Syntara Limited (SNT) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. We just hit 1:00. So we will get going and start the briefing. Just while a few more people are joining in, I just want to say thank you to everyone who's made it today. It's really exciting to see quite a few international attendees from the likes of North America, Europe, Asia. So that's great. My name is Samantha Freidin from Principal IR. I'm hosting the Investor Briefing today for Pharmaxis. We're joined today by CEO of Pharmaxis, Gary Phillips, who will provide a general business update following the release of quarterly results this morning. We'll then open the floor to questions from both investors and analysts. [Operator Instructions] Gary, as always, there's plenty going on at Pharmaxis, so I'll hand over to you now to get started.

Good afternoon. Going forward, sorry, I was having a couple of technical hitches. I couldn't hear the previous presenter, but I hope that you can hear me now. So welcome to the quarterly update from Pharmaxis. Usual forward-looking statement, and Sam if you can move to the next slide. So for those of you that are perhaps slightly newer to the story, I thought I'd just start with a very brief overview of the company as it stands today. And then I'll talk about the events that have happened in the last quarter and outlook perhaps to the rest of the year. So we are a -- Pharmaxis is a clinical stage drug development company in that we have 2 drugs, which are currently either in or about to enter studies where we will see clear evidence of clinical efficacy, whether the drug works and a safety in defined patient groups. The first of those is 5505, which is currently more than halfway through its Phase Ic dose escalation study. It's due to start a Phase II study before the end of the year. And that's in myelofibrosis, which is a rare kind of bone cancer, where we hope that the drug will have a disease-modifying potential in a market which is already worth more than $1 billion per year for drugs which produce a symptomatic improvement in these patients. We also hope that, that drug, 5505, has a potential in a lot of other cancers where it will be used on top of standard of care. So a bit more news on that coming up, too. The second drug is 6302. This is a topical drug. So it's in a cream which is rubbed into the skin. It's an anti-scarring drug, and that's currently just completing a Phase I study, and it's due to go into patient studies with scars in the second half of the year. We hope that, that drug has got the potential to improve both the appearance of scarring, adverse scarring and reactions to the skin and also improve function in those patients who have severe scars. And then funding that and drawing money from the previous investments that we've made, we do have a specific strategy to deliver non-dilutive cash and cost savings from the mannitol business, which is at a commercial stage with 2 products, Bronchitol and Aridol, which we sell across the world now, including the U.S., Europe, Russia, Asia and of course, Australia. So in summary, Pharmaxis finds itself in a strong position to fund its clinical program, and it has a clinical program that we believe will drive significant value. Next slide, please, Sam. So just before we dive into the highlights of the quarter, just a quick word on cash. So at the 30th of June, we ended with $19 million on the balance sheet as cash. We added to that very quickly afterwards. We had an announcement on the 1st of July that we had sold the distribution rights for Aridol and Bronchitol in Australia, New Zealand and some Southeast Asian countries for an upfront of $2 million to an Australian company called BTC Health. We continue to sell product to them for distribution in those countries. So this is not us exiting the business, but it's a sign of us focusing more of our efforts into the manufacturing side of the business and supply rather than commercialization. So pro forma cash balance at June then goes up to $21 million. So looking towards the future and looking at outcome and the cash runway, it's perhaps worth noting that mannitol respiratory business went from a cash burn in FY '20 of around about $4 million, there was a loss in EBITDA to that particular section of the business to cash flow positive in this financial year, and we're estimating that it will go to approximately an EBITDA of about positive AUD 10 million per year by the time we get out to FY '26. So -- as well as that cash on hand, there are further opportunities to extend our cash runway and make sure we can deliver on the milestones in the pipeline that we have -- that we're laying out. The first of those is cost savings from rationalizing that mannitol business. Now we announced the deal to sell the distribution rights to Russia earlier in the year. That also came with $1 million worth of cost savings per year, and that obviously benefits us going forward as well. And there are still further cost savings to make across the mannitol business that will be announced over the next couple of quarters. Our pipeline continues to be supported by grants and R&D tax credit. Now in FY '20, that was about $5 million. Obviously in the last year, because of the milestones that we received, we went over the $20 million cap that's allowable for the R&D tax credit. But that probably won't be the case in the year to come. So we do expect R&D tax credit to form a part of the cash coming into the company in the forthcoming financial year. And there's also the possibility of partnering deals with pipeline assets that we have. Though our discussions continue to be ongoing. Next slide, please. So let's now look at the quarter where we got to and where we're going next. 5505, this is the primary asset in the company. It's the one that we're focusing on, the one that the majority of our investments are in. This is the cancer drug, which is, first of all, going into myelofibrosis, the bone cancer that I mentioned earlier. We've made extremely good progress in the first part of this study. So this study is split into 2 bits. The first part is a dose escalation study, where we're giving patients 3 doses, one after the other. They stay on dose -- they stay on each dose for 28 days. The Safety Committee then assesses the safety profile of the drug at the end of that dose period and also the PK of the drug in the blood, and then decides whether they can go onto the second dose. Now we've already announced that we -- obviously, we went from the Safety Committee approving us to go from the first dose to the second dose. And I'm pleased to say that the dosing in the second cohort is now completed. We expect a meeting of the Safety Committee to be happening quite shortly where we hope that they will give us approval to go on to the third dose. With all that in, we had -- the first dose showed very good tolerability profile. The level of inhibition of the enzyme was extremely good at that lowest dose. So that gives us confidence that we will meet our target of inhibiting -- fully inhibiting the lysyl oxidase enzymes with one of the doses that we're giving here and that we will have an acceptable safety profile. And we expect to start moving into the second stage of this study, which is a 6-month dose expansion study. So this is myelofibrosis patients being dosed for 6 months on the dose that we select from the dose escalation part of the study. And we're -- in order to get that started as quickly as possible, we have already started to put additional sites on as well. So we are in negotiations now and contracting with additional sites worldwide. And we have sites identified in the U.S. Taiwan, South Korea and Australia, all of them active and looking to start recruitment before the end of the year. So that's a really great bit of progress. I feel really comfortable with the progress we're making. It has been challenging with the global pandemic globally, but I think that we've -- the contingency plan that the company put in place and the countries we've been to have enabled us to move quickly through the dose escalation part. And I'm hoping that, that continues to be the case when we get to the dose expansion. That 5505 also has, as I mentioned, further potential in other cancer indications where it will be used on top of other drugs. So this is where, very often, other cancers have a strong fibrotic element to them or the lysyl oxidase enzymes play a role in the tumor itself. And we believe that by inhibiting those lysyl oxidase enzymes in those cancers that we can enable the existing chemotherapy regimens to work much better than they do at the moment. And I think a sign of that was in the last quarter, we had the Charlie Teo Foundation grant to MD Anderson, one of the world's primary centers. The -- for cancer research in glioblastoma. So we're really delighted with that. And then the -- we've got collaborations going in several other cancers, including pancreatic cancer, liver cancer. Myelodysplastic syndrome is another blood disorder. And we expect the first public data to come from those collaborations in sort of preclinical studies that they've been running with our compounds in the second half of this year. And that will be, again, a major step forward for 5505 and a real start to exploration of its benefit across the range of cancers. The 6302 skin scarring study is a study that we've been working with, with Fiona Wood -- Professor Fiona Wood and her group in Perth. It's one that we're very excited about. We've actually completed dosing in the healthy volunteer study. So this is a Phase I study where we're putting this cream on the skin of healthy volunteers, and we're checking to see the safety profile of the drug on the skin, and we're also checking to see the level of drug we see in the skin and the level of drug that actually gets through to the systemic circulation. So we're expecting the study report on that to come shortly. So we'll be reporting on that in this quarter coming up now. So that's a really good start to that program, all done in collaboration with Fiona Wood's group in Perth. The preparations to the next stage, which is where we start putting the cream on to patients who have scars, and we've identified 2 particular groups, one with established scars and another one where they're getting scarring where -- with patients who've had burns injuries. Both of those studies, we're looking at protocols, discussing with the group in Perth how to progress and starting to identify which patients might go into those studies. And we hope that those studies will start in the second half of this year. So that -- getting this drug onto the scheme of patients with scars, again, a major step forward for the company. And with results of both that study and the 5505 myelofibrosis study, during the next year, it's going to be a busy few months ahead of us and a busy 2022 as well. Then finally, just looking at the non-dilutive cash. I think it's worth noting that in this last financial year, the company has added $16 million to its balance in milestones and distributor appointment fees, plus that $1 million per annum of ongoing expense savings that I talked about earlier with the deal with Russia. On top of that is a further $2 million with the deal we did for Aridol and Bronchitol in Australia, New Zealand and selected Southeast Asian countries. So I think that's a real demonstration of the company's commitment to clean up the mannitol respiratory business to make sure that we're maximizing the benefit to shareholders that can come from that business. And delivering $18 million in the last year, I think, is a good result. There's more to come from this business, and we look forward to see the results of that in the next 12 months. Having said that, I think we should also note that with the COVID-19 pandemic, there's been a mixed sales picture over the last 12 months, and that will likely continue into the next 12 months as well. Aridol appears to have bounced back pretty quickly in many markets, as patients have started to be accepted into hospital, pulmonary function labs again. And in fact, the use of Aridol with its dry powder technology seems to have advantages over some of the nebulized test that it competes against. Whereas, with Bronchitol, I think, particularly relevant to the U.S. launch that came in this last quarter from our license partners Chiesi, it's difficult to put new patients on to drug when those patients can't go to the hospital centers where they are being prescribed drug. So there has been a slower start to the launch of Bronchitol in the U.S. But we think, in discussion with our partners, that the mechanisms they've put in place and the vaccination programs in the U.S. and the opening up of the U.S. is happening, so we expect to see a return to normality within this next financial year. But obviously, this is slightly difficult to predict as all of us are struggling with the progress going forward and the impact of that of the pandemic. The next slide, Sam. Sam, can you go to the next slide? So just to wrap up then the news flow. We see that the -- in the things shaded in blue here are the things we've already announced. So it's already been a very busy 2021 with the number of things that we've already put in place. But looking forward into this next half year, further those annual cost savings coming from the mannitol business, the 5505 dose escalation study, both cohorts 2 and 3 reporting, both on safety and the efficacy that we're seeing in terms of the inhibition of the enzyme, in the system of these patients. And then moving very rapidly into the dose expansion stage and starting dosing of that before the end of the year, and that will be a, as I said, a major step forward for both the drug and the company when that happens. It puts us on the global stage for myelofibrosis drug development, one that is certainly very valuable, and there's a big prize to be had for generating positive data, which looking ahead to calendar year '22, we expect to see before the end. And then 6302, again, also progressing into patient studies in burns and established scars in the second half of this year. Again, reporting in calendar year '22. And then I think not to be underestimated, the number of publications coming from key opinion leaders in other cancers that we expect from our work and collaborations with them on 5505 in the second half of this year. So that concludes my discussion of the quarter. And I'm happy to take some questions now.

Great. Thank you so much, Gary, for that detailed update across all Pharmaxis projects. We have had a couple of questions coming through the presentation already. [Operator Instructions] The first question I've got here is from [ Red ] saying, what market share does Pharmaxis have in the U.S.? And what is the target? Also, how do the margins compare to the rest of the world?

So in terms of market share, we -- the product has only just been launched, so it's probably easier to talk about the anticipated market share rather than the actual one they have at the moment. I mentioned that it's been a difficult start for the product there because cystic fibrosis patients, in particular, are vulnerable to respiratory viruses and therefore, they are being advised not to go to the clinics at the moment where they could be put on new drugs. The expectation of our partner, Chiesi, in the U.S. has been that they would reach peak sales in the order of USD 50 million a year. I think that -- working backwards from that, that would give us a market share of the adult patients where the product is approved in the order of around about 15%. So Bronchitol is not a product that will change the lives of cystic fibrosis patients significantly in terms of becoming sort of revolutionary. But it is one where the benefits that come from our improved lung function reduced lung infections, but done in a way which is a drug, which is portable, easy for them to carry around. So it has lots of usage benefits for the patients. And that's where we see the uptake coming from in adult patients. And that's the kind of market share that we've seen in commercial markets in other parts of the world and one which we hope we can emulate with Chiesi in the U.S. The U.S. is an important market, not just because of the numbers of patients there, but also because of the pricing. So the pricing of Bronchitol in the U.S. is like other parts of the world, measured against the market leader in our segment, which is Pulmozyme, a drug from Roche and Genentech. And that sells for well over USD 30,000 a year in the U.S. compared with around about $10,000 to $12,000 in other parts of the world. So the pricing for Bronchitol in the U.S. is significantly higher there than it is in other parts of the world. Therefore, the income that we generate from it is going to be substantially higher as well.

Great. Next question I've got here is, what does the commercial opportunity for Fiona Wood's drug look like compared to the myeloid treatment market?

Yes, that's an interesting question. I mean myelofibrosis is an orphan disease. It's a rare cancer. It occurs in around about 15 people in around about every 1 million. So 1.5 people in every 100,000. But nevertheless, it's got a very significant market size because of the price per patient that's currently being charged for treatments, which only produce symptomatic relief for the disease. So as I mentioned, it's already over USD 1 billion a year for drugs being sold in that area. And our hope is that we can be disease modifying. So we would hopefully claim a significant chunk of that market. I think the scarring treatment is very much dependent on, clearly, the benefit that we can bring. But Fiona Wood's vision for the drug is that we can produce scarless wound healing. And if you can do that, then clearly, you not only have a drug that would be used in severe scarring as occurs in patients with burns and skin grafts and hypertrophic scarring that comes from accidents and major surgery, but also you would extend the product possibly into the cosmetic area. And it's interesting. We've had some interest from companies which are clearly in the cosmetic space, asking about the trials that we're doing and the outcomes that we're looking for. So if we do see some improvement in scar, particularly, say, the established scar patients that we'll be trialing in the second half of the year and getting results next year, then I think the market could be bigger for the scarring treatment, funny enough, than is for the myelofibrosis thing. But it very much depends on the results from the trials. But it's something that we don't want to get ahead of ourselves on, but the trials in the patients that we're running should explore both angles. So both the opportunity for the drug to improve functionality in patients with really severe scars that currently only have repeat surgery or laser therapy as options, but also in another group looking at what can we do about scars that are already there. Can we actually cause them to melt away?

Another question here from Dennis. What is your expected time line for starting PXS-6302 investigator-initiated studies?

So there -- second half of this year. So we finished the Phase I. And with that, then comes the study report. We update our investigator brochure. The protocol we're working on at the moment with Perth that would be then submitted for [ assumptive graphics ] approval. And then the center in Perth will be ready to go. So we're very confident that we'll start in the second half of the year. And I think there's 2 groups of patients there. One is the established scar patients, and one is burns patients. The established scar patients maybe is a quicker start because those patients can be identified within the clinic already. They are known to the group, the clinical group in Perth. So they've got a list of patients who might be interested in going into that study that have scars that are suitable to be looked at. But the burns patients, obviously, that would be done -- each of those patients would be treated after they've had surgery for a burn's injury. So they will come in as they emerge from the community. So that's maybe a slightly slower start. But certainly, in the next half year, before the end of the year, we'll be well underway, I hope, with at least one of those studies.

A few questions coming in about LOXL-2. So one of them was, can you give us a brief about LOXL-2 PXS-5382 negotiation, and PXS-4728? And someone else wants to have some more detail on LOXL-2 outlook, and why the partnering process has taken so long? So just a bit of a combined question there.

Yes. Let's start with 5382 and the LOXL-2. So it's been a frustrating process. And we've had numerous companies in diligence on the drug and looking at the scientific data that we've generated. I think the problems are twofold. The first one is that we produced a small molecule drug to an enzyme, which had already been trialed in the clinic with an antibody from Gilead. And that has proven to be a really severe obstacle to overcome in that the antibody was not successful in the clinic. And that puts a big question mark over the target of LOXL-2 as to whether it can be an effective target to go after in fibrotic disease. And the fibrotic diseases we're talking about are things like pulmonary fibrosis or liver fibrosis or NASH or kidney fibrosis. Now as a company, we've confronted these issues with numerous potential partners and gone through discussions to quite a late stage with many of them. It's been a hurdle to get over that we've failed up until now. We haven't sat still though. So we have generated new data with the antibody, which we are going to publish in the second half of this year, which will finally put this issue to rest in that we will demonstrate clearly that LOXL-2 as a target in these diseases, is still valid because the antibody was not an effective inhibitor of that enzyme. Now there are still many discussions ongoing, and we're sharing some of that data with the partners that we're talking to. But it's too early to say whether that will progress or not. But I think I share many -- probably many of the people's frustrations on this call that it took a longer time. And I personally probably underestimated the challenge of getting over this particular obstacle in companies, which -- where there are many levels, you have to deal with it. I think scientifically, we've been extremely successful in persuading companies that this was an appropriate way forward. But the failure of a major drug by a company like Gilead in the market makes it sometimes difficult to get over the second hurdle, which is the commercial teams within these groups. So we're still very much in the market there, and we've generated new data that's going to hopefully turn the tide for us. And there's still a potential. As I've laid out on the slide, the income that could come from partnering deals is something which could also help us forward with the other studies. I think the important thing here from that position, we're not dependent upon that income. It's perhaps not the blue sky that we hoped for within that, although it may still turn out to be. And where we, as a company, are really taking control of our own destiny is by generating positive clinical data in those 2 assets, 5505 and 6302. So that's a clear change in the way that we're going about the business. We're not reliant on partnering things at Phase I. We will generate Phase II data, which is an irrefutable and makes it much easier to go forward with either on our own, with further capital raises or in collaboration with major companies using their funding. 4728 is the drug that came back from Boehringer. Now they returned it because, although the drug actually worked in its Phase II trial in NASH, it had an off-target effect. So as well as inhibiting the enzyme SSAO, which is an enzyme which is involved in inflammation in the liver, which obviously produced the benefit. It also inhibited another enzyme called MAOB in the brain. So it didn't do it anywhere else. It was a selective inhibition of that enzyme in the brain. It was something that both we and Boehringer didn't spot during the lead in the preclinical work that we've done. And it was a kind of really off-the-wall kind of observation that led to that. And Boehringer felt that, that was a complication to the further clinical development in NASH, in liver disease, which I can understand. NASH is a very competitive area. So going in with a drug, which also inhibits another enzyme in the brain, would have led to questions. Now we don't believe it affects the safety of it. I mean, in fact, Boehringer also told us they believe the drug is extremely safe. So there's not a safety issue per se. It's just that it inhibits this enzyme in the brain. Now in talking to neurologists, we've now identified that, that inhibition of MAOB in the brain together with SSAO inhibition, actually makes this drug very suitable for treating neuro inflammation. So we're in discussions with a number of groups, both commercial and disease-based funding groups worldwide about putting this studies through into diseases that are associated with neurodegenerative conditions. So things like Parkinson's, in particular, seems to be maybe a happy hunting ground for this. So there'll be more news on that as we go through the second half of this year. But I'm very encouraged that maybe that this drug, which is Boehringer have developed to quite a late stage when they've done all the long-term tox, they've got GMP material ready waiting to go into the next clinical studies, a very complete profile of the drug. So if we can find an indication which suits the mechanism of action, then this could be a very quick start and a quick turnaround for that drug. So I'm keeping my fingers crossed that and working hard on trying to realize that opportunity.

Last question here is from Charlie. Will Pharmaxis continue to seek distribution rights from other providers for assets in the pipeline? Or is this mainly the strategy for the mannitol business?

No. This really relates specifically to the mannitol business, and it's where we have commercial territories, which we are already in, where we have approvals and where that generates some value in itself where distributors to get access to those rights will fund us for that. Now the -- in -- there's a number of different types of deals here that are possible. I think the ones that we've reported in the last 2 quarters have been where we ourselves have commercialized the drug in those markets. We've generated sales, and then we've sold the distribution rights by effectively selling the existing margin that we are making through to the distributors. So there, if you like, paying upfront for the margin they're about to receive over the next period of years within the distribution contract. So that makes it a relatively quick negotiation to do and one that was relatively easy to value. And we've generated $2 million from the Russian business and also $2 million from the Australian and New Zealand business as well. So that's been fine. The other assets that are in the pipeline, the way forward for them is -- as I mentioned before, is primarily with those 2, 5505 and 6302, is to generate Phase II clinical data. And at that point, it gives the company an option. We can either go on, raise more money and take those drugs into Phase IIb, Phase III clinical studies to keep them closer to market, or we could decide to collaborate with other companies at that point. And I think it's not worthwhile to speculate at this point about what our strategy would be. It depends very much on the data that we get out of those studies, but it's a flexible approach going forward.

Great. Thank you so much for that, Gary. I'll wrap up there. If anyone else has any other questions, just e-mail them through. This webcast will also be recorded -- has been recorded, sorry, and will be available shortly. Thank you so much.

Thank you. Thanks, Samantha. Thanks for your time today.