psd wallstreetreporter interview

Transcript of GR's WallStreetReporter interview on 22/04/2004.

http://www.wallstreetreporter.com/linked/p....html#Trancript

Cheers,
Brantley

QUOTE


WallStreetReporter
Interview With:
Gavin Rezos
Managing Director
Dated April 22, 2004

WSR: For those members here in our audience not familiar with the company let's start with a time line and overview of this organization, please?

PSD: Well, briefly, we were founded in 2000. Work commenced though in 1995 at what was then called DERA or the Defence Evaluation and Research Agency, which is an agency of the UK government. It's now called QinetiQ. QinetiQ is the largest research institution in Europe. We have a UK subsidiary, pSiMedica which focuses on developing the BioSilicon technology, which was invented at QinetiQ, and the other major shareholder that's UK government. QinetiQ, for those who don't know about it, besides being the largest research institution in Europe, they have invented things such as carbon fiber, liquid-crystal displays, jump jet, thermal imaging, sonar; quite a range. They are a very successful group to be associated with. We have a very strong IP portfolio, with patents granted in the US and the European markets. As you mentioned, with the recent capital raising, we have about just over $21 million US dollars, and we have a very broad platform technology. But, the core focus is in drug delivery that relates to controlled slow release drug delivery over hours, days, weeks, or months, and diagnostics. As you mentioned, the base thing we are working on is the element, silicon, which is ubiquitous. It's the third most abundant element in the earth's crust, being 28% of the earth's crust. There is much known about silicon in terms of the way it behaves, the semiconductor and chemical properties, micromachining properties, but what wasn't known was that we could make it dissolve in the human body. It dissolves into silicic acid, which is a natural form of silicon found in the everyday foodstuffs such as beer, wine, rice, and cereals. So, we are taking something, which is very well known. We fill it full of holes at the atomic level, we nanostructure it, we have loaded it with drugs, and embed that either by injecting it, implanting it or swallowing it, in a variety of forms to release drug over hours, days, weeks, or months.

WSR: What can you tell us about brachytherapy and also controlled slow drug delivery in terms of the potential market opportunity?

PSD: Well, brachytherapy is a fast growing area. Essentially, brachytherapy is a short-range radiotherapy with direct injection into a tumor. You have a bigger dose with less side effects. There's nothing really which achieves that at the moment, and the reason is because the isoptopes that are currently used have a longer-range effect. So, we are lucky to able to use p32, as in the isotope phosphorus, is very hard to load normally. Also, we can buy silicon off the shelf in most countries in the world, which is doped with phosphorus for electronic use. We are able to nanostructure that, put it into a reactor, bombard it with neutrons, and then very simply you have a p32 brachytherapy product, which can go directly into a tumor, delivered by a fine gauge needle. p32 has an eight-millimeter kill range, which means only killing the tumor cells, in that vicinity, and not impacting the entire body. In the brachytherapy market, there are products for liver cancer, for prostate in particular. But, we believe that the BrachySil (32p BioSilicon) product will have applications across a range of cancers because of the mode of delivery. Importantly, this area is currently about $500 million per annum growing to $1 billion per annum over a couple of years. Now, we expect our p32 product to be registered as as a device by 2006. Phase IIa clinical trials start in Singapore in May. Phase IIb will be in Singapore, UK, and US in 2005. So, revenues from that product will start coming in during 2005, with the bulk of revenues post registration in 2006. Drug delivery is a very important focus for us and is one of the fastest growing segments of the pharmaceutical market, growing at about 20% compound average growth per year. One of the reasons for that is big pharma tries to better target its drug with a higher dose with less side effects. The other aspect for drug delivery is that there are a number of drugs coming off-patent, various commentators say that there is between 17 and 22 of the world's top drugs going off-patent in the next five years, ranging from about $40 billion to $60 billion in revenue. By repackaging those drugs , you can get new patents positioned on them, new improved versions of the original formula, you simply need to show that you have a better efficacy, safety, or compliance. The BioSilicon has the ability to be able to repackage some of those drugs in terms of slow release mechanism, with better compliance so there is only a one take of the implant as opposed to taking a capsule everyday or having a slow drip intravenously everyday, in terms of safety, by going directly to the site, and in terms of efficacy by having a higher dose with less side effects. So, that's an important area for us, in slow-release controlled drug delivery.

WSR: Give us a sense here of the next step in the development of the company’s progress to the clinic?

PSD: We have been bringing up the entire platform over the first three or four years. This technology has applications in orthopedics, tissue engineering, and stem cells. Most of those areas are done through collaborations externally for development that, whilst we focus on the core areas. We chose the BrachySil or the p32 product as a core area, which will help prove up the rest of the platform as studies in man. At the end of the day, we are always using BioSilicon at 99.99% purity, unlike polymers in drug delivery, where if you want to change the profile from two weeks to four, you have to change the chemical entity, which means a new regulatory process. With this, we are simply using the same silicon. It is the element silicon, it's not a compound. We simply change the amount of air in it it last two weeks or four weeks. The data we get from the p32 trial in Singapore, in terms of its efficacy or the product itself, but in terms of the byproduct, the silicic acid in the body etc., all of that data helps to prove up the whole drug delivery platform, and that then gives us a better stand with the large pharmas we've been talking to over the last six or seven months in relation to the potential of this particular technology.

WSR: Let's highlight that for our audience here, the milestones achieved over the course of the past year.

PSD: Well, we've spent the first few years really patenting positions in terms of the technology, the application, and fabrication of it. Since then, we've been able to announce, once we've covered those positions that we are able to load and know how to load, a range of different drugs in terms of size, in terms of water solubility, and in terms of additional bonding of particular drugs to the BioSilicon. But, most of it would be simply loading it. We've proven how to load a range of drugs. We've also proven that we can release them over hours, days, weeks, or months. We've proven that it's as safe as titanium in the body. These have been shown in small and large animal models, and we've proven that the byproduct is silicic acid, which is processed through the kidneys. So, there's been a lot of risk in the technology over the last three years, which has been reduced significantly as a result of these milestones being achieved.

WSR: When we talk about the company from a standpoint now of cash position give us a sense here of the direction of how far this placement in capital will allow the company to develop?

PSD: Well, we've just raised about US$21 million. We expect those funds will last well into the period when we start getting some revenue. Two areas of revenue to mention. We have potential revenues coming from the BrachySil lead product in late 2005 or early 2006. We are also looking to license the platform technology to drug companies and biotech companies who wanted to use it for their own products. We would expect some upfront payment, and milestone payments. We would see, obviously, some of that cash coming in certainly in 2005. So, funds we have raised now have put us in a very good standing, a very strong capital position to have strong negotiation positions, as well as have the cash resources that we need to complete the clinical trials of our existing products, products we are developing, as well as of course working capital and general admin and overheads for the next couple of years until revenue comes in.

WSR: What is the long-term strategy for the BioSilicon technology that, in your vision, will help the company succeed in this market space?

PSD: We have to develop our own product to prove the technology so that others can see how well it's working, so they themselves will then approach us to use the technology for their own product. At the end of the day, this is an enhancing or enabling technology. It enables people to deliver their drugs better, to implant their devices to work more effectively. It enables chip and electronic companies to move into healthcare using technology they know very well. By having our lead products out there, being successful in clinical trials and then being marketed by ourselves or distributed by others, that then brings the entire platform open for others to come and use. That is the longer-term aim, and that this company will be essentially an enhancer or enabler, collecting revenue from many others who are developing products where have a component and then pick up royalties through that.

WSR: In terms of the collaborations, give us a sense of some of the collaborations that are driving the company forward here?

PSD: We have collaborations, Ian, in important areas in the UK, Singapore, Germany, US, and Australia. The more important ones recently, I guess, NanoHorizons was an interesting one because it showed the strength of the intellectual property portfolio, the company which is working in the area of porous silicon, which has strong US government contracts and connections, and they saw the strength of our US patents, rather than work around this, they approached us to work with us to see if we can help them and the applications that their technology and perhaps there are some things we can use there. That's another example of the collaboration, which benefits both parties, but importantly it shows the strength of our patents. Other collaborations that are important are the ones with Singapore General Hospital. It's their first joint venture in their history, a 136-year history, that is for developing the BrachySil product. We have some important collaborations with teaching hospitals in the UK, in particular, and in universities in the US, where we are developing some of the non-core areas. But, that also enables us to be in a position where we can sell off some of that technology of which is orthopedics, with tissue engineering or stem cells, which for various reasons they are important to other companies, whilst we focus on the drug delivery side which is our core focus.

WSR: When talking about members of the team here do you feel you have the team clearly in place to accomplish the mission at hand?

PSD: We have an excellent team, and it's been together for the last three and a half years. We have Roger Brimblecombe, who is the former Chairman worldwide of SmithKline & French Research. We are very lucky to have someone of his caliber, his networks and contacts available to us. Roger Aston, Dr. Aston is a former CEOof one of Australia larger biotech companies as well as being a consultant for UK government in biotech. He brings a big biotech experience. I have the international capital markets experience, and the chief scientist is a world leader in his field. It's a very strong team, and we've built up underneath that, a number of specialist people we've managed to attract in the drug delivery side, the microbiology side, the formulation side, and the operations logistics side from other pharmaceutical companies and biotech companies. So, the team is strong, and getting stronger. Of course, with our recent capital raising, we've now got people who are looking at where the fast growing companies are, where the big potential is, and we are getting some approaches from people who want to come and join us, which is even better.

WSR: As far as it relates to the US capital markets, is there a chance the company will approach the US markets?

PSD: Well, we are listed in Australia. We are also listed in Frankfurt, in Germany. We have about 40% European and US owned, we have strong liquidity in both the Australian market and the Frankfurt market. We trade probably 20% of the stock, a good $20 million or $30 million worth of stock trades every month in Australia and Germany. We are looking at, in the longer run, to be listed in the US, and there are ways of doing that. We are probably going to do a NASDAQ listing in one or two different forms which haven't quite crystallized yet, but I would expect, within the next 18 months or so the US is where we'll be, and have a bigger focus. To that extent, we are building up collaborations in the US and looking for additional staff and facilities to build that.

WSR: When talking about the commitment of the company to shareholder value, what are the things that are paramount in our understanding of pSivida Limited in the near term and beyond?

PSD: The paramount thing is the enormous potential with this company. It's a platform technology with many opportunities, which is using a material which is extremely well known in the world in terms of its properties as well as its cost, and its abundance. We’re meeting unmet needs in a fast-growing pharmaceutical and healthcare sector, we have a very strong IP portfolio, we have a very strong management team, large and growing market, and we have reduced a significant amount of risk in the technology over three or four years, plus the fact that we have as our partner the largest research institutions in Europe, which is UK-government owned. We are in a very strong position financially. We have a core area that we are focusing on, a clear direction and from here, we are extremely confident about where this company is going.

END



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R/Brantley