TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH PHYLOGICA (ASX:PYC) MANAGING DIRECTOR AND CFO, NICK WOOLF
Joining me today from Phylogica is Managing Director and CFO, Nick Woolf.Nick welcome back. Since we last spoke Phylogica has received an award for its technology and also been named one of Bioshares Top picks for 2011. First up, congratulations and could you start by telling us a little about the Frost & Sullivan Award for New Product Innovation?
Nick Woolf: Well thank you for your kind words. Well the Frost & Sullivan Group are a global consultancy focussed on various industries but particularly in the healthcare. They’re present in forty countries and it was out of the blue for us, we weren’t expecting it, we didn’t know they were doing an award for peptide drug discovery services. But clearly it’s a validation of what we have as our platform and it has helped to raise the profile of Phylogica within the global pharmaceutical industry. So we are delighted to be the recipient.
Okay now you mentioned potential, could you tell us briefly what did Bioshares like about Phylogica?Nick Woolf: Well Bioshares is a very prestigious biotech journal here in Australia and they are known for the best coverage of the biotech sector and to the public companies traded on the ASX. And they looked at companies that they thought would best perform in 2011 and chose us as one of their top ten. And what they saw in us was really the transformation that we hope to achieve over the course of 2011, which will be further deals and obviously revenue growth, to the extent that we are happy with our guidance now that we will be cash generative in the year 2012.
Okay and what about Phylogica’s own goals for 2011?Nick Woolf: Well in terms of our goals, it’s to drive revenue growth which is our business model through our drug discovery services, which includes fee for service work. And also attaining bigger downstream milestones and royalties from our pharmaceutical partners when they’re successful with our Phylomer peptides, and we have the goal of signing three new collaborations in 2011 with new pharmaceutical companies. And also extending our current relationships that we have with Pfizer, Roche and AstraZeneca.
Now while on the deals, since we last spoke you’ve signed a deal with Pfizer bringing to three the number of major pharmaceutical companies you’re doing work for. Now could you tell us with Pfizer what they are targeting and also what the value of the deal is at this stage?Nick Woolf: Well firstly, I might say that we’re delighted to have Pfizer which is the world’s largest
R & D based pharmaceutical company as one of our partners, and it also brought to a total of three deals that we’re able to achieve within say the first twelve months of our model for drug discovery partnerships.
The deal has certain confidential aspects which I can’t disclose. They are paying us for our research funding and they gave us a technology access fee up front of half a million. And we are identifying peptides that have potential as vaccines against a disease area with high unmet medical needs today, where peptides potentially can have advantages over other biological therapies. The value of the deal in terms of downstream potential for us is upwards of $134 million.
Excellent and how is your work with Roche progressing?Nick Woolf: Well Roche was our first partnership that we signed at the very end of 2009 and that deal is to identify peptides that can penetrate cells, and target the disease pathways that happen within the cells themselves. It’s been a challenge for the biotechnology industry and the pharma industry to find drugs that can target the biology within cells. Peptides can do it and particularly our Phylomers have sort of unique properties of cell penetration.
We successfully completed the first stage of that deal in October. We submitted our report with a panel of peptides and Roche and us have been reviewing that data in determining next steps, and I am very encouraged by the dialogue that we’re having with Roche today.
And progress with Medimmune?Nick Woolf: Our second collaboration in 2010 was the deal with Medimmune which is the worldwide biologics unit of AstraZeneca, the large UK pharma giant. And there we are indentifying peptides with novel antibiotic activity against one of the most prevalent hospital acquired infections, pseudomonas aeruginosa, a multi drug resistant drug that’s been an issue for the industry in trying to tackle with current antibiotics. And we’re making great progress in the research collaboration, they have paid us to date $1.5 million and the potential downstream value of that deal is upward of $100 million for us.
Now Nick I see you’ve entered into an agreement with German Biotech XL-Protein GmbH to extend the half-life of your peptides. Now could you tell us in layman’s terms, what does this mean?Nick Woolf: Well peptides are protein fragments and one of the issues in the past with peptides has been that they’re quickly eradicated by the body, in terms of so their duration of action is relatively short. But XL-Protein is a very exciting little company based in Germany, came out of a prestigious research institute there and they have a technology that for linking a biological Polymer to our peptides that extends that half-life, reduces the clearance by the body. And it’s an opportunity really to improve the therapeutic window of our drugs and we’re very excited to be working with them.
Right and where are you going to apply the technology first?Nick Woolf: Well we have in terms of our agreement with XL-Protein a Proof of Concept Study that we’re working on with one of our in-house programmes. It’s an anti-inflammatory target called CD40 Ligand. The disease indications that we are targeting for that drug are rheumatoid arthritis and again it’s a drug where, you know, we have novel lead candidates. And we’re looking to try and broaden the therapeutic aspect of those candidates using a half-life extension technology from XL-Protein.
Okay and now to your 4C Cash flow Statement for December. Could you tell us what your cash position is and also how much did it cost to run the business over the quarter?Nick Woolf: Well in our 4C to the end of December 2010 we reported a net cash position of $1.8 million. We also reported in our Foresee that we had a very successful January 2011 in the first month of this calendar year. We’ve generated an additional revenue of close to $1 million, so our pro-forma net cash position as at the end of 31st including that revenue was $2.8 million. And that puts us in a very strong position in terms of what we can achieve this year. We generated revenue over the last twelve months of $2.5 million and our underlying operating costs are around $5 million a year.
Okay and what’s your forecast for the first quarter of 2011?Nick Woolf: We’re not giving specific revenue guidance for this quarter, but what I can say is that there is more funding expected from our current partners and we’re working towards new collaborations, which will obviously bring in new revenue flows this quarter.
Last question Nick. Phylogica shares are up strongly since your Rights Issue at 5 cents in October with volume to match. How many shareholders do you have here and in Germany?Nick Woolf: Well the German listing firstly is relatively new to us. We’ve just really embarked on a new initiative in terms of investor relations to try and push that, but there is certainly trading and certainly interest. We’ve been attending various conferences in Germany, been on various webinars to German high net worth individuals and there is absolute growing interest in Germany in our stock.
In terms of our shareholders here, we have our top 50%. So 50% of our shareholding is owned by twelve shareholders and then we have a relatively long tail of several hundred private individuals who own Phylogica and we’ve seen incredible shifts in our volume, as you mentioned in the trading volume, the stock is up over 50% this year. So we’re delighted by the progress that we’re making.
Nick Woolf congratulations on some very good progress so far.ENDS
