Syntara Limited (SNT) Earnings Call Transcript & Summary

Good morning, everyone. The clock has now ticked past 10 a.m., so we'll get started with today's special investor briefing with Pharmaxis' CEO, Gary Phillips, who'll provide a clinical trial program update, which continues to meet a company restructure. My name is Alfred and I'm from the Investor Relations team, and I'll assist with running today's briefing. Just a quick run through the formalities after the presentation. Gary will take questions from attendees. [Operator Instructions] It's a very busy day on the ASX for investors, so I won't take up anymore of Gary's time. Gary, let me hand over to you.

Thanks, Alfred, and good morning, everybody. Thanks for joining us. Quite a lot of content I'll be presenting this morning is something we -- we put out a few weeks back when we announced the restructuring of Pharmaxis. So I won't spend too much time on my presentation and I need plenty time for questions. So the first slide is obviously the new kind of assets, so let's -- let's crack into that. Just as a -- probably to giving you an introduction to Syntara and the launch of the new company. I just wanted to spend just a couple of minutes on reminding people of what we've done. So we have sold off the Mannitol Respiratory business to a company called Arna Pharma. The employees that were with Pharmaxis in the Mannitol respiratory unit have -- and -- working on behalf of Arna Pharma, and we closed this 2 weeks ago. So the employee numbers going into Syntara dropped from around 70 to around 25, it means that we have a much reduced lease over the research labs and a small corporate office that we'll have. We've downsized all our corporate administration requirements and remit all of the direct and indirect costs associated with operating a global pharma distribution business. And I think it's worth noting that this is the basic premise for the restructuring, running a pharmaceutical company, which is manufacturing and had to comply with good manufacturing practice guidelines and we're audited by the TGA, the FDA, European authority is another regulatory that assist worldwide, carries a huge cost burden and that the new company Arna Pharma, taking on the Mannitol Respiratory business is well placed to manage that with a lot of additional products that's going to be putting through its factory, which reduces the overall overheads in running that and we'll turn them on at our respiratory business into a profitable business. Likewise, the new company, Syntara being focused on clinical development isn't carrying all those additional costs that were part of that business. So it allows a significant reduction in cost. We've tried to show that graphically on the right-hand side here with the cash expenses, excluding clinical trials, if you look at sort of core expenses to take away all of those clinical trial cost external one and the external drug discovery costs. Then the core expenses dropped from $23 million per annum on a pro forma -- financial $23 million down to $9 million. So that's a saving of $14 million going forward -- from this point going forward. So it makes a massive difference as the new company, Syntara a very strong step back position. So what is Syntara? What are we about? The first thing to say is that we have a smaller and very focused board and the new leadership. I'm joined by our Chair, Kathleen Metters, Kathleen had a stellar career, the Head of Basic Research at America for 4 years, also on our U.S. biotech exited to [ Celgene ]. So she really understands our business model, if you understand our science very well and has been a non-exec director with us around a number of years now. And I'm delighted that she accepted the Chair of the new Board. The science within Syntara has been well and truly validated. We've got a science platform that leads the world in its field, that we've been internationally acknowledged in the claim, but also with 3 recent major publications in the last 2 years from 30 different collaborators and we've been working with us for a number of years and then publish their research and to get a publication in nature is no mean feat, and it means that the science behind it is both notable, interesting and also very well validated as well. The new company also starts with a very strong pipeline of clinical stage assets. And our lead program is in forms of blood cancer or hematological malignancies which I'll go into briefly the study that we're about to start. And so that company, those 20 to 25 people with the new board, really well-validated science has the potential for 5 Phase 1c/2 studies in markets with a high unmet need, significant potential from a market perspective and also high-value exit opportunities. All of them due to generate data in a 9-month window from the end of '24 through to the middle of '25. So that's a really valuable proposition for the new companies starting up. And that study I mentioned in myelofibrosis, rare form of blood cancer is due to start recruitment in this quarter after getting the go-ahead from the FDA in the last quarter. We've made really quick and speedy progress on that. So that study is now our drug PXS-5505 being used in combination with standard of care in myelofibrosis, which is a JAK inhibitor. In this case, we're using the market-leading JAK inhibitor called ruxolitinib which is used by the vast majority of myelofibrosis patients. Ruxolitinib is a very good drug at controlling the symptoms of myelofibrosis. And in this case, we'll be looking to recruit patients who are on a stable dose of ruxolitinib coming into the study, and then we'll be adding 5505 onto that. Because of the good safety profile we've had running up to this point, we're able to go straight in at the dose we used in the monotherapy study, which we know inhibits the lysyl oxidase enzymes more than 90% at trough. We haven't got to go through a dose escalation phase of using a lower dose for us. We can go straight in. And we're looking to see in this study, we're going to track these patients for 12 months. It's an open-label study. So there will be news flow going through the middle and second half of next year when we start to see data coming out. It will be a study which we believe will be fast to recruit. We're looking for the FDA would like us to recruit 15 patients. We've actually got 20 clinical trials sites opened in Australia, South Korea, Taiwan and the U.S. Those sites are already operational and already looking for patients now. So we start -- we -- as I said, we aim to start recruiting this really quickly. And we expect to see recruitment of this take, be finished in the -- by the first half of next year. And we would have significant data coming out towards the end of '24 with those patients with 6 months' worth of data. Now we're going to keep those patients on and look at them for 12 months because looking at the monotherapy study, which we're just winding up now, we believe that at the end of 6 months, these patients have still got some improvement left to go. The drug is still increasing its effect at that point. So we're going to track them out to 12 months as well. So the full data set would be available by the middle of '25, but I said that a really important interim data set towards the end '24. So yes, that's -- we're really excited about the study and the investigators that we've got working with us are all very keen as well. The mode of action is that this drug is a novel one. And certainly, we've got a lot of support from international key opinion leaders who believe that there's a place for 5505 in myelofibrosis used in combination with the current standard of care. The -- I guess the other reason I mentioned was the exit values. And this is a table just put together to demonstrate the number of companies and deals that have been done in myelofibrosis in the last couple of years. And certainly, CTI pharmaceuticals were bought by Sobi in June of this year and then in the middle of last year, Sierra Oncology bought by GSK, both these acquisitions were north of USD 1.5 billion for drugs which have Phase III data or in the case of CTI had one on the market. Other examples as well are drugs going with Phase IIb data with exits north of $1 billion. So I think it's -- we -- I've seen personally the level of interest in the program that we have and the early data we've got. We're planning on giving an update at the American Society of Hematology in December and a month of the data we've got from the monotherapy study. And again, I expect that to attract significant interest from other companies that are active in this area that -- on the lookout for assets to take advantage of the unmet need that's here and trying to bring more benefit to patients. So I mentioned the 5 studies that those are spread across. So there is a focus within Syntara. The investment that we're placing is largely in those kind of blood cancers, myelofibrosis is the lead indication there and when the studies are underway. We are looking at Myelodysplastic Syndrome, MDS. It's another disease where there's a high unmet need where we think 5505 a good rationale. It was a subject of a nature publication at the beginning of the year. So that protocol is being reviewed at the moment to see whether there's an opportunity to go ahead there. And then in the Scar prevention things working with Professor Fiona Wood in University of Western Australia over in Perth. We're back and we're going to a study in scar prevention which will be a placebo-controlled study in patients with burns, where they have a greater than 5% body surface area. And so these repeat patients with significant burn injuries, and we are listening to Fiona Wood, it was clear that there is a large unmet these patients often have bad scars when it's a large body surface area that's involved. And there's nothing really they can do for them at the moment. So using a pan-LOX inhibitor here is a very attractive proposition and one that we'll be commencing very shortly. We'll be announcing more about that study in the next couple of months if the recruitment gets underway. And we're also looking at modification of established guard. Based on that earlier study we reported in this year with a topical agent, again, we're looking at different kinds of that and the endpoints we can use to get a study which really demonstrates great clinical proof of concept in that one. And lastly but not least, the PXS-4728, which is a back to start the study in IRB data sleep disorder, which is associated with Parkinson's disease, again, another placebo-controlled double-blind study, first patient is -- we expect in this quarter, with data coming in the first half of '25 and again, a big market opportunity as well. So if you're looking around biotechs with valuations where we are with this number of shots on goal in the next 18 months then it's a very smallest. And this is -- we're really excited about the launch of the company with this potential, with this many shots on goal with this number of clinical studies that can due to report. And just to add that the scar preventions and scar modification studies are investigator-initiated studies. They're not -- the company is not investing a huge amount of its cash indeed. And the Parkinson's disease study is majority funded by Parkinson's U.K. So I think that the majority of the investment going into the blood cancers from the company's focus. And news flow, all important, I think, in today's market that companies are able to keep up a continuous flow of updates to the market. And you can see that in this quarter coming, in this quarter now, we'll be announcing the start of 3 separate studies. The myelofibrosis combination study with the JAK inhibitor, the scar prevention study for burns injuries and the Parkinson's disease IRBD study as well. All three of those due to start in the next couple of months plus the company presenting at ASH, American Society of Hematology of data. First half of next year, we'll see the completion of recruitment of we expect of the combination study in myelofibrosis, potentially the start of a study in MDS and us giving a further update on the technical development plan in skin scarring as well. And then towards the back end of next year, the second half data starting to come out, which we expect to be real value drivers of the stock. So I'll just finish up with just a push on the cash. So at the end of September, we had $7 million in the bank. And I just note that there's also about another -- just short of $1 million to come in from an R&D tax credit. We've advanced some of it through a loan, but the rest of it is the balance of it is due in this quarter coming. We also expect about $1.7 million to come from Parkinson's U.K. when we dose the first patient in the IRBD study as well. So that plus, obviously, the impact of exiting the Mannitol business unit, which means that the -- these enormous cost savings, which I pointed to, and obviously, that means a much reduced cash burn for the ongoing business going forward. So, Alfred, with that, I'll leave it there, and I'm very happy and open to take some questions.

Excellent. Thanks, Gary. We've had a few questions coming which will start asking in a moment. [Operator Instructions] I can see a few questions coming multiple times, so I'm going to lump a few together. The first question is from Jawahar. The LOX inhibitor trials for anti-scarring or scars healing have reviewed excellent results so far. Now that you've reorganized the company, is it possible to commit more resources and expedite these trials?

Yes. I think clearly, we see a lot of potential in that area. The mechanism, I think, we've demonstrated those work. I mean, we showed a 30% reduction in collagen content in the scars from a 3-month treatment with a topical agent. I think you'll see with the scar prevention study, we're going for burns injury. It's a severe scarring process. We think the double-blind placebo-controlled study there done in 2 centers in Australia, where we'll give more details about the protocol when we recruit our first patient. I think it's an excellent way of demonstrating the efficacy of the drug and what it's capable of. With the scar modifications, yes, the company is investing at the moment in trying to understand which are the particular forms of scarring that the drug will be best suited for. And in particular, one of the endpoints that we can use in order to make sure that we can demonstrate both an appearance and functional change in the scars, which are valued by patients. I think the study that we ran earlier in the year the endpoints in that -- we learned a lot, and I think we're very conscious this time to just work with -- and we're talking to both dermatologists and plastic surgeons globally, across all continents to get their read on what are the scar types that we should target. And what are the end points that we should be using that would be valued by clinicians, by patients and also regulators as well. So there'll be an ongoing discussion with the regulators. So yes, certainly, the review of that and announcement of more detailed plans in the first half of next year, we'll see the company moving forward as quickly as we can in that area.

Thank you, Gary. Jawahar that also answers your other question about using additional medical centers as Gary's talking overseas as well. Question from [ Mariana ]. How much was the Mannitol respiratory business sold for? And can you elaborate more on the agreed royalties?

Sure. Yes. So the Mannitol business unit made, I think we put this out in the announcement a few weeks ago, have been losing cash flow from a segment perspective and EBITDA, we -- for the last 3 years, we're losing on average around about $5 million a year. And on top of that, there was also the rent that is associated with the facility that we used to produce the Mannitol factory as well. So in moving to the future, what we've been able to do is to exit that business, the costs of exiting in the next -- in this financial year. We are still forecasting it being less than $1 million. There is no upfront cash coming in for a business which is making a lot at the moment. What we do get is a reimbursement of a lot of the expenses that we are incurring in the Mannitol business unit, which will lead to, as I said, to an overall exit cost of less than $1 million. And we've converted that loss of $5 million plus the rent into a positive royalty stream going forward. From the Mannitol products, so Aridol which is an asthma-diagnostic and Bronchitol a therapeutic for cystic fibrosis. The company will receive high single-digit royalties on the net profit of Arna Pharma from producing and selling those drugs. The company will also receive mid-single-digit royalties on the net profit of all other Arna Pharma products produced in its facility in Sydney going forward as well. And both of those royalty streams go for 8 years from the day that we closed. So we've converted a loss situation into where one of the company is immediately going to be in the black and making money from the [ rotors ] on it. It's a little bit difficult to be more specific about the values associated particularly with the Arna Pharma products. Once we understand more about the products and the facility and the likely profit levels, then we can get more guidance in the market. But at the moment, high single digits on the Mannitol business profits and mid-single-digit qualities on the Arna Pharma product net profit.

Thank you, Gary. A question from Angus. Can [indiscernible] speed up any of these clinical studies to bring commercial deals to the nearer term? And when might we expect such a commercial deal of note to take place?

Yes, good question. The -- so I made a point of talking about the data outcomes from the myelofibrosis study. That is the most mature program. One which will attract, I think, the most commercial interest in a short time frame. The data we have from the monotherapy study, so the drug being used in patients who've failed a JAK inhibitor, has already generated interest. It's now a proven antifibrotic drug. We've seen more than half the patients that finished the 6 months of therapy. Get the reduction in fibrosis scores in their bone marrow, a grade greater than one. And my view is that the value of the asset goes up considerably once we demonstrate the data coming from it in the combination setting. The vast majority of patients only about 15% of myelofibrosis patients are actually not on the JAK inhibitor, and therefore, that previous study was slow to recruit and difficult and obviously, in patients who, on average, had less than a year to live. So that was a challenging study both from -- to show from a safety point of view, but the drug came through with flying colors, we showed great safety and some early signs of efficacy as well. The data that we get from the combination study will be, I think, important in 2 ways. One is, believe that with 6 months' worth of data, which we believe we will have by the second half of next year. That will be an update on back to the FDA had a discussion about the pivotal study, the Phase IIb/III study that would be required registration. It's the data from that study that has in other companies generated exits north of $1.5 billion. So the value of doing that further study down to the end of '24 is obvious for all to see. At the same time, the company will have at that point. It will be, I think, clear that the drug is hopefully producing a benefit for these patients. We think we -- from a safety perspective, we don't expect to see issues in this next study. We think we've really proven that the drug is safe thus far. We need to demonstrate that in combination, but we're not expecting to see any problem. It's really the efficacy we see for 6 months of treatment of these patients that will be enough, we think, for a discussion with the FDA, but also will spark commercial interest in the drug from strategic potential strategic partners, with obviously that the additional 6 months going out to 12 months' worth of data coming in by the middle of '25. So that, I think, is the point where the company is seeing. And in terms of accelerating it, we've really moved fast. As soon as we have the data, we went to the FDA in quarter 2. We got approval for the protocol in quarter 3. We're already recruiting in quarter 4. We've got 20 sites open. We've been able to not have a dose escalation step so that we can have those patients recruited on the therapeutic dose straightaway. So I think that the proof now will be in the speed of recruitment. As I said, we expect to have it fully recruited in the first half and 6 months data by the end of '24.

Thank you, Gary. Just another one from Angus. Will Syntara be able to operate within its means to complete these 5 studies? If not, how does the company expect to finance these studies and would fuel studies deliver clinical results sooner?

Yes. So we -- the company is focused on that myelofibrosis study. As I said that the -- I mean, the study in looking at scar prevention in burns patients and the further study in scar modification, those studies are coming in at less than $0.5 million for the studies. Their investigator-initiated studies. They're not sponsored by Pharmaxis, we fully believe in the quality of the studies being run by the University of Western Australia and other centers, which will be coopting. But there -- we run them very efficiently and with a low price ticket because of the way that we're managing them. The Parkinson's study is being largely funded -- majority funded by Parkinson's U.K. So again, that's not a lean on the company. So the company can move forward in that area with very little cash investment. The major cash investment is going to the myelofibrosis study. And we're exploring them the myelodysplastic syndrome. We haven't committed to doing that study. We think it's an area that would be of interest to strategic partners with data coming from that -- from a smaller study with a dose escalation step on top of standard of the current standard of care. We think it's an attractive one for partnerships. It is why we're exploring because we think it could add considerable value to the asset. So as the majority that we're keeping within our means going after that. Myelofibrosis study and considering additional ones and thinking about how we might fund that going forward.

Just one more from Jawahar. Are you looking at any AI tools to expedite and reduce the evaluation time of the human trials proposed or drug discovery?

Yes. I think the use of AI is -- I think it's a topic of considerable debate in clinical trial world at the moment. There are certainly some tools which we can use to look at fibrosis. And for example, the bone marrow biopsies that we take and evaluating them, we use a central pathology labs to do that to make sure we have consistency. And I think we have not yet reached a point where AI tools are accepted from a regulatory perspective, and that's really our benchmark. We whilst we think AI can be useful, it has to be acceptable by the regulatory advantages. But I believe that in the skin scarring area, again, looking at the fibrosis areas and maybe using those tools to give an overall scoring on other assessments of the scars, photographs from scans, ultrasounds are all things which are being thought through and we may well have some exploratory endpoints in those skin scarring studies that have some elements of AI in them. But as I said, at the moment, it's very much a nascent field.

Fantastic. Okay. We are now running a bit tight on time, so I'll wrap up questions there. If anyone does have any further questions, please feel free to e-mail them through. A recording of this webcast will be made available shortly on the Pharmaxis website. So Gary, on behalf of the investors and those attendees. Thank you very much for your time today.

My pleasure. Thank you Alfred.