Good morning, everyone. We're just at 11:00 A.M., so I'll get going with the briefing while a few more people are still joining. My name is Samantha Fraden from Principal IR, and I'll be hosting today's Pharmaxis quarterly investor briefing. Today, we're joined by CEO of Pharmaxis, Gary Phillips, who will give a general business update of progress through the quarter. After that, we'll open the floor to questions from investors and analysts. If you do have any questions throughout the presentation, just type them into that Q&A box on the left-hand side of your screen. It's on the bottom if you're on a smart device. We'll read them out after the presentation. If anyone's having any trouble seeing the slides or the presenter's face at any point, just refresh the tab. That usually fixes it.
It's been a very productive quarter for Pharmaxis, with plenty going on as usual. I'll hand over to Gary to talk us through it all. Gary, over to you.
Thanks, Sam, and good morning, everybody. Nice to be with you again. I'm just gonna share my slides a moment so you can. Okay. This is the review for the first quarter this year. I guess there when I was thinking about what I should share with you this morning, ongoing, I think are core to the value proposition of the company. Also reflect a little bit on what we heard from the clinicians and scientists that presented at our R&D showcase webinars that we held earlier in the quarter. Just starting with the myelofibrosis study. This I think is, you know, this is where the company is investing the bulk of its cash at the moment.
We see it as the biggest value driver for the stock. You know, we've continued to make good progress here. This, if you remember, is a study that's gotta recruit 24 patients. It's open label. I'm pleased to say that the number of open sites that are now recruiting increased to 16 in the quarter. We brought on an extra five sites in Taiwan. You know, that's deliberate. We've got sites open now in Australia, Korea and Taiwan, and that was a direct reaction to the impact that COVID is having worldwide and on hospitals' ability to recruit. The sites in the U.S. have been particularly slow in getting through.
They've suffered with staff shortages, backlogs, and ours is a small study in an orphan population, so sometimes we get bumped to the end of the queue. We still expect the four U.S. sites to come on stream, yeah, later this month, actually, but certainly by the end of the quarter. I, you know, as it's open label, we can see some of the responses of the patients as they come through. We're already can see that what we've got is a very good tolerability profile. That we saw that in the phase I- C study where we had patients on drug for a month.
We've now had patients on drug for three months, and we can see that the tolerability profile, which is so important and pivotal to the value of the drug, it is one of its unique propositions, is, has been maintained. That's been really pleasing to see. The other study in established scar patients that's going on in Perth, with Professor Fiona Wood. We've completed the first month's treatment on active of the first cohort of patients. This was eight patients that we were looking to recruit, to see how they responded in the first one month, from a safety perspective.
Once we were sure that we were seeing both a drug that was well-tolerated, but also that we were seeing good inhibition of the LOX enzymes in the skin from the skin punctures that we were taking, that would give us the confidence to go on and recruit the second cohort, which is placebo-controlled. That recruitment is now commencing. In parallel, again, because of the response that we've seen in the first few patients going into the established scar study, the protocol for the second study, which is looking at prevention of scars in patients with burn injuries, is now being developed. That's actively going on in Perth with Fiona Wood and her team. That's where we are with those two studies.
As I said, just a reflection on the webinars we held earlier in the quarter. We heard from Gabby Hobbs, who's Harvard Medical School in Massachusetts General Hospital. You know, really significant cancer center over in the U.S. I think it was really interesting. I was reflecting on what she said, and I looked back at her presentation. I think what she really placed value was, you know, she could see that there was disease-modifying potential with the drug. Really importantly, the tolerability profile of the drug means it can be used in many of these patients who currently they're struggling to use existing drugs because of the poor tolerability profile.
If you're looking for combination therapy on top of a JAK inhibitor, or as monotherapy, then having a drug which is really well-tolerated is really core to them. Many of the drugs that are in the development pipeline and also in the clinic, being used in the hospitals at the moment, you know, make the blood counts, which is a fundamental problem with the disease, get worse rather than better. As she said, you know, I think she expressed her almost indignation that existing therapies, you know, made what was a core element of the disease worse rather than better. How could that be? That was really interesting to hear her perspective on it.
We also heard from the group in Rochester about the upcoming study that they're gonna be doing in liver cancer. Again, tolerability came through as a really interesting thing. They're looking to add efficacy on to the current standard of care. Having a drug which doesn't have a poor tolerability profile is really important to them, 'cause if it did, they couldn't add anything else on because the drugs they're using at the moment they don't work well enough, and also they do have side effects. A lot of drugs we're using for cancer, so you know, they're cytotoxic. They kill cells, and they come with their own set of problems as well as the potential solutions that they bring.
We heard from Mark Fear and Fiona Wood over in Perth on SNT-6302 and their preclinical work that they've done in scarring. I think when I look back at that, I think what I heard was, you know, a high degree of confidence. They really think from the work that they've already done, the preclinical data and looking at the mechanism and their knowledge of what the lysyl oxidase enzymes do, their role in scarring, there was a high degree of confidence that they will see an impact on scarring in the skin, and that these studies that they're currently running will really help them and us understand the way the drug works in perhaps different skin types. Fiona even talked about differences between males and females.
Obviously, there's different racial types as well in terms of skin and different scars as well, and whether they're scars that have been caused and you're trying to prevent a scar emerging or whether you're trying to treat an established scar. I heard a high degree of confidence that these studies that are ongoing will really help them understand where the drug fits into clinical practice. The last, I think, thing just to point out from the quarter is that the mannitol respiratory business, our sales of Aridol for asthma diagnosis and Bronchitol for cystic fibrosis, that business was breakeven up until the end of March. Just to note that, you know, COVID-19 continues to impact the sales of both.
We had hoped that our situation in terms of the profitability of that business would be better at this point of the year, but we still haven't seen much in the way of sales coming from the U.S., in particular for Bronchitol, because of the impact that COVID's had on cystic fibrosis patients in particular, and the fact that the centers where they treat them are, a, not receiving patients and, b, not receiving commercial people either. Chiesi, our partner in the U.S., have been unable to launch the product as yet. Our last discussions with them were quite positive. They're still very much committed to the launch of the drug, and they're starting to see those centers beginning to open up now.
We expect that situation to improve certainly in the second half of this year. Just before I kind of wrap up, you know, I've showed this slide before on the mechanism of lysyl oxidase chemistry and biology. We had a question before today's session from one shareholder who was asking about SNT- 6302 and how it penetrated into the skin and whether you could treat scars in the deeper tissues. I just wanted to remind you that lysyl oxidase is involved as an enzyme in.
They actually oxygenates the collagen and causes this cross-linking between the collagen fibers, and that is the final stage in the process of scarring or fibrosis in both the skin, but also in organs, like the bone marrow or the liver, or the lungs. If you can inhibit that, then you stop this cross-linking. Okay. Now, both of our molecules, SNT- 6302 and SNT- 5505, are very small molecules. They have a very well-balanced hydrophilic, lipophilic character. So in terms of their solubility, both in oily solutions and water-based solutions. They're both very well-balanced drugs. That's deliberate.
That's part of our drug development process, where we screen a lot of compounds before we choose ones to go into the clinic, and we're trying to pick compounds that fit a certain profile that give them good properties like this. Now, because of that, both drugs easily penetrate skin tissues. We've confirmed that with all of our in vivo work we did before we went into human subjects. SNT- 6302 is a good example. It does penetrate through the outer layer of skin, the epidermis, and then reaches the deeper layers of skin called the dermis, where scarring occurs. Penetration into that is not a problem.
We've confirmed it in the studies we've done in healthy volunteers and now in patients, in the first eight patients that have gone through the established scar study. We can show inhibition of those lysyl oxidase enzymes in that. SNT-6302 does not go through and then is significantly absorbed into the systemic circulation because we're giving it in quite small amounts under the skin. It works in the skin, but then gets metabolized very fast. You don't see any, almost any levels of inhibition of lysyl oxidase enzyme systemically. Whereas SNT-5505, given orally, we see good inhibition of the lysyl oxidases throughout the body and again, very good tissue penetration. Just ending on that, to wrap up on the studies, just a reminder.
The myelofibrosis study, that market is a billion-dollar market, where we're looking to recruit 24 patients, is recruiting. We expect to get meaningful data by the end of this year. The hepatocellular carcinoma study is due to be recruiting first patient around the middle of the year. The scarring study, the established scar study is underway already, and the burns scar prevention post-surgery in burns patients, we expect to see first patients again around the middle of the year. These studies all in markets which are very valuable, where there's a high unmet need, and data coming from two of them by the end of the year. We finished the quarter with AUD 15 million in cash.
We saw a bit of an uptick in the share price during the quarter. I think we bucked the trend in biotech overall. I just note that Morgans started coverage on us in the last month. I think they came in around about AUD 0.58 a share. We also have coverage from Taylor Collison and MST Access as well. With that, I'll hand back to you, Simon, and see if there are any questions for us.
Great. Thank you, Gary. It's great to see so much progress across the pipeline. We've just had a couple of questions submitted during the presentation already. If anyone has any more they'd like addressed, just pop them into that Q&A box. First question I've got here from Dennis is regarding the myelofibrosis expansion cohort and meaningful data by the end of 2022. What data should we be expecting? And would it be a six months follow-up on all subjects or something a little bit different?
Sorry, what was the last part of that question?
Would it be a six-month follow-up on all subjects or something a little bit different?
No. This is a study where the patients are gonna be on drug for six months. We will have. We're looking for 24 patients, and by the end of the quarter, we'll have 20 sites open. This is a rare disease, and these patients are also the sicker end of the patient group. We're looking for patients who have basically failed on the standard of care being the JAK inhibitor. We're looking for rare patients in a rare disease. But nevertheless, you know, because of the mechanism of action, we expect to see results from the drug at the six-month period.
We're very encouraged by the safety thing that we're seeing at the three-month end, but we need to wait and see a significant number of patients with six months data. By the end of the year, we may not have data from all 24 patients, but we should have a significant number of patients that have completed six months, where we will have data both on the safety of the drug and on the efficacy of the drug. When I say we're expecting meaningful data by the end of the year, that means, you know, a significant number of patients with six months data.
Yeah, brilliant. Next question here. Is there any international interest in the scarring drug or is it just domestic?
No, it's very much international. We've talked to clinicians in the U.S. We've actually talked to the U.S. military on and off as well. They have a strong interest in scarring. You know, I've also talked to the key large dermatology companies. That would include companies like AbbVie, Galderma, LEO, Almirall. They all have franchises in dermatology products. They're all looking for pharmacological treatments for scarring. At the moment, the majority of treatments for scarring are done through either devices, laser therapy, or treatments such as silicone sheathing and pressure bandages. Very much on that end of it.
Obviously, the drug companies that have got steroids and things like this, which are used in scarring, but as Fiona explained on the webinar earlier in the last month, are not very effective. To have a pharmacological treatment that really addresses the key mechanism within a scar and can both change the appearance of an existing scar and stop the formation of scars after a surgical procedure would be a real breakthrough. You know, there hasn't been anything new here for many years. The last treatment, I think, was from a company that had a TGF-beta inhibitor drug, which was given by subcutaneous injection. That was back in about 2013. It's a company called Renovo.
They sold that asset to Shire at the time for about AUD 600 million, based on some phase Gen İlaçIIa data. Shire went on and the drug failed as it went forward in the clinic. I think even that just showed the value that can be ascribed to something which can address scarring. That was, you know, there really hasn't been much since then that's really been effective. We feel that we've got a really competitive program. As Fiona talked about, you know, this is quite an exploratory study we're doing at the moment to understand more about which patients the drug is most effective in, what kind of scars, what kind of skin type.
Any data that shows efficacy in this will be hungrily mopped up, I think, by the international community. Yeah, very much an international global program that we have.
Exciting. Are there any R&D grants pending, and how much would they be worth? Is our next question.
We do have one significant grant pending for one product in our pipeline, where we've reached, you know, quite an advanced stage in that. I would expect to have more information on that in the next quarter. It is, you know, clearly, Pharmaxis is a company that's quite unusual in the biotech space in that we do have a pipeline. You know, we are an established company with a factory. We produce, we have products on the market producing a revenue, and we have a drug discovery team that are generating new opportunities, new drugs that take advantage of the R&D tax incentive.
It's a very efficient way of doing it, and we've built, you know, drugs which are either ready to go into phase I or already completed phase I that are ready. Now, that gives us the ability to then look for non-dilutive funding. You know, we're not aiming to support the whole pipeline via the financial markets. We're looking for non-dilutive ways of doing that, and I think because the quality of the work we've done and the quality of the scientific packages, we stand a good. We're in a good position to leverage some of that. Yeah, that will be a continuing ongoing focus of the company. We do put quite a bit of effort into the grant applications.
We had a lot of success in the last round at the NHMRC. The group in Perth had, I think, over AUD 600,000, and Tom Cox at the Garvan, with his work on pancreatic cancer, also over half a million AUD, for programs that are specifically about our compounds in the scientific models that they're running. Yeah. That all benefits shareholders. I mean, that's AUD 1 million of more than AUD 1 million of funding that's come from the government through NHMRC for programs that are associated with us. We've got some big applications in at the moment, which I hope we'll be able to report more on next quarter.
Yeah, fantastic. We've also got our CFO, online as well that can probably comment on that as well.
Thanks, Sam. Just one other point that's not quite a grant, but we are eligible for the R&D tax incentive, which is about 43% of eligible expenditure. We book that at the end of the year when we've done the calculation. If you look at what we spend on new drug development, expended at the nine-month mark, then most of that expenditure, subject to the usual kind of tax ins and outs, but most of that should qualify for a 43% cash injection that we see in the second half of this calendar year after we've filed our tax returns. Additional source of funding, not quite a grant, but very relevant. It relates-
Yeah. Thanks. Thanks, David. Yeah.
Thanks.
Just onto the mannitol business. I've got a question here. Can you give some color on Bronchitol in Russia and the U.S. for the rest of the year?
Well, let's start. They're both somewhat in the problematic characterization, aren't they? The U.S., I guess, is difficult to read. You know, we felt that we were really at an opening of the clinics at the end of last year, and then the Omicron variant came and wiped that away as an opportunity. I think, you know, we're in ongoing discussion with Chiesi. They've seen an uptick in both sales in the last month, and access to the clinics, and the CF patients coming back to the clinic again.
As the world returns to normal and CF patients start to emerge from their self-isolation where they've been for two years, conversely, we also see them exposing themselves to the risks in the world, and they get sicker again, and the need for the drug increases as well. I do expect to see, as I said, the sales in the U.S. improving quite dramatically in the second half of the year. But as always, we're one step away from another variant perhaps or, you know, what that will throw at us, we don't yet know. Russia is obviously an ongoing situation. We're all, you know, trying to understand, you know, what's happening there and where it's going.
We did sell the rights to Bronchitol in Russia to a Turkish company, Gen İlaç , about a year ago. You know, Gen İlaç are a company and Turkey as a country still have, you know, active links with the Russian government and are able to sort of navigate some of the problems that are occurring there because of the war with Ukraine. I mean, we have considered it and talked about it. We view Bronchitol as an essential medicine for the CF patients in Russia. It's the only CF medicine which is on the essential drugs list in Russia. None of the more modern recent drugs in cystic fibrosis are reimbursed or available at all in Russia.
Even some of the drugs which are widely available, and antibiotics, are not available in Russia from their normal suppliers. I think, you know, conversely, Bronchitol has done very well in Russia, and there's a lot of patients on it, but that's because of the scarcity of other drugs. We feel that continuing to supply it there is a humanitarian position. We're not investing in any studies. We're not investing directly in any promotional activities there in Russia or any way supporting the economy. We're just supplying drug for the CF patients that are there. We're gonna continue to do that.
We have an ongoing dialogue with both the Gen team in Turkey and in Russia just to monitor the situation on a monthly basis.
Great. Thank you for that. I have a question here from Chris just regarding the cash run rate, given the current cash burn.
Yeah. We still expect that we have enough cash to get to data in the studies that we're running. As David says, we're expecting an R&D tax credit to come through in quarter three. I'd also note that we have an option that comes up in the next quarter as well from Aptar. Aptar are a large global device company. They took an option on Orbital, our large high-payload dry powder inhaler, in August of last year, and that gave them 12 months to do tests and further market assessment of the inhaler.
If they exercise the option, which will happen in quarter three, then the company also receives, I think it's $2.5 million at that point for them taking up the option. That's two points of further cash that could potentially support the existing balance. In any case, even without that, we have plenty of cash to take us through to data with these two studies, which is obviously the key thing that would drive value in that time.
Great. I have another question here. Just back to myelofibrosis. If a patient passes away during the trial from their cancer, would this cause delays in the FDA application process?
Well, I think with all cancers, you expect. Yeah. As I said, that we are dealing with patients who have already failed the cancer's current standard of care. So we do anticipate that some patients will get worse, even if they're taking our drug during the trial, just because of the stage of the disease they're at. But the FDA understand that, and they acknowledge it. It was interesting. You know, we have an IND approval, so the Investigational New Drug status with the FDA. So they look at all of your preclinical data, any human data you've got, everything around the manufacturing of the product, the tox studies that you've done before they give you a nod to go ahead and do the study.
In doing so, they assess, you know, what kind of numbers of patients that you need in order to gather enough data, irrespective of the ongoing disease and the fact that some patients, as the question suggests, are actually dying while they're in the trial. In the liver cancer study, you know, they've also assessed the amount of toxicity that the existing standard of care has and sort of put a level in there and say, "Well, you know, we already expect about 30% of patients to be experiencing these level of side effects. So what we're looking for is, does the addition of SNT-5505 make that worse? And if so, how much worse?" There's a baseline that's there.
Yeah, it's something that the FDA understand and take account of when they look at the numbers of patients that you've got to put in, and the length of the study that you're running.
Yeah, of course. We're just running a little bit tight on time. If anyone has any other questions, just make sure to pop them into that Q&A box now. The next one I've got here is from Dennis saying, "Will long-term use of the SNT-5505 adversely affect formation of normal body fibers?
That's a really good question. So clearly, LOX is an enzyme which is involved in the cross-linking of collagen, as I've said. That is an important process. If you used SNT-5505 for years, you may well end up with weakening some of the body structures like ligaments, for example. That's been part of our tox program. We've studied six months toxicity at very high doses, multiple times more than the ones that are being used in the clinic. We haven't seen any of those changes with it in quite a short period of time. We don't expect that, you know, any longer term effects would be relevant at all.
In any case, the need is to stop patients dying. You know, the risk-benefit balance is weighted in favor of, do you do anything? Can you help these patients? Then it's worth almost any risk to do it. That's why patients take these very toxic drugs in order to help themselves. Beyond that, we've also looked at models of tissue strength and use of the drug, particularly in animal models where you're using mature animals. We think that the turnover of lysyl oxidase and the turnover of collagen is really only quick in humans and in animals when they're developing. Once they reach maturity, that's no longer an issue.
We're confident, and the FDA have accepted our position that this is a safe drug to be used, particularly in adults, well, you know, obviously. In the skin, we don't see systemic absorption of the drug, so therefore that it doesn't affect other structures in the body. Yeah, we're very happy that we've got a really good profile. It's a very good and insightful question. Yeah, we thought of that. We've looked at it. The FDA have also thought of it and looked at it, and we don't believe that will be an issue for us.
Great. Next one here is, how many patients have been recruited in the myelofibrosis dose expansion cohort thus far?
We think that we're about the end of this month, we'll be at 40% recruitment. As I said, we'll have also 20 centers open by the end of the month as well. That's where we are at the moment.
Fantastic. We do have another question here from Paul just about the Russia-Ukraine situation, but that's already been covered by yourself. We don't have any more questions that have come through, so if anyone has any that they think of afterwards, just send them through via email and Gary can respond there. Just a reminder, a recording of this webcast will also be made available in the coming days. I'll wrap up there. Gary, on behalf of Pharmaxis shareholders and everyone in attendance today, I'd just like to thank you so much for your time, and we look forward to hearing from you again soon.
Thanks, Samantha. Nice talking to you all.
The webinar has ended. Thank you for joining.