q&a with dr. patti

At least he works hard. Got this email back early sunday morning, I thought I was pushing it with the number of questions.

His replies were in red but that doesn't seem to come up here.

Thank you for your interest in Biota Pharmaceuticals. I have answered your questions based upon information that is in the public domain.

In my institution it only takes 2-3 business days for respiratory PCR results to return (this is completely understandable for a single institution, however as you can appreciate for a clinical trial of this magnitude we are using a central lab to run all the PCR assays and its takes 2-3 weeks to get the swabs from the sites to the central lab, have tests run, and then get results back to Biota) and whilst it is understandable that analysis of the samples would lag behind recruitment, to me there seems to be a large discrepancy between the number of patients tested and number of swabs processed. Given the difficulties in identifying patients with the flu unless it is quite severe and without imaging in the primary practice setting I thought you would have used the PCR results to guide recruitment. We need to use the same central lab for all sites so that PCR testing is harmonized across the entire Phase 2 trial.

The issues I had with this were as follows.

1) Activation of trial sites - Are patients being screened to determine whether they are PCR positive before activating a site for recruitment to identify if there is a flu cluster in the area? No, because its impractical to use local site based PCR testing. However, we are using a significant amount of regional and local influenza surveillance to assess the overall flu activity and in some cases RATs to determine whether influenza is prevalent or waning in a given location.

2) Continuation of enrolment of patients in trial sites - Should you not be monitoring whether patients are PCR positive at trial sites. This would allow you to close recruitment at sites if there are a run of PCR negative patients recruited or be more liberal with recruitment in centres where there are a higher proportion of PCR positive. Given half of the samples have not been tested it does not seem like you are doing this in a timely fashion. We are monitoring the PCR rate at each site and holding webinars and providing other educational tools with sites that are exhibiting a low PCR (+) rate to enhance their ability to recruit patients with influenza. Again, since local PCR testing is not being used as tool for recruitment we are relying on local surveillance methods and/or RAT testing to open and close sites.

3) Implications for analysis of trial results - Given the high number of patients without the flu being included analysis on an intention to treat basis will be less likely to be significant and it will also increase the number of patients with side effects unnecessarily. The ITT-1 analysis (efficacy) will only include PCR (+) patients. Every patient randomized will be part of the safety database.


I also had a couple of questions RE: Vapendavir.

1) From previous messages from management it appeared that progress for vapendavir was being halted unless third party funding was found but my interpretation of the conference call was that this was no longer the case? A major hurdle to advancing the development of Vapendavir was the risk, size and cost of a study in mild to moderate asthma patients (the population studied in the prior Phase 2 trial) and a challenge in the endpoint (WURSS-21) to support a reimbursable indication in the U.S.. We have identified and are evaluating a different clinical and regulatory approach that we believe can result in a smaller and more cost effective study, namely treating moderate to severe asthma patients (GINA Steps 3,4,5,6) with rhinovirus infections to help them maintain asthma control. We are in the process of planning for two Phase 1 studies; one trial to determine the bioavailability of a new tablet form of vapendavir and the second trial to characterize the potential for drug-drug interactions, both of which are planned for the next quarter. These studies may support further evaluation of Vapendavir in a future Phase 2 study.

2) Is Biota going to commence another large trial and if so would this be enough to count as a registration trial for the FDA given it has already been tested in a phase 2B trial, albeit in a different population. If the above mentioned trials are successful and subject to a number of other variables and factors, including the potential for a collaboration with a third party, a Phase 2b trial, which is currently in the preliminary planning stage, may begin in the fourth quarter of 2014. In our estimation, the objective of the trial will be to select a dose for potential Phase 3 studies to determine if Vapendavir is safe and efficacious. However, even if these Phase 1 trials are successful there is no guarantee that we will conduct any further trials with Vapendavir. If we were to conduct another Phase 2 trial, it is unlikely to be considered a registration trial because it will be in a different population and with a different endpoint than previous trials.

3) Is this what the capital raising was for and if so how much would such a trial cost? The capital raise was for general corporate and working capital purposes. We do not have enough information at this point in time to determine what another Phase 2 trial for Vapendavir, if conducted, would cost.

Other general questions

1) What progress has been made with regards to in-licensing another drug program and what clinical areas were you targeting? We continue to look for appropriate in-licensing opportunities. Respiratory infectious diseases, other viral infections, and inflammation are clinical areas we have interest in.

2) What progress has been made with regards to reaching an agreement with Daiichi Sankyo with regards to royalties for LANI for the rest of the world? I remember comment that you were hoping that Daiichi Sankyo would get 10-20%. Our discussion with Daiichi Sankyo regarding royalties for LANI outside of Japan are ongoing.

3) Is my interpretation from the releases from the company that the default royalty split between Daiichi Sankyo would be 50:50 for LANI unless it was licensed to a third party correct? Under the agreement, if LANI is licensed to a third-party for sale outside of Japan, the proceeds received from that third party would be split 50:50 between Biota and DS. We refer you to a number of risk factors in our SEC filings that outline this situation and the specifics of the DS agreement.

4) When would Biota initiate a prophylaxis trial in the ROW for LANI, what would be its approximate cost and who would fund this? Previous management indicated that BARDA funding may have been available. Currently there are no plans for a prophylaxis trial and we cannot speculate whether any additional funding from BARDA may or may not be available in this regard in the future.

5) It is pleasing to see the share volume increasing recently, do you have a sense of where the share supply is coming from? I.E. Is it just the institutions that were issued shares selling out for a quick profit, ex NABI holders selling out, Hunter Hall doing more selling or other Australian shareholders. We do not have any insight who the buyers and sellers are; however, we believe the increased liquidity is a result of the financing transaction we completed in early January with a number of U.S. based institutional investors.

6) Is there any progress in the other clinical programs? We do not have any other clinical stage programs at this point in time.

Regards,
Joe Patti