Syntara Limited (SNT) Earnings Call Transcript & Summary

Welcome to virtual health conference. We're speaking to ASX-listed company CEOs us today. On the line, we have Gary from -- Gary Phillips from Pharmaxis. And Pharmaxis is a pharmaceutical research company and a global leader in drug development for inflammation and fibrotic diseases. The company has a highly productive drug discovery engine, drug candidates and clinical trials and significant future cash flows from partnering deals. Gary Phillips is the CEO, and Gary joined the company in 2003. He was appointed CEO and became a member of the Board of Directors in March 2013. Previously, Gary held the positions of Commercial Director and Chief Operating Officer. Gary has more than 30 years of operational management experience in the pharmaceutical and health care industry across Europe, Asia and Australia. Great to have you online, Gary. How are you going today?

Thanks. Yes, it's great to be here with the new format. So [ Renee ], thanks very much for inviting.

Of course. We're very excited to hear from you. I'll pass over to you now.

Okay. So we had a few technical difficulties before [ beginning ]. So I'm going to be asking the person on that end to just turn my slides over if -- when I reach a certain point. But on the first slide -- so for those of you maybe coming to this conference and looking at Pharmaxis either for the first time or -- again, our valuations have recently been depressed by 2 key issues. One was a decision of a major partner, Boehringer Ingelheim, not to progress one of the drugs they bought from us in 1 of the 2 indications that they're developing it for. And that was in quarter 4 at the end of last year. And then the overall market depression from COVID-19. So now, it's certainly a good time to assess the potential investment in Pharmaxis. We have a market cap of $34 million. We've got cash of $20 million and a list of near-term significant news flow that I'll be talking you through in the next 20 minutes or so. So going to the next slide, just a normal forward-looking statement. And in the next slide, the summary slide. So Pharmaxis aims to be a global leader in drug development for fibrotic and inflammatory diseases. These are 2 areas where there's a high level of unmet need, a large number of diseases you can go after and one where we have established a significant track record already. We aim to build a pipeline of valuable assets. And then the exit or the value for the shareholders will be generated through exits via an asset acquisition or even via a company acquisition. So we're a bit different from other biotechs that you may have looked at in that we do have a pipeline. So we're not a biotech with just one shot on goal, but all the investment point into one asset, which will lead to a binary decision somewhere down the track on the clinical trial result. We have a range of assets that go all the way from the mannitol business, which is the bottom of the list in point 1 here, which is already on the market, being sold in the U.S., Australia, Europe and some parts of Asia, generating income and near-term approvals possible; right the way through to assets which are already partnered, where Pharmaxis is not investing any further. We're a partner investing and we're waiting on significant development points and milestone points that come from that. Through to early-stage pipelines, that's where -- we're either still in the drug discovery process or we've got assets through into the clinic, and we're developing them ourselves to get to a significant valuation point. We've got a management team that's got significant international experience in drug development, commercialization and partnering. And we believe that big pharma, through our partnerships and deals we've already struck, validated both the science that we do and our commercial acumen. $20 million in cash, as I mentioned. And you'll be joining some good company in terms of the institutional investors that are in Pharmaxis already from the U.S., the U.K. and Australia. Some specialist health care biotech investors are on our share register now. So numerous catalysts over the next 12 months, including 2 cash-generating events, which we'll talk about as we go through this. So the next slide. So this is a good graphic to show the -- illustrate the approach we have with the business model with the pipeline. So on the top line, you can see the development of the assets from discovery right with these -- the right-hand line, with assets that are actually marketed and on -- approved and on the market. And at the top of here, you can see our mannitol business where we have 2, Bronchitol for cystic fibrosis and Aridol for asthma diagnosis. Both of those products are approved in many markets and sold, where we have a partner, Chiesi for Bronchitol in many of the European markets and for the U.S. market as well. Underneath that, the drug development part of the pipeline, where we have an already partnered asset, an AOC3 inhibitor and anti-inflammatory in the clinic for diabetic retinopathy, partnered with Boehringer Ingelheim. And then LOXL-2 inhibitor and antifibrotic for chronic fibrosis for diseases like NASH; IPF, idiopathic pulmonary fibrosis; or chronic kidney disease, CKD. That's in partnering discussions at the moment. An oral pan-LOX inhibitor, which is a cancer drug, which is hoped to go into the clinic later this year. Then a topical pan-LOX inhibitor for scarring, for the skin. So a broad pipeline, as I said at the outset, with a number of different assets. And the risk involved in a classic biotech model is somewhat mitigated by the number of different assets that we have going through development. Next slide. This shows the senior management team. I've already been introduced to you. I've been the CEO since 2013; David McGarvey, the CFO; and Brett Charlton, the Medical Director, have been with me since -- in fact, even before me entered the company, before 2003. That was the founding scientist. Wolfgang has been with us as the Head of Drug Discovery. He's ex-GSK, been with us for 10 years. And Kristen Morgan from Sanofi looking after alliance management and our medical affairs. Our Board is strong and populated with an appropriate level of skills for the kind of business model we have and includes Kathleen Metters, the most recent appointment there, who joined us as a Nonexecutive Director. Kathleen was the head of worldwide basic research at Merck [ for most of her career ] and has also headed up a significant U.S. biotech company as well; so a very appropriate Board for the business model we have. Next slide, please. These are the key catalysts targeted for 2020. At the top are LOXL-2, our antifibrotic program, reached the end of Phase I. Partnering discussions are underway at the moment with major pharmaceutical companies. Our pan-LOX cancer program, that's due to go into the clinic by the end of the year in a Phase II study, which will show efficacy and add considerable value, turn that into a really valuable asset should that study read out positively. Boehringer Ingelheim with the asset it bought from us in 2015, due to report on the second indication in the second half of this year. The study for that is already fully recruited. It won't be delayed by COVID-19. So that's going to be some good -- there's hopefully some good news later on in the year. And then our mannitol business with an FDA approval pending midyear and then a significant fast milestone should they approve and we launch before the end of the year, and also the sales growth coming from the U.S. market having a transformational impact on the cash burn in Pharmaxis. So digging into that pipeline, a number of our assets are based on the lysyl oxidase enzyme. So I just wanted to give you an introduction as to the basis for their role in fibrosis. And the graphic on the left-hand side of this slide shows what happens during fibrosis. So we all have fibroblast type of cell within our organs. So within the heart, the liver, the lung, the kidney have fibroblasts, also in the skin. Normally, they're -- in most cases, they're not active. They can become activated by chemical injury or inhaling pollution; by mechanical injury, a blow or a cut; metabolism, so an increase in, say, fat in your bloodstream, causing activated fibroblasts in the liver. And sometimes, there's a genetic precondition for activating the fibroblasts. And when they become activated, they start to produce more collagen fibers, collagen and elastin fibers. And these flood the area of the damage that's occurred or the inflammation area that's occurred where the fibroblast -- activated fibroblasts are. And then this family of lysyl oxidase enzymes, in which there are 5 -- so there's lysyl oxidase itself and lysyl oxidase 1, 2, 3 and 4, so 5 of them. They cause cross-linking of the collagen, which forms them together, which then causes a stiff matrix. That stiffened matrix has 2 impacts. One of -- first of all, it goes on to further activate the fibroblast cells. So it's a further stimulus on those fibroblasts. And the increased stiffness also causes an increase in the contraction forces in that scar tissue, which again increases further with collagen. So this is a vicious circle of which lysyl oxidase enzymes play a key role in the final stage of knitting those collagen fibers together and causing the fibrosis. The therapeutic benefits of inhibiting those lysyl oxidase enzymes are threefold. The first off is straightforward antifibrotic effects. So by inhibiting the enzymes, we can reduce the cross-linking of those collagen and elastin proteins and just reduce the area of fibrosis there. In doing that, we reduce the tissue stiffness and also the cellular stress. So it will cut through the vicious cycle and stop the ongoing fibrosis from happening and allowing the tissues to regenerate, particularly areas like the liver, which is good at regrowing the tissue once you can stop the fibrotic process. Secondly, it has an anti-metastatic effect. So primary tumors, when they metastasize, will seed cancer cells off into the bloodstream. And in order for those cells to germinate and become full metastases, they need a fibrotic microenvironment. And we've got a number of preclinical models which show that if you inhibit those lysyl oxidase enzymes, you reduce the fibrotic microenvironment and you stop those metastases forming. So we've got active models which show reduction in metastases in cancer models. So that's really exciting. And lastly but not least, for the primary tumor. Many tumors, particularly those like pancreatic cancer, have a strong fibrotic element to them and they grow a stromal or a fibrotic sheet around them, through them, sustains and encapsulates the tumor. And many of the drugs we use today find it difficult to penetrate that stromal element of the tumor and therefore aren't very effective. If you can inhibit the lysyl oxidase enzymes, then you can loosen that stiff stroma and you can improve access of the anticancer drugs and things like checkpoint inhibitors as well. So this is again a really exciting development in the understanding of the role of lysyl oxidase enzymes in both fibrosis and in tumors. Next slide, please. So the first of those tumors or cancers that we aim to look at is myelofibrosis. So this is a rare type of bone marrow cancer that disrupts your body's normal production of blood cells. So on the left, we have a graphic of a normal bone, and the bone marrow is responsible for producing red blood cells, white blood cells and platelets. Myelofibrosis is a buildup of scar tissue in the bone marrow, so replacing the bone with scar tissue, which reduces the production of blood cells. The reduction in red blood cells can lead to tiredness and shortness of breath. Reduction of white blood cells can lead to an increased number of infections. Reduced platelets causes easy bleeding or bruising. Some other organs come in and try to enhance the blood production, like the spleen. That in itself then becomes enlarged and cause the same problems. And many of these patients have common symptoms, including fever or night sweats or bone pain. This is a rare disease that only affects 1 in 0.5 million people worldwide. So for example, about 5,000 U.S. patients are diagnosed each year. There will be a total of around about 16,000 U.S. patients at any one time. Those patients have about a 5-year life expectancy. So it is a fatal disease. It -- you can get it at any age, but the normal age of onset is between 50 and 80. Current drugs for this market address the enlarged spleen and the symptoms but don't crucially address the fibrosis of the bone marrow itself. Even so, this is already a market which is approaching $1 billion. So there's a large opportunity here to add on to the current therapy. Next slide, please. Our program here, our anticancer program, is a drug -- an oral drug which blocks all of the lysyl oxidase enzymes. We believe the indications for are myelofibrosis, as I've explained already; secondly, pancreatic cancer; oral cancers and several other severe fibrotic indications. We've already completed Phase I study in healthy volunteers. And you can see on the right-hand side that this drug acts in a very predictable fashion. So the green line at the top shows the inhibition level of the lysyl oxidase enzymes from a placebo. And that's with 100%. So actually, there's no reduction in activity at that point. The activity of the lysyl oxidase enzymes drops to only 10% when you give a 300-milligram dose. So as you increase the dose, the level of inhibition of activity increases. It's got a good safety profile. We've already done 6-month toxicity studies, which leaves us free to now try it in study -- Phase II studies of patients with cancer and give us a good chance of showing real efficacy end points. We've shown efficacy in animal models of myelofibrosis, 2 of them, in fact, and it's a very recent patent, so 2018. Next steps for us in this program, to file a new -- an investigational new drug application with the FDA midyear. We're discussing with clinical contract research organizations now to start the study. We're aware of the fact that COVID-19 has caused a reduction or a slowdown in some clinical trials, but we're confident we've identified trial sites that are able to start later on this year. We think that's a realistic aim, to start recruitment for that Phase II in quarter 4 of this year. In the meantime, we've got potential further indications through many academic and industry collaborators. This is a first-in-class drug. Nobody else has one of these. So we've attracted a lot of interest from other people who believe that lysyl oxidase enzymes are important, and they're testing our drugs in their models of other cancers, including pancreatic cancer and oral cancer. Next slide, please, our LOXL-2 program. So this is a drug that specifically targets only one of the lysyl oxidase enzymes, the lysyl oxidase 2. This particular enzyme is involved in chronic fibrotic diseases, so we see upregulated in diseases like IPF, pulmonary fibrosis; NASH, which is a liver disease; and cardiac fibrosis; and also kidney fibrosis. The patient on the left of this chart shows a patient with a -- on the left-hand side, a healthy lung; on the right-hand side, a lung with IPF. And you can see that the fibrotic tissue here replaces the healthy tissue. It decreases gas exchange in the lungs and reduces the oxygen transfer to the bloodstream. These particular cases, again, only have about a 5-year life expectancy from diagnosis. And these, together with the other indications like liver fibrosis and kidney fibrosis, are significant market opportunities. We finished Phase I. We have 13-week tox studies. It's the only known drug in clinical development to also inhibit LOXL-2 -- LOXL-3, which is involved also in IPF. And we have a significant amount of interest from both big pharma companies in this asset, midsized biotech companies, and also Chinese biotech companies. So they're -- for commercial-in-confidence reasons, I can't talk further about where we are in the partnering process, but we're hopeful having good news on this in the next couple of quarters. And I hope to be issuing press releases when we do complete the deal. Next slide, please, the Boehringer program in diabetic retinopathy. So as I said at the outset, the NASH program had a positive clinical trial outcome, but they decided not to develop it further because of a drug-drug interaction and potential adverse effect that they saw with the highest doses of the drug. Now whilst that means that they won't go ahead in NASH in diabetic retinopathy, the study in this disease is already ongoing. It's fully recruited. It's expected to complete in May, and Boehringer will make a decision on whether to progress this in the second half of the year. If they do see significant efficacy, then they have identified a dose, a lower dose than was used in the NASH study that they would be happy to go into the clinic if that doesn't cause the adverse effects that they felt were a threat in the NASH program. So there may well be a further study here at a lower dose to see whether there -- this drug can work [ in the scene ]. So this program, whilst half of the value has gone, the other half is still there. And the next slide shows a summary of the Boehringer Ingelheim deal. So on the top, you can see, in the dark blue bars, the income received to date. So to date, we've received AUD 83 million from Boehringer as part of this deal. The value that's in the diabetic retinopathy arm is about AUD 380 million. If they complete the Phase IIa in May and then make a decision to progress, then they have some other Phase II studies to do. But if they commence Phase III, then there would be a EUR 37 million or approximately AUD 60 million milestone payment to be paid when that commences. So there is still value in the Boehringer Ingelheim deal, and we will learn whether that value will be realized later on in this year, so another milestone to come. Next slide, please, finishing up on the portfolio, the mannitol business. So this will become profitable from 2020. This is going to be driven by existing market growth. We're seeing strong growth in markets like Russia, for example, plus obviously the market entry of Bronchitol into the U.S., which would be transformational for both mannitol business as a whole and Pharmaxis as well. Back in June 2019, the FDA issued a complete response letter to the application that Chiesi made for marketing authorization for Bronchitol. And if you remember, earlier on in the year, we had a very positive recommendation from the Pulmonary Advisory Committee, so the FDA recommending that Bronchitol be approved. The complete response data identified 2 things which Chiesi needed to do in order that FDA could approve Bronchitol. One was to revise the product packaging and user instructions; and the other one was to conduct a human factor study, which would demonstrate to health care -- that health care professionals can properly administer the mannitol tolerance test. So this is a test that's done to check, to see whether that patients are -- have any adverse reactions to mannitol before they prescribe the drug. So that human factor study was completed in the first quarter of this year. We expect that Chiesi will shortly file their submission to the FDA. The FDA then have 60 days from the filing of that to make their decision. Now we're not hearing at the moment that the FDA are delayed at all by the COVID-19 impact in the U.S. Clearly, there may be some risk there, but we don't think it's significant. So we would still expect to get a decision from the FDA midyear. We'll get a launch milestone. So when Chiesi receives the $10 million -- receives the launch stock, we'll receive a USD 10 million milestone payment from that point. And obviously, U.S. sales will commence at that point. So both of those things are transformational for the company. The next slide just shows the shareholders and the trading that we've experienced. As I said, the market cap is actually $36 million at the moment. The cash balance is $20 million at the moment.

Just in the interest of time, Gary -- apologies, Gary, but just in the interest of time. Perhaps if we could maybe summarize the slides -- the next couple of slides because I know that...

Yes. This is actually going to be my last slide. So I think...

Perfect timing.

So the -- I'm trying to help you there. So the institutional shareholders at the moment include BVF Partners. They're a West Coast American specialist health care fund; Arix Bioscience, they're a U.K. specialist health care publicly listed fund. And then Aus Ethical being an Australian specialist fund as well. So you'd be in good company on the Pharmaxis register. There's 53% institutional ownership at the moment. So just as a reminder, key milestones that are going to flow this year, the partnering of the LOXL-2 program, the FDA review and hopefully approval of Bronchitol in midyear with the USD 10 million milestone payment later in the year, the Boehringer Ingelheim decision on progression of our asset in diabetic retinopathy in the second half of the year, and also and not last, the start of a Phase II study in myelofibrosis kicking off before the end of the year as well. So plenty of news flow to come from Pharmaxis and a good time to be assessing this as a potential investment. Thanks very much for listening.

Thanks, Gary. Thanks for covering that off in such a comprehensive yet succinct kind of way, very appreciated. We look forward to hearing more from Pharmaxis in the future, and we'll keep following along.

Thanks very much.

We'll be back with more very shortly. We'll be back on video, both parties, in about 5 minutes' time and no tech difficulties included, we've heard. We obviously can't ever be sure. So stay tuned and we'll be back in about 5 minutes' time.