Synthetic Biologics, Inc. (NYSEMKT:SYN) Q3 2020 Earnings Conference Call November 10, 2020 4:30 PM ET
Vincent Perrone – Director, Corporate Communication
Steven Shallcross – Chief Executive Officer & Financial Officer
Michael Kaleko – Senior Vice President, Research & Development
Vince Wacher – Head-Product & Corporate Development
Conference Call Participants
Michael Okunewitch – Maxim Group
Good afternoon, and welcome to the Synthetic Biologics’ 2020 Third Quarter Investor Conference Call. All participants will be in a 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 call over to Vincent Perrone, Director, Corporate Communication at Synthetic Biologics. Vincent?
Thanks, Grant and good afternoon, everyone. Welcome to Synthetic Biologics 2020 third quarter investor conference call. Today, I’m joined remotely by Steven Shallcross, Chief Executive and Financial Officer; 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 September 30, 2020. 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 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 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 statement 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?
Thanks, Vincent. Good afternoon, everyone and thank you for joining our 2020 third quarter investor conference call. I hope everyone is safe and in good health.
I’m excited to be with you this afternoon to share our third quarter operational highlights and financial results. It’s been a busy quarter and a busy year for Synthetic Biologics. Clearly, this was a challenging quarter given the disappointing results of SYN-010 as well as the ongoing impact of the COVID-19 pandemic, which continues to test the global community and our healthcare system. Nevertheless, we’ve made substantial progress on both SYN-004 as well as SYN-020, and we’re as excited as ever about the outlook for the business.
We believe our ability to successfully navigate these challenging times is a testament to the diversity of our platform as well as the strength and resilience of our team and our clinical development partners. Earlier this year, we implemented a set of initiatives focused on prudent cash management and financial stewardship. This has allowed the company to aggressively conserve capital and extend out our runway.
And as we anticipate clinical activities to return to normal, we remain focused on executing our strategy to advance our portfolio of GI-focused clinical development programs. We believe both SYN-004 and SYN-010 address very sizable and underserved markets. Moreover, the mechanisms of action are unrelated — that are unrelated to SYN-010 and as such we remain highly encouraged by the clinical outlook for these two programs.
With that backdrop, I’d like to provide an update on developments during the third quarter beginning with the SYN-010 Phase 2b investigator sponsored clinical trial in IBS-C patients. Last year, we began enrollment in a Phase 2b investigator sponsored clinical trial of SYN-010 in collaboration with our research partner Cedars-Sinai Medical Center. This trial was intended to further evaluate the efficacy and safety of two-dose strains of SYN-010 in both methane-positive IBS-C patients.
It was structured as a 12-week randomized placebo-controlled trial and expected to address specific queries about dose response and length of treatment that led to the design of the Phase 2b/3 adaptive design clinical program previously agreed with the FDA.
During the third quarter, we completed a planned interim futility analysis of the Phase 2b clinical trial. After a thorough review of the results, it was concluded that although SYN-010 was very well-tolerated it failed to meet the pre-specified efficacy criteria, meaning, the study is unlikely to meet its primary endpoint by the time enrollment is completed.
On September 30, we discussed these results with Cedars-Sinai and agreed to discontinue the trial due to futility. At this time, Cedars-Sinai has been unblinded and is conducting a thorough analysis of the data set, which they intend to publish at the appropriate time. As a result of this decision, we have also mutually agreed to terminate the exclusive license and clinical trial agreements related to the SYN-010 program. We are grateful to the patients and to Cedars-Sinai who supported this clinical program.
And while we’re disappointed by these results as I mentioned earlier, we remain committed to working with our clinical development partners to advance our SYN-004 and SYN-020 programs. Both of these programs are unrelated to SYN-010 and therefore we remain encouraged by the outlook and potential for these programs to address large underserved markets and deliver long-term value to our shareholders.
Turning first to our SYN-004 or ribaxamase program. As most of you are aware SYN-004 is our first-in-class therapeutic intervention designed to protect the gut microbiome from antibiotic-mediated dysbiosis. We believe protection of the gut microbiome may play a pivotal role in improving health outcomes for patients administered long courses of intravenous beta-lactam antibiotics as part of their treatment plan for bone marrow and solid organ transplantations.
Last year we announced our intention to move this program forward in collaboration with our clinical development partner, the Washington University School of Medicine in St. Louis in the form of a Phase Ib/IIa clinical trial of SYN-004 in allogeneic hematopoietic cell transplant or HCT recipients.
Allogeneic HCT patients have a very high risk of dysbiosis following long courses of IV beta-lactam antibiotics used to treat fever after conditioning therapy. Damage to the gut microbiome caused by these antibiotics is also strongly associated with a number of potentially fatal adverse outcomes in allogeneic HCT patients, most notably; acute graft-versus-host disease, VRE colonization, bacteremia and C. difficile infection.
Results from our previously completed Phase II clinical trial of SYN-004 demonstrated protection of the gut microbiome in treated patients, which led to significant reductions in the incidence of CDI and VRE colonization. Earlier this year we held a Type C Meeting with the FDA to discuss the clinical program requirements needed to evaluate the safety, tolerability and potential absorption into the systemic circulation; if any, of SYN-004 in this patient population.
During the third quarter we were pleased to receive notification from the FDA that the Phase Ib/IIa clinical program may proceed per our submitted clinical protocol. This is an important milestone for this program as it provides us with the framework necessary to establish the clinical infrastructure to support this trial.
Looking ahead, we’ll continue to work very closely with Washington University including conducting a planned virtual clinical site audit to ensure we are positioned to commence this trial as soon as pandemic conditions allow. At this time, we believe we’re on track to commence this trial during the first quarter of 2021 and look forward to providing additional updates as they become available.
Next I’d like to provide an update on our SYN-020 Intestinal Alkaline Phosphatase or IAP program which we believe has the potential to be a significant long-term value driver for our company. SYN-020 is a recombinant form of bovine Intestinal Alkaline Phosphatase or IAP produced in CHO cells and formulated for oral delivery.
IAP is an endogenous enzyme expressed in the upper small intestine that plays an important role in maintaining gut health through at least three important mechanisms. First, it diminishes GI inflammation by detoxifying inflammatory molecules; second it acts directly on the intestinal wall to tighten the gut barrier to diminish leaky gut; and third, it functions to support a healthy gut microbiome.
Preclinical studies have demonstrated support for these mechanisms. And recent studies in mice also suggest that these outcomes may be particularly beneficial in mitigating the effects of aging.
Based on these functional activities, we believe administration of oral IAP has the potential to treat a number of clinical indications stemming from inflation of the GI tract. Equally important IAP has the potential to diminish low-grade systemic inflammation which is believed to exacerbate metabolic syndrome and accelerate the progression of diseases associated with aging.
Despite its broad therapeutic potential industry development of IAP as an oral drug has been hindered by manufacturing hurdles which has led to currently commercially available IAP costs of up to $10,000 a gram. We have overcome these hurdles and now have the ability to produce more than 3 grams per liter of IAP at scale for roughly a few hundred dollars a gram.
Equally important, we are capable of incorporating SYN-020 into an oral dosage formulation an achievement that we believe makes SYN-020 a commercially attractive compound.
Earlier this year, we filed an investigational new drug application with the FDA for SYN-020. During the third quarter, we were pleased to receive a study-may-proceed letter from the FDA to conduct a Phase I single-ascending dose study in healthy volunteers designed to evaluate SYN-020 for safety, tolerability, and pharmacokinetic parameters. This is an important milestone for the program as the Phase I SAD study is intended to support the clinical development of SYN-020 for multiple indications.
We’re tentatively targeting the first quarter of 2021 to begin the study pandemic conditions permitting. We continue to use SYN-020 as a versatile multi-indication program that has the potential for development as a platform program for our company.
As an initial indication, we’re pursuing the intercalates associated with radiation therapy for rectal and anal cancers a largely underserved market with a significant unmet need. Initially we’ll focus on the acute toxicities associated with radiation enteropathy. However, we believe there’s also a significant opportunity for SYN-020 to address the long-term complications as well.
Importantly, the pursuit of this indication may also provide an accelerated path to registration. While we’re enthusiastic about SYN-020’s potential to mitigate and treat radiation enteropathy, we are also very excited about our collaboration with Massachusetts General Hospital to pursue the development of SYN-020 in several additional indications.
As you may recall, earlier this year, we announced agreement with Massachusetts General Hospital granting the company an option for an exclusive worldwide license to intellectual property and technology related to the use of IAP to maintain GI and microbiome health diminish systemic inflammation and treat age-related diseases.
If executed, the license expected to support the advancement of an expanded clinical development program for SYN-020 and will implore indications to treat and prevent metabolic and inflammatory disorders associated with aging. Our pursuit of these indications would expand upon foundational research conducted by Dr. Richard Hodin’s Laboratory at Massachusetts General Hospital and Harvard Medical School. I’d encourage you to visit the scientific publications page of our website where you can access Dr. Hodin’s published research.
Lastly, we’re also exploring the potential utility of SYN-020 for celiac disease. Celiac is particularly intriguing because when the disease is active, it’s associated with low levels of IAP and gut barrier leakage. Therefore supplemental SYN-020 may be ideally suited to play a role in alleviating the symptoms associated with this disease.
I hope I’ve conveyed my excitement for this versatile program and for the role it may play in delivering long-term value to our shareholders. Looking ahead, our Phase I studies will support an initial indication of radiation enteropathy but more broadly should enable the pursuit of other clinical indications as well.
Before reviewing our financial results for the third quarter, I’d like to take a moment to share our vision beyond SYN-004 and SYN-020 which as I laid out earlier represent a very sizable and underserved markets. Importantly, we’ve built a first-class team with extensive operational, scientific, and clinical experience.
For this reason, we plan to actively explore and evaluate a range of strategic options which could include in-licensing or acquiring assets that may complement our GI focus or give us the ability to expand our interest into related areas of clinical development.
We are committed to building a first-in-class pharmaceutical company rooted in our scientific and operational know-how. And we believe we have the tools and resources to make this vision a reality while driving value for our shareholders.
With that backdrop, I’ll review our financial results for the quarter ended September 30 2020. During the third quarter of 2020 we continue to operate very efficiently. We remain focused on prudent cash management and continue to identify additional areas to further reduce non-essential operating expenses. We ended the quarter with approximately $6 million in cash and cash equivalents.
And looking ahead, we anticipate our burn to remain in line with the previous quarter. This is due primarily to the postponement of the Phase Ib/IIa clinical trial of SYN-004 and allogeneic HCT recipients and discontinuation of the Phase IIb clinical trial in SYN-010.
At this time, we do not anticipate additional expenses related to both programs for the remainder of the year.
As a result, we anticipate, that our current cash position will allow us to continue our operations through at least the first quarter of 2021. As we have in the past, we believe we can identify additional areas of cost savings to further extend our cash runway, which at this time may not be reflected fully in our guidance.
Now I’ll turn to the third quarter financial results. General and administrative expenses increased by 9% to $1.2 million for the three months ended September 30, 2020 from $1.1 million for the three months ended September 30, 2019. This increase is primarily due to increased insurance costs and stock registration fees, offset by a decrease in legal costs.
The charge related to stock-based compensation expense was $67,000 for the three months ended September 30, 2020 compared to $68,000 for the three-month period ended September 30, 2019. Research and development expenses decreased by 78% to $900,000 for the three months ended September 30, 2020 from $4.1 million for the three months ended September 30, 2019. This decrease is primarily the result of the response to the global COVID-19 pandemic by our clinical development partners, which led to the postponement of the Phase Ib/IIa clinical trial of SYN-004 and allogeneic HCT recipients.
Additional reductions in R&D expense during the third quarter are the result of the discontinuation of the Phase IIb investigator-sponsored clinical trial of SYN-010. The charge related to stock-based compensation expense was $15,000 for the three months ended March 30, 2020 compared to $23,000 for the three months ended September 30, 2019.
Other income was $134 for the three months ended September 30, 2020 compared to other income of $92,000 for the three months ended September 30, 2019. Other income for the three months ended September 30, 2020 and 2019 is primarily comprised of interest income.
In closing, despite continued uncertainty around COVID-19, we at Synthetic Biologics remain focused on the execution of our strategy of advancing our portfolio of GI- and microbiome-focused clinical programs. We see a tremendous potential for both SYN-004 and SYN-020, as I mentioned, and we look forward to leveraging our clinical and scientific expertise to potentially license or acquire other synergistic assets.
We have operated with responsible financial discipline and have proven nimble in our ability to adjust and adapt our strategy including our clinical strategy as well as our response to the coronavirus pandemic. We look forward to continuing to update you on our progress in the weeks and months ahead.
And now I’ll turn the call back to Vincent for questions.
Thank you, Steve. Grant, we’d like to open the phone line to questions. Can you please describe the procedure to ask questions for our listeners?
We will now begin the question-and-answer session [Operator Instructions] Our first question comes from Jason McCarthy with Maxim Group. Please go ahead.
Hey, guys. This is Michael Okunewitch on for Jason.
How is it going? So on the peak, one of the things that you’ve repeatedly highlighted is dramatic cost reduction, which is made possible through your production process, down to I think you say 100 per gram from 10,000 per gram. So my first question is how many gram would someone generally use for a therapeutic application?
So let me bring Mike Kaleko in and let him answer that question. Mike. go ahead.
Well, the decision on dosing is usually made in Phase II clinical trials. So we don’t know the exact numbers yet, but we believe it will be in the range of 5 to 30 milligrams per day per patient.
All right. Thank you. That certainly is pretty significant on a yearly basis. I also have another question on SYN-020 actually. I’d like to see if you could kind of lay out a bit of a road map for development. Because I know you’ve discussed that radiation enteropathy is probably the quickest way to registration. And then you’re potentially moving into other indications like celiac or even potentially metabolic disease. So let’s see if you could lay out how you’re planning to approach this. Would you be going straight for radiation enteropathy? And then after that’s done and approved moving into other indications? Would you look at doing things in parallel or potentially bringing partners on board to explore some of these other indications?
So, I’ll take a shot at that first. So, obviously, we got to get through the safety studies, which we don’t anticipate there being any difficulties given how clean the tox studies were in the animal models that we conducted.
You raised an interesting strategy and we’re evaluating all of the above. We have the ability assuming sufficient funding to run one or more of these programs to Phase 2s together or to do one of them or at least one leg of one of the two Phase 2 studies and then layering in in parallel the remainder assuming that we may have to do more than one.
We also could possibly partner at that point in time and share some of that clinical burden with a partner. We have fielded some inbound calls with folks that have interest in this program. So that is totally within the realm of possibilities.
All right. Thank you very much. Also just one more if you don’t mind, it might be early to say. Obviously, you haven’t started anything, but could you give us a rough approximation on how long you’re expecting this Phase 1 to last so we could start to see data from that?
Why don’t you go, ahead Mike?
Of the Phase 1, the very first study is a single-ascending dose study. It should last a couple of months, I would imagine. And actually that includes data analysis. That would be followed by a multiple-ascending dose study. We don’t have the details worked out with the FDA yet, so I can’t really comment on it. But we anticipate — well, let me not comment on it, but it would be relatively short-term cohorts maybe six months for that. And then we would at that point move on to the patients. Does that help answer your question? I’m sorry I don’t have more details for you.
Right. No problem. Surely that definitely very helpful. Thanks. I appreciate it.
[Operator Instructions] There being no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Steve Shallcross for any closing remarks.
Thanks again everyone for joining us this afternoon. And we thank you for your continued support, and we look forward to further updating you on our progress. Have a great evening and we’ll talk to you next time. Thank you.
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.