Theriva Biologics, Inc. (TOVX) Q2 2014 Earnings Report, Transcript and Summary

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?

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.

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…

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.

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…

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?

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

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.

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.

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?

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.

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

I am sorry. Keith, I didn’t catch it.

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?

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.

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.

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.

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

Thanks.

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

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

Thanks.

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.

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…

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.

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?

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?

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?

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.

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.

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?

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.

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.