Syntara Ltd

ASX:SNT

Earnings Call Analysis

Strong Cash Position and Promising Trials Signal Growth Potential

In the recent earnings call, Syntara highlighted progress in its lead asset for myelofibrosis, with interim results expected in December 2024 at a major hematology meeting. The company secured $5 million in funding and is set to initiate a Phase II study on myelodysplastic syndrome, funded by the prestigious German Cancer Aid grant. Syntara's cash reserves stand at $10.4 million, sufficient to extend operational capabilities into mid-2025, while its monthly cash burn is around $1 million. With a focus on antifibrotic treatments, the firm is strategically positioned to capitalize on its growing pipeline and recent investor interest.

Exciting Developments Ahead

Syntara is gearing up for significant milestones as it prepares to release interim results from its myelofibrosis study in December 2024, coinciding with the prestigious American Society of Hematology Meeting from December 7-10. This is particularly crucial as the interim data will mark the first public disclosure from this study, sparking interest among over 30,000 hematologists and scientists attending the conference.

Funding Secured for New Studies

In addition to the anticipated data release, Syntara has confirmed non-dilutive funding through a grant from the German Cancer Aid group to support a new study focusing on myelodysplastic syndrome (MDS), expected to begin in the first half of next year. This grant underscores the scientific rigor of Syntara’s work and prepares the company for potential future collaborations or acquisitions, particularly appealing to strategic investors.

Financial Management and Cash Position

Syntara closed the September quarter with a pro forma cash balance of $10.4 million, including a recent R&D tax credit of $4.56 million. With a cash burn rate of approximately $1 million per month, the company is well-positioned to fund its operations through mid-2024. This stable financial footing is essential as it navigates the upcoming important clinical developments.

Business Restructuring Highlights

The company has successfully reduced its operational costs by approximately $14 million annually through the divestiture of its mannitol business, alongside a significant reduction in its workforce from 65 to 25. These changes not only streamline operations but also enhance financial sustainability, allowing Syntara to focus intensively on its promising pipeline.

A Diverse and Robust Pipeline

Syntara's pipeline is not reliant on a single asset, which balances the risk for investors. The firm is currently advancing three assets in Phase II studies, traditionally recognized as a value-generating phase in biotech. This strategic positioning increases the chances of positive data flow, which can substantially enhance the company's valuation.

Looking Forward: Major Clinical Trials

The company also plans to advance a study focused on skin scarring and a Phase II clinical trial for Parkinson’s disease, receiving a $5.2 million grant from Parkinson's UK. The skin scarring program, which aims to address an enormous unmet need in the market, is poised for further investment based on the interim results and potential market data expected by the end of 2024.

Market Context and Strategic Positioning

Syntara’s lead asset has received orphan drug designation from the FDA, targeting a substantial market for myelofibrosis, estimated to exceed $1 billion annually. There is a significant opportunity as current treatments are primarily symptom-managing JAK inhibitors. The unmet need is evident, and investor interest is building as previous strategic transactions in this space have valued companies in similar spaces over $1.7 billion.

Final Thoughts: A Bright Horizon

With a series of critical data releases and studies on the horizon, alongside sound financial management and a diversified pipeline, Syntara presents a compelling story for investors. The upcoming month promises to be pivotal for the company as it prepares to share significant study results that could shape its future and enhance shareholder value.

Earnings Call Transcript 2025-Q1

[Unknown Executive]

Thanks for standing by, and welcome to the Syntara quarterly update webinar following the company's Appendix 4C lodged this morning.

All participants are in a listen-only mode. There will be initial slide presentation lasting for approximately 15 to 20 minutes followed by Q&A. If you have questions for the Q&A session, please feel free to submit it by typing it in using the Q&A function within Zoom.

Presenting for Syntara today, we have the CEO, Gary Phillips, and he's joined by the CFO, Tim Luscombe.

To begin, I'll hand it over to Gary. Please go ahead.

[Gary Phillips, executive]

Thanks, Matt, and welcome all of you. Thank you for sparing us some time this morning. I know it's a busy time of the month. So I thought this morning, I've been doing quite a lot of investor presentations recently at conferences around the place. So for those of you who haven't had a chance to either attend or see some of the videos online, I just thought I'd run through the cut-down version of the company overview at the moment during this morning just to make sure everybody is up-to-date with the information as the company approaches quite a critical moment in its year.

So I think if you're perhaps new to the story or you're considering us for the first time, trying to get your head around where do we sit as an investment opportunity within the biotech space in Australia, I think there's really 3 things that investors really need to think about that distinguish Syntara from its peer group.

I think the first is we have a share register, which is over 50% health care investors -- specialist health care investors who've done a lot of background diligence on the company and the data from our earlier studies before deciding to invest in the company. So I think that's quite unusual.

And back onto that, there's at least 2 of those investors that I'm aware of on the register who've made significant money from exits that have been made by other companies who've been developing assets in myelofibrosis, which is the lead indication for our primary asset. So I think that speaks volumes about the rationale for investment and the background to where that institutional investment comes from. I don't think you'll find other ASX companies, certainly not in the micro space -- microcap space with that kind of percentage institutional.

Second thing is, our lead asset has been granted orphan drug status for bone marrow cancer by the FDA. It's a first-in-class drug with potential disease-modifying effect where the current drugs just treat the symptoms. They don't do anything about the underlying disease. And yet the market there is still worth more than USD 1 billion a year.

And perhaps because of that, because of the unmet need that's obviously there, we've seen strategic investors, big companies pay in excess of $1.7 billion in 3 different deals over the last 3 years for assets which have reached Phase III data in myelofibrosis. So again, it's a really attractive commercial area for our lead asset.

And I think the third thing is just the strength and depth of the company. We are not a one shot on goal. We do have a pipeline. We've got multiple assets, 3 of them in Phase II studies now, which is traditionally the place where you see value appreciation in biotech. So having 3 of them there at that point is a real strength for the company.

We've also got a very strong Board and a very experienced management team that already has FDA approvals under its belt and have already done commercial deals as well that have taken in more than $100 million for the company in the period that the team has been together. So it's -- as I said, those are 3 main planks of the company that really distinguish us from our peer group, I believe.

Now just returning to the highlights for the September quarter. That lead asset that I mentioned in blood cancer, that's fully recruited. We announced the dosing of the 15th patient in July this year. The study actually went on and we recruited the 16th patient before we closed recruitment. But most importantly, we plan to release the interim results in December '24 and that will probably coincide -- we're planning for it to coincide with the American Society of Hematology Meeting, which takes place from the 7th to the 10th of December.

So that's a really important point for the company. It's the first time we've released data from this particular study. And the American Society of Hematology, in terms of peer group review, there are over 30,000 hematologists and scientists that attend that meeting. It's the largest hematology meeting in the world. It happens every year in December.

We released data from our previous study last year at the same meeting, and they clearly can see that this is an interesting area for them, which is why they've accepted us to come and present there again this year.

Secondly, and related to that first one is, we announced further non-dilutive funding via grant from the German Cancer Aid group for a study in myelodysplastic syndrome. Myelodysplastic syndrome is a related blood cancer to myelofibrosis. It's a different group of patients. Market size is probably treble of the myelofibrosis group.

But being related to myelofibrosis, and having data in this area would really increase the commercial value of the asset, particularly in the hands or in the eyes of a strategic that was looking to pick up an asset in blood cancers. So we were really delighted to get that grant.

Maybe it doesn't come across. It's difficult to explain sometimes in press releases, but the German Cancer Aid foundation is a really big deal in Germany. You don't get funding from this group unless your science is of the highest order and that there's considerable support from the German clinicians behind it.

So we were delighted to see that level of funding, and that study is due to start in the first half next year. It's a Phase Ic/II study. So it starts off with a dose expansion where we're comparing 2 different doses of our drug on top of standard of care in patients with high-risk MDS.

And then following that, which we expect some preliminary results from that by the end of 2025, we expect that to go on into a dose expansion Phase II study. And now that's fully funded by that grant from the German Cancer Aid. So really good news for the company and the shareholders that we can explore that additional indication.

We also appointed -- I'm delighted to have him on the call with me today, Tim Luscombe, as our Chief Financial Officer. And finally, but not least, we raised $5 million earlier in the quarter to make sure we had enough funding to complete the current Phase II clinical trial, which is underway that we've just spoken about.

So given those were the highlights, I'll just go to the cash. So we ended the September quarter with pro forma cash of $10.4 million. That included $4.56 million R&D tax credit, which came in only earlier this week. So the cash burn of the company is still around $1 million a month. So that $10.4 million takes us through to the middle of next year.

You've seen the share price. Since we've announced the completion of the recruitment of the study, the shares have certainly got some momentum behind them. And it's good to see some of the value coming back into the company after a long period where it was really struggling during the first half of the year and that's, obviously, anticipation of the data that's coming out for the lead asset in December.

Just a quick word on the science. So Syntara's lead asset is an antifibrotic. It inhibits an enzyme called lysyl oxidase. Fibrosis is something which happens in all organs of the body. After any organ, including the skin is damaged, the area gets flooded with collagen fibers and that enzyme lysyl oxidase.

The lysyl oxidase causes that collagen fiber to become aligned and then get cross-linked. So those loose weave of fibers becomes a stiff area of tissue. If that happens on your skin, you'll notice it as a scar, which is less pliable than the tissue around it. It's often a different color, and it's often raised above the surface of the skin. So it's nonfunctional tissue. It doesn't have any hair follicles. It doesn't have sweat glands.

And the same thing happens in fibrosis or scarring in your kidney, your liver, your lung, your heart, where that fibrotic tissue that comes after damage to those organs is nonfunctional. So a heart that's got the cardiac fibrosis is less good. It produces less output. It doesn't work as well as a normal heart without that fibrotic tissue.

So we've done 2 studies, one in bone marrow fibrosis and the other one in skin scarring. And in both of those, we've demonstrated that our drug, which inhibits lysyl oxidase by almost 100% when given in the case of bone marrow fibrosis orally, 2 tablets a day; in the case of skin, applied daily via a cream, it fully inhibits the lysyl oxidase enzyme and also reduces the area of fibrosis or scarring in those patients.

So we know that our drugs are antifibrotic and the studies that we're doing now are to see what's the clinical benefit that comes from that action and reducing the level of fibrosis.

Our lead indication, lead asset is in myelofibrosis. Myelofibrosis is a cancer. It's a fibrosis of the bone marrow. Your bone marrow is your body's blood production unit. So it produces red cells, white cells and platelets. If it becomes fibrotic, then clearly, it doesn't do its job. That causes a whole range of different symptoms, including an increase in spleen size, a drop in cell counts, night sweats, bone pain, fevers, more infections.

The only treatments at the moment for this in a disease which has a life expectancy of around 5 years are drugs called JAK inhibitors. They are myelosuppressants. They dampen down the aberrant cells that are often resulting from this disease. And they're good at reducing spleen size. They're somewhat good at reducing symptom scores.

You see patients in studies with JAK inhibitors, about 40% of them are responders in terms of the amount of symptom reduction that they get after treatment with it. So there's a large group of patients here who are suboptimally controlled right from the beginning.

And as those patients stay on JAK inhibitors, the effect of them wanes and the level of side effects goes up. These drugs cause cytopenia. So they cause drops in red cells and platelets, which is then a problem.

The clinicians have nothing else to do, but other than reduce the dose of the JAK inhibitor. And when you come off of the JAK inhibitor, you have about 12 months left to live. So there's a huge opportunity here, commercial opportunity for a new drug, which will work alongside a JAK inhibitor to change the course of this disease.

We've already done one study in patients who were end of life. That patients who'd failed on a JAK inhibitor had about 12 months left. That study was 6 months long. And in that study, we saw about half of the patients have an improvement in their bone marrow fibrosis. We saw many patients having improvements in symptoms, but also patients that had either stable or improving red cell counts or platelet counts.

So having done that study in those patients where they've already failed on a JAK inhibitor, we took that data back to the FDA under the IND that we have with them and asked them for approval to go ahead in patients who were actually on a JAK inhibitor.

They said, yes, they like the safety profile. They approved the study design. And this study is the one that we are now engaged with. This is 16 patients in this study. It's an open label. We're treating them for 52 weeks or a year because at the end of the 6-month study that we saw with the monotherapy, we could see that patients were probably still improving. So we're running this study longer to make sure that we capture more of the benefit that we're seeing from the drug.

This patient population, we also enriched with patients with predetermined thresholds in bone marrow fibrosis and symptom score to make sure that we showed -- we gave ourselves a chance of showing an improvement in these patients as they came into the study.

Having completed the recruitment in July, the -- I think we can say already that the safety profile of the drug looks very similar to that it did in the monotherapy study did before. So the safety profile was extremely good in that first study. We had no adverse events -- serious adverse events for those patients that were on the active treatment. And we now wait to see what the efficacy looks like. And that's approaching us now. And as I said, that this data will be released to the market, and we expect to present it also at the ASH Meeting in December from the 7th to the 10th later this year in San Diego.

Once we've got that data, we'll start to evaluate it, and we'll be looking at the data that comes in on top of that. Obviously, these patients are still ongoing. We'll have a number of patients at the next interim release that will have reached 9 months' worth of treatment. But as the study goes on, we'll see more patients on 9 months and then 12 months' worth of data.

When we think we've got enough data that fully characterizes the drug and what it can do, we will go back to the FDA. So we expect to do that in the first half next year. And we will talk to them about the design of the pivotal study, which follows this. So that's a Phase II/III study, which would lead with the -- if successful, lead to the registration and commercialization of the drug.

So that approval from the FDA to go ahead into that study is a critical point for the company and is the launch point either to raise the money to do that Phase II/III study or to investigate potential partnering options at that point as well. So both the capital raise and the partnering opportunity are both triggered by the FDA review of the data and the approval of the design of the following study that would come after that.

Now I've mentioned commercialization a few times and the kind of deals that have been done in this space. This is the last 3 that have been done, CTI BioPharma, $1.7 billion. So that was the company that at least 2 of our institutional shareholders were large investors in CTI before exited.

Sierra Oncology sold out to GSK for $1.9 billion. Both of those drugs were JAK inhibitors. So they're not competitors to SNT-5505. They are alternatives to the market leader, ruxolitinib. Ruxolitinib is the JAK inhibitor that we're using in the current study to add the drugs on -- our drug on top of.

The other drug here is from Novartis. It's called pelabresib. They bought that drug from MorphoSys for $2.9 billion earlier this year. They closed the deal in quarter 1. And it's a potential competitor to SNT-5505. But we noted during the studies that whilst it did help patients from a number of different aspects, also the safety profile of the drug was still, in the way of the JAK inhibitors as well, still causes considerable cytopenias and other adverse effects as well.

And interestingly, Novartis in their update that was put out this morning have announced that despite spending $2.9 billion on it, they've decided to delay the lodging of the application for approval to the FDA. It could go back a number of years. They may have to collect more data. And in their accounts, they've also taken $800 million off the valuation of that acquisition. So it looks like one of the potential competitors for SNT-5505 that had considerable value at that point seems to have had a bit of a hiccup along the way. So that was a really interesting news just from this morning.

So I mentioned at the beginning that we weren't one shot on goal, that there's a pipeline here. So just very briefly, I've talked a bit about the myelofibrosis and myelodysplastic syndrome studies that are ongoing, and that interim data from patients that have got at least 6 months' worth of data, some of them with 9 months' worth of data coming out in December.

From a scar prevention and scar treatment point of view, we've had a long-term collaboration with Professor Fiona Wood over in Perth. Both Fiona Wood and Royal Brisbane are engaged in a study, which is looking at patients with burn injuries where they've had to have a skin graft. Once the skin graft is healed, closed over, then these patients are being treated with one of our pan-LOX inhibitors to see if the scarring that comes after the skin graft can be prevented. So that's a scar prevention study.

The other one that we are investigating at the moment and talking with the group in Perth about is the modification of the scarring process in patients who have keloid scars. So that study is in planning at the moment. We expect to start it in the first half of next year. The data from the burns patients we expect to get by the end of next year.

So the skin scarring area is a really exciting one for the company. It's got tremendous commercial potential, but it's not an area that we've invested a lot of money in yet. So this is one with data coming from the bone cancer area coming later in this year, we would expect to see accelerate during next year as the company starts to consolidate and move forward.

Finally, but not least, we have a study ongoing in Parkinson's disease or more correctly, a group of patients who suffer from a sleep disorder where they act out their dreams in a pretty violent fashion, 90% of those patients go on to develop Parkinson's disease. And the company received a grant to cover the cost of that study, $5.2 million from Parkinson's UK.

It's a placebo-controlled Phase II study and double-blinded, and it's ongoing in 2 centers, one in Sydney and one in Oxford in the U.K. That study is recruiting, and we expect to finish recruitment by the middle of next year and have data in the second half of next year.

Again, it's another market that's gotten a lot of potential, and it's an area of very considerable interest, both the patient groups and the clinicians because other than that, we would not have got that size of grant from Parkinson's UK.

So that's where the company stands at the moment. So it, obviously, means that from a news flow point of view, we've got a lot to report on in the next 12 months, starting with that data coming in December. And that study will report again probably at the end of quarter 1 and the end of quarter 2, and then data from both the skin scarring studies and the IRBD Parkinson's studies in the second half of next year as well. So a lot of news flow to come in 2025 that we're looking forward to.

With that, Matt, I'll hand back to you and see if there are any questions.

[Unknown Executive]

Thank you, Gary. As you've mentioned, we'll move on to the Q&A. Again, for anyone listening, if you have a question you'd like to send through, please type in using the Q&A function within Zoom and we'll get to it shortly.

Gary, the first question is just from me. You mentioned at the start, you've been on the road quite a bit recently. Can you just give some color to everyone on these activities and what you've been doing just in terms of marketing the company to investors?

[Gary Phillips, executive]

Yes. I think we recognize -- it was just a short year ago when we sold off the mannitol business unit and changed from Pharmaxis to Syntara. And I think during the first half of this year, there was some -- we had a major shareholder that exited the company because their fund had closed in January. It created a bit of an overhang on the stock. So there was both a lack of understanding, I think, in the market about who we were, who Syntara were and what we were doing, and a bit of turbulence there.

So we felt it was really important to start, as we got towards completion and getting towards a really critical milestone for the company that we put a lot more effort into marketing the company and getting out there as much as we could to make sure investors -- current shareholders and prospective investors understood the value proposition of the company and what we're doing. The amount of money that we've taken out by selling off the mannitol business unit, $14 million of annual expenses that we removed.

So as part of that, I've done some extensive trips around Australia, but I've also spent some time in Singapore and Hong Kong as well and done a couple of, I think, 3 different conferences to try and make sure that the message gets out about where the lead asset is at, what the size of the market is that we're entering into and what the stage of the data is at.

So, yes, it's been a busy period, but I'm pleased with what we've managed to achieve. I think the interaction with investors has been really encouraging and positive one. And I think you can see that in the increased liquidity a bit in the stock as well. You can see the volumes going up and obviously, the price appreciating as well as we approach that interim data in December.

[Unknown Executive]

Thanks Gary. A question that came in was just around the company's cash position and runway, which you touched on and it's in the 4C on Page 3 for anyone who wants to refer to it. But can you perhaps just give some more comment around how the company has reduced cash burn and how it might approach this moving forward?

[Gary Phillips, executive]

Well, the cost of running a pharmaceutical factory is high. The regulatory requirements are extensive. And I think it's been well documented. The mannitol business, whilst occasionally moving into quarterly areas where we profit when we -- when the sales were up and as we sold in a sort of lumpy fashion to distributors. On the main, we were still losing money on that business, and it was the expenses of running the factory that were really, really hurting. So really, the key way of reducing our expenses was to offload that business, which we successfully did. And that's where the majority of the savings have come from.

Alongside that, of course, we've taken the opportunity to downsize the Board, the management team, there's also some reduction in expenses there. And now we've gone from a team of 65 people down to 25. And just as an illustration, the annual rent that the company was paying before for the whole factory facility was in the order of $2.5 million a year, and that's less than $200,000 a year now with the lab space that we are now renting within that facility.

[Unknown Executive]

Thank you. Another question that has come in is regarding whether SNT-6302, the skin scarring trial, whether that trial will be registered? And also if -- I know you gave a bit of an update there, but if there's any more color around that?

[Gary Phillips, executive]

When you say will be registered, what does that -- so I understand the question. Well, I mean, we've already published the results from the first study, which was called Solaria -- Solaria 2 with 6302. That was published -- it sort of went out earlier in the year. The next studies that are underway aren't expected to complete until the end of next year, so there won't be any publications from it.

From that, I mean, clearly, the company's ambition is to take these, what are fairly early small exploratory studies with the technology. I think we were all really encouraged by the impact that we had on established scars when we saw a 30% reduction in collagen content of scars that were treated for a 3-month period. But those scars were pretty old in age. They were, I think, average of 13 years old. So we learned a lot from that study.

We didn't see a change in the appearance of the scars, despite changing the structure of the scars by what Fiona would call an unprecedented amount. So I think we've seen some really good data from that study, and it's encouraged us, which is why we're continuing to pursue skin scarring as an opportunity.

And I've been encouraged by talking to many companies as well that are in the area that are hungry and looking for something that will do something about scarring. The unmet need here is high. The only treatments available at the moment are laser therapy to try and remove the epidermal layer of the tissue and force the scar to remodel, surgical corrections to sort of reset resuture and cut the scar out and resuture again, or pressure bandages and silicone sheeting is another one that's used. But none of these produce a really long-lasting impact for these patients. So the thought of something that can do pharmacologically, can fundamentally change the structure of the scar and its ongoing progression is a really attractive one.

Wes need to think very carefully about the studies that follow this and the design of them, and we've spent some time talking to plastic surgeons and dermatologists globally about where they see the unmet need is and crucially, what kind of study we could use in order to get some regulatory endpoints that could get this product through to approval, because it will have to be registered by the FDA. This will be a drug. It's not an OTC product. It will have to be registered by the TGA in Australia, the FDA in the U.S. and the EMA in Europe. So it's important that we fully understand the regulatory requirements of the area. So we've talked to the FDA, we've talked to clinicians. And yes, as I said in my presentation, it's an area that we can expect to see the company accelerate and invest more in the year ahead.

[Unknown Executive]

And just on that note, Gary, with regards to funding the skin scarring programs, what are the potential options there? Is there also potential to partner that and reduce the cost of the company?

[Gary Phillips, executive]

I see this as an area for investment for the company. I think it's -- we've done the studies so far under investigator-initiated studies that have been supported actually by grants as well. So the cost of the company has been very minimal to get it to this point. I think what we've seen is a technology which is now proven to fundamentally change the scarring process.

And it's worthy of -- rather than an area for cost saving, it's an area for investment for the company in the future. And so that's what I mean when I say when we start to see data coming out of the blood cancer area and the potential from that, then that will encourage us, I think, to start thinking about the pipeline more seriously and where we can invest further to make sure that we've got a supportive pipeline behind the drug as it goes forward.

[Unknown Executive]

And a final one, assuming no other questions come through. I know you touched on that news flow slide at the end, Gary, but someone has just asked the question what news flow can be expected for Christmas?

[Gary Phillips, executive]

Well, the key one is the data from the myelofibrosis study, which we're planning to put that out around the same time as ASH, which is the 7th or the 10th of December. I think that a lot of the interest in the stock at the moment, and we've got a large number of new shareholders coming on and being attracted is because of that data.

Phase II is traditionally the area where biotech stocks see big value appreciations with positive data. So that will dominate the reporting between now and the end of the year.

[Unknown Executive]

Thanks, Gary. We'll leave it there, and I'll just throw back to you if you want to provide a closing comment.

[Gary Phillips, executive]

Yes. No, just to thank people for their time. I know we've taken up the full half an hour. I appreciate it in this what's a busy couple of days with end of quarter reporting. And yes, I look forward to updating you all again in December. We undoubtedly will hold a further webinar when the results come out.

[Unknown Executive]

Thanks, Gary and Tim, and thanks, everyone, for joining. We'll be in touch shortly with those updates and more. Thank you.

[Gary Phillips, executive]

Thank you.

[Operator]

Goodbye.