Syntara Limited (SNT) Earnings Call Transcript & Summary

Welcome. We're hosting today's Pharmaxis investor briefing. We're joined today by Pharmaxis' CEO, Gary Phillips, who'll provide a general business update, and then we'll open the floor to questions from investors and analysts. [Operator Instructions] We have plenty of happening at Pharmaxis at the moment. I won't take out anymore of Gary's time. So Gary, if you're ready, I'll hand over to you now, and we'll get started.

Okay. Thank you, [ Sam ]. I'm just going to share my screen for a moment. Just bear with me. Okay. Okay. I hope you can all see that. So good morning and -- or good evening to some of those who are joining from overseas. Welcome. Thank you very much for participating this morning. We've allocated about 20 minutes for this webcast. I'll spend just over half of that time reviewing the Pharmaxis business, and then the rest we'll use for Q&A, as [ Sam ] said, and I'm really looking forward to that. Actually, I'm going to address one of the questions that we've already received upfront, and that was, your stock price has been unchanged despite good news in recent months. What are you going to do about it? It's a very good question. Now some of that news flow has been related to Bronchitol, the cystic fibrosis business that we've been building. It's included a U.S. approval from the FDA. It's included USD 10 million of payments; a Russian deal, generating $2 million of cash and $1 million of annual savings for Pharmaxis. So here's the thing, I think Bronchitol and our mannitol business will continue generating cash. We're expecting it to be cash flow positive this year and for years going ahead. In fact, if we look at 5 years out, we expect a positive cash flow from that business of around about $10 million per annum. But we or I don't think that, that will necessarily drive the Pharmaxis valuation significantly. The things that will change valuations by tenfold or twentyfold will be the delivery of results from 2 Phase II studies that we are now undertaking and that will finish by the end of next year. And I'm going to explain that to you today. So moving through the normal forward-looking statement. So I now describe Pharmaxis as a clinical stage drug development company. We're targeting 2 areas: fibrosis and cancer. And we have 2 assets. One is 5505. That's going into a patient study in a rare kind of bone cancer called myelofibrosis, and that has got disease-modifying potential, which we hope to demonstrate with this trial by the end of next year. The other asset is 6302. It's another anti-fibrotic, but this time, a topical agent that you put on the skin. That's currently in Phase I studies, and we expect to go into phase -- into patient studies in the second half of this year in 2 areas where -- which we think are really important for both patients and commercially as well, where we expect to be able to improve the function and appearance of scarring. And those studies are also expected to read out by the end of next year. So those 2 studies and the completion of them by the end of next year is what I expect will really drive Pharmaxis well beyond its current window valuation that oscillates within. In the meantime, we will be doing other things within our business to deliver nondilutive cash and cost savings from our business. We'll continue to streamline the mannitol business with the -- looking at distribution license fees from unpartnered mannitol territories and other simplification and rationalization that we're currently working hard on. So post the small capital raise that we did back in April, Pharmaxis is in a strong position to fund a very focused clinical program around 2 assets in 2 diseases where we think there's enormous potential here for both investors and for patients. So just briefly dwelling on our cash and capital structure, by the end of March, we had $16 million in cash...

Sorry, Gary, the screen is just showing up just with the first one. Do you want to maybe just stop sharing and reshare your screen just because we can't see the current slide? [Technical Difficulty]

So by the end of March pro forma, we had $20 million in cash, with another $2 million to be added on from the sale of the Russian business, which I mentioned earlier on. And more nondilutive cash we hope to come before the end of this year as we start to continue to rationalize the business there. If you translate that through and look at our enterprise value, our market cap is currently around $36 million. And that gives us an enterprise value of around about $16 million. Now that I believe to be a historic low given the 2 assets that we have that are in Phase II studies basically that are going to report by the end of next year. And there was certainly some of the basis of the capital raise that we did back in April where our long-term shareholders, major shareholders, BVF, currently at 19.5%, went pro rata on that raise. And we brought on a new institutional shareholder, Karst Peak, who came at around about 9%. Karst Peak described themselves as being long-term contrary investors that look for value in undiscovered or underappreciated assets. And I think what they saw in us and then being a recognized sophisticated investor was that $16 million enterprise value and with the 2 assets that we have funded to go through to patient -- trial results from patient studies. We certainly are under appreciated at the moment, and that has to change as we start to deliver results from those 2 studies. And that really addresses that question that we had at the beginning in terms of what are we doing. We believe that those 2 trials are the way forward. For those of you who are shareholders, this is the team that look after the business for you, that manage the business for you. It's a strong scientific and commercial team. Wolfgang Jarolimek and Dieter Hamprecht, the 2 people involved in driving our drug discovery group forward, both come from significant jobs in big pharma. Wolfgang came to us from GSK; Dieter from Boehringer Ingelheim. My background is before I joined Pharmaxis was with Novartis where I led the business in Asia Pacific and Australia before joining. And we've got 2 members of the Board as well, which look after the business for you and really make sure that we make good decisions going forward. Kathleen Metters, who is -- was the Global Head of Merck, Global Merck, in basic research for 4 years before also leading a very successful U.S. biotech, Lycera. And Neil Graham, who came to us from -- with a lot of experience in the clinical role at Regeneron, a very -- another very successful and significant U.S. biotech company. So when we look forward at things that will change value, will drive value, I've mentioned these 2 studies. They're represented here in blue. So the items in blue here are things which the company is focusing its resources on. The areas in green are things which are potential for the future. They're not funded. First of the myelofibrosis study, we're in Phase Ic. I'll explain a bit about the study structure in a moment. That will have results in the second half of this year. So a point where... [Technical Difficulty] So this pipeline slide, again, summarizes the 2 studies that are really going to drive value. So the myelofibrosis reporting Phase Ic by in the second half of this year, and those patients rolling over into Phase II, which we'll report by the end of next year. And then 6302 in scarring in Phase I healthy volunteer study at the moment. But coming up with results around the middle of the year, and then starting 2 patient studies: one in patients with established scars and one in burns. So we'll look at both of those in a little bit more detail in the next slides. I hope you can now see the myelofibrosis background slide, and that's still not doing -- okay. My apologies for the hiccups in this. [Technical Difficulty] So in myelofibrosis, this is a rare bone cancer. It affects about 15 people in 1 million worldwide. But it's a nasty disease. People have a life expectancy of around 5 years, and a lot of them transform to leukemia. It's driven by a particular mutation, which causes scarring of the bone marrow. And the bone marrow is something which is producing your red cells, white cells and platelets. So without that, the body's factory of those blood cells, the patients get anemia, their spleen start to enlarge, they have symptoms such as fever and night sweats and bone pain. This disease is currently treated with drugs called JAK inhibitors. JAK inhibitors relieve some of the symptoms of myelofibrosis, but they don't do much for the survival. And a lot of patients discontinue from them. They have got an adverse side effect profile. And once they come off those drugs, then their life expectancy is quite short as well. So these are drugs which treat symptoms. They're not disease-modifying. Our drug goes directly to the heart of the problem and deals with the scarring in fibrosis of the bone marrow itself. And by reversing that, we believe that we can reestablish the factory in the body producing those red cells and white cells, so we'll start to see improvements in blood counts. We'll see improvements in reductions in the level of fibrosis in the bone marrow, and that it leads to a disease-modifying effect. So these patients would start to live longer. So if we look at the Phase II study, which I'm guessing -- is that okay?

[indiscernible]

All right. Okay. Good. So this is the Phase II trial design. So the first half is a dose escalation study. So at the moment, we have patients in Australia and Korea who are on drug, and they're in the first cohort. So we're trialing 3 different doses. Each -- once the end of -- we get successfully to the end of the first dose cohort, then the patients click over into the second dose and then to the third dose. We from -- at the end of that, we'll select from the inhibition we see of the enzyme that we're targeting which dose will go into Phase II. That dose expansion phase is a 6-month study with 24 patients. It's open label, so you might start to see results coming out throughout next year. And the endpoints are looking at the level of fibrosis in those patients, looking at their blood counts importantly and their spleen volumes. So this is a really important study, and it's designed to produce some hard endpoints. Why is that important? Well, this slide just shows other companies who have drugs in myelofibrosis who were 1 step ahead of us. So these are the companies which already have Phase II data in myelofibrosis and have entered Phase III or about to enter Phase III. And you can see, I mean, they're listed on NASDAQ in the main, but their market capitalizations are well above $500 million to over $1 billion. This is -- I don't do this as a way of suggesting that Pharmaxis will be a $1 billion company by the end of next year, but it's an indication that markets are sensitized to myelofibrosis as an indication. They understand there's a high unmet medical need, and that there's a clear commercial opportunity that we had from drugs which can demonstrate efficacy and particularly if you can show disease-modifying efficacy in this particular disease. So just going -- flipping now to the second study, which is in scarring, this is a study which is being run in Western Australia, in Perth by Fiona Wood's group. Fiona Wood has a long background in producing dermatological drugs. She was behind the invention of spray-on skin, which is now a U.S. listed company, Avita, which has a very high market cap. So there's a commercial awareness within that group of what kind of drugs are needed to make changes for patients. Our drug will work in stopping the fibrosis of the scar tissue. So when you cut yourself, your body floods the area with fibers, and then an enzyme comes along, which connects those fibers together and forms the scar tissue. Now our drug stops that enzyme working, stops the knitting together of those fibers and, therefore, stops scars forming. In the case of scars which have already formed, actually, there's an ongoing turnover of that scar tissue all the time, even though the scar might look very similar. So even in established scars, we believe we can reverse the scarring process and melt the scars away. Fiona Wood's ambition is to have scarless wound healing. And if we can do that, there are 100 million patients a year in the developed world who develop scars as a result of elective operations and operations after trauma. Hypertrophic scars, keloid scarring are all things that cause a high degree of disfigurement but also changes in function as well, the function of the patients depending on where the wound is. So our clinical strategy here is to complete the Phase I study in healthy volunteers that we're currently engaged with. That will look again at the inhibition of the enzyme in the skin. So we take skin biopsies from the patients that are in. That will report by the middle of this year, so we're looking forward to that. That will be quite an announcement which comes quite soon. And after that, we go into 2 different patient groups. A patient group with burns, so we're looking at treating them within a few weeks after the burn has occurred and any surgery corrective measures taken and then looking at them for 3 months to see how the application of our drug affects the scar formation in what will be -- is a very aggressive scar in burns patients. The other patient group we will look at are patients with established scars. So these are patients often with quite severe burns over a large percentage of their body. We will be looking at a small area to see whether the application of our drug over 3 months can change the appearance of established scar. We expect both of those studies like the myelofibrosis study to read out in the second half of next year. And positive clinical evidence from either of those studies will really change the way that Pharmaxis is seen by the market and valued. So just finishing on the news flow, we've done an awful lot already in the first half of this year. We've started these 2 studies in myelofibrosis and scarring. We've had milestone payments from our U.S. partner, Chiesi, for launching Bronchitol in the U.S. And we've announced the sale of our Russian business to a distributor there to get nondilutive cash coming into the company. We've also had a grant from the Charlie Teo Foundation to do some work in the leading cancer center worldwide, MD Anderson, in glioblastoma, a form of brain cancer. So a lot already through the door and done. Second half of the year will also be busy as we progress those 2 studies in myelofibrosis and scarring into the second half of the study, the bit where you really start to see the clinical efficacy coming through with results coming through, as you can see here in the calendar year '22 (sic) [ '21 ]. Clearly, also, the ongoing sale of Bronchitol in the U.S. will lead to cash receipts coming back to Pharmaxis, and the rest of the pipeline being progressed. Next year, calendar year '22, is all about delivery of those 2 trial results, the myelofibrosis study and the scarring study with safety and efficacy data coming through. So with that, I'll conclude my presentation. I apologize for the slight hiccup in progressing the slides, but I think we overcame that in the end. And I'd like -- I'd now like to open the floor to any questions that you have.

Beautiful. Thank you so much, Gary, for that detailed update across all Pharmaxis projects. We have had a couple of questions come in during the presentation already. [Operator Instructions] So I've got a question here. Is there any plans to list Pharmaxis in the U.S. market?

That's an interesting question. Well, yes, clearly, when you put up a slide that shows the valuations of companies that are not that far ahead of us with very different valuations, it highlights that the U.S. market does give higher valuations for biotech companies. I think everybody can see that. The transition between the Australian market than in the U.S. one is not a straightforward one. The U.S. market is a very competitive one, and I think that whilst that might be something for the future, it would be probably done after we had positive data from those 2 studies. And our market cap was significantly higher, probably in the plus $200 million mark. And we had data which allowed us to show to the U.S. markets that we had -- we were a clear comparator to other companies that we could point to on the U.S. market and say, look, we're like them and look at our data. So you don't get drained. I think there's quite a few examples of Australian companies going to the U.S. and listing and then just getting lost because they don't have the data, they are too small or they don't -- they're just not mature enough. So it's something for the future and certainly something we keep our eye on, but it's not an immediate concentration of the company. We are focused on delivering those 2 studies, which might get us there.

Beautiful. I've got another question here. What are the hurdles stopping other drug developers replicating PXS Pharmaxis research?

We have a -- so we produced about 5 drugs from our drug discovery group in the last 5, 6 years. So they've been enormously productive. And they've been able to do that because we are global leaders in a particular kind of chemistry, amine oxidase chemistry. There are other companies which have dabbled in this area, but none of them have reached the point of expertise that we have. And it is something I'm actually very proud of. And I think it's probably underappreciated. The level of effort it takes to get drugs through that preclinical phases and awfully high failure rate in getting drugs from the invention stage through to the point where you can put them into the clinic. And for us to have done 5 years is great. And we do attract a lot of attention at conferences and amongst other big pharma companies as well for what we've managed to do. So our -- all of our drugs are patented. And the -- as I said, the lead that we have in this particular chemistry gives us a unique view on how to design drugs that are very effective against blocking the enzymes that we pick. So the -- and we typically -- our patenting strategy is to patent just before we go into Phase I. So we don't do it early. So for example, the 5505 has a patent date, which is, I think, 2018 or '19. So it's very, very recent.

Okay. I've got another question here from [ Mark ]. Can you provide an update on Bronchitol progress in the U.S. since launch?

Yes. So it's -- obviously, it's gone through with our U.S. partner, Chiesi. We chose Chiesi because they have a -- already have a franchise, other drugs in cystic fibrosis. So they have a sales team which are experienced and know the clinics, know the clinicians and know the staff in these clinics, know what they need. And they have devoted an enormous level of resources to preparing the market to go in with Bronchitol. And we've seen that time and time again, even with their interactions with the FDA. The investment they made in making sure they presented the best case was very impressive, and they've never shared that. The beginning of the launch of -- in the U.S. is, of course, affected a little bit by COVID. In order to put patients on a new drug, the patients have to go to a clinic. Cystic fibrosis patients are among those that are most impacted by the problems really the potential of a pandemic, so they're reluctant to go into the clinics. Chiesi, obviously, realized that before the launch and have strategies in place. So I think at the moment, the launch is going as well as we expected. But it is slower than it would be if we did -- if it weren't affected by COVID. It's great to see the U.S. and their vaccination program progressing so quickly. And we hope that, that returns to normal, so that we start to see a normal -- a more normal situation where patients can visit clinics, they can be tested, and they can be put on Bronchitol straight away. So very pleased with the progress to date, probably slower than we would have liked. But I think the reasons are understandable, and we can see the commitment that Chiesi is bringing to this is very impressive.

Great. I've got a question here from [ David ]. How different is the Pharmaxis approach to treating burn scars to that than the one developed by Avita?

So Avita's is -- product is spray-on skin. So that's looking at trying to improve wound healing, so trying to get wounds to close and get them to heal. Our drug is to stop the scar formation after the wound is healed. So for example, in a burns patient, they would be -- they would come in with their burn. They would be treated probably surgically with skin grafts, that kind of approach, or closure or dressings. Our product would not be used until probably 3 weeks after the patient has been first treated. At that point, they would go on to our topical, our cream. So this is after the wound is closed to stop the adverse scar formation. Because the scarring is a good thing, right, so you need to have a scar in order to close the wound and actually give you strength in the wound that's left there. The problem comes with when the scar continues to grow over a period of time, so it becomes a -- both a cosmetic and a functional impediment to what you do. These patients at the moment normally get referred for laser therapy. That's the most effective way we have at the moment of trying to treat that, and it's not -- it doesn't produce great results in all patients. So there's a lot of room for improvement here. So a topical agent that the patient could rub on that would stop these scars emerging in the first place would be a huge commercial opportunity and a great benefit to patients as well.