VERY GOOD INTERVIEW WITH STOCKHOUSE....
StockHouse.com Interview - October 1, 1999
By Craig Sebastiano (csebastiano@stockhouse.com)
SYNSORB BioTech is developing two drugs designed to treat difficult diarrhea cases,
aiming at a $1.5 billion market where there most likely will be no competitors. If all goes
well with the Phase III trials that both drugs are in, the company is expected to start
generating revenue in 2001 and 2002.
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SYNSORB Biotech Inc. [T.SYB] stirred up some interest in its shares recently when it announced that unexpectedly good
results caused it to cut short its Phase II trials for one of the drugs it is developing in order to move immediately to Phase III
trials. While some investors may be impatient about how long it is taking to find out if SYNSORB's drugs will ever be
commercially viable, the company is excited about this most recent development. In an interview with StockHouse, Dr.
David Cox claims that SYNSORB is the only Canadian biotechnology company with two drugs in final Phase III trials, and
furthermore, if the drugs are approved, they would be entering a $1.5 billion market with virtually no competition.
SYNSORB currently is working on two treatments: (1) SYNSORB Pk,
for the prevention of Hemolytic Uremic Syndrome and the treatment of
enteric hemorrhagic E. coli infections; and (2) SYNSORB Cd, designed
to treat Recurrent C-Difficile Associated Diarrhea. Through its
subsidiary, Oncolytics Biotech Inc., SYNSORB is working with the
Alberta Cancer Board on the clinical development of reovirus is this
the correct spelling? for the treatment of certain cancers.
Dr. Cox says the worldwide market for Pk could be 250,000 cases a
year and nearly 3.5 million for Cd. "Collectively," he says, "those two drugs [Pk and Cd] are addressing a $1.5 billion
market and it will be almost totally uncluttered from a market point of view."
Essentially, there are no drugs that SYNSORB will be competing with or replacing. "SYNSORB Pk as a drug has been
accorded orphan drug status in the United States," Dr. Cox says, "which means that once approved, nobody else can come
in with a similar kind of therapy."
After announcing exceptional clinical results from an interim analysis of data in the Phase II trial of SYNSORB Cd on
September 13, 1999, the Phase II trial was halted. The results surpassed the company's expectations, and SYNSORB Cd will
be entering Phase III clinical trials.
On September 30, 1999, the company announced it has signed its first exclusive licensing agreement for the Canadian
marketing and distribution rights for SYNSORB Cd with Montreal's Paladin Labs [V.PLB]. If approved, Dr. Cox does not
expect SYNSORB Pk to be released until 2001 and expects SYNSORB Cd to be released in 2002.
SYNSORB expects to spin off Oncolytics Biotech possibly in October in an initial public offering and list its shares on the
Alberta Stock Exchange.
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StockHouse: Regarding financing, how long can you go on with the cash you have right now?
David Cox: At the end of Q2, we had $16.9 million. We have hitherto been burning cash at around $1.3 million per month. Now,
because we've fortuitously been able to halt the Synsorb Cd Phase II trial and prepare to go into a Phase III Trial, our burn drops right
away. We've also taken some other steps to conserve cash and so our burn is now in the process of getting down very quickly to $1
million a month.
On top of that, we are negotiating with a number of pharmaceutical companies about corporate partnerships with both Pk and Cd.
We anticipate that that will bring in significant cash. The best estimate I have right now is that if we do get cash from corporate
partnerships, we shouldn't have to go to the capital markets again until way into next year. At which point we will have passed by
some very significant value drivers and milestones in the company, which one would expect to see manifested in an improved value
of our stock.
StockHouse: If you do need more financing, how would you get that? Would you issue more stock or would you get a loan, line of
credit?
David Cox: No, we wouldn't go for loans or lines of credit. We do have some loans right now. We financed our manufacturing facility
through debt. Basically the major options available to us are corporate partnership cash, which is the top priority right now and the
most likely outcome, or we'd issue stock either as a private placement or a secondary offering.
StockHouse: Is the company planning to make any announcements in the near future?
David Cox: You can anticipate announcements concerning corporate partnerships for Synsorb Pk and Synsorb Cd. You can
anticipate announcements relating to the ongoing clinical development of especially Cd. So as we move into Phase III Trials, you can
expect to see announcements about filing of INDs, expect to see announcements about commencement of recruitment, those kinds
of things. And probably announcements involving some of our pipeline projects such as Oncolytics. So there's a lot of stuff
happening right now, a lot of which is going to result in announcements. But as to when, I wouldn't want to say because it's unfair to
make projections about that.
StockHouse: Do you have any revenue right now?
David Cox: No.
StockHouse: When are you expecting to have revenue?
David Cox: Well, setting aside income from corporate partnerships, if you're asking when do we expect to start selling our drugs, for
Synsorb Cd I don't expect it to be any sooner than 2002. For Synsorb Pk it could be 2001. A lot depends on how we choose to
accelerate the program and whether we accelerate the program in collaboration with a third party.
StockHouse: What is the hemorraghic E. coli 0157 infection and how many people are affected by it?
David Cox: The definitive authority on such numbers in the United States, at least, is the Centre for Disease Control in Atlanta, the
CDC. Two years ago they were talking about 20,000 cases per year in the United States. Last year they revised that to 40,000
cases a year. And just last week they put out a revised estimate, which is 110,000 cases of what's called virotoxigenic E. coli, not
just the 0157:H7 strain. There are about 74,000 cases of the 0157:H7 and another 40,000 or so of the non-0157:H7 varieties, which
are just as dangerous. Now the usual multiplier in the pharmaceutical industry is 2.5 times to take in Europe and Japan and Canada
and so on. So that would put it at around 250,000 cases a year in the world.
StockHouse: Are you developing the Synsorb Pk for that treatment?
David Cox: Yes, just Synsorb Pk.
StockHouse: And when do you expect to get FDA approval for that?
David Cox: Well, I'm not in a position yet to give definitive time lines on the drug. (It depends on how fast we can get enough cases
for testing). There are some variables about the disease. It's episodic in nature to some degree. So, a lot depends on how bad a
season is and how many outbreaks there are and so on. Although most cases are not associated with outbreaks, nevertheless it's a
factor. And secondly, our drug is designed to prevent children that get E. coli from going onto the serious complications called HUS.
And the rate at which the children go onto HUS, you know, in the normal population, varies from season to season. So there's a
couple of variables in that. What we're going to do is mid-way through the trial, probably about December or January or so, we'll take
a look at what we've got so far and at that point we'll be in a position to predict when we'll be done with it. Another variable is how
much resources we want to pour into it. We can finish quicker if we spend more money. And that'll be a kind of resource-based
decision while we're trading off priorities.
StockHouse: What is HUS?
David Cox: HUS is a disease called hemolytic-uremic syndrome and it's a very, very serious condition for which there's no
treatment that children usually get when the toxin from the E. coli gets into their bloodstream. It's really a hideous and insidious
disease. As I say, there's no treatment for it right now.
StockHouse: And what does Synsorb Pk do? How does it work?
David Cox: At the semi-technical level, the toxin attacks the cells of the body by seeking out and binding to natural receptors in the
body. They're very numerous in the gut. They're very numerous on blood cells. They're very numerous on kidney cells. And these
natural receptors are sugar-like. That's just the way they are. And what Synsorb Pk does, is to mimic those sugar-like receptors so
that when the toxin is in the gut, instead of seeking out and finding the natural receptors on the gut wall, it instead is attracted to and
binds to the receptors on the Synsorb-Pk drug. And when that happens the toxin molecules are immobilized, inactivated and just
excreted out of the patient with the stool. Since we present more Pk than there is receptor in the gut, then most of the toxin, the
overwhelming majority of the toxin gets stuck to the Pk instead.
StockHouse: Is anyone else developing a similar drug?
David Cox: No. Two comments to that question. Firstly, there is no other drug in development for E. coli in the clinic. Such other
things that are being experimented with are at the laboratory R&D phase. We're the only ones in the clinic. Secondly, Synsorb Pk
as a drug has been accorded orphan drug status in the US, which means that once approved, nobody else can come in with a
similar kind of therapy. That's a program that the US government has to encourage pharmaceutical companies to develop drugs to
treat relatively rare diseases.
StockHouse: What other diseases are you trying to combat, and when do you expect to see results?
David Cox: The second of our products is called Synsorb Cd, which is a drug designed to treat a disease called Recurrent
C-Difficile Associated Diarrhea. C is actually short for Clostridium, a Latin word, and the second part of the Latin word is Difficile.
That's the name of the bug. We talked about E. coli. Well, Clostridium Difficile is another kind of bug. So it's Recurrent Clostridium
Difficile Associated Diarrhea. Now that might sound like something that's fairly esoteric. In fact, it's a very, very widespread disease.
There are about 3 and a half million cases annually in the United States. And it is caused by antibiotics basically. If you're
prescribed an antibiotic, particularly Ampicillin or the Cephalosporin derivatives, you open up the box and you look inside and see
the product leaflet. And one of the first contraindications will be "beware of diarrhea". When you are taking an antibiotic, I'm sure you
know that the antibiotic doesn't automatically zero in on the site of the infection. It bathes the entire body and all its organs,
including the gut. And in bathing the gut with antibiotics, it kills a lot of the natural organisms that live happily in your gut. But it
doesn't kill C-Difficile, which lives in the gut of about 20 to 30% of healthy individuals. When the C-Difficile all of a sudden wakes up
and finds that all its competitors are dead, it proliferates, and it makes a toxin as it proliferates. And that toxin is going to give you
the worst case of diarrhea you can imagine.
Now, fortunately, in about 80% of those cases the doctor will realize what's happening and he'll take the patient off of the antibiotic
that's causing the problem in the first place and prescribe another antibiotic called Metronidazole. And this will kill the C-Difficile.
And in 80% of the people that's fine, no problem. In 20% of the people, as soon as they finish the Metronidazole treatment, the
diarrhea comes back again. And you go back on the Metronidazole, the diarrhea goes. You finish the Metronidazole, back it comes
again. And this is called Recurrent C-Difficile Associated Diarrhea. There's no satisfactory treatment for that disease. It affects about
700,000 people in the U.S. per year, probably 750,000 to 800,000 if you include Canada. There's no satisfactory treatment for it. And
Synsorb Cd is designed to treat that disease by soaking up the toxin that's causing the problem in the first place. Now, only a
couple of weeks ago we completed an analysis, what's called an Interim Analysis, of a Phase II Trial that we had Synsorb Cd in and
we encountered results at this relatively early stage that were really quite spectacular, much, much better than we had anticipated in
our wildest dreams. So in Phase II Trials with Synsorb Cd, we saw quite stunning evidence of the efficacy of the drug, so much so
that we decided to halt the trial early and move into the last of the three stages of clinical evaluation called Phase III Trials. So, in
other words, we're short-circuiting the whole process because things look so good right now. We're jumping from Phase II right into
Phase III which, from an investment point of view, basically accelerates the date at which we can anticipate revenue from this drug
by 18 months to 2 years. We're still a ways off because you have to go through Phase III Trials; you have to plan them, get
approvals, actually do the trial, do the analysis. So that'll take us probably way into 2002 by the time we're all done. But it's earlier
than otherwise would have been the case. We still anticipate that the Synsorb Pk drug will be the first to be approved, but Cd won't
be very far behind it at all. And the exciting thing about this is that this dramatically compelling clinical evidence is the vindication of
the Synsorb concept. It gives very, very convincing evidence that the concept is worthy and is likely to form the basis of a series of
therapeutic drugs.
StockHouse: So does the Synsorb Cd, does that work similar to Pk?
David Cox: The mechanism of action is entirely analogous to Pk. The toxin that looks for these natural sugar-based receptors in the
gut instead finds the Synsorb Cd and attaches to it. Now chemically, Cd and Pk are quite similar, but they have totally different
actions. Cd does not work at all against the E. coli toxin, and vice-versa. But the Cd is very precise at picking up the C-Difficile toxin.
A lot of these gastroenteric diseases are caused by toxins that get into the gut. And if you can remove the toxin then you don't have
the disease. That's the notion. It's pretty simple really.
StockHouse: And is Synsorb trying to focus on a lot of gastrointestinal diseases?
David Cox: At the moment, yes, it's our area of expertise. If you had two phrases to describe the company right now, it's
carbohydric chemistry (the technology platform) and gastroenterology, the disease focus, particularly bacterial infections of the gut.
StockHouse: What would be the impact on the company if both drugs were approved?
David Cox: Let's look at it this way: Synsorb Biotech as a company effectively now has two drugs in Phase III Trials. Even though
the Cd hasn't actually gone into Phase III Trials, it's now eligible to go into Phase III Trials. We're the only biotech company in
Canada that has two drugs in Phase III Trials, which are last stages of clinical evaluation. If the drugs are successful and are
approved, they are dealing with diseases that have no competition, no competing drugs. The E. coli disease is a rapidly emerging
disease, as I gave you those numbers earlier on, they're just rising astronomically. We would be the only treatment available on this
planet for that problem. The Synsorb Cd is an even bigger market. So collectively those two drugs are addressing a $1.5 billion
market and it will be almost totally uncluttered from a market point of view. There are also some riders on this, we have to cross
plenty of hurdles yet. But I'm sure you can see the potential for revenue from these drugs is quite remarkable. And it will transform
our company of course. Everybody knows that when you have a drug that's approved, then you go from being a wannabe to a serious
contender with significant market cap.
StockHouse: So the two drugs won't be replacing anything at all, will they?
David Cox: No. For the E. coli there's no treatment at all other than supportive care. For the Cd, C-Difficile, a number of things have
been tried here and there. The antibiotic of so-called "last resort," vancomycin, is sometimes used. But it's no more effective really
than the Metronidazole. So essentially there's no drug that we're competing with or replacing. There's just nothing.
StockHouse: You recently acquired Oncolytics. How is that a part of your strategy?
David Cox: Synsorb acquired Oncolytics largely opportunistically. Because the technology was developed at the University of
Calgary, the scientists involved with the original inventions were known to us, knew our company, wanted to have the treatment
developed in Calgary. So it was a natural fit for Synsorb and for Oncolytics to become one. And frankly we were that excited by the
data we saw - admittedly early data - that we couldn't pass it by. So we acquired the company in the spring of this year. Because
we're so anxious to focus on Synsorb Pk and Synsorb Cd, we don't want to get distracted by lots of pipeline projects. So in each
case, everything that we've acquired, we've either financed separately or are in the process of financing separately and we manage
them separately so that they still remain an asset for Synsorb and appear in our books, but they don't consume shareholders'
money that should be properly spent on Pk and Cd. Nor do they consume shareholders' time. So where that leaves us with
Oncolytics is that the company has been separately financed with a private placement and will be additionally financed with a further
round of public offering or the first initial public offering probably in October. So Synsorb as a company will remain the majority owner
of Oncolytics but it will have adequate finances to take it way through into mid-stage development without using any of Synsorb
shareholders' cash.
StockHouse: Do you plan to spin off?
David Cox: It effectively is spun off already. Right now we're the sole proprietor but we'll be the majority owner once the offering is
complete.
StockHouse: What is Oncolytics about? What do they do? How are they helping you?
David Cox: The Oncolytics company is based on a treatment which involves the use of a naturally occurring virus. Now, for many,
many years, the holy grail of cancer research is being able to find a virus that will kill cancer cells but not kill healthy cells. And a
number of companies that have experimented with genetically engineered viruses are making some progress. What the scientists at
the U of C discovered was that there is a naturally occurring virus called the reovirus, which you will have had and I've had and my
kids have had, everybody's had. It's a harmless virus that in most cases you don't even get any symptoms, and at worst, you get a
little cough or perhaps some diarrhea when you were a child. And that's the end of it. The virus is harmless. It doesn't infect normal
cells. However, the scientists at U of C discovered that if you expose cancer cells (at least certain kinds of cancer cells) to this virus
then it goes from being a harmless, benign, non-infective virus to be a rabid killer of cancer cells. And so here you have the
possibility for the holy grail in the treatment of at least about 50% of cancers. You have a virus that kills cancers but doesn't kill
normal cells. It has the potential at least of being a side-effect-free cancer treatment.
The scientists tested this virus out in a variety of human cancers that we transplanted onto mice, and in most cases the mice that
received the virus by simply injecting the virus into the tumour either had serious regression or simply the tumour disappeared. And
those that received viruses that had been killed just as part of the control experiment, they all died, or were sacrificed. So people
have said that this is one of the best animal models for cancer treatment they've ever seen. Now, so we've got a lot of happy mice.
But last time I checked, they don't buy a lot of pharmaceuticals. So clearly we have to go into trials with humans. And the first
human trials are scheduled for the spring of next year here in Calgary. So we're pretty excited about this treatment. Many things
have crashed and burned once they gone into human trials, but the animal model data are very, very exciting.
StockHouse: Thank you for taking the time to speak with us.
Disclaimer: The opinions expressed herein do not necessarily represent the views of StockHouse Media Corporation or any subsidiaries or affiliates thereof. |
