Sharewise Presentation 22/7/24, page-119

here is full tanscript - discussion on safety and retina testing at end

Well, Paul, g'day and welcome back to our interviews. I spoke to you almost five years ago, and the share price was above $3 at the time, peaked at $3.90. Now it's 28 cents under 30 cents, so it's obviously been a very disappointing five years for you. Tell us what's your perspective on why the share price has fallen so much?

Yeah, thanks Alan, and good to connect again and yeah, it's been a heart wrenching ride, unfortunately, as you say, from the highs of the high $3 mark down to 28 cents. I think if you follow our chart, you look that we were at that high leading into COVID and post-COVID. We had a significant reduction in our share price, and that was obviously a global phenomenon. I think every company went through that. If you look at their chart, you'll see very significant reductions, 40, 50, 60 per cent reduction in their share price. And then during the COVID period, we were working very diligently and very hard. It was a very difficult time for clinical development companies and companies looking to do additional preclinical trials. One of the issues and challenges with the preclinical was that there were very few sites that actually had animals that were available for testing, and the shipment of animals was greatly restricted during the COVID period because there wasn't a lot of transport happening and there were...

What sort of animals?

These are experimental animals. There are breeds of the rodents, the rats and mice for experimental studies. In some cases, they're dogs, Beagle dogs that are bred for research and breeders were in a position where they couldn't really ship their animals to research centres. So, the animals are produced by a producer, then they're sent to a research centre, and all of those animals that are acclimatised to the conditions, they're trained to be in an experimental environment.

I thought you'd moved on to human trials?

Oh, yes, but the FDA did ask us to do some additional preclinical work and I was just trying to explain that during...

Okay, righto.

...post-COVID, we believed that we were doing very productive work. We were one of the few companies that were actually able to keep a preclinical program going during the COVID period. But also, during the clinical trials, we were able to continue to recruit and treat patients, and we felt that we'd done a sterling job in being able to progress things in terms of answering the preclinical questions asked by the FDA and also doing our clinical studies. But I think when we came out of COVID, even though we had a very productive period, and we were very happy with our progress during COVID, particularly given some of the companies, our peers, if you like, that were struggling to execute on a clinical study or execute on preclinical studies during that period, we felt that we'd been very productive.

But coming out of COVID, the market had changed and I think a lot of investor sentiment had switched across to ASX 100 companies obviously looking for more guaranteed returns via dividends. And I think also companies such as ours, which was still to embark on the phase three study, we were then in a situation where investors were looking at saying, no, this is a two-year horizon or more depending upon the outcome of the trials before we were getting into revenue. I think those factors combined the shift from the investors from speculative stocks into blue chips, and then secondly, the shift from non-revenue producing companies to revenue producing companies. But those two shifts really affected our share price.

I don't think there's anything fundamental to the company that has resulted as an outcome. We haven't had any failed trials; we haven't had any major setbacks from our clinical program. So, I think it's all to do with the market sentiment, but we continue to forge ahead and we do have documents in front of the FDA. We're hoping on some news from the FDA in the coming weeks, and we hope that that news from the FDA will allow us to move into our pivotal phase three trial, which is the phase three trial, which is required for us to get to registration and then onto those...

What are the documents you've got in front of the FDA now? What's the actual decision you're waiting for? What have you got to with - because when I spoke to you last, you just got approval from the FDA to start the trials, right? So that's now...

Yes.

...four and a half or nearly five years on. Where have you got to? What are the documents that you've got before them?

Yeah, so during that period, we continued to develop and research our product by way of a dose ranging study, which was approved by the FDA. So, we were looking at differing doses to establish the lowest effective dose of our drug for the phase three trial and that was a question that was outstanding with the FDA. So, we undertook a study with 600 subjects to determine that our lowest effective dose was two milligram per kilogram twice weekly. And so the document that we have in front of the FDA is all of the evidence to show them that lower doses are not as effective as our two milligram per kilogram dose, which we had explained to the FDA previously that we felt that that was the most effective dose to use in humans. But the FDA wanted us to confirm via a study that we had the lowest effective dose, and that's what we've done.

Is that two milligrams per kilogram, is that per dose, per injection?

Per injection, yes. So two milligrams per kilogram, a hundred kilogram person gets two mil of the drug. So therefore, we believe that that was our most effective dose, the lowest effective dose, and so the agency asked us the question during that time that we were just talking about that time period, we undertook this dose ranging study, which was a lead-in to the phase three study. So, the dose ranging question had to be answered with the FDA before we got into the phase three study.

Right.

So we've done that now, we've got that document in front of the FDA, we're just waiting for them to give us clearance to go ahead with that dose. And I think after that decision, we then have a very clear path forward, and then I think the investors will see that now we've removed a lot of the risks or the questions that were arising from that earlier period.

We now have a very sharp focus and a very clear endpoint in mind in terms of doing a phase three study, which will be 400 subjects. It will be a global study - centres in the United States, Canada, Europe, Australia. We hope that we'll be able to execute the recruitment of that phase three clinical trial within 10 months and once that's recruited, we'll then obviously take time to follow up those subjects. So, recruitment is getting those 400 people to sign consent forms and have them treated with the drug, but each patient has to be followed up for 12 months because also during that intervening period, we also did a phase two study on the two milligram per kilogram dose. Very interestingly, Alan, what we showed in that study was that not only did we get good analgesic effect, but that analgesic effect lasted for 12 months. And we also got very good functional effect, which is a sophisticated way of say in joint stiffness. Joint stiffness was reduced in patients for a period of 12 months as well.

So, people had better range of motion in their joint and they had less pain and that study was presented at a large orthopaedic conference earlier this year. But very interestingly, we also did some exploratory endpoints where we measured via MRI before the patient started the treatment and then we did the treatment, which is over a six-week period, so two injections a week for six weeks. And then we followed them out to six months, and at six months we did a follow-up MRI. And what we found was that many of the joint structures that are destroyed in osteoarthritis such as the bone under the cartilage, the synovium, which is the capsule that contains the fluid of the joint and the cartilage are all largely changed while going through a degenerative process.

We actually found that there was a regeneration in some of those tissues giving us hope that the drug is doing more than just having an analgesic effect and an anti-inflammatory effect. And that was presented at this conference, it was really quite groundbreaking data. And so in our phase three study, we've also asked the FDA, if we can do a study that will take an MRI at baseline again at six months and again at 12 months, and if we can show the same results that we saw in this phase two study, which we did during this intervening period, we would then be hopeful that we can get a lot of that information onto the product label and that information about cartilage regeneration, reduction in the synovitis, improvement in the bone marrow lesions, et cetera, could go into the label and therefore the product would command a higher price once it gets to market.

But again, these are sophisticated questions that we're working through with the FDA, what do we need to actually show that the drug is having this type of effect and therefore make it understandable with the FDA, that if we get those data at the end of the trial, we'd like to include that onto our label, which means that doctors will be able to see that the drug is doing a lot more than just having an analgesic effect and an anti-inflammatory effect. It's actually helping the joint to regenerate, which has never been seen before in any clinical product for the treatment of osteoarthritis. We're very excited, we're very hopeful that we'll get back to a much higher share price once we get the all clear from the FDA, and of course if we...

You're expecting that all clear in the next few weeks, are you?

Yes. We're hoping that we'll have feedback from the FDA in the next couple of weeks. We hope that feedback is positive and then allowing us to do this 400-patient trial.

It's not just feedback you're waiting for, it's actually approval to begin a phase three trial?

Well, it's clearance that the FDA doesn't have any reasons why we shouldn't proceed. So yes, it's approval if you like.

Yeah. Okay. So how long will the phase three trial take?

Well, so each patient will have to through a follow-up period of 12 months because we want them to have the treatment, have an MRI at six months and then have an MRI and X-ray at 12 months, so we can actually look at the structures of the joint through imaging being both MRI and X-ray. So that will take us at least two years because we have to recruit the subjects, which will take us in the region of 10 months or so and then once we've recruited those patients, we have to follow them; the very last patient recruited in has to be followed for 12 months, so it pushes the timeline out to about two years. And these are obviously lengthy programs, which is, I think, a lot of investors understand...

How much are you budgeting for the phase three trial to cost?

The phase three trial currently as it's in front of the FDA would cost us in the region of US$50-60 million.

And where are you going to get the money for that from? Are you going to partner it at this point or just raise more equity?

Well, our preference would be to have a co-funding partner, so a pharmaceutical company. We are in discussions with a number of companies. We have discussed with those companies the possibility of them assisting with the funding, they may fund the bulk of that or they may fund a component of that. And then the remainder come from other partnering deals that we might have in regional areas such as China or South America and that money contributes up to a total pot of being able to fund it via partnerships as opposed to going back to investors and offering them equity. Given the low share price, our preference is not to go back to the market, but we have to do what we have to do to get the money to keep the program running.

Yeah, because you're burning through a ferocious amount of money at the moment. I mean your cash burn in the March quarter was 6.8 million, but that included a government tax incentive grant of 7.3. So the actual R&D spend in the quarter was over 13 million, and 62 million for the nine months. And what have you got in the bank? About 26 million. So even at your current rate of burn, you're going to run out of money, aren't you?

Yes. I mean, we've explained to major shareholders that we will have a funding gap knowing that the trial will cost somewhere in the region of US$50 to 60 million with 26 million in the bank. We understand that there's going to be a gap and we obviously have to have operational funds as well. Yes, it is challenging, but I think the positive news is that the data that we've been generating throughout all of this time has been very compelling, particularly the most recent phase two study where we saw structural improvements by MRI on people who are treated with the drug versus structural deterioration in people who were treated with the placebo. So, if the drug is working in a subject, it's generally improving their condition of osteoarthritis. Look, the bottom line is that investors know that these are lengthy, expensive programs. We're dealing with the most sophisticated regulatory authority in the world being the US FDA.

It is expensive, but at the end of the day, the upside is enormous. And I was talking to a group recently and I said, you know, like everyone in the pharmaceutical industry thinks that they have a blockbuster drug, and it's all very large numbers, and that's largely true. But I asked the group over the last, before Ozempic say 2023 backwards, what's been the largest selling drug over the last 20 years? And a number of different drugs were mentioned, but one that was mentioned was Humira, which is these anti-TNF therapy for the treatment of rheumatoid arthritis. Now, rheumatoid arthritis occurs at the prevalence of about one 10th of that of osteoarthritis. Osteoarthritis is a much more prevalent disease in the community than rheumatoid arthritis. But rheumatoid arthritis, that market of rheumatoid arthritis, that drug of Humira returns that company over $22 billion a year in sales at very high margins.

So, the rewards for a product that gets through the regulatory authority and shows improvement in the disease, so it's modifying the disease positively, modifying the disease. The returns are enormous, and I think that's what investors continue to focus on. Even though we are in an expensive phase through phase three trial, any company in phase three will be burning cash because it's expensive. You have lots of people on the ground, you have to provide all of the regulatory documents to the agency. There's a huge amount of work involved. It's very experienced and professional people involved, therefore it's very expensive, but the returns are very, very large if you can get through. So, we think the phase two study gives our investors a lot of confidence that the drug does have analgesic effect and it does have anti-inflammatory effect out to 12 months, which is not seen by any other drug on the market.

So that is a real plus. We also showed structural improvements in those treated with our drug. I think investors also, even though we're burning cash, we have made some significant reductions in our overheads. We have reduced our staff by 50%, and we're looking to continue to find other ways to drive costs out of the business so that while we're running through this expensive period, we can do it very efficiently. But I think investors are focused on the fact that we have generated these data which has excited the market, and if we can get to registration, the returns at the other side of this equation are going to be enormous.

Your drug is Pentosan Polysulfate Sodium PPS?

Correct.

Is it the same a drug as ELMIRON, which is being sold to treat some sort of vision problems in the eye? Is that exactly the same stuff or not?

It is the same active ingredient. It's from bene pharmaChem, ELMIRON is also from bene pharmaChem in Germany that produces the active ingredient, PPS. In the oral form, it is used to treat a bladder condition, interstitial cystitis, which is a painful inflammation of the bladder. It is the same material, but the drug when taken orally is known to be poorly absorbed. So to get the level of drug required to change the structures within the joint, we inject the drug via subcutaneous injection, so it's very similar to Ozempic. It's a fine needle put against the abdomen, that the drug is administered and then people have had the drug administered. Ultimately, we think it'll be done at home. But to answer your question, it is the same active pharmaceutical ingredient.

Obviously, the reason I ask is that there's a class action lawsuit going on at ELMIRON or whatever it is, a class action because of the side effects. If they're getting really terrible side effects from poorly absorbed oral, what's going on with your version of it?

Well, first of all, Alan, that's one of the things that the FDA asked us to investigate. So everyone who went into our trial was given a very sophisticated and very expensive, I'll just add, eye exam and we showed that during this study of 600 subjects, we did not see one subject who had any change in their retina compared to baseline. So we make the conclusion that the injectable version of the drug is a much lower dose than what is seen when you administer it orally. So let me just explain that. With this class action, again, Paradigm's not involved in this whatsoever. This is being run by Janssen, the division of Johnson and Johnson, who market the ELMIRON product in the United States, which is where the class actions are occurring.

How this occurred was that there was a report that was written by a researcher at Emory University who suggested that people who were taking ELMIRON at very high doses, much higher than the dose prescribed for a very long period of time, up to an average of seven years, taking excessive doses of the drug for over seven years, had some changes in their retina known as retinal maculopathy.

So that started the class action. However, since that time, another researcher, Proctor and his group Proctor et al, published a paper saying that the disease being a chronic inflammatory disease, interstitial cystitis, is most likely the cause of the retinopathy, not the drug. It's still an open question, it's still being debated. There is obviously in the United States, these class actions are run by various groups, but the conclusive evidence is still equivocal, and there's still a question as to whether it's the drug, whether these people who've been taking the drug have used it within the guidelines or they have been overdosing because the drug is very effective in treating the painful bladder syndrome. People have tended to take it more regularly, and in addition to that, is it the disease itself or is it the drug and that is still being investigated and the evidence at this stage seems to be weighing towards it's the disease and not the drug.

Then that would mean that the class action will fail. Is that right?

Well, one would think so, But...

But the thing is that Wikipedia tells me that patients who have taken Pentosan Polysulfate orally report a variety of side effects, gastrointestinal complaints like diarrhoea, heartburn or stomach pain, hair loss, headache, rash, and insomnia. I mean, are you getting any of those kind of side effects?

No, we are not seeing any of those. We do see the most common complaint in a clinical program is generally a headache. We do see headaches. We do see injection site reaction, so a small rash around where the drug is injected. We also see that same injection site reaction with the saline injection. So it's not necessarily totally due to the drug, it's just a side effect of a drug being administered.

Does your application of the drug also cause an anticoagulant effect in the blood?

Yes. It's a mild anticoagulant, yes.

Right, but it's not like warfarin, it's something where it's a blood thinner?

Well, it certainly is a mild anticoagulant, so it would thin the blood, but not to the same extent as heparin or warfarin. Studies have shown that the anticoagulant effect of PPS is about one 25th, the effect size of heparin. Heparin is a well-known and widely used anticoagulant, and it might be worth a Wikipedia on heparin, Alan, to see the side effects of heparin.

Right. Okay. Fair enough. Very good. Well, just to sum up then, you've got everything in front of the FDA, just waiting to hear from them about phase three. The phase three will take a couple of years, and you're talking to some pharma companies about partnering the phase three trial. Does that sort of sum it up?

That's a very good summary, Alan, and I think we got off the injectable version for osteoarthritis onto the ocular potential side effects of the drug. But I do want to assure all listeners that we were asked by the agency to investigate that during the phase three program. So we got the top ophthalmology sites in the United States to do a baseline on every subject that went into the trial and throughout the trial, so multiple investigations into their retina. We saw no change whatsoever. And therefore, all of that data on 600 subjects has been presented to the US FDA to say that in our opinion, the injectable version of the drug has no impact on the retina because we're injecting it twice a week for six weeks and then no further drug is administered. The reference to the ELMIRON is people are taking the drug orally for daily use over a very extended period of time, some cases reported up to overdosing for 14 years.

So I just wanted to put that to bed, but that issue is one of the questions asked by the agency. We, rather than hypothesised that we didn't think our drug would have that effect, we had to demonstrate or we felt that we needed to demonstrate it by including an ophthalmology exam in our program and we were very pleased to see that none of the subjects in our trial had any change to their retinal profile whether they were on placebo or on our drug.

Right. And just finally, Paul, what do you say is the percentage efficacy of PPS for osteoarthritis?

Yes, we have investigated that very closely, Alan, and we think that the responder rate is around about 94 per cent of subjects who've received the drug will get sustained analgesic effects and sustained anti-inflammatory effects, which means that there is a small subset of subjects for whatever reason, won't respond to that same extent that I've just mentioned, having significant analgesic effects and also significant anti-inflammatory effects for 12 months.

Thanks for talking to us, Paul.

Thanks, Alan.