Phylogica partners with Janssen Biotech

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Transcription of Finance News Network Interview with Phylogica Limited (ASX:PYC) CFO and VP Corporate Development, Nick Woolf.

Joining me today from peptide drug discovery company Phylogica Limited (ASX:PYC) is CFO and VP Corporate Development, Nick Woolf. Nick welcome back. Now Phylogica has just announced its fourth partnership with a major pharmaceutical company. Who are you working with and what makes this partnership different to your others?


Nick Woolf: Oh well thanks Lelde. We’ve just announced our fourth partnership and this is with Janssen Biotech, and Janssen is part of Johnson & Johnson the large healthcare company. And it’s our largest deal to date, potentially broadest both in scope and also duration of the agreement.

Looking closer at the options and collaboration agreement with Janssen Biotech: What are the main objectives of the alliance?

Nick Woolf: Well the initial stage of the agreement is for us to identify a peptide from our library, our proprietary libraries of peptides that targets a specific cell type, one that they can then work with to deliver various payloads.

OK and under the terms of the deal, what will Phylogica receive?

Nick Woolf: Well not all the terms are disclosed. What we can disclose is that we’ve had an upfront payment from Janssen and that they will be funding the first 18 months of research work, conducted at Phylogica. And there’s scope within the agreement for that to be expanded to cover potentially up to another 10 candidates.

And where do you plan to focus the research funds?

Nick Woolf: The work will be done within our facility in Perth and we’re working on a target that I can’t disclose. But one, as I say, will identify a peptide that penetrates a specific cell type and one that could be used to target many different diseases.

So Nick are there opportunities to expand the collaboration?

Nick Woolf: Yes, I mean there are multiple opportunities to expand. As an option type agreement, it’s one where Janssen has the option to develop our peptides with various payloads, in various different scenarios for various different disease types. And also, the scope to expand it potentially to add as I mentioned, another 10 candidates on top of the original collaboration.

And what is the potential scale of the partnership with Janssen Biotech?

Nick Woolf: Well we’re still negotiating various commercial terms with Janssen. But essentially, it’ll be mirrored on our previous collaborations where in addition to the upfront and the research funding that they provide - if they want to have commercial rights over the peptides that we identify, they will be milestone payments associated with successful development of anything that comes out of our libraries. And also, royalties on commercial sales of any products that are brought to market.

Great, so if we can look at your other major partnerships. Your collaboration with MedImmune, the biologics arm of AstraZeneca, just moved to the final stage of the research plan. Where do you hope your partnership will be by year-end?

Nick Woolf: Well that’s a good question, and just to remind you that the collaboration with MedImmune is to discover novel peptides from our libraries that have antibiotic activity against a hospital-acquired super bug, called Pseudomonas. As you mentioned, we’re just going into the final stage of the research plan. And, over the course of 2012 we will be completing the research objectives. And then the resulting peptides will be evaluated by our partner with a view to then taking them into development.

Phylogica has also just completed its first stage of collaboration with Pfizer (NYSE:PFE). When do you hope to receive indication from Pfizer if they are keen to exercise their Option to License and further develop these candidates?

Nick Woolf: There are aspects of the deal which I can’t disclose, but it is absolutely an Option to License deal. So, the next phase during 2012 is for Pfizer to do their evaluation and at some point during this period we would hope that they would exercise their license to take commercial rights over those peptides. And, that would obviously trigger a milestone payment to us.

Now moving to your financials: You’ve maintained guidance for commercial revenue to double in fiscal 2012 from the year before. What underpins this forecast?

Nick Woolf: We’re halfway through the financial year. We’ve got pretty good visibility now on at least half of that revenue from payments to date and also committed payments from our current collaborations. But we’re also on track to sign new collaborations over the next six months, so before the year-end June 30, 2012. And, you know, we are pretty confident at this stage that we can meet our guidance.

Phylogica generated revenue of about $1.3 million in the last quarter of 2011. How does this translate into costs and will they remain the same?

Nick Woolf: So our cost base that we’ve indicated for the financial year is between $6 million and $7 million. So it’s about half a million a month and, at this point, we’ve got no plans to expand that. You know, despite the new deals that we are signing and have just recently signed are – a lot of what we do is automated. And although we’re performing more work, it doesn’t translate into any increase in the operating costs.

Finally Nick, what opportunities will you be pursuing this year and what milestones would you like to see Phylogica reach?

Nick Woolf: Well for the financial year, we’ve set guidance that we want to sign at least two more deals, say three for the financial year. And we’re on track with a number of discussions with Big Pharma [the pharmaceutical industry] and with all of these deals; we’re talking about broader scopes and larger financials than our previous deals. So we’re looking to sign bigger deals. And we’re also obviously looking to extend the relationships that we currently have with our existing partners, either through the progress of the existing partnerships or through signing second collaborations with those partners.

Nick Woolf congratulations on your latest developments and all the best for 2012.

Nick Woolf: Thank you.

Ends