Syntara Limited (SNT) Earnings Call Transcript & Summary

All right. Good morning, everyone. So it's just ticked over to 11:00. So I'll get started with the briefing just while some other people are still joining. My name is Samantha Freidin from Principal Investor Relations, and I'll be hosting today's Pharmaxis investor briefing. Of course, we are joined today by Pharmaxis CEO, Gary Phillips, who's actually in the U.K. currently living on in the middle of the night. Gary will give an update on the current clinical trials and drug development pipeline that's being boosted by a $7.2 million placement, specifically for the Phase II trials of lead drug candidate, PXS-5505, for a new indication in liver cancer. Following the presentation, we will then open the floor to questions from both investors and analysts. If you do have any questions throughout the briefing, just pop them into the Q&A box on the left-hand side of your screen. They are on the -- that box is on the bottom if you're on smart device. And Gary will then answer these after the presentation. As always, things are very busy at Pharmaxis with multiple trials underway. So I'll hand over to Gary now to give us an update.

Thanks, Sam. Thanks for the great introduction, and it's great to be here talking to you all. The wonders of the Internet that I can join you from the U.K. and talking even though it's rather -- as Sam said, rather late at night. So I guess that many of you on the call this morning are -- know the company quite like you're already shareholders of Pharmaxis. I think the important thing about Pharmaxis at this particular moment in its life is that we have 2 programs that are entering the stage of clinical trials where biotech really comes alive. 2 trials in patients, both of them have disease-modifying potential. Both of them are going to produce results by the end of next year. I'll be talking about those in just a moment as a background to the use of the funds from the placement that we've just done. So if I can just go to the placement now, capital raising. So as Sam said, we've raised $7.2 million. I was really pleased that, that was oversubscribed. Institutional and sophisticated investors completed on the 24th of November. And we had strong support from our existing substantial shareholders. So BVF Partners, many of you will know, are U.S. West Coast institutional investor. They've had a lot of success in the Australian biotech market. They've picked several winners over the last few years. And they've been with us since 2015. And they met the team. They like our science and what we're doing. Karst Peak joined us earlier in 2021. Karst Peak, many of you will recognize as being an institutional investor, a very sophisticated one that does a lot of diligence before it joins and decides to invest in companies. And we have a U.K. investor, D&A Income. So -- and the placement pleasingly also brought in some new institutional and sophisticated investors as well. So we're really delighted with the level of support we received. And we've just announced the share purchase plan. So this is targeting to raise $2 million to eligible shareholders. The offer price is the same as the placement, $0.105. And now we're sitting at $0.105 at the moment in the market. That closes on the 15th of December. So if you've already made an offer, and as a result, listening to me, before the 15th, you want to increase it, then you still can. And we'll talk about the use of funds as I go through this presentation now. Sorry. My slides are taking a little bit of time to click over. So I think the important thing about our current shareholders and cash position is that we have pro forma $23 million in the bank. That's enough to get those 2 clinical trials I talked about through to completion, but it also opens up a completely new opportunity, which I think the last time I talked on one of these webinars, we talked about a thought bubble that was -- that's liver cancer and the placement and the recent progress we've made with the group in Rochester has made that come alive, and I'll talk specifically about that as we go through this. Our enterprise value is sitting at $30 million with a market cap of $53 million is, I think, compared to our peers, pretty low for a company that has 2 programs at this stage of clinical development. So the first of those drugs is PXS-5505. We are focusing on myelofibrosis as the study that we already started, kicked off. Myelofibrosis is a rare bone cancer. It's caused by scar tissue that builds up in the bone marrow, and that stops the bone marrow doing its job, which is producing red cells, white cells and platelets. So that patients all suffer from cytopenia. They get increased numbers of infections. They often get bleeding and bruising. Their spleen enlarges because it tries to take over the blood cell production and lots of other symptoms. The standard of care in this area at the moment is a group of compounds called JAK inhibitors. They are the standard of care. Their revenue in this area, and therefore, the addressable market at this particular point in time is USD 1 billion per year. But these JAK inhibitors only provide symptomatic relief. There's very limited survival improvement, and they're not very well tolerated. They're quite nasty drugs. Most patients discontinue them by 5 years. And then once you're off, you really don't survive very long. So this is an area with a really high unmet need. So why are we confident? And why are we going into this disease? And why are we really make -- wanted to make sure with this placement and the share purchase plan, that we've got enough cash to deliver the result from this study? Well, on the left-hand side of this chart, we've got the preclinical model that we ran -- or a group in Boston brand independently of us to demonstrate the effectiveness of our drug in a model of myelofibrosis. Now this is a genetically modified mass that develops, myelofibrosis. And on the left-hand side, you can see on the y-axis is the level of fibrosis that's actually happening within these mice in the bones. And in a normal mice, you see very, very low levels of fibrosis, as you would expect. And in the genetically modified mice, you can see fibrosis of over 20% in their bones. So flip that on to the right-hand side, and you see what happens when you dose these same mice with our drug, PXS-5505. The normal mice, obviously, there's no change. They still have low fibrosis. Giving our drug doesn't do anything there. But on the mice that's genetically modified, you can see a dramatic reduction in the level of fibrosis. And these mice not only saw reductions in fibrosis, we also saw improvements in the blood counts that they had. So the bone became functioning again, and we saw reductions in spleen volume. So this suggests that we have a drug which is disease modifying. It does something which the existing standard of care does not do. We then put that drug into a Phase IC study, a dose escalation study where we tried 3 different doses given over a month to patients. We escalated one after the other. And you can see on the right-hand side that the line at the bottom of that chart, I mean that's the highest dose. And on the y-axis here, we have the level of activity of the enzyme lysyl oxidase. And lysyl oxidase is the enzyme that we -- that our drug inhibits. This is the drug that -- this is the enzyme which causes cross-linking of collagen fibers within the bone marrow that causes that scarring. So if we can inhibit that, we stop the scarring, we stop the fibrosis, and we can return these patients, we hope, to a much better life going forward. So the important thing here was that the highest dose gave us almost complete inhibition of lysyl oxidase even at trough. So before the dose was given, the preceding dose gave us a complete inhibition. And we saw a really good safety profile. It's really pleasing and very important in a condition where tolerability is so important. Our existing drugs have quite a nasty side effect profile. Our drug was likely to be used in combination. So not adding to the patient's side effect profile is a really important thing for the future. So where are we with this? This study, the IC is finished. We're now into the dose expansion. I've circled that with a red circle here, so you can just focus on that. This is 24 subjects. It's an open-label study. It runs for 6 months. The primary end point is efficacy, but the secondaries include the fibrosis grade that happens in the bone. We're taking bone biopsies at beginning 3 months and 6 months. We're looking at hematology, looking at their blood counts throughout the trial. And we're also looking at their symptom score. So we aim to recruit this study by the middle of '22 and have results by the end of '22. And if we can demonstrate a disease-modifying effect, then we do indeed have a blockbuster on our hands and something that would really be transformational for the Pharmaxis stock. Now 5505 is a very interesting drug. It's something that can also impact on other cancers where there's a very high scar tissue involved in these things. So you may have heard of Merck and their great new cancer drug, KEYTRUDA, is taking the world by storm. Many different tumors respond to it. But if you look at the list of tumors which don't respond to KEYTRUDA, it includes things like liver cancer, pancreatic cancer. These are tumors which have a very high level of scar tissue in them and around them. And the theory is that prevents the drugs -- chemotherapies actually getting into the tumor and prevents it curing it. So having a drug like ours in combination is potentially a way forward. So we had a group in Rochester in New York, and they came to us and said, look, we think lysyl oxidase is a really important enzyme in this liver cancer. We can see that if we added it to our existing chemotherapy, we think it would improve. We gave them our compound. They've used it in -- preclinically in models of liver cancer. And they showed that -- first of all, that in their tissue samples they've taken from patients, that lysyl oxidase enzymes are significantly elevated. And then they showed that with giving it along with chemotherapy in their preclinical model, they saw improved survival really importantly. Delays tumor growth, reduces the pressure inside the tumor, allows more drug to get into the tumor and, therefore, improves survival. So in liver cancer, this is -- this would be a really big deal. I mean this is -- liver malignancies have doubled in the last 2 decades. It's the fourth leading cause of cancer-related death. It's a very fibrotic tumor. And patients presenting at the moment when they get diagnosed, only about 20% to 30% of them are actually referred for surgery to have the tumor removed. The rest of them have to rely on chemotherapy. And that isn't that effective. So these patients are dying quite quickly. Huge market, though. The commercial opportunity here, this is a market worth $2 billion a year already. And the forecast out of that will increase to $7 billion in the next 5 or 6 years. So a really important thing. So with the use of the placement that we've just wrapped, the $7.2 million has come in and the proceeds from the share purchase plan. We will now be funding a Phase IC and a Phase II study in liver cancer. It's going to start early in the new year. It's going to be run at Rochester and one other site in the U.S. It will be a 6-month study. So we'll probably do a dose escalation study to start with on top of the existing chemotherapy. And then once we've selected the dose, that will then go into a 6-month study with these patients. The important thing here is that our drug will be used as -- on top of standard of care as a first-line therapy. So this is not about patients who don't respond to existing drugs then being used on it. As soon as patients are diagnosed, they're going to put out -- gives our drug a really good opportunity to show what it can do. I'm really excited about this as an opportunity for the company going forward with a massive new market for 5505, which is turning into, I think, a real leading asset that we have that we seek to maximize the value of going forward. The other drug we have in the other trial we're running at the moment that we are also funding a good results by the end of next year is the work we're doing with Fiona Wood and her group over in Perth. It's also to do with scarring. Fiona Wood has been on record as saying that her vision is for scarless wound healing. Scars do cause problems for millions and millions of people worldwide every year. They cause both cosmetic issues, but also functional problems. And this leads to a real impact on quality of life of patients who are affected by scarring. The total scar market in 2019 exceeded $19 billion a year. We're focusing on 2 different kinds of scarring. We think that keloid and hypertrophic scar segments, that's -- even that's more than $3 billion per year already. These patients at the moment can only really receive treatment, which is laser therapy, surgical revision. There aren't any pharmacological treatments which can deal with reducing or stopping scar formation, adverse scar formation or reversing scars in patients who've already got them. So there's a real unmet need here. Fiona Wood and her group are really excited about our drug. They've used it in preclinical trials to show what we can do. They were really excited about that. We've run with them a Phase I study in healthy volunteers. We showed a couple of things. It showed good tolerability on the skin. It showed full inhibition of lysyl oxidase in the skin, which is the enzyme again, which is causing this scar formation. And also, we showed that it didn't inhibit lysyl oxidase in the systemic circulation. So it gives us a wide safety margin. It looks like a safe drug to use. And the thought of being able just to use a cream on your skin to get rid of a scar or just stop a scar formation is -- would be revolutionary to this area. So the next step is to do a 3-month study in 2 different patient groups. The first one of those is starting this month, and that's going to be in patients with an established scar. There are patients who've had a scar for at least a year. We're going to enroll 50 patients altogether. 25 of them will be on a placebo. 25 of them will be on an active drug. And after 3 months, we will look at the appearance of the scar. We'll be looking at the function of the scar. We're looking at the structure of the scar. And we'll be looking at the safety of the drug when it's used for a period of 3 months. Really exciting study. And obviously, with these patients with established scars, we're seeing if we can actually start to melt the scar away in that period of time. Once we've got the initial safety data from the first few patients in the established scar study, we'll be starting up a second study probably in the second quarter next year in patients with burns. And in this case, the patients will be identified after they've had surgery and before their scar starts to form. And in this sense, we'll be looking to see whether we can prevent the scar forming as it goes -- as the patient heals. Again, a different mode to the established scar one, 2 different ways of using the drug. And we already have interest from pharma companies who are actively out there looking for other drugs they can add to their franchise that do something. So efficacy, if we can demonstrate efficacy before the end of next year with this drug in this trial, again, another really transformational asset that will add a lot of value for shareholders in Pharmaxis. So this is how the picture looks. It's my final slide. It's -- when we talk about 2022 and what we can deliver, if you look at us now and where we are sitting at $0.105, either of those studies, the myelofibrosis study or the studies in established scars or post burns scarring, any of those positive results in those is going to lead to a significant revaluation of the company. And on top of that, we also have a further pipeline, which could deliver a few surprises during the year. They are not things that the company is investing in, but we are looking at partnering and grant applications for those to progress other assets to go forward. So we will focus on those 2 assets and really looking forward to seeing the news flow that those 2 trials generate during the year and starting off our liver cancer trial at the beginning of next year as well. Sam, back to you.

Great. Thank you so much, Gary, for that in-depth update. We've had a couple of questions come through during the presentation already. So I'll just start working through them. If anyone have any that they'd like to address, just pop them into that Q&A box there. So the first one I've got here is if we get through to commercialization, what's your market share expectation of the $1 billion annual spend on myelo treatments?

So I think that the JAK inhibitors that are currently used, which make up 100% of the market at the moment, they are standard of care. They're the only thing which patients can access at the moment. So all clinicians use them. I think the most likely course of our drug being introduced will be used as a combination. And indeed, I think if we're successful with this study going forward, probably the FDA for the pivotal study to get approval will ask us to look at the drug both as a monotherapy but also in combination with the JAK inhibitors. I think the projections are that this market is going to expand. So we're going from $1 billion now to probably more than $2 billion, $3 billion even as these new drugs, like ours, start to make an impact on that. So there's -- at the moment, I think the other limitation on market share would be tolerability. So if we can demonstrate disease modifying, I think we do already know that we've got a safe drug. We've used it already for 28 days in myelofibrosis patients, and they actually felt really good. Indeed, the patients in the dose escalation study chose to stay on and go into the dose expansion phase, which is a really good sign going forward. So I think a significant market share within that market is -- it really is achievable.

Absolutely. Next question here, will you be releasing trial data throughout the year as you go or just at the end of 2022?

I think in all clinical trials, it's -- I mean this is an open label, so there will be data available to us and to the safety committee, which are monitoring it. But I think it can be very misleading to drip feed data into the market before you've seen all the patients go through. So the most likely scenario, I think, is that we will hold on to our data and release it when we've got the full data package and the full picture so that we can educate and inform the market appropriately rather than have rabbits running at certain points where -- oh, we've got 2 patients done well ending of 2 patients and perhaps don't -- it's -- we need to see all 24 patients' power to show effect after 24.

Yes. Great. Do you have any expectations of the PXS share price over the next 12 months?

Yes. I indicated at the beginning that I think we -- compared to our peers, our valuation is -- I think, is low. I think we've appreciated a lot since -- in the last 6 months, and that's all been driven by news flow from these 2 studies from the Phase I in the scarring study with Fiona Wood and the Phase IC data in myelofibrosis patients. And we've already seen a significant rise in the past. That's going to continue. And I think, historically, biotech companies see chasing the share price up as they get closer to revealing Phase II data. The important thing here is the company has the cash to complete these studies, and that data will be transformational. I think we've got irons in the fire, and I'm looking forward to seeing it. I was delighted that our placement was oversubscribed. I think our major shareholders who've done a lot of work on us and assessment of us are really confident that these studies are the right studies to be doing, and they want to make sure that we had enough cash to get through to the end. And I also note that in the past, Fortnite and Taylor Collison has initiated coverage on us, and their initial valuation was $0.34. So -- and that's at this point not knowing what that Phase II data is. So there's a lot of headroom here for Pharmaxis going in the next 12 months. And I look forward to sharing the journey with many of you that are on this call today.

Fantastic. Another question here. Regarding the scarring drug, at what point might those pharma companies you're talking to look to buy outright? Would it be for sale?

Yes. I think when I talk to -- I've talked to companies that have got drugs like BOTOX in its armamentarium. Otherwise looking cosmetic surgery and dermatology-focused companies. And they saw us at because there's a real lack of any drugs which really treat this. The only company which ever did a treatment in scarring was Renovo back in 2013, and they sold their asset after Phase II data, much like we're generating now to Shire for USD 600 million. It was a big deal. Now that drug didn't go on -- then go on to be successful in Shire's hands. And we've talked a lot about that with the group in Perth as well. And we think we understand what that drug did and potentially some of the problems with its clinical trial design. So I've been talking about the trial designs that we're doing with these bigger companies to make sure that we're generating information, which will be useful and indeed important for them to see. And we will have a choice, I think. If we get good data, we could go on and do further studies. Or I think we would have the option at that point. If we've shown efficacy, then there's nothing stopping some of these companies making us an offer to take on and further develop at that point. And I think drugs with clinical proof of concept command high prices and big upfronts as well. So it'll be something we certainly look at, at the end of '22, and I'll be continuing to update those companies as we go through the year as well.

Great. Next one here. Why should we participate in the SPP when it's the same price as one market?

Well, I think our objective here was to offer an opportunity for shareholders to purchase a large parcel at the same price that we did the placement. We felt that was fair to all the existing shareholders that we have. And I think the important thing is that the eligible shareholders can participate up to $30,000 worth with no brokerage costs. And we watch the market, and we've seen some small parcels go through at $0.105. But I think if you try to buy $30,000 worth, I think you would have difficulty in buying at that price. So I still believe that the price that is set out is a fair one. And given the news flow that we think is just around the corner with the scarring study starting very soon and the preclinical data coming available, my expectation is that we'll look back at $0.105 and say that was a good deal at the time. The other thing, of course, is that if you buy in the share purchase plan, then the money that you're investing in the company comes to the company as opposed to just going to other shareholders, which is selling out. So that's really important. We want to put that money to use. The liver cancer study is a great opportunity with $2 billion market at the moment and growing to $7 billion in the future. So that's something, I think, we all want to have a go at. And I think that's a good reason to be joining in with us now and sharing the journey with us.

Absolutely. How confident are you that you will meet your time lines?

Yes, time lines are always -- clinical trials are something which they are a big piece there. The myelofibrosis study is looking at multiple centers in Australia, South Korea, Taiwan and the U.S. The reason that we talk confidently about delivering a result by the end of next year is that we are already aware of the impact that the pandemic has had on clinical trials. I think we've gone overweight on the number of study sites that we need. So our focus is really being able to add sites in. So the South Korean and Australian sites are already recruiting. The Taiwan and America, we expect to join in quarter 1 next year. And we're already working with them on identifying patients so they can do a quick start. So we think there's a good chance that will be fully recruited by the middle of next year, and that should deliver us a result. In the case of the scarring study, the established scar patients are already well-known to the center in Perth. So they know who they are that have these problematic scars. And they've already talked to them about the potential for a study and are ready -- just ready for the final. We're just going through the final few admin bits with Perth before they start recruitment. So that -- I think that study will recruit fast. And I think the chances of it delivering a result in the second half of next year are really, really high. The burns one, I think, is one that we -- maybe that relies on patients having a burn coming into the hospital, being identified as suitable for the study and then going on. So we're somewhat more reliant on the number of patients coming with burn. So that one may be -- we'll wait and see. But the myelofibrosis and the established scar study, I think we're really geared for success.

Fantastic. I've got a question here from another investor. Will you ensure a more thorough dossier compilation to avoid a situation where the FDA requests further data, which could extend approval by one or 2 years?

Well, we -- I think with both of these drugs, we don't see ourselves as being the holder of this right the way through until the approval of the drug. So if I look at the myelofibrosis clinical development comparators that we have, we have companies that are listed on NASDAQ with their lead asset being a myelofibrosis drug. It's the only drug they've got, really. The other ones they've got are in preclinical still. So their valuations are based on their myelofibrosis drug, and they've all got Phase II data, and they're going into Phase III, and they have market caps which are approaching or over USD 1 billion. So there's a considerable value to getting good Phase II data, which is where we're heading. There will be many occasions and potential for exit either for shareholders as we deliver positive clinical trial results and the share price appreciates or for the company, if we get approached by existing companies in the myelofibrosis market are looking for combination drugs. So I think the discussion with the FDA about the dossier and the data is still a number of years away. And I don't -- I suspect that we won't be holding it at that point. It will be with somebody else at that point.

Great. And I've got a question here from Ian. What's the long-term game plan on each of these assets, partner, self-develop and commercialize or trade and sales?

That's good question. I think it's -- it will -- forgive me for being somewhat evasive, but I think it will depend somewhat on the data. If it's -- it's really, really strong data. On the one hand, that will attract a bigger player in because they potentially want to get their hands on it, but our confidence in delivering the next study and even more value for shareholders will also be high. So I think it'd be important to give ourselves options. I think 5505 for me is a key asset. It's got a potential use in a number of different indications. We talked about liver cancer. So myelofibrosis, whilst it's a good market and a big market, there's more to come from 5505. And I think there will be benefit to the shareholders in us keeping that drug and continuing to develop it. I think the scarring drug, clinical development in scarring is quite an art form. Every patient's got different skin, different types of scarring. It's not such a straightforward thing to do. I'm very much interested in then perhaps a collaboration with an experienced dermatology company might be the best way of realizing value for us for that particular asset. But that's really me crystal ball gazing and guessing what the data might look like at the end of this. But that will be where I sit at the moment, I guess.

Fantastic. I have a question here from Peter. How does Strataderm currently on sales for scars compare to PXS-6302?

He's got me there. I'm not familiar with Strataderm as a product. So I couldn't really comment. I mean I know that there are a number of different treatments. So when I talk to Fiona Wood about what she uses, the vast majority of her patients with severe scars end up having laser therapy as their treatment of choice for modifying and removing scars. In fact, she has some pictures for me of -- I remember the little girl who was seen running down the road after -- in the Vietnam war with -- after the Napalm burned close off of her. And she had pictures of her in her 50s, going for, I don't know, 30th or 40th surgery to help release the contracture of the scars on her back that were continuing to cause her functional problems decades after the original injury. Patients do go around with the silicone sheets and other things to try and modify the scarring process. But most of these things have very limited life and they only slightly modify. And that's why Fiona Wood was so excited about finding a drug which actually modifies the scarring process itself. So I'm sorry, I don't know what's Strataderm is, but I think relative to the other treatments that are available for scarring, this has got disease-modifying potential and something which is quite novel in the market today.

Yes. Fantastic. Look, we're running a little bit tight on time now. Sorry, if there are any more questions, feel free to e-mail them in. And Gary can respond via e-mail or one of the Pharmaxis team. Just a reminder that a recording of this webcast will also be made available in the coming days. Gary, I just wanted to say on behalf of Pharmaxis shareholders and everyone in attendance, thank you so much for your time, especially logging on in the middle of the night. And of course, we look forward to hearing from you again soon.

Yes. Thank you very much, and I look forward to it, too.

No problem. Thank you.