Synthetic Biologics, Inc. - Head of Product and Corporate Development [4]

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Thanks, Steven, and good afternoon, everyone. As Steven noted above, our successful End-of-Phase-2 meeting with the FDA was really a very encouraging recognition of ribaxamase as a potential new intervention to prevent antibiotic-mediated CDI. We spent considerable effort elaborating a registration pathway for ribaxamase in this indication, during which we've encountered an imposing development challenge that's inherent to all preventative agents.

Specifically, the overall incidence of the target disease, in this case CDI, is comparatively low, which means ribaxamase would be administered to a broad range of patients who might never have contracted CDI at all. This mandates large clinical trials in order to ensure appropriate safety in a broad patient population as well as establishing efficacy as a means of preventing the CDI.

As noted above, in the fourth quarter, we described an FDA-agreed Phase III program that would comprise one global event-driven trial with an enrollment of around 4,000 patients. Clearly, a 4,000-patient study is an expensive and very costly undertaking for a company of our size and resources. So in order to maintain our clinical momentum, we've explored alternative, more narrow indications for ribaxamase where target disease incidence is high and the clinical development cost should be less onerous. Pursuing this alternative strategy, we can leverage our existing ribaxamase clinical data and our recent regulatory insights to advance ribaxamase ourselves rather than depend on a potential pharma partnership.

Our detailed review of potential ribaxamase opportunities identified cancer patients who undergo allogeneic hematopoietic cell transplantation, more commonly referred to as bone marrow transplantation, as a population for whom ribaxamase may provide a substantial therapeutic benefit. Allogeneic HCT, hematopoietic cell transplantation, is a surgical process where patients with a hematologic disorder such as acute lymphocytic leukemia have their diseased cells removed or destroyed and they're replaced by healthy hematopoietic stem cells from a matching donor.

Allogeneic HCT recipients routinely receive long courses of IV beta-lactam antibiotics to treat neutropenic fever, which occurs in about 80% to 90% of the patients. A large body of published clinical evidence has demonstrated the damage to the gut microbiome caused by the IV beta-lactam antibiotics is strongly associated with a number of potentially fatal adverse outcomes in allogeneic HCT recipients, most notably acute graft-versus-host disease, or aGVHD; colonization by vancomycin-resistant enterococci, bacteremia by VRE and other organisms; as well as CDI. Allogeneic HCT patients are a particularly fragile immunosuppressed population, and prevention of aGVHD and opportunistic infections like VRE and CDI is an absolute necessity.

AGVHD occurs in 40% to 60% of the allogeneic HCT recipients and it's recognized as a primary contributor to morbidity and mortality in this patient population. Significantly, first-line treatments for aGVHD fail in more than 50% of the patients, and 2-year survival in patients with steroid-refractory aGVHD, which is the first-line therapy steroid, is only 20%. VRE bacteremia occurs in up to 16% of allogeneic HCT recipients, and it's rapidly fatal. At least 1 study found that more than 80% of patients who developed a VRE bacteremia died within a median of 1 month from acquiring the infection.

Importantly, colonization, so not just the bacteremia but colonization by VRE, is also associated -- is observed in more than 40% of allogeneic HCT recipients and has been associated with a ninefold increase in mortality. And CDI occurs in 10% to 31% of allogenic HCT recipients and is associated with increased severity of aGVHD and also increased mortality. Clearly, with these indications, the high incidence and severe outcomes of aGVHD, VRE and CDI emphasize that it's not possible to just wait and treat the problems when they arise; prevention is critical.

The use of ribaxamase in allogeneic HCT patients is well supported by our existing clinical data. Our Phase IIb clinical trial demonstrated that ribaxamase preserved intestinal microbiome diversity and significantly reduced the incidence of CDI in patients treated with IV ceftriaxone to treat a lower respiratory tract infection, typically severe pneumonia. Of particular relevance to the current strategy, ribaxamase also reduced VRE colonization by about 44% in these patients, and this was the most statistically significant result in the study. The mechanism by which ribaxamase could reduce the incidence and severity of aGVHD in allogeneic HCT recipients is identical to what we saw in our Phase IIb, preventing microbiome damage by IV beta-lactam antibiotics.

The use of ribaxamase to preserve the intestinal microbiome and allogeneic HCT recipients could have remarkable potential benefits to patients, providers and payers. Estimates of in-hospital costs for allogeneic HCT recipients in the U.S. range from around $180,000 to over $300,000. All-cause inpatient and outpatient costs are estimated to be greater than $600,000 per patient when measured up to 12 months after the hospital admission. At least 1 U.S. study found that allogeneic HCT recipients who developed aGVHD had 3x higher in-hospital mortality and almost twofold higher median hospital costs than the patients who did not develop aGVHD. So if ribaxamase could reduce aGVHD incidence by even 20% in this population, this may provide significant improvements in patient outcomes and reduction in treatment costs.

To provide some scale, there were approximately 8,500 allogeneic HCT procedures conducted in the U.S. in 2016 and an estimated 4,500 procedures in China. These are comparatively small patient numbers, certainly, relative to CDI. However, the substantial potential benefits ribaxamase may provide in this patient population could allow for premium pricing and significant market value. It's worth noting also that the small number of patients provides an opportunity to seek orphan drug designation, which may facilitate clinical development and potential approval if we are able to achieve orphan drug designation.

We're currently evaluating clinical development pathways for the use of ribaxamase in allogeneic HCT recipients. Our primary indication for ribaxamase as planned will be the prevention of aGVHD. Secondary end points related to VRE and CDI will also be evaluated, and these data may support downstream development of ribaxamase to prevent CDI in a broader population. Discussions with key opinion leaders in allogeneic HCT are ongoing and we're planning a pre-IND meeting with the FDA. We'd like to initiate a Phase I/II investigator-sponsored clinical study during the second half of 2019; however, this is clearly contingent upon successful identification of an investigator and subsequent review and approval by the investigator's institutional review board and the FDA.

In closing, I emphasize that the advancement of ribaxamase as a means of preventing aGVHD in allogeneic HCT recipients is both complementary to and enabling of a longer-term strategy to seek approval for ribaxamase as a means of preventing CDI in a broader patient population. The aGVHD program enables us to leverage our existing clinical data and maintain our clinical momentum without having to rely on a potential development partnership. So hopefully that's compelling.

And with that, I'll turn the call back over to Steve.

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [5]

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Thanks, Vince. While we move forward with our later-stage assets, SYN-010 and ribaxamase, we're also continuing to drive new value from our R&D engine. One of the most promising preclinical assets is SYN-020, an oral form of intestinal alkaline phosphatase, or IAP.

IAP is an endogenous enzyme expressed in the upper small intestine that plays an important role in maintaining GI homeostasis and promoting a healthy gut microbiome. IAP has several key functions, 2 of which are to detoxify GI inflammatory mediators and to diminish so-called leaky gut. Through these activities, oral delivery of IAP has the potential to treat both local and GI systemic disorders.

Despite its broad therapeutic potential, the development of IAP as an oral drug has been hindered by manufacturing hurdles, which has led to commercially available IAP costs of around $10,000 per gram. We've overcome these hurdles and now have the ability to produce 3 grams per liter of IAP for roughly a few hundred dollars a gram. We believe this is a true game-changer.

We currently are planning to pursue clinical trials for SYN-020 and have identified 2 novel indications with unmet medical needs and which span a range of market sizes -- specifically, enterocolitis associated with radiation therapy for cancer and enterocolitis associated with checkpoint inhibitor therapy for cancer. We intend to move forward with an IND filing for 1 of these indications to be identified based on ongoing preclinical research in the fourth quarter of 2019. Following the submission of an IND, we anticipate initiating a Phase I clinical trial for SYN-020 in the first quarter of 2020.

We believe the clear and viable strategies we have detailed today will allow us to creatively and aggressively advance our development pipeline in ways that have the potential to drive significant value for our company and for our investors, which to date remains unrecognized. With that backdrop, I'll review our financial results for 2018.

The completion of our public offering during the fourth quarter and the proceeds raised from our ATM facility in 2018 has significantly strengthened our balance sheet with the financial footing required to continue to execute against our planned clinical activities and the value-driving milestones we've identified. We will continue to operate in an efficient manner as financial stewardship and cash management remain a top priority for us.

Now I'll turn to the financial results for 2018. General and administrative expenses decreased to $5.7 million for the year ended December 31, 2018, compared to $5.7 million (sic) [$7.5 million] for the same period in 2017. This decrease of 24% is due to the decreased stock-based compensation expense related to forfeitures and share price, along with the reduction of salary, travel and consulting expense, offset by slightly higher registration, investor relations and legal costs. The charge related to noncash stock-based compensation expense was $1 million for the year ended December 31, 2018, compared to $2 million for the year ended December 31, 2017.

Research and development expenses decreased to $11.8 million for the year ended December 31, 2018, compared to $18.8 million for the same period in 2017. This decrease of 37% is primarily the result of lower SYN-004 and SYN-010 program costs for 2018, since no clinical trials were ongoing during the year. The research and development costs incurred during the quarter and for the year, for that matter, were primarily related to planning for future clinical trials for SYN-004 and the Phase IIb/III trials for SYN-010 as we sought to secure the financial resources necessary for the advancement of these clinical trials.

We anticipate research and development expense to increase in 2019 due to the ongoing Phase IIb investigator sponsored clinical trial for SYN-010 and development activities associated with a potential Phase I/II investigator sponsored clinical trial for the prevention of aGVHD in allogeneic HCT recipients for SYN-004. The charge related to noncash stock-based compensation expense was $1.1 million for the year ended December 31, 2018, compared to $1.4 million for the same period in 2017.

Other income was $4.2 million for the year ended December 31, 2018, compared to other income of $10.8 million for the year ended December 31, 2017. Other income for the year ended December 31, 2018, is primarily due to noncash income of $4.1 million from the change in fair value of warrants. The decrease in the fair value of warrants is due to decrease in our stock price from December 31, 2017.

In connection with the issuance and subsequent conversion of the Series B Convertible Preferred Stock in 2018 and issuance of the Series A Convertible Preferred Stock in 2017, we recognized noncash deemed dividends of $11.7 million and $6.9 million, respectively, for the beneficial conversion feature resulting from the intrinsic value of the Series B and Series A conversion options as of the issuance date. Cash and cash equivalent on December 31, 2018, totaled $28.9 million, an increase of $11.8 million from December 31, 2017, providing us with substantial runway to continue our operations through at least the first quarter of 2020.

In closing, I would like to thank each of you for joining the call today. As I hope I have conveyed clearly in my remarks, we are well underway in our pursuit of a new direction for Synthetic Biologics designed to unlock and showcase the value of our clinical assets in a practical and financially responsible manner. I and the entire team at Synthetic Biologics are focused on executing on the clear and achievable milestones and value drivers we have established for 2019 as part of this pathway. We will continue to look for every opportunity to build long-term value for our shareholders and reward the continued confidence and support you have given us. We look forward to continuing to update you on our progress in the weeks and months ahead.

I'll now turn the call back over to Vincent.

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Vincent I. Perrone, Synthetic Biologics, Inc. - Director of Corporate Communication [6]

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Thank you, Steve. Brandon, we'd like to open the phone line to questions. Could you please describe the procedure to ask questions for our listeners?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Katherine Xu with William Blair.

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Katherine Xu, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research, Partner & Biotechnology Analyst [2]

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I'm just wondering, Steven and Vince, for SYN-010, the IBS-C drugs so far approved have not been performing very well in the commercial space. I know you guys have been talking to partners for some time as well. I mean what do you think this upcoming data would -- what kind of difference do you think upcoming data would make later this year in terms of differentiating the profile? And also, is there a real sizable market?

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [3]

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Thanks for the question, Katherine. Since Vince has been working on our models and assessing the market here, I'll let him answer that for us.

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Vince Wacher, Synthetic Biologics, Inc. - Head of Product and Corporate Development [4]

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Katherine, so I guess there's 2 parts for that question. What does that data do for us coming out of this study? Well, in our conversations, when we look at people that are in the GI space, interested in this space, there's recognition that the things on the marketplace now all more or less do the same thing. They all pour water into the intestinal tract, and they all have largely the same concerns, which is variability in activity, unwanted side effects, particularly unpredictable and explosive diarrhea. And they are all symptom-driven. You take them once every time you get constipated. And there's not really a sense of being able to get people to any kind of normalized bowel function over a consistent amount of time.

SYN-010 has the opportunity to do that, certainly, based on the mechanism of action. We should be able to give this chronically and to normalize the bowel function. So the mechanism of action and the opportunity to do something on the symptom side is recognized. The particular advantages of the product that are also recognized are the absence of diarrhea and the potential to significantly reduce bloating, which I remind everybody is the symptom that IBS patients report as the most bothersome in their quality of life. So there is, within the product itself, if the data is meaningful and compelling, then we will be able to show differentiation to the current products. Part of the challenge in terms of getting a partnership previously is that the clinical development program that we agreed with the FDA was quite substantial, and that's because we didn't have a good dose response coming out of our Phase II results.

By getting good data from this study, we should be able to evaluate the dose response and pick a single dose to go forward into Phase III. That will reduce the size and the time of the Phase III clinical trial program and make that more compelling and more appealing to potential partners. We -- so that's where we want to get with this particular -- with this study, is to affirm our activity, affirm our benefits, particularly the absence of diarrhea and bloating and be able to pick a dose that enables us to proceed with a smaller Phase III clinical trial program. And with that, we think we'll be able to have more -- a better engagement with potential partners.

Our cost of goods is very low for this product, and it means that we are going into a marketplace that is technically considered competitive and full. We will still have a very good opportunity to price this effectively to get into that marketplace, certainly, to potentially take away from other products that may not be working with patients, but ultimately to be that line of therapy where patients have tried everything else and will get to our product eventually. And in IBS-C and in chronic idiopathic constipation, I think we know very well that patients have tried everything, things they make up, things that are prescription, they stop, they start it again. We want to get -- there is an opportunity in that space for something that is different because everything that is there now is not working as well as it should be.

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [5]

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Katherine, I might also add that when we announced that we're going back into the clinic with this asset, we had a lot of interest generated and we've had folks proactively, potential partners, reaching out to us to have discussions about what this clinical design was going to look like, how long it was going to take and when we expect to have the data. So we're very excited about the renewed enthusiasm around the compound. Clearly folks in this space understand that there's no perfect solution out there, and we have a real opportunity to offer something that's truly differentiated in the marketplace.

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Operator [6]

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Our next question comes from Jim Molloy with Alliance Global Partners.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [7]

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My question is on SYN-004 for aGVHD. And the -- looking at some of the – let me sure that I get that right -- looking at the Takeda Millennium trial they have ongoing, is there any additional information you guys have on where that stands and your thoughts on having another partner -- or not a partner, I guess -- competitor in this space targeting the same market, speaking to the validation perhaps of the opportunity? And your thoughts of comparing and contrasting SYN-004 versus vedolizumab?

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [8]

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Go ahead, Vince.

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Vince Wacher, Synthetic Biologics, Inc. - Head of Product and Corporate Development [9]

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So I think it's great to see a clinical trial going forward like that because it gives us the guidelines on what sort of end points the FDA are looking for in the space. That also validates that the space is valuable and compelling. We are very different because the -- that Millennium program is an antibody, and it's really having a direct effect on biological targets, where ours is a preventative that doesn't do anything to the biology but prevents the damage in the first place.

So while we are in the same space, we are mechanistically quite different and could even be complementary. The way that our product would be used in aGVHD is not to supplant immunosuppressive agents or things that will treat aGVHD as it emerges. Our product is an add-on to make them all that more effective because there's one less battle to fight. We -- if we can prevent the damage to the microbiome, if we can suppress the effects of that damage on immune dysfunction in the GI tract, then we make all of those things more effective in terms of preventing the aGVHD.

And I know that people are using immunosuppressive agents now and still getting aGVHD and still having microbiome damage. So again, this is a space that's unaddressed in the aGVHD prevention marketplace and where we add something, not necessarily remove the immunosuppressive agents overall.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [10]

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Great. And then a quick follow-up on your comments on the R&D number going up for next year. Is there any magnitude to that number? You guys were right about your $2 million, almost $3 million a quarter, towards the middle of the year; is that sort of the range that you expect to see R&D going back to? And any guidance on G&A and sort of overall, where you anticipate your new cash balance to take you to?

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [11]

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Yes, I'm glad you asked that question. So when you think about our burn going forward, first and foremost, we've guided that we've raised sufficient capital to fund these programs that we've described to you today and allow us to operate without having to go back to the markets at least through the first quarter of 2020, and I believe possibly a little bit beyond that. We've already taken our fixed burn down significantly. As we announced in December, we resized the organization to accommodate our human resource needs in order to conduct the clinical activities that we laid out for you. If you recall, perhaps not even 2 or 3 quarters ago, our monthly fixed burn was sort of in that $800,000 to $900,000 a month range.

Currently, we've got our fixed burn down to around $700,000 a month, and we continue to work to get that down further. So we have a very, very focused effort to continue to reduce our overhead costs. Costs associated with our clinical programs -- and these are numbers that we've talked about publicly, particularly around the last financing -- we're probably going to commit somewhere around $700,000 this year to SYN-010, maybe about $200,000 or $300,000 for manufacturing and the rest for clinical work. Our SYN-020 program, we'll commit about $7.5 million. That will pay for our manufacturing and some clinical activities.

And then we also stated we'd commit somewhere in the neighborhood of $5 million to our SYN-004 program for bone marrow transplant. So that's what you can expect. And you can run the numbers. The timing of when the expenses will happen will obviously be correlated to when we start these activities. You saw a little bit of burn here in the fourth quarter. You'll see a little bit of a bump in the first quarter because we've had to frontload some of our manufacturing costs for SYN-020, but that's exactly what you can -- and we're very confident that we put ourselves in a really solid financial position here without having to go back to the markets until we have clinical data.

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James Francis Molloy, Alliance Global Partners, Research Division - MD of Equity Research and Biotechnology & Specialty Pharmaceuticals Equity Research Analyst [12]

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Great. And my final question is just on the IBS program with Dr. Pimentel's lab. Do you still have confidence -- and I know you said in the press release, data second half of '19. Any -- when do you think you'll have an idea of -- is that third quarter, fourth quarter, for that data?

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [13]

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So we're very excited and happy about our progress to date. Right now, our guidance is the second half. What I'd like to do is probably get a few months or so under our belt and then we'll be able to probably tighten the time frame of when we'll have top line data. I'm not going to put ourselves in a position where we start giving updates on enrollment; I think that's just unfair to the Cedars organization and to us, and then everybody starts sort of gaming the system. So when we have a little bit more data, we'll tighten up the guidance on when we expect to have top line.

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Operator [14]

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

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Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director [15]

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Thanks, again. And before we end the call, I just want to make a couple brief comments. First, we're incredibly excited, and probably more excited than ever, with our continued progress and our path forward. First and foremost, we're back in the clinic, and we haven't been able to say that for a while, and that's created some great enthusiasm within our organization as well as with our existing and new investors that have become engaged with us and are now behind us as we pursue these clinical activities to finally develop some solid clinical results.

We have incredible products that, again, we believe have the potential to significantly impact the quality of life for patients all over the world, and we've talked to folks, not only in North America but in Europe, and as you've heard me talk before, in China. Our products are needed. This has been reaffirmed in multiple discussions that we've had with our team and key opinion leaders, clinicians, researchers and public health officials, again, all around the world.

The strategy we've laid out, it's simple. It's designed to give us multiple ways to advance our products through the development cycle by, number one, focusing on targeted indications that, again, address significant unmet needs, allow us to rapidly advance our programs through the clinic at reasonable costs -- I don't think we've paid enough attention to that in the past, and I think we've got a solid strategy on how to do this and do this in a respectable way. This will allow us to capitalize on our investment, again, with the goal of having products that have a viable commercial path forward. I've referred to this in the past as sort of our multiple shots on goal strategy.

And then finally, and we tried to talk about this on our call today, we have the financial resources to execute on our plan. The cash on hand will fund our plan through, again, at least the first quarter of 2020, and we're continuing to work diligently to extend that runway beyond that time frame. This will allow us, again, to deliver several value-creating milestones, the most significant being the SYN-010 Phase IIb data for the 150-patient trial that we described, where the results will be available on the second half. And again, this data is going to be key to advancing our partnering discussions, selecting a dose for the Phase III program for SYN-010, and more importantly, once we've identified that dose, to be able to lower the overall cost of that Phase III program.

And in closing, you have our commitment and the commitment of our team that we will do everything possible to get the job done. We remain focused on execution and delivering the return on investment that all of you, our shareholders, expect from us.

Thank you again for your support, and we look forward to keeping you updated on our progress as we continue to move these products through the clinic.

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Operator [16]

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