Q1 2019 Synthetic Biologics Inc Earnings Call
ANN ARBOR May 22, 2019 (Thomson StreetEvents) -- Edited Transcript of Synthetic Biologics Inc earnings conference call or presentation Wednesday, May 8, 2019 at 8:30:00pm GMT
TEXT version of Transcript
* Steven A. Shallcross
Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director
* Vincent I. Perrone
Synthetic Biologics, Inc. - Director of Corporate Communication
Good afternoon and welcome to Synthetic Biologics' 2019 First Quarter 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. Please go ahead.
Vincent I. Perrone, Synthetic Biologics, Inc. - Director of Corporate Communication 
Thank you, Debbie, and good afternoon, everyone. Welcome to Synthetic Biologics' 2019 First Quarter 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 quarter ending March 31, 2019. The 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, 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' filing 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'd like to turn the call over to Steve. Steve?
Steven A. Shallcross, Synthetic Biologics, Inc. - CEO, CFO, Treasurer, Corporate Secretary & Director 
Thanks, Vincent. Good afternoon, everyone, and thank you for joining our 2019 First Quarter Investor Conference Call. The last several months have been a period of careful planning and keen execution for Synthetic Biologics, with a focus on the strategic advancement of our GI and microbiome-focused pipeline, while reducing our cash burn by streamlining our workforce and refining our strategy.
At the beginning of the year, we detailed our strategy to realign our clinical programs on what we believe to be clear and achievable regulatory and development pathways. And while things may seem quiet at the time, I assure you, we are hard at work positioning our portfolio of clinical programs targeting critical unmet needs in the prevention of life-threatening gut microbiome infections and GI disorders for clinical success.
Of particular note, we announced the commencement of our collaborative Phase IIb investigator-sponsored clinic study of SYN-010 with our clinical partner, Cedars-Sinai Medical Center. We're nearing the establishment of a defined clinical development pathway for potential secondary indication for SYN-004 to reduce the incidence and/or severity of aGVHD and other adverse outcomes in allogeneic HCT recipients.
We continue to prepare our SYN-020 intestinal alkaline phosphatase program for an IND and have submitted a request for a pre-IND meeting with the FDA, and we continue to focus on prudent cash management and financial stewardship, further extending our cash runway through at least the second quarter of 2020.
With that backdrop, I'd like to share more detailed updates on our lead clinical development programs, starting with an update on SYN-010. Unlike currently approved and marketed therapies for IBS-C, which provide temporary relief to patients by targeting the symptoms in the disease often at a cost of significant adverse side effects, SYN-010 is designed to target and treat an underlying cause of this disease. 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 a primary causative factor of 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. SYN-010 is intended to treat the cause of the IBS-C symptoms without the negative side effects of diarrhea, often associated with over-the-counter prescription therapies.
SYN-010 is also designed to be a chronic treatment, is intended to normalize bowel movements over time, and importantly, reduce abdominal pain and bloating often associated as a result of this disease state.
During the first quarter, we announced the commencement of enrollment in our investigator-sponsored Phase IIb clinical study of SYN-010. You'll recall that this study is being conducted and cofunded by our research partner, Cedars-Sinai Medical Center. 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.
I'm pleased to announce enrollment is proceeding as expected, and we anticipate announcing a top line data readout during the second half of the year, likely during the fourth quarter, to ensure the team at Cedars have ample time to complete the study's enrollment objectives and to ensure proper analysis of their findings.
The Phase IIb clinical study is an important component of our SYN-010 strategy, as it is designed to address specific questions about dose response and length of treatment that were not clearly addressed in previously completed exploratory Phase IIa clinical trials of the 21- and 42-milligram dose strengths of SYN-010. This in turn may enable us to move forward with the Phase III clinical program entailing a single SYN-010 dose strength of either 21 or 42 milligrams, potentially reducing the overall size and cost of future Phase III registration trials.
Importantly, we believe that the successful completion of this trial will allow us to continue our 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, 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 degrades 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 resistance as well. We previously shared the results from our End of Phase II meeting with the FDA in which the agency confirmed key elements of a Phase III clinical program to support a marketing application for ribaxamase for the prevention of CDI.
During our last call, we outlined the specific challenges inherent in this registration pathway for ribaxamase as a preventative agent. Specifically, that the overall incidence of CDI is comparatively low, meaning that 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 proper safety in a broad patient population as well as establish efficacy as a means for preventing CDI. As we previously stated, given the significant capital requirements associated with running such a trial, we do not intend to move this trial forward without a partner to help fund it.
On our last call, we also outlined concepts for a regulatory pathway in which we could potentially advance ribaxamase on our own in a more focused, specialized patient population where preservation of the gut microbiome is a key element to positive clinical outcomes, and where the cost of such development pathway are far less onerous.
With that in mind, we've identified a specific class of patient, cancer patients who undergo allogeneic hematopoietic cell transplantation, or commonly called bone marrow transplantation, is a population for whom ribaxamase may provide substantial therapeutic benefit.
Allogeneic HCT recipients routinely receive long courses of IV beta-lactam antibiotics to treat neutropenic fever, which occurs in 80% to 90% of patients. Damage to the gut microbiome caused by IV beta-lactam antibiotics is also strongly associated with a number of potentially fatal adverse outcomes in allogeneic HCT recipients, most notably acute graft versus host disease, VRE colonization, bacteremia and CDI. The high incident and severe outcomes of aGVHD, VRE and CDI emphasize the simple fact that prevention is absolutely critical.
The use of ribaxamase in allogeneic HCT patient 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 who were administered IV ceftriaxone to treat a lower respiratory tract infection, typically severe pneumonia.
Of particular relevance to our current strategy, ribaxamase also reduced VRE colonization by approximately 44% in these patients, 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, preventing microbiome damage by IV beta-lactam antibiotics. We are currently in the process of defining the clinical development pathway for the use of ribaxamase in allogeneic HCT recipients. We anticipate the primary indication for ribaxamase will be the reduction in the incidence and/or severity of aGVHD.
Secondary end points related to VRE and CDI will also be evaluated with the expectation that these data may support the downstream development of ribaxamase to prevent CDI in a broader patient population.
During the first quarter, we continued to make important steps -- to take important steps to establish the infrastructure needed to pursue a possible Phase I/II clinical study of ribaxamase in allogeneic HCT recipients. We are currently working with a potential research institution on the clinical protocol and the clinical trial agreement for the study. Our goal remains to commence the study before the end of the year. I look forward to sharing additional details about this initiative once we have additional clarity.
Before I review our financials for the first quarter, I would like to share a brief update on one of our more promising early-stage assets, SYN-020. SYN-020 is an oral form of intestinal alkaline phosphatase, or IAP. IAP is endogenous enzyme expressed in the upper small intestine that plays an important role in reducing GI inflammation, tightening the gut barrier and promoting a healthy gut microbiome.
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 currently commercially available IAP cost of up to $10,000 a gram. We have -- we believe that we have overcome these hurdles and now have the ability to produce 3 grams per liter of IAP for roughly a few hundred dollars a gram, what we believe to be a true game-changer.
As part of the SYN-020 nonclinical package, we have evaluated SYN-020 in conjunction with radiation and with 5-fluorouracil, or 5-FU, in studies using a mouse ectopic colon cancer model. The purpose was to show that oral administration of SYN-020 does not alter the effectiveness of these cancer therapeutics. As expected, SYN-020 did not diminish the anticancer efficacy with either radiation or 5-FU. And interestingly, very preliminary data suggest that SYN-020 may have improved the outcomes of treatment with 5-FU. We expect that this study will be repeated with larger groups of mice and measure additional mechanistic end points to determine if expanded evaluation is warranted. We anticipate publishing our findings in the coming months and look forward to sharing these results with you at that time.
By leveraging the efficiencies created by our proprietary manufacturing platform and based on outcomes from our supporting animal model, we are developing SYN-020 to mitigate intestinal damage by radiation therapy that is routinely used to treat pelvic cancers.
During the first quarter, we submitted a request for a pre-IND meeting with the FDA, keeping us on track to potentially file an IND for SYN-020 before the end of this year. 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 our investors which to date I believe remains unrecognized.
With that backdrop, I'll review our financial results for the first quarter of 2019. Following the completion of our October 2018 public offering as well as the proceeds raised from our ATM facility in 2018, our balance sheet remains well capitalized. As a result of our restructuring activities, which included a streamlining of our workforce and refocusing our clinical development strategies, we have been able to considerably reduce our quarterly cash flow.
At this time, we believe we have sufficient cash on hand to further extend operations until at least the end of the second quarter of 2020. This improvement in our cash runway, which adds another quarter of cash to our previous estimates, is the result of our focus on operational efficiency and cost saving practices.
Additionally, as we continue to operate in an efficient manner, we will seek to identify additional areas where we can further reduce our cash burn while remaining focused on execution in the advancement of our clinical development pipeline.
Now I'll turn to the financial results for the first quarter. General and administrative expenses decreased to $1.1 million for the quarter ended March 31, 2019, compared to $1.6 million for the same period in 2018. This decrease of 30% is primarily due to decreased stock-based compensation expense related to forfeitures and decreased share price, along with the reduction of Investor Relations, registration and legal costs. The charge related to stock-based compensation expense was $65,000 for the 3 months ended March 31, 2019, compared to $349,000 for the 3 months ended March 31, 2018.
Research and development expenses decreased to $2.4 million for the quarter ended March 31, 2019, compared to $3.4 million for the same period in 2018. This decrease of 28% is primarily the result of lower SYN-004 indirect program costs for the 3 months ended March 31, 2019, including salary and related expense reductions resulting from the 2018 restructuring and the fact that no clinical trial activity for SYN-004 was ongoing during the current quarter, offset by an increase in manufacturing costs for our SYN-020 program.
The research and development costs incurred during the quarter were primarily related to the investigator-sponsored Phase IIb clinical study of SYN-010. We anticipate research and development expense to increase in association with the ongoing Phase IIb investigator-sponsored clinical trial of SYN-010, a potential Phase I/II clinical trial of SYN-004 in allogeneic HCT recipients and the continued development of SYN-020.
There was no charge related to noncash stock-based compensation expense for the quarter ended March 31, 2019, compared to $326,000 for the 3 months ended March 31, 2018. Other income was $44,000 for the quarter ended March 31, 2019, compared to other income of $2.7 million for the same period in 2018.
Other income for the 3 months ended March 31, 2019, is primarily comprised of interest income, while the 3 months ended March 31, 2018, is comprised of noncash income of $2.7 million from the change in the fair value of warrants. The decrease in the fair value of the warrants is due to the decrease in our stock price.
Cash and cash equivalents on March 31, 2019, totaled $24.7 million, a decrease of $4.2 million from December 31, 2018, providing us with substantial runway to continue our operations through the second quarter of 2020.
In closing, I'd like to thank each of you for joining the call today. As I hope I've conveyed clearly in my remarks, we are well underway in our pursuit of new direction for Synthetic Biologics designed to unlock 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 a clear and achievable milestone and value drivers we have established for our clinical development pipeline during the remainder of 2019. 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 and update you on our progress in the weeks and months ahead.
So given the fact that we have nobody in the queue for Q&A, I'd like to add a couple more comments before we end the call. First and foremost, I'd like to stress that even in the absence of any recent news flow, our team has been diligently focused on the execution of our strategy that we've laid out for you.
For SYN-010, we've been actively engaged with our partners at Cedars-Sinai Medical Center in order to advance this very, very important program. For SYN-004, we've been actively working with a well-known bone marrow transplant center in order to garner support for the program, develop a Phase I/Phase II clinical protocol, negotiate a clinical trial agreement and prepare for a pre-IND meeting with the FDA.
For SYN-020, we've advanced our manufacturing assay development activities. We've prepared for toxicology where necessary for our IND submission. We've prepared for our pre-IND meeting with the FDA and submitted our pre-IND meeting request. And finally, we've continued to find ways to better manage our expenses and further extend our cash runway.
I'm extremely proud of what our team has accomplished in such a short period of time, and I look forward to sharing our continued progress with you. Thank you and have a good evening.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.