Plus Q&A Session with Soligenix CMO & CSO
BEND, OR / ACCESSWIRE / May 10, 2017 / Sylva International:
By Ross Silver, RIA
Chief Executive Officer, Sylva International.
I serve as the CEO of Sylva International, and my firm and I are shareholders of Soligenix. I recently had the opportunity to converse with Dr. Chris Schaber, CEO of Soligenix (NASDAQ: SNGX), regarding the current status and future of Soligenix. I came away from our conversation very excited for a number of reasons, which I will get to shortly. I also asked Dr. Schaber if Dr. Straube (CMO) and Dr. Donini (CSO) would be willing to respond to some questions I had regarding their clinical pipeline. Before getting to the Q&A with Drs. Straube and Donini, I wanted to highlight a subject that came up in my conversation with Dr. Schaber. The subject was the $25M mixed prospectus/shelf that was filed on May 5 th. It seems to me that many investors perceived this prospectus as the company seeking to raise capital immediately and, as such, the share price has been under pressure. For those of you who do not know me, I have been investing in and advising public companies for nearly 20 years. I am a Registered Investment Advisor in my home state of Oregon, as is my firm, Sylva International. In this day and age, any development stage small/microcap public company should have a shelf on file with the SEC, in my opinion, as it may provide the company with considerable optionality and negotiating leverage.
Let's address negotiating leverage. Assume a company wishes to acquire Soligenix as a whole, rather than acquire one of the many assets Soligenix owns and is developing. Without an effective shelf registration in place, Soligenix will likely be valued based solely on the cash on their balance sheet (approximately $9M at year end 2016), plus the negotiated value of their assets under development. However, with a $25 million shelf in place, and personally I wish it was a $250 million shelf, Soligenix now has negotiating power and considerable optionality because their stock can be used as an asset to raise capital. When negotiating with a potential acquirer, the financing alternative is leverage that can be used to either strike a better deal for shareholders, or walk away from the transaction altogether.
Given Soligenix's new found liquidity, the company could raise $25M tomorrow, should it choose, which means Sologenix will be able to negotiate from a position of strength. Soligenix did not have this optionality just two months ago. To those of you worried about any dilution at the current valuation, per my recent discussion with Dr. Schaber, CEO of Soligenix, there is no plan to raise money as it is not needed. Not to sound like a broken record (remember those?), Dr. Schaber stated emphatically to me that the company has zero intention of raising any money at the current valuation and that Soligenix raised money in December 2016 and, as such, has no pressing need for cash. With that stated, Dr. Schaber also understands what the significant increase in average dollar volume means to Soligenix and that is what has me smiling, as a shareholder!
Two months ago, March 9th 2017, the company could not raise $25M money, given the average daily trading volume was a meager 101,355 shares a day over the past 30 calendar days from March 9th to February 9th. The average daily volume in that 30 calendar day period multiplied by the share price on March 9th equated to $236,157 of average daily dollar volume, given the closing price on March 9, 2017 of Soligenix was $2.33. Now, let's fast forward to May 9th, 2017 and the stock closed at $2.55 and average daily trading volume over the past 30 calendar days has been 1,609,836, which equates to $4,105,082 of average daily dollar volume, a MASSIVE difference. This increase in daily dollar trading volume over the past 30 calendar days is of major value for shareholders of Soligenix - allow me to explain why. Let's go back to my hypothetical acquirer looking to buy Soligenix, before the substantial increase of Soligenix average daily dollar trading volume; the hypothetical acquirer would calculate their acquisition price by utilizing a risk adjusted net present value calculation ("NPV"), which essentially takes the estimated value of a stream of future cash flows that result from sales of developed drugs, then discounts that value to a present day figure, and adds cash and cash equivalents that are currently on the company's balance sheet. With a shelf in place, however, a prospective acquirer or partner must take into consideration that Soligenix has the ability to raise $25M, literally overnight, given the increase in average daily dollar trading volume. As a result, the NPV calculation will be adjusted considerably, because the company has viable financing options. In turn, the optionality provides Sologenix with negotiating leverage, making the company A LOT more valuable.
For fun, let's assume Soligenix gains FDA approval for SGX942 in Oral Mucositis and launches SGX942 by itself. Many experts have stated that the market for Oral Mucositis is $500M, or greater, annually worldwide. SGX942 has a number of potential benefits that may help those afflicted with Oral Mucositis and, as such, Soligenix may garner a majority, if not all, of the market share for this $500M+ market. So, given that assumption, what is Soligenix worth today? The answer has to be something in excess of the meager $13.95M market cap at which the company now trades. This massive increase in average daily dollar trading volume should be met with cheers versus jeers by shareholders. The reason why it should be cheers versus jeers is because the value of partnering or purchasing Soligenix just went up substantially because of the optionality and leverage Soligenix now has given this increase in average daily dollar volume. Many of you have called or emailed me asking me why the stock price is under pressure, why the company filed a $25M shelf, and what do I think? Well, now you know why I answer the phone downright giddy as it relates to Soligenix, as it sure looks like they are shining!
As I mentioned earlier in this article, I conducted a Q&A with Dr. Richard Straube, MD, Chief Medical Officer, Soligenix and Dr. Oreola Donini, PhD, Chief Scientific Officer, Soligenix. As promised, our Q&A is below:
Q&A with Ross Silver - CEO, Sylva International, Richard Straube, MD, Chief Medical Officer, Soligenix and Oreola Donini, PhD, Chief Scientific Officer, Soligenix
1. Ross Silver: When evaluating the compounds used to manage Oral Mucositis ("OM"), what options currently exist, what do they cost annually, and how do they improve or neutralize OM, if at all?
Dr. Richard Straube ("RS"): As you know, oral mucositis (OM) is an extremely debilitating side effect of many cancer treatments. Although there are ways to prevent OM, for some treatments, this may come with the risk of also protecting the tumor. Because the tumor treatment is the primary treatment objective, tumor protection is a major safety issue.
There is no approved drug for the treatment of oral mucositis in head and neck cancer (or indeed any "solid" tumor - that is, a tumor affecting an organ rather than the blood). There is only one approved drug for treatment of any type of oral mucositis in hematological cancers. It is called palifermin and it is contraindicated in solid tumors. This is because the treatment (which is actually used prophylactically) is actually a tissue growth factor that could encourage solid tumors to grow.
Other "treatments" for OM are not approved drugs, but rather 510k devices - this means that they did not have to show efficacy data to get approved by the FDA. The use of these approaches is considered palliative only and they do not treat the underlying disease.
Thus, there are no true treatment options for OM in any solid tumor setting at the current time.
Severe OM not only has major impacts on the patient's quality of life and their ability to tolerate a complete course of chemoradiation therapy, it also has a major financial impact. In 2007, it was estimated that head and neck cancer patients that developed severe OM required extra hospitalizations and care that total to about $17,000, and these costs are probably higher today.
2. Ross Silver: SGX942 is what Soligenix is developing to treat OM, and the compound is now in a Phase 3 trial. Can you tell us how SGX942 may improve or neutralize OM?
RS: Over years of study, we have come to understand that OM is driven by a dysregulated inflammatory response of the innate immune system. The innate immune system responds to the damage caused by the chemoradiation therapy by triggering an inflammatory signaling cascade, which makes the damage done by the initial chemoradiation even worse.
SGX942 is an Innate Defense Regulator. It modulates the innate immune system, enhancing the tissue healing and anti-infective pathways while modulating the inflammatory pathways. Thus, SGX942 deals with the downstream consequences of triggering the innate immune system and thereby prevents the damage from getting worse. Importantly though, it doesn't protect the initial damage to the mucosa that is directly caused by the radiation and chemotherapy, because this would also protect the tumor. The drug is specifically targeted to reduce the amplification of the musical damage caused by the over-exuberant inflammation triggered by this initial insult. It's other actions, bacterial destruction and enhanced tissue healing decrease the duration of the damage that does occur.
In the Phase 2 study, we saw a 50% decrease in the duration of severe OM. Severe OM means that the damage to the oral mucosa is so severe the patient has visible ulcers in their mouth and cannot eat and/or drink. We also identified a high risk patient population in the Phase 2 trial, those receiving the highest doses of concomitant chemotherapy, who had a median duration of 30 days of severe OM in the Placebo group - and in this subgroup, treatment with SGX942 (1.5 mg/kg) reduced the duration by 67% (to 10 days).
Actually, the Innate Defense Regulators may have some anti-tumor action, as well, but this is not the primary aim of our treatment. Rather, we take this as an encouraging sign that SGX942 will not negatively impact tumor control. In fact, in our Phase 2 study, we saw indications that the SGX942 treatment group (1.5 mg/kg) had a higher rate of complete tumor resolution at the 1-month follow-up visit than the placebo group. We also saw a reduced rate of infection, particularly bacterial (or "non-fungal") infection, also consistent with the mechanism of action. Finally, in the long-term (12 month) follow-up results, which we announced in on December 8, 2016, we also saw a reduced mortality rate in the 1.5 mg/kg SGX942 treated group. I would encourage those reading this interview today to go back and check out the press release.
3. Ross Silver: Is there a possibility SGX942 may eliminate OM?
RS: As I noted above, the initial damage to the mouth is done by the chemoradiation therapy that is targeting the tumor, but also causes damage to rapidly dividing cells, such as those found in the mucosa of the mouth. Clearly, this initial damage cannot be "undone" without also protecting the tumor. However, the more severe OM, which is also driven by the innate immune system, certainly can be "undone," and this is the aim of SGX942 treatment.
4. Ross Silver: Switching gears a bit, you have another Phase 3 clinical candidate meant to treat CTCL named SGX301. Can you tell us how SGX301 works and, if approved, what sort of impact the compound may have?
RS: SGX301 is a combination product - a topically applied ointment (synthetic hypericin) which is activated by safe, cost-effective fluorescent light. The ointment is applied to the cutaneous T-cell lymphoma lesions (CTCL) for up to 24 hours to allow it to be taken up by the cancerous T-cells in the skin. The following day, the lesion is exposed to fluorescent light for a short period of time (e.g., about 5-10 minutes). The light activates the synthetic hypericin, causing it to release free radicals which induce apoptosis (programmed cell death of the lesion cells only). This is called photodynamic therapy.
There is no approved first line treatment for CTCL. There are other photodynamic therapies, which are used off-label, in CTCL - such as PUVA. The distinction here is that this photoactivating agent known as Psoralen is mutagenic and the UVA light used to activate it is carcinogenic; as a result, the product has a BLACK BOX warning for causing other (potentially more fatal) skin cancers, such as melanoma. SGX301 is neither carcinogenic nor mutagenic and is, therefore, potentially much safer to use. This is particularly important because CTCL can be a very slowly progressing disease when appropriately treated, with the need for multiple treatments over years and decades.
We expect SGX301 to have a significant impact, if approved, since it will be a very safe therapy for a disease which currently has no available front-line therapy and all secondary therapies come with significant safety concerns.
5. Ross Silver: Soligenix has a robust vaccine program under development that has received nearly $60M in government funding. The Vaccines/BioDefense segment is involved in the development of RiVax, a ricin toxin vaccine candidate, which has completed Phase IB clinical trial for the treatment of vaccine against ricin toxin poisoning; OrbeShield, a GI acute radiation syndrome (GI ARS) therapeutic candidate, which is in pre-clinical stage to treat therapeutics against GI ARS; and SGX943, a melioidosis therapeutic candidate that is in pre-clinical stage for the treatment of melioidosis. Its vaccines are supported by its ThermoVax, a heat stabilization technology. Can you tell us how this heat stabilization technology works?
Dr. Oreola Donini ("OD"): Heat stabilization works by "freezing" the protein in a glass-like state with minimal water. This is important because of a lot of protein degradation reactions occur due to water. By minimizing the water, and providing a stable solid state, the protein is protected and remains in its active conformation. While this has long been understood, the presence of aluminum, a common adjuvant in vaccines, causes significant problems with this process. With our proprietary technology, we can even stabilize aluminum-adjuvanted vaccines, and believe there may be even broader applications. The initial use of this technology has been applied to our RiVax® vaccine that, although very effective, was extremely unstable in classic formulations and lost substantial activity over several weeks even in refrigerated conditions. When the vaccine was stabilized using this process, the vaccine was 100% potent after being stored for more than a year at 104°F.
6. Ross Silver: In your most recent press release, you focused on correlates of immune protection. Can you explain what these are and why these are important, particularly in the context of the Animal Rule?
OD: As you know, our most advanced thermostabilized vaccine is RiVax®, a vaccine to protect individuals from exposure to ricin. We have tested the antigen (without the thermostablized formulation) in healthy human volunteers and shown it to be safe. We have tested the fully thermostabilized vaccine in animals and shown it to be 100% protective to subsequent ricin exposure, even when the exposure is by aerosol, the most lethal route of exposure.
The FDA "Animal Rule" is a way of getting a drug approved for the treatment of diseases or exposures that one cannot ethically generate efficacy data in humans. For example, the RiVax vaccine is designed protect people exposed to ricin, most likely as the result of terrorist or military use of the extremely deadly poison, from dying from the poison. Obviously, it is unethical to conduct a typical clinical trial in which some subjects get the drug and a separate group gets an inactive placebo and then exposed both group to ricin exposure and see how many die in each group. Because the need to prove efficacy in situations in which human trials are ethically impossible but critically needed to protect high-risk groups of people, a common situation with biodefense products, the FDA established a route for Marketing Approval usually referred to as the Animal Rule. Under the Animal Rule you need to demonstrate the following key things:
1. That your treatment is safe in humans;
2. That your treatment is effective in animals; and
3. That you can predict efficacy and dosing in humans based on your animal studies.
This means that the disease in animals must mimic the disease in humans and that the response of the animals to your treatment is the same as would be expected in humans and that there is some metric you can use to assess the needed dose in humans.
In terms of ricin intoxication - the animal models are very reproducible of the human disease (the toxin kills all cells the same way). We have already demonstrated in a pilot study that non-human primates respond to our vaccine in a similar manner as humans. The last step was to predict the appropriate dose levels to use in humans. In the vaccine world, this means being able to determine a level of immunogenicity in animals that correlates to survival in animals and then show that humans (say in a Phase 1 trial) can achieve the same level of immunogenicity.
This last step is the one we have begun to make progress on. With our colleagues at HRI/NYSDOH in the laboratory of Dr. Nicholas Mantis, we have identified a panel of assays which shows a very promising ability to predict protection in animals. That is, if we draw blood before the animal that is challenged with ricin, testing the blood alone will allow us to predict whether the animal may survive the challenge. Once we have finished testing these methods, we'll be able to use these same methods to test vaccinated humans and demonstrate they can obtain similar levels of immunogenicity.
7. Ross Silver: Lastly and, not to sound like a broken record, but as it relates to the vaccine candidates, how are they better than other options available now?
OD: Our ricin toxin vaccine is the most advanced product. The only other product in this area has been stalled in testing for some years now. Moreover, our product (RiVax) is also the only thermostable option, suggesting that it can be efficiently stockpiled and shipped as needed without concerns about cold chain integrity.
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SOURCE: Sylva International LLC
