Greetings. Welcome to the Sol-Gel Technologies Asset Acquisition Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I'll now turn the conference over to your host, CEO, Alon Seri-Levy. You may begin. Alon Seri-Levy, you may begin. Alon Seri-Levy. Alon, is your phone on mute?
Thank you. Hello, everybody, welcome to today's investor update call. Today, we announced the recent acquisition by Sol-Gel of a phase III-ready new chemical entity, Orphan Drug candidate, patidegib gel 2% for the prevention of new basal cell carcinomas or BCCs in Gorlin syndrome patients. We acquired this novel candidate from the California company, PellePharm, for a $4.7 million upfront payment, up to $70 million in regulatory and commercial milestones and a single-digit royalties. Together with me, our Executive Board Chairman, Mori Arkin, and our Chief Financial Officer, Gilad Mamlok. We are all very excited to share details with you about this acquisition, which we believe will drive significant value for all our stakeholders and more than anyone else for Gorlin syndrome patients. I would like to invite Mori to give you his perspective on this recent acquisition. Mori?
Just a second. Thank you, Alon. I am very pleased to be part of this great enterprise and this great project of acquiring the patidegib assets. Instead of developing simple products, dermatological products in a very crowded market, we decided to push for more unique products, for more lucrative products that cater to rare disease and to real problems that are unmet medical need as of now. This will be also our strategy for the future, to develop only sophisticated products that provide new hope for patients in unmet medical need.
I'm very happy to provide my own capital to this project and to continue to support the company all the way until the success of this project and some others that I'm sure will follow. I'm sure that this new strategy that we are now applying will be in the best interest of all our stakeholders, shareholders, management, and most importantly, the patient community that are suffering from this debilitating disease. Thank you.
Is this all the prepared remarks? Mori? Alon, are you on mute?
I'm on.
Okay.
I want to make a remark that before we begin, we wanted to remind all listeners that this presentation contains certain forward-looking statements concerning the financial condition, results of operations, and other business of Sol-Gel Technologies. All statements other than statements of historical fact are or may be deemed to be forward-looking statements. Before you make any investment decisions about Sol-Gel, please read the Company's Full Safe Harbor statements about forward-looking statements, which can be found in our filing with the SEC online, www.sec.gov, or via our company website, www.sol-gel.com. Let's now focus on the Gorlin syndrome patient. Let me begin by referring you, and, Gilad, you could please switch to the right slide, Gorlin syndrome patients. Let me begin by referring you all to these two photos of Gorlin syndrome patients who suffer from BCC.
I can assure you that there are many patients with far more complex situations than the patients shown here, but I believe they clearly demonstrate the need for prevention of new BCC. Gorlin syndrome is also called nevoid basal cell carcinoma syndrome because most patients with the syndrome will develop a few to many thousands of BCC lesions. The current standard of care is most surgery for the removal of BCC. This is a painful solution, and repeated surgical procedures lead to disfiguration and later become impossible. Preventing the development of new BCCs is critical for people with Gorlin syndrome. Next slide, please. It is estimated there are approximately 70,000 adult Gorlin syndrome patients worldwide.
If we assume market penetration for a product preventing new BCC at 44%-55% and patient adherence of around 65%, the annual net revenue opportunity is over $300 million. We believe that these estimates are attainable and realistic given how vital prevention of new BCC is for these patients. The lack of other approved therapeutic treatment options, the convenience of topical administration, and the expected tolerability of our new drug candidate. Next slide, please. It's on? Slide six. The patidegib formulation, which we have acquired, was originally licensed by PellePharm to LEO Pharma. In November 2018, LEO valued this asset at $760 million plus double-digit royalties. In 2021, BridgeBio announced that PellePharm's pivotal trial did not succeed, and LEO returned the asset. Next slide, please.
Patidegib is a Hedgehog inhibitor, and the mechanism of action of Hedgehog inhibitors is well-established. These drugs work by antagonizing a transmembrane protein called Smoothened, which under ordinary conditions is antagonized by another transmembrane protein called Patched homolog 1, which is encoded by the tumor suppressor gene, PTCH1. Gorlin syndrome is mainly caused by inheritance of one defective copy of PTCH1. When the PTCH1 gene is mutated, the Smoothened protein is released excessively, and BCC tumor cells divide uncontrollably. Currently, all Hedgehog inhibitors are approved to treat certain patients with BCCs, but Hedgehog inhibitors have never been approved for the prevention of new BCCs. In addition, these oral therapies often cause adverse reactions such as muscle spasms, taste disorder, hair loss, as well as other adverse reactions which result in patient noncompliance. Next slide, please. Patidegib was found to penetrate well into the skin but not into the plasma.
It was therefore decided to formulate it as a topical gel with the objective of producing local efficacy, specifically preventing new BCCs while avoiding systemic adverse events associated with oral Hedgehog inhibitors. It has been granted Orphan Drug Designation in both the U.S. and the E.U. Namely, if approved, it will have seven years of exclusivity in the U.S. and 10 years of exclusivity in the E.U. It also has FDA Breakthrough Therapy designation, which provides for fast-track review and additional FDA guidance through the development process. We have designated the patidegib topical formulation as investigational compound SGT-610. Next slide, please. PellePharm failed in phase III for patidegib gel 2% despite achieving, as you can see here, a difference of 30% in prevention of new BCCs between the treated and the vehicle arms.
When we delved into the design of PellePharm's phase III study, we learned that the study had included symptomatic patients without testing them for positive PTCH1 mutation, even though we know that patidegib, like other Hedgehog inhibitors, works only when PTCH1 is mutated. In addition, the inclusion criteria for the study specified that patients must have at least two BCCs at baseline, which is clearly not enough BCC burden to demonstrate efficacy, particularly as the primary endpoint was prevention of new BCCs. We plan to conduct a new phase III study and to only include Gorlin patients with PTCH1 mutations and with a greater number of BCC lesions at baseline. We believe that with this type of inclusion criteria, we would be able to detect statistically significant prevention effects. Next slide.
Our plan is supported by a post-hoc analysis in which we identified those participants that had PTCH1 mutations and more than 10 BCCs at baseline. In this group, we saw 48% fewer new BCCs in the treatment arm and a statistically significant difference from vehicle-treated patients. Next slide, please. The FDA correspondence we reviewed as part of our due diligence process indicated that the agency advised PellePharm to explore the impact of baseline disease characteristics on outcomes in future study design, which is exactly our plan. Next slide. Based on our post-hoc analysis, if we narrow the patient screening criteria to those with a PTCH1 mutation and a higher BCC burden at baseline, we expect that we also see early onset of action. Next one, please. In terms of phase III study, the patidegib arm was found to have similar tolerability to the vehicle.
We are optimistic that this drug candidate, if approved, will have no compliance issues associated with systemic adverse events or skin intolerability. Next one, please. The FDA and EMA have both agreed to a single phase III trial, and we plan for 100 to 150 subjects for a study powered at 90%. Our goal is to initiate the study in the second half of this year and finish the study with last patient, last visit by the end of 2025. Now let me hand over to Gilad.
Hi, everyone. With regards to the payment to PellePharm, we are going to pay PellePharm $4.7 million upfront. We'll also pay them up to $6 million in total development and regulatory milestones and up to $64 million in commercial milestones and single-digit royalties on net sales. We are very happy that we have managed to quickly finance this transaction via private placement of public equity investment from our controlling shareholder, Mori Arkin, as well as a registered direct investment from a new investor, Armistice Capital. In total, we have raised $22.8 million, and we expect that with this additional capital, we can now finance our activities to mid-2025. In parallel, we will seek to out-license international rights to TWYNEO and EPSOLAY, as well as monetizing rights to SGT-310 and SGT-510, which could extend our cash runway even further.
Thank you, Gilad. Next slide, please.
It's on. Slide 15.
We are entirely focused on advancing SGT-610 as well as SGT-210 for the treatment of pachyonychia congenita and other rare skin keratodermas. They both represent what Mori already mentioned, underserved market opportunities in which pricing and gross to net are attractive. In parallel, we are suspending development of SGT-310 and SGT-510 in psoriasis, a market that has become crowded and competitive. As for SGT-210, phase I study is ongoing and is expected to be completed during this quarter. As for EPSOLAY and TWYNEO, they have made significant market penetration since their launch in June and April last year, and more than 10,000 units of TWYNEO and more than 3,000 units of EPSOLAY were sold in the U.S. last month.
To remind you, we have the option to regain the commercialization rights for EPSOLAY and TWYNEO in 2027 without any financial or other considerations. Next slide, please. Let me now wrap up our call. We spent a significant amount of time identifying the perfect next asset for Solgel. SGT-610, if approved, is expected to be the first therapy for preventing new BCC lesions in Gorlin syndrome patients. It will have seven years of exclusivity in the U.S. and 10 years of exclusivity in the E.U. We estimate that this asset represents an annual net revenue opportunity with the potential to exceed $300 million. We expect to initiate phase III study for SGT-610 this year, with results by the end of 2025. SGT-210 in pachyonychia congenita, another rare underserved disease, is about to complete phase I.
Excellent, we know has made significant market penetration, and we have the option to regain the commercialization rights in 2027 without any considerations. The transaction with PellePharm was supported by our controlling shareholder, Mori Arkin, and by Armistice Capital. We are well-positioned to run our programs and have cash runway through mid-2025. Thank you so much for joining us on today's conference call. We look forward to keeping you updated on the progress of SGT-610 as well as our other programs. We will now take questions.
At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Elliot Wilbur with Raymond James. Please proceed with your question.
Thanks. Good morning and congratulations to the team. ten looks like a very interesting asset. First question is just on the regulatory strategy going forward. Obviously, you've identified the PTCH1 mutation as potentially a significant differentiator between the prior phase III and what you're planning to run. I'm curious as to whether or not there are gonna be other changes to endpoints, primary or secondary, beyond the changes that you are planning on making to just the inclusion criteria. You know, what percentage of Gorlin patients actually have that particular mutation?
Hi, Elliot. It is good to hear your voice. As your first question, we prefer to minimize the changes to the protocol to only those that we believe are absolutely necessary in order for us to demonstrate the efficacy. We are not gonna change the formulation, and we will introduce only minimal changes to the study design. As for the number of PTCH1 mutation patients, these are the vast majority of the Gorlin syndrome patients. There are also patients with mutations in PTCH2 and SUFU gene, but these are minority.
Okay. I want to ask a follow-up question on the prior study results. It looks like the effect size at 12 months that was not statistically significant was roughly 30%. I'm wondering, you know, what the effect size in terms of establishing clinical significance would be. You also see what looks like a continued separation or widening of the curves over time. I'm wondering if there was any additional open label analysis that increases your or enhances your comfort with efficacy endpoint at 12 months or whether there's a possibility that you could actually extend the duration of treatment and look at time points beyond the 12-month period.
Yeah. There are analysis of patients that are treating longer than 12 months. Your observation that the longer the patients are treated, the larger the gap should be between the those patients that were treated with the vehicle and those patients that were treated with the drug itself. This is also our observation. As I said earlier, for other good reasons, we intend to maintain the study as a 12-month study. We believe that if we introduce those changes that we that I described earlier, then there is no need to extend the study beyond 12 months. At least this is what we now have in mind.
Okay, maybe just one final question for myself. This would be indicated for the prevention of new BCCs. In terms of actual patient utilization of the product, assuming that this is a preventive agent, I mean, how exactly would this be used, you know, applied at earliest signs of emerging new BCCs? Is this just something that would be used continually over the course of the patient's life?
The latter is the case. We believe that this drug should be used chronically in order to prevent new BCCs in adult Gorlin patients that have, of course, a PTCH1 mutation, which are the vast majority of the Gorlin syndrome patients.
I apologize for taking up all the mic time here, but one more question. Just any commentary on what the intellectual property runway looks like on the asset beyond the current orphan exclusivity? If you've had a chance, as of yet to think about the possibility of formulation enhancement or additional benefits that could be derived utilizing the company's proprietary microencapsulation technology.
If I may, answer this part, Elliot. This is Mori Arkin. One thing that we did immediately is to file a new patent application that refers to these exclusion and inclusion criteria that may look as maybe trivial, but they are not and definitely not obvious as we see that the experts that were conducting and designing the first trial didn't think that they are essential. We believe that our insight and hypothesis that these inclusion criteria are essential for the success are very much patent-worthy, so we already sub-applied for a patent. We are sure that if our product will be successful and approved, as we believe, we will have this additional 20 years, not addition, additional, but 20 years starting from the day of application of the patent.
We certainly. We are sure from looking at the CMC data and others that we will be able along the lines to submit other patents. Most important is the patent for the 20 years patent, we are fairly confident we will be entitled to for the new designs that the former experts and did not find them essential. We have more ideas for intellectual properties, but this is the one we would already disclose.
Elliot, do you have any further questions?
No, thank you.
Okay. We have reached the end of the question and answer session. This also concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Thank you.
Thank you.