TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH PHYLOGICA LIMITED
(ASX:PYC) CEO, DR. PAUL WATT AND EXECUTIVE CHAIRMAN, DR. DOUG WILSON
Emma Pearson: Hello Emma Pearson reporting for the Finance News Network. Joining me today for the first time from Phylogica is CEO, Dr. Paul Watt and Executive Chairman, Dr. Doug Wilson. Paul and Doug welcome to FNN. Paul can you introduce Phylogica to us?
Dr. Paul Watt: Phylogica is a specialist drug discovery company. We’re crucially not a drug development company, so we’re not engaged in clinical trials. We discover prototypes for drugs which we licence to large pharmaceutical companies.
Emma Pearson: Doug what would someone with your background, being a former global head of medicine for big pharmaceutical company, Boehringer Ingelheim see in a little Australian biotech company like Phylogica?
Dr. Doug Wilson: When I looked at Phylogica for the first time, I felt they had something unique because the start of the prototype drugs is to have a reservoir of those and the second part is to have a search engine, so you can find what you want in that massive array of hundreds of billions of these compounds.So when I saw it I felt that the optimal business model for them was not to try and take these drugs through to the clinic, that wasn’t their expertise, but they had something so profoundly unique it was absolutely worthwhile to concentrate on that. And this is what they’ve done, they’ve concentrated on these massive libraries they have, they’ve polished up the search engines which are very, very efficient to find the appropriate prototype drug against the target. And then we’ve been selling that concept to big pharmaceutical companies.
Emma Pearson: And Paul can you tell us about the uniqueness of Phylogica’s business model?
Dr. Paul Watt: Phylogica has adopted a discovery model. This means that we focus on the earlier stage which is the identification of the drug prototypes and then we’re able to derive revenue immediately by licensing those drug prototypes to large pharmaceutical companies.
Emma Pearson: So Paul your business model eliminates all clinical risk?
Dr. Paul Watt: Our business model eliminates clinical risk because we’re not engaged in clinical development at all. Phylogica concentrates on the earlier stages of drug discovery, with this model we can obtain early revenue; this revenue can be seven figure revenue.
Emma Pearson: Okay so what are Phylomer drug prototypes?
Dr. Paul Watt: Phylomer drug prototypes are a special kind of Peptide and Peptides are really like parts of proteins. So Peptide drugs belong to this very fast growing class of drugs called Biologics or Smart drugs. This is the fastest growing class of drugs overall and these drugs, these Smart drugs, are expected to constitute half of all drugs by 2015.
Emma Pearson: Paul where are Phylomer drug prototypes being used today?
Dr. Paul Watt: We’ve identified Phylomers that can block various types of diseases. So we’ve got Phylomers that can block inflammatory diseases and we’ve validated that in animal models of those inflammatory diseases. We’ve got Phylomers as another example that block infectious diseases, so these Phylomers bind to and kill bacteria that are important in hospital based infections. So Phylomers are very versatile, they can block off a huge range of different targets that are responsible from all sorts of diseases ranging from cancer to inflammation to infectious diseases. And I think that’s one of the attractions for the pharmaceutical industry, is that we’ve shown this versatility in the Phylomer Libraries and they’re looking for versatile Peptide drugs.
Emma Pearson: And what’s their potential?
Dr. Paul Watt: Well they could be used for all sorts of diseases which are hard to block with conventional small molecule drugs. Small molecule drugs are those tablets that people take every day. The reason why the Biologics drugs are replacing gradually, the small molecule drugs and by 2015 as I said, more than half of drugs will be of this Smart drug class - the Biologics, is that small molecule drugs on average can be more toxic and less specific than these more targeted Biologics drugs.And the other reason is that it is harder and harder to find disease targets to hit with the small molecule drugs and so Phylomers, because they belong to this Biologics class have enormous versatility in terms of the targets that they can hit, unlike small molecule drugs. So really there’re thousands of potential targets that you could hit in many, many diseases with these Phylomer drugs.
Emma Pearson: So what success have you had?
Dr. Paul Watt: We’ve hit targets that are inside cells as well as on the outside of cells, well that provides a huge advantage over antibodies for example that can only really hit targets outside cells. We’ve also managed to deliver the Phylomers by patient friendly routes, for example we’ve shown that we can deliver the Phylomers through the intranasal route.
Emma Pearson: And what about deals or agreements with major pharma?
Dr. Paul Watt: In December of last year we signed our second large pharmaceutical deal that was with Roche, which is the largest company in this Biologic space. It’s the largest pharma company in Europe and so we were delighted to be chosen for Australia’s first discovery alliance with Roche.
Emma Pearson: Are there any deals in the pipeline?
Dr. Paul Watt: Well the good news is there are other big pharma companies that are queuing up to access these Phylomer Libraries. So we’re actually negotiating two deals, we’re at late stage negotiations with two pharma companies, one is a top five company and one is a top ten pharma company, and so we expect to be able to announce those alliances within the next few months.
Emma Pearson: Now drug discovery and development is well known for being difficult and expensive, who has been funding the Company up to this point and what’s your burn rate?
Dr. Paul Watt: Drug discovery is not nearly as expensive as drug development and so we’ve eliminated all that development risk, but we’ve also eliminated all of that drug development cost. So in fact our costs are relatively low, our burn rate at the moment is about $4.5 million a year which is a lot lower than the burn rate of a drug development company.
Emma Pearson: Do you expect to become profitable any time soon or are you looking to be acquired by a major pharmaceutical company?
Dr. Paul Watt: Well the great news about accumulating interest from the pharmaceutical industry and the fact that we’re negotiating two more pharma deals, and we expect a third deal towards the end of the year, is that these deals bring in immediate revenue. So the revenue from these discovery alliances which last about a year is usually a seven figure revenue amount, and you can easily do the sums and work out that with three or four of these deals, we could be cash flow neutral and that could be as early as next year.
Emma Pearson: Looking at your share price, where is it and what’s your market cap?
Dr. Paul Watt: Our share price is at around 9 or 10 cents which caps us at about AUD$20 million.
Emma Pearson: Dr. Paul Watt and Dr. Doug Wilson, thanks for introducing Phylogica.
