IO Private Interview Botanix Pharmaceuticals


Investor community IO Private interviewed the Founder of Botanix Pharmaceuticals, Matt Callahan.

Botanix Pharmaceuticals (Botanix) is an advanced clinical stage biotech company, leading the world in synthetic cannabinoid research. Botanix has an advanced clinical pipeline including a planned Phase 3 Acne program, a recent positive Phase 2a Antimicrobial program, and a Phase 1b Rosacea program which is starting recruitment.

Botanix completed a world-first clinical study in February 2021, killing the bacteria known as Staph and the super bug MRSA in the human nose, with their drug BTX 1801 – a synthetic form of CBD.

We hope you enjoy our interview with Matt Callahan.

What’s your background in biotech? Describe your previous success.

Well I started in the early 2000’s working in a venture capital firm called Stone Ridge Ventures in Perth and we invested in a number of life sciences and med device companies around Australia.  I was pulled into a University of WA founded company called iCeutica in about 2005 and led that company through the preparation for an IPO in 2010 to a trade sale to some private equity investors out of Philadelphia.  The Board threw me in with the deal and I moved to the US in 2011 to transition the company and have ended up staying here for more than 10 years now (during which time I was fortunate to take 4 products through FDA approval and launch, and resold iCeutica and a spin out company Churchill Pharmaceuticals).  I’ve been a founder or founding director of Dimerix, Orthocell, Emyria, Respirion and a couple of other startups in the last 15 years, so I’ve learnt a lot!

Why did you start Botanix Pharmaceuticals? Why did you choose synthetic cannabidiol?

Botanix was inspired by the coming together of a novel skin delivery technology developed by an old colleague and the potential of CBD to positively effect skin diseases, starting really with acne.  The Permetrex delivery technology was invented by a previous adviser of ours who had 40 years’ experience in drug delivery and we found it was perfectly suited to oily molecules like CBD (and most other drugs that people develop these days).  The inspiration for using CBD in skin diseases came from some scientific publications on raw extracts of the plant, but no one has taken a really pharmaceutical approach to using a synthetic form of the drug and focusing on doing FDA standard clinical development.  We aimed to fix that.

Describe your Botanix pipeline?

We are really excited to have a pretty broad dermatology and antimicrobial pipeline leveraging the unique properties of the Permetrex delivery system, the therapeutic potential of synthetic CBD and the ability to rapidly move products through early development into the clinic to see what works.  We’ve focused on acne, rosacea and dermatitis in the derm space and topical infections on the skin and in the nose for the antimicrobial product candidates.

What are the competitive advantages of the pipeline and why is this important for dermatology and antimicrobials? 

Well in addition to the advantages of Permetrex actually getting a lot of drug into the skin which I’ll come back to, cannabinoids and particularly CBD is an amazing drug because it does the two things that are required to treat almost every skin disease – kill bacteria and reduce inflammation.  Whether it’s acne, rosacea or dermatitis or even an orphan disease like Epidermolysis Bullosa – there is always a bacterial component and a redness or inflammatory component which usually means you have to prescribe 2 different drugs.  But with CBD – we see both activities in one molecule.  And best of all – CBD is very very safe – we have not seen serious side effects with our studies and the work done by GW Pharma with Epidiolex (that’s CBD for epilepsy taken as an oral liquid), high doses of CBD don’t seem to cause any real side effects at all.

The benefit of Permetrex, is we can deliver much higher doses of drug than the usual alcohol or permeation enhancer additives in creams and gels deliver.  This is important because CBD is not very powerful (which could be why it’s so safe), so we’ve learnt from our previous studies that high doses are needed for good efficacy and you can achieve those high doses with Permetrex.

What was your last capital raise and what valuation?

We raised $40 million in August of 2019 and we still have about $24 million of that left which is fantastic. That was raised at 21 cents.

Do you have enough cash to fund all your clinical programs?

Yes we are in the great position of having enough cash to run our clinical programs and have the rosacea study underway now, the antimicrobial study planned for Q4 start and another canine dermatitis study to kick off in the next couple of months which hopefully will lead to an exciting Phase 2b human study in dermatitis next year. Our overheads are very modest with a very hands on board and wise use of consultants in the US and Australia and outsourced clinical trial operations.

Describe the world-class team Botanix has to commercialise all the clinical programs. 

Well we think it’s world class and most of our team have the track record to back that up! Vince is our Exec Chair and President and sold his last company Anacor with a single dermatitis asset to Pfizer for $5.2 billion (that’s “b” as in “butter” as my American friends say). Prior to that he was the senior guy at Medicis that sold for $2.4 billion to Valeant and he has launched more than 30 dermatology products in the US and worldwide – so there is almost no one better qualified than Vince. Dr Bill Bosch is another exec director who worked with me at iCeutica as CSO and has more than 30 years experience in pharma – you will not find a better chemist or manufacturing guy.  Stewart Washer is our NED and he has a fantastic reputation as a director and founder of life sciences companies and led our sale of iCeutica back in 2010 as a director. Our development team is also well credentialed with Anthony Robinson as head of development, Dr Clarence Young as CMO and Lynda Berne as head of commercial – all of whom have more than 25 years’ experience in drug development.

Can you update us on your 3 clinical programs, their stages, and the market opportunities? 

Sure thing. Rosacea or BTX 1702 is the most active at the moment as we are kicking off the Phase 1b/2 study for that in 120 patients in Australia and New Zealand. This is an important study for us as the dose of CBD we are using in the study is somewhere between 2 and 4 times higher than what we used in acne and we’ve reformulated the vehicle (or placebo) to improve the separation between active and vehicle groups. We’ll be testing a high and low dose in this study and our plan is to take this data once successful and go straight into a pivotal study in the US and Australia and drive quickly to FDA approval. We’ve introduced some innovations in this study which are world firsts such as using a special camera system in all our sites to record and review images of patients and also utilizing a central reviewer to increase recruitment quality and level out any investigator’s differences in how they assess acne.  There has been nothing new approved in rosacea in more than 20 years and it’s close to a $2 billion a year market with no good solutions.

Next is our antimicrobial program with BTX 1801 which we announced successful data from in Q1 this year and which we updated the market recently about our change of first indication to pursue treatment of hemodialysis patients with nasal carriage of staph or MRSA. These patients really need some help as on average they have a hospitalization for an infection once a year and 40% of them die not from a kidney failure (which is why they are on dialysis) – but from an infection!  There are no products currently approved to remove the bacteria from their noses which sits directly over their catheter tube in their chest which they have to open every 3 days to clean their blood via dialysis. So these folks are exposed constantly to infections which means if we can reduce the cost of hospitalizations (at about US$32k a visit) and improve their chance of living longer – we have a real winner.  We will be doing a Phase 2b study kicking off in Q4 this year in Australia treating subjects for 3 months to get rid of their bugs in their noses – then the Phase 3 should be very efficient with a 12 month treatment period for FDA approval.  We think the market for an effective nasal decolonization drug like BTX 1801 is more than $700m per year and that doesn’t include all hemo patients and does not even include post surgical infection patients which is where we will go next after approval in hemodialysis.

The next clinical program is in acne with BTX 1503. We completed a Phase 2 study in 2019 with this product and subsequently held an end of Phase 2 meeting with FDA which green-lighted us for the Phase 3 studies.  We had some challenges with that study and so we plan to increase the dose of CBD we use as we head into the Phase 3 program, as well as introduce some of the innovations we are pioneering in the rosacea study (with cameras and central reviewing of patients etc). So we are eagerly awaiting the finalization of the rosacea study to kick off this Phase 3 program.  Acne remains a huge unmet need with more than 50 million patients getting drugs prescribed to treat their acne each year and a market of more than $5 billion per annum. With nothing new approved in 20 years – it remains another huge opportunity for us.

Can you talk more about the market opportunities from your successful world-first Phase 2a trial in Australia, which killed staph and super bacteria MRSA in the human nose?

Sure – well the BTX 1801 2a clinical study was completed in February this year and was able to successfully eradicate bacteria in more than 75% of the population on average after 5 days of treatment which was an excellent result, and more than 20% those subjects remained bacteria free 23 days later with no further drug treatment.  People have asked how this compares to mupirocin – the only other product from GSK approved for decolonizing (that’s the technical term) bacteria from the nose prior to surgery and the answer is very well.  All of the studies that have been run with proper detection methods in the last 20 years show clearance rates of about 63% with mupirocin and so we are well above that without the resistance challenges that mupirocin has in up to 95% of some patient cohorts.

We initially were going to follow GSK into “post surgical infections” as the market for 1801, but with more work and some help from clever clinicians – we’ve identified hemodialysis patients as the group most in need of a solution to get rid of bacteria and there are no products approved for this population at all. In fact GSK did some studies with mupirocin in this population successfully, but because the patents were expiring never sought FDA approval for this use. This is a really attractive market as each hospitalization of a hemo patient costs the health system US$32k per visit, they have on average at least one visit per year (so testing in this population is easier as they have more infections sadly), and even using the low price of mupirocin, the market opportunity is more than $700m per annum.  What makes this opportunity even more attractive is that FDA will give you an extra 5 years of regulatory exclusivity if we successfully develop the product (which makes it close to an orphan product, but in a large market) and will give you breaks on the size and duration of clinical studies under their Fast Track and LPAD programs.

This program alone justifies a significant investment in the platform quite separate from the dermatology applications.

In January 2021 you published research with The University of Queensland which “could lead to the first new class of antibiotics in 60 years”. Why is this important and can you give an update on this development?

Of course. The research we did with Mark Blaskovich’s group at the Center for Superbug Solutions was not only world leading in the area of cannabinoids, but provided the first peer reviewed confirmation of the stuff we’ve been saying about the therapeutic potential for CBD in a well respected journal. There are a few key points from that publication – first CBD is a broad spectrum antimicrobial with effect against all the bugs we target in dermatology and with our 1801 product (staph, MRSA etc). Secondly, the bacteria don’t seem to be able to form resistance to CBD easily as it kills within 10 minutes and we now know it affects all 5 pathways that the bacteria use to protect themselves from antibiotics – no other antimicrobial can do that. And finally – to our surprise we found that CBD is active against the problematic bacteria that cause gonorrhea, legionnaire’s disease and meningitis – which also opens up a whole range of new applications in attractive markets.

With a limited team and need to focus we have advanced 1801 into Phase 2 studies for the new target of reducing infections in hemodialysis patients, but you can expect to hear more from us on other applications and our “new versions” of CBD that we’ve been working on in the background.

In regards to funding and licensing deals, are you likely to partner with pharmaceutical companies (e.g. Pfizer, Roche) in Phase 2 and Phase 3 studies?

That’s always the big question and we kind of look at it like taking a train trip from one place to another.  Drug development goes in stages where (particularly at Phase 2 and 3), you have data that’s interesting to pharma companies and you have the opportunity to get off the train at one of the stations on the way to your ultimate destination, in exchange for some money in your pocket.  At each station it’s important to get off and look around and see what deals are available, as you weigh the cost and risk of going to the next station or the final destination, as obviously the value increases at each station, but so does the cost and risk – it’s a trade off.

So for us we chat to all the big guys and medium size guys on a regular basis telling them about what we are doing and gauging their interest in terms of what they might pay at that stage, versus the value of carrying the program through the next station. There is significant interest now and belief from pharma companies in cannabinoids post Jazz’s $7 billion acquisition of GW Pharma for the Epidiolex CBD product for epilepsy, so we believe that positive data from our derm and 1801 studies will catalyze interest in what we are doing and allow us to pursue a product or M&A opportunity if that makes sense.

Thanks Matt. How can people learn more about you and Botanix?

The website www.botanixpharma.com is a good place to start, but also follow us on the socials on facebook and twitter – we have a lot coming up in the next few months so it’s a great time to invest in Botanix.

Disclaimer: This interview was put together by Mark Sita. Mark is an investor in Botanix Pharmaceuticals.

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