Synthetic Biologics, Inc.

one third quarter investor conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the starting one on your telephone keypad. To withdraw your question, please press the starting two. Please note, this event is being recorded. At this time, I would like to turn the call over to Vincent Peroni, Director, Corporate Communication at Synthetix Biologics. Vincent?

Thank you, Simona, and good afternoon, everyone. Welcome to Synthetix Biologics 2021 Third Quarter Investor Conference Call. Today, I'm joined by Stephen Shawcross, our Chief Executive and Chief Financial Officer, Dr. Michael Calico, Senior Vice President, Research and Development, and Dr. Vince Wager, Head of Product and Corporate Development. Synthetic Biologics issued a press release this afternoon, which provided operational highlights and reported our financial results for the quarter ending September 30th, 2021. The release can be found in the investor relations section of our website, syntheticbiologics.com. During our call, we'll provide an operational update on our GI and microbiome focus clinical programs, and we'll summarize our financial results. We'll take questions after prepared remarks. In addition to the phone line, This call is being streamed live via webcast, which will be archived on our website for about 90 days. During this call, we'll be making forward-looking statements regarding Synthetic Biologics' current expectations and projections about future events. Generally, the forward-looking statements can be identified by terminology such as may, should, expects, anticipates, intends, plans, believes, and estimates, and similar expressions. These statements are based upon current beliefs, expectations, and assumptions, and are subject to a number of risks and uncertainties, including those set forth in synthetic biologics filings with the SEC, many of which are difficult to predict. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. The information on this call is provided only as of the date of this call, and synthetic biologics undertakes no obligation to update any forward-looking statements contained on this conference call on accounts of new information, future events or otherwise, except as required by law. With that, I'll now turn the call over to Steve. Steve?

Thank you, Vincent. Good afternoon, everyone, and thank you for joining our 2021 Third Quarter Investor Conference Call. We continue to make significant progress on our clinical programs, and I could not be more excited by the outlook for our business. Our balance sheet remains stronger than ever with $72 million cash on hand at the end of the quarter, providing us with substantial runway to support our operations into 2023. Within this time, we expect to execute on a number of key milestones related to our current therapeutic pipeline that we believe will drive significant value for shareholders. In addition, our strong balance sheet has enabled us to actively evaluate a variety of strategic options, which could include potentially acquiring or licensing new therapies that could complement and further enhance our current pipeline. We look forward to providing updates on our progress. In terms of some of the near-term milestones, first, We anticipate reporting data from the first antibiotic cohort of the SIN4 phase 1A2B clinical trial during the first quarter of 2022. Second, we look forward to reporting the data readout from our ongoing phase 1 multiple ascending dose clinical trial of SIN20 during the second quarter of 2022. I'll discuss more about each of these in a moment, but as you can see, we're in the midst of a very exciting period for our company. Turning now to the quarter. First, on CIN20, we previously announced that patient enrollment, dosing and evaluation was completed in a phase one open label single ascending dose or SAD clinical trial of CIN20, a proprietary formulation of intestinal alkaline phosphatase or IAP, intended to treat local and systemic diseases stemming from inflammation of the GI tract and disruption of the gut barrier, including radiation neuropathy and celiac disease. Analysis of preliminary data from the SADS study demonstrated SYN20 maintained a favorable safety profile and was well-tolerated at all dose levels. During the third quarter, we initiated a phase one placebo-controlled multiple ascending dose clinical study of CIN20. I'm pleased to report that the first cohort of eight study participants will complete final dosing and PK sampling this week with dosing of the second cohort of eight study participants expected to begin shortly thereafter pending a safety review. Importantly, Both Phase I studies are designed to support the development of SIN20 and multiple potential clinical indications. Turning to SIN4, Washington University continues to screen and enroll patients for our Phase I B2A clinical trial in L-Genea comedopoietic cell transplant, or HCT, recipients for the prevention of acute graft-versus-host disease. A data readout for the first of three antibiotic cohorts is anticipated during the first quarter of 2022. As I've stated before, we believe both CIN4 and CIN20 may address very sizable and underserved markets and have the potential to be foundational long-term value drivers for our company and our shareholders. With that backdrop, I'd like to provide a more detailed update on our clinical development activities, beginning with our SYN4 or Rabaxamase program. SYN4 is our first-in-class therapeutic intervention designed to protect the gut microbiome from antibiotic-mediated dysbiosis. We believe protection of the gut microbiome may play a pivotal role in improving health outcomes for patients administered long courses of intravenous beta-lactam antibiotics as part of their treatment plan for bone marrow and solid organ transplantations. We continue to advance this program in the form of a Phase 1b2a clinical trial in allogeneic HCT recipients with our partner, the Washington University School of Medicine in St. Louis. This study is designed to evaluate the safety, tolerability, and pharmacokinetics of SYN4 in this fragile patient population. Earlier this year, We announced that enrollment and patient dosing had commenced in the first of three sequential antibiotic cohorts that will each be administered a different IV beta-lactam antibiotic to treat fever following conditional therapy. In total, eight participants in each cohort will receive SYN4 and four will receive placebo. At this time, patient screening and enrollment of the first cohort remains ongoing. However, we are experiencing short delays in patient recruitment as a result of demand from competing trials and a lower number of transplant recipients whose underlying disease warrants high intensity conditioning. Despite these delays, which are outside of our control, The trial is progressing and we look forward to reporting the data readout from the first antibiotic cohort during the first quarter of 2022. Assuming these results are in line with our expectations and we observe that SYN4 is not systemically absorbed in this first cohort, we'll consider applying for orphan drug designation and begin preparations for our Phase III program while we complete the remainder of this clinical trial. I'd like to provide an update on our CIN20 intestinal alkaline phosphatase or IAP program. We continue to view CIN20 as a versatile therapeutic that has the potential to treat a number of clinical indications stemming from inflation of the GI tract and disruption of the gut barrier, including enteropathy, secondary radiation therapy used to treat certain cancers, and celiac disease, both of which have a significant unmet medical need. Importantly, we've overcome the manufacturing hurdles which have previously hindered the clinical and commercial development of IAP to treat these diseases. CIN20 is our proprietary recombinant form of bovine IAP produced in show cells and formulated for oral delivery. IAP is an endogenous enzyme expressed in the upper small intestine that plays an important role in maintaining gut health through at least three important mechanisms. First, it diminishes GI inflammation by detoxifying inflammatory molecules. Second, it acts directly on the intestinal wall to tighten the gut barrier to diminish leaky gut. And third, it functions to support a healthy gut microbiome. In addition, we believe CIN20 has the potential to diminish low-grade systemic inflammation, which is believed to exacerbate metabolic syndrome and accelerate the progression of diseases associated with aging. We previously outlined in detail our clinical development strategy for CIN20, which includes the completion of safety studies before progressing into phase two proof of concept clinical trials in a target indication. Earlier this year, we announced the completion of a Phase I open-label single ascending dose clinical trial, which evaluated safety, tolerability, and biodistribution of SYN20 in 24 healthy adult volunteers. Analysis of preliminary data from this study demonstrated that SYN20 was well-tolerated at all dose levels, and no adverse events were attributed to study drug. Importantly, no serious adverse events were reported, and as anticipated, CIN20 was not detected in the systemic circulation. During the third quarter, we initiated a phase one placebo-controlled multiple ascending dose clinical study of CIN20. This clinical study is intended to evaluate the safety, tolerability, and biodistribution of CIN20 upon repeated dosing in up to 32 healthy adult volunteers. The study is divided into four sequential cohorts of eight participants with four doses of CIN20 given orally twice daily for 14 days. As I mentioned earlier, I'm pleased to report that the first cohort of eight study participants will complete final dosing and PK sampling this week. And dosing of the second cohort of eight study participants is expected to begin in relative short order pending a safety review. we expect top-line data readout from this clinical study during the second quarter of 2022. Assuming successful completion of the Phase I MAD study, we anticipate conducting a placebo-controlled Phase IIa clinical trial as early as the second half of next year. And one of our initial target indications enteropathy secondary to radiation therapy used to treat abdominal and pelvic cancers, or celiac disease. Looking ahead, we are also considering potential Phase II clinical trials of SYN20 to evaluate its therapeutic utility and additional indications, including non-alcoholic fatty liver disease, diseases stemming from disruption of the gut barrier, as well as metabolic and inflammatory disorders associated with aging. the latter of which are supported by our exclusive option license agreement with Massachusetts General Hospital. We are excited about this versatile program and its potential to become a platform therapeutic for our company. We believe CIN20 will play a major role in driving long-term value to our shareholders while targeting large, underserved markets, including celiac disease. With that backdrop, I'll review our financial results for the quarter ended September 30, 2021. Our balance sheet remains very strong and we are well capitalized to support our operations for the foreseeable future as we reported approximately $72.1 million of cash on hand at the end of the third quarter. Our strengthened financial position and current cash runway provides more than sufficient funding to achieve a number of major milestones, including the completion of ongoing Phase 1B2A clinical trial of SIN 4, completion of clinical trials for SIN 20 through proof of concept, and other key value drivers for the company. Before reviewing our financials for the quarter, I'd like to mention that in addition to the 10Q, we will be filing a registration statement this evening covering warrants associated with our 2018 public offering of common stock. The registration statement filed this evening will supersede an expiring registration statement and should be viewed simply as a housekeeping matter. Now turning to the third quarter financial results. General administrative expenses increased. by 9% to approximately $1.3 million for the three months ended September 30, 2021 from approximately $1.2 million for the three months ended September 30, 2020. This increase is primarily due to higher insurance cost, audit fees, and registration fees offset by lower legal costs and vacation expense. Research and development expenses increased by 116% to approximately $2 million for the three months ended September 30, 2021 from approximately $900,000 for the three months ended September 30, 2020. This increase is primarily the result of increased clinical trial expenses as we continued dosing patients in the Phase 1b2a clinical trial of SIN4 and by higher indirect program costs for the three months ended September 30, 2021, including an increase in manufacturing costs for SIN20. We anticipate research and development expense to increase as our ongoing clinical trials continue to enroll patients. To wrap up, the remainder of 2021 promises to be a very exciting time for synthetic biologics. We are very happy with our progress and remain focused on executing on our strategy. As I previously stated, I'm more confident than ever and the outlook for our business and believe we have the financial strength to execute and deliver on our clinical strategy. At the same time, we continue to actively evaluate a variety of potential opportunities that could further expand our clinical development pipeline through licensing, acquisitions, or other strategic options where we believe we can further enhance value for our shareholders. I'm proud of the progress we've made and even more excited about what lies ahead. I'd like to thank our shareholders for their ongoing support, and we look forward to keeping you updated on our progress. Now I'll turn the call back to Vincent to open the call for questions.

Thank you, Steve. Simone, if we'd like to open the phone line of questions, can you please describe the procedure to ask questions for our listeners?

At this time, we begin the question and answer session. To ask a question, you may press Start and 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press Start and 2. At this time, we will pause momentarily to assemble our wheelchair.

The first question comes from Mr. Jim Molloy with AJP.

Hi, thanks for taking my question. I was wondering if you could talk a little bit about the areas of potential acquisitions and potential timing. I know it's hard to know on timing on deals, but if there's any framework you might be able to give and then what makes the most sense for what areas you might be targeting, please.

So Jim, thanks for the question. Good to hear from you. The only thing I can say at this point is that we have been very, very active in evaluating a number of exciting opportunities. We are in various stages of diligence. These things take time. And outside of that, I just really can't give any specific details on timing. There are always unknowns that come up along the way as you're evaluating ideas. And I can assure you that our team is working very, very hard. I can tell you that over the last year or so, up until today, we've probably evaluated several dozen ideas. And we do have a short list. again, in a process, and as soon as we are ready to talk publicly about it, we'll get that news out.

Understood. Will there be a way to characterize the stage of development of the products that you're looking to bring in?

What we did is when our team started evaluating opportunities, we sort of set a criteria out there, and one of those criteria is that we we were interested in clinical stage assets. So anything, you know, phase one, phase two, phase three. So our primary interest is in clinical stage asset, not in preclinical stage assets. Excellent.

And then the 004, it looks like it moved back from fourth quarter to the first quarter of next year. Just sort of, is it COVID related or just, did it take a little longer than perhaps previously anticipated?

Yeah, thanks for the question. Let me hand it off to Vince. He just recently had an update from WashU this week, so I'll let him handle that.

Thanks, Steve and Jim. It's not COVID-related. Washington University, when we spoke to them, said that they're the number of transplants is not dramatically impacted by COVID. Things have settled down somewhat in that regard, and processes are in place. What's happened is two things. One is the initiation of competing clinical trials, and so there's multiple investigators at a tremendous institution like Washington University, and they're competing for patients. The other is that our patient population is required to have what's known as myeloablative conditioning, which means that that's the most intense conditioning regimen. And if patients come in that don't need that, then they get referred to a reduced intensity conditioning regimen. And ethically, you must do that. I mean, you've got to have the best outcome for the patient. We had a bit of a spurt in the last few months where we had three to four patients come in that all got diverted to reduced intensity conditioning and so weren't eligible for our study. So those are the two things that are impacting on the enrollment or have impacted on the enrollment in the last few months. and they are absolutely typical of this area and people that are working in the space with transplant. So, having spoken to our principal investigator, he's indicated that we would expect to have enrolment come in ways where we'll get several people in a row that will be eligible and enter our study and then there might be a month where there's a patient or two that gets diverted or isn't going to have the right conditioning. So it's really down to their underlying disease and the therapeutic modalities that are used to treat them.

Got it. Understood. Obviously, clinical trials are challenging. They take a little longer sometimes. One quarter is no big deal. Then on the other indications for O2O, beyond celiac, and NAFLD and the others, any thoughts on timing or when... It might either start or indicate which of the indications you're going to target.

So I'll handle that, Jim. We're looking at a number of opportunities. We know we want to hopefully be in a phase two trial in the second half of next year. We have a short list. We've engaged a number of experts in various areas. And I think once we understand what the full clinical program would need to look like for each of the possible indications, we'll make a decision about how we're going to approach the clinic. Obviously, we'll need to understand the cost of what it's going to take to advance these programs. And we'll talk about this. I'm hoping that we'll be able to give an indication to our investors you know, sometime probably the first quarters, no later than the second quarter of next year on how we plan to advance into a Phase II program. We've given some indication on celiac and radiation neuropathy already, but, you know, fatty liver disease, non-alcoholic fatty liver disease, we're still evaluating that, as well as, you know, additional possible inflammatory disorders that, you know, we have an opportunity to consider. Is that helpful? Yes, it is. Thank you very much.

Thank you for taking my questions.

The next question comes from Jason McCarthy with Maxine Group.

Hey, guys. This is Michael Okunowich on the line for Jason. Thanks so much for taking the questions.

Hey, Mike.

So I'd like to look, and as we're moving into that first 1b2a readout with Mirapenem, the one where you're getting the absorption data, what is the DSMC looking for to progress to the second cohort? Is that just the absorption, or are there any other signals that we'd be looking for that wouldn't have been uncovered by the previous body of data in infection control?

What good Vince.

OK. So the safety is primary is the number one thing that they're looking at. Are we seeing things that could attributed to the drug in this population that might not have been observed in the other populations, understanding that obviously this population is very different, the bone marrow transplant population. So safety is the number one thing. The absorption, when they look at that information, if there's any absorption, they'll have to determine whether that could be sufficient to potentially impact the pharmacokinetics and efficacy of the antibiotic in the next cohort, because as we've talked about before, meropenem is not metabolized We've actually just recently had some in vitro data that confirms that in plasma that it doesn't do anything to the meropenem. So the safety primarily and then whether or not the levels of SIN-004 would be sufficient to degrade the next antibiotics. And in the same set of in vitro experiments that we've done, we've looked at these, looked at the other antibiotics. And so we have a sense of what levels could have an effect on the antibiotic. And at the moment, the levels that we've observed previously in clinical trials are exceedingly low. And the levels that we would anticipate, if any, in the population, the bone marrow transplant population, are so low that there should not be a problem. But that's what we need to, that's why we're running this first cohort, to evaluate that, to make sure that in this patient population with the impaired barrier function that we still have low absorption and that won't affect the efficacy of the systemic antibiotic.

All right, thank you. And then, so following that readout, which we're expecting in the first quarter, what are you thinking on the timelines for the subsequent two cohorts?

So the timelines of the subsequent two cohorts are going to be patient driven just as this cohort has been driven. So we're going to have to evaluate over the course of the next few months what we can legitimately expect in terms of the enrollment rates at Washington University for the patients that are coming in. The critical piece of this obviously is that the next antibiotic in the study is something that can be metabolized by SIN-OF4. And so we'll want to make sure that we are able to get in enough patients, a significant number of patients to make sure that we can actually see an effect if there is one. So I think, you know, it's hard to give an answer because we can't pin down exactly the enrollment waves that go through on the bone marrow transplant. It's very much dependent on the patients and the needs. but I would not expect it to go significantly faster than the current cohort, and we would want to use the current cohort, I think, as a baseline for the projected enrollment.

All right, thank you very much, and then I'd just like to ask one more follow-up on this, on the 1B2A, specifically about what sort of, and effect size in those later cohorts where you might get some initial efficacy data, what effect size you would consider sufficient that you would be able to bring this to the FDA and discuss moving straight into a pivotal? Because I know that you previously mentioned that as a target.

So we would want to leverage not just the data here but our previous data in the other patients with the pneumonia and looking at the CDR. is really to look at the microbiome outcomes, the safety above all, and pharmacokinetics, because to get an effect size on something like AGBHD, obviously we need significantly more patients than 12 per cohort. So this is going to guide us, but it's going to be very much, I think, safety, PK, and to some degree, biomarker-driven, and also leveraging our previous experience where we can show that Cynoa4 stops the metabolism of antibiotics in the feces, preserves the microbiome, Those are the kinds of information that we'd be needing to put together, I think, to take to the FDA to make that argument because we won't have enough patients in this one to say we absolutely stopped AGVHD. It's not a study that's designed to give a categorical outcome. It's a study that's designed to give us indications on safety and utility moving forward.

All right.

Thank you very much for answering my questions. Thank you.

Now I would like to turn the conference back over to Steve Shawcross for any closing remarks.

Thanks again, everyone, for joining us on the call today. We're, as you can see, very excited about the progress we made, and I can assure you there's a lot more excitement to come. We look forward to keeping you updated. Have a great night and have a great weekend.