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Exclusive: Leading Biosciences Execs Talk About How The Company Could Save Hospitals Millions Of Dollars Per Year

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Exclusive: Leading Biosciences Execs Talk About How The Company Could Save Hospitals Millions Of Dollars Per Year
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Leading Biosciences is a small biopharmaceutical company focused on addressing the breakdown of the intestinal mucosal barrier using a simple technology platform. While privately held, this firm has been around for more than a decade.

Benzinga met with CEO Tom Hallam, Ph.D., and Chief Financial Officer JD Finley recently and had the chance to shoot a few questions.

What Leading Biosciences Does

BZ: Can you tell our readers what you do?

Tom Hallam: Our technology is amazing, and very simple. It’s about the digestive enzymes in our body and all of our gastrointestinal tract. Sometimes they leak out — which they shouldn’t, and when that happens [...] they basically digest our bodies on a really small scale, and that causes a lot of chronic diseases, and in some cases, when it’s really bad, a lot of acute crises for patients. So, we’re focused on this idea that we can stop that.

BZ: So, you’re precommercial?

Hallam: We’re a precommercial company. We’re currently in two different ongoing Phase 2 clinical trials.

The first is a trial that’s ongoing in Asia right now; we’re enrolling cardiovascular surgery patients.

The second is a clinical trial in the United States that is enrolling patients for gastrointestinal surgery. In addition, we’ll soon have a small investigator-sponsored study looking at septic shock.

BZ: Which indications are you targeting?

Hallam: There are a lot of different indications we’re looking at, but most importantly we’re really talking about GI [gastro intestinal] surgery. That is the big value driver for the company.  Let me back up; I’ll show you why.

There is a moment in every GI surgery where the surgeon takes a scalpel and he makes an incision into the bowel, the GI tract in particular. What happens in that moment is all of those digestive enzymes in the GI tract spill into abdominal cavity [...] They attack the muscles that disrupt the motility in the intestine and it causes this big inflammatory response in the body [...] so the bowel basically stops moving; it has to repair itself for a few days.

That’s a really big problem for patients [...] because once the surgery is finished, the patient can’t be discharged from the hospital until he/she has had a bowel movement.

If you look at the numbers, they say that if you’re an average person getting bowel surgery, particularly with a couple co-morbidities, you’re going to be in the hospital for one week to two weeks. And that length of stay is just waiting for that bowel function to return.

What we’ve shown in all of our preclinical studies is that we can have a very rapid return of bowel function, like as early as on the same day as the GI surgery.

The Potential

BZ: What is the market potential here?

Hallam: What we believe is that we can pretreat patients with our drug, which inhibits those digestive enzymes before they spill into the cavity. So, they’re going to still spill, but they’re not going to be active when they do it. By preventing that damage, the motility will still be there; the bowel will kick back into gear in a couple days, and the patient will be discharged from the hospital in a day or two.

This has an impact for the hospitals, from the fact that they can have a higher level of turnover and help patients get home faster. And, it helps the patient because they’re not waiting in a hospital to go home

BZ: Do you have a number for the savings that you can generate for each patient for this drug? Also, what is the size of the addressable market?

JD Finley: The savings from the hospitals perspective is very large.  For acute care hospital stay, it averages $3,500 a day. So, if you shave one day of hospital stay off of that patient’s stay in the hospital and taking into account that there are 10 million abdominal surgeries annually, that translates into multimillion-dollar savings.

If we price our drug at a very conservative price of $500 per dose, and assuming we only capture about 10 percent or 20 percent of the market, that could translate into over $1 billion of annual sales from the drug.

BZ: You said you’re Phase 2 right now. Where do you stand in the FDA process?

Hallam: From the FDA process, we have this great thing that came before us.

Merck & Co., Inc. (NYSE: MRK) has a drug that’s currently approved for return of bowel function; it’s basically, an m-opioid receptor antagonist. And, this is what we know about that drug: when that drug was originally bought, the company that bought it basically spent $417 million for that acquisition. The drug delivers a one-day improvement in return of bowel function, and has some really bad side effects; it causes an increase in heart attacks and cardiovascular events, and it is only available through a special FDA program that restricts use to special hospitals. So, most hospitals don’t use the drug.

But the great thing is, that drug paved the pathway for how to get there. They created this entire community of investigators that know how to run these clinical trials, the key opinion leaders that understand the right patient endpoints and how to treat the patients in the clinical trials from that perspective. We are currently partnering with the Cleveland Clinic in Florida, the Cleveland Clinic in Cleveland, Mt. Sinai here in New York City, and the University of California, San Diego, and the University of California, Irvine for running our clinical trials. By having them design and participate in our trial, they not only know how to get there in the best way, and enroll the patients, but they know how to hit the bar to get to the FDA approval.

From our conversations with the FDA, we likely only need this single Phase 2 clinical trial, and one Phase 3 trial to get to approval, basically because our drug is made of components that are already approved by the FDA. The active ingredient has been used in over 30,000 different clinical trials.

BZ: Do you have an estimated timeline for the FDA process?

Hallam: From the company perspective, we expect to finish enrollment of our clinical trials in 2017, and then we would go and start enrollment of the Phase 3, likely in 2018. Those would wrap up in 2019 and ideally, we would have a drug on the market in 2020

Financials

BZ: Do you have any plans to raise capital and/or go public?

Finley: Right now we’re in the market for a very small bridge round to get to a $15 to $25 million private round. Following that we’ll evaluate our options for funding the Phase 3 trial; one of the options we are examining is taking the company public at that point.

BZ: Who are the competitors in the space?

Hallam: The biggest competitor is Entereg, produced by Merck, and the process to use it is quite complex and requires specialized training. The FDA has set up a high bar use, which has led to a very low adoption.

Instead, what our drug is and how it competes with that in particular is, we have a safety profile that is well known; we have a single treatment that we think will be at a relatively good price point; and that it basically flows into the bowel prep process for the patient.

BZ: JD, what’s one goal you have as a CFO for 2017?

Finley: For 2017, the major goal is to complete the funding to get us through the end of the Phase 2 clinical trials so we can be prepared for Phase 3 next year.

BZ: Tom, what’s one goal you have as a CEO for 2017?

Hallam: To keep our clinical trial engines moving.

We deliver value to our shareholders really be doing two things: by protecting our discoveries with intellectual property (and we’ve got great intellectual property patent fortresses around our lead drug), and then we deliver shareholder value by delivering the data in our clinical trials to demonstrate the safety and efficacy of our drug.

This is really that year where I see we will have a big proof of concept for our lead drug and clinical trials.

A Proven Management Team

BZ: We’ve heard good things about your background, Tom. Would you tell us about it?

Hallam: Well, thanks. Over my career, I’ve been lucky and fortunate to be part of a number of different clinical trials. Out of 27 trials I’ve been a part of, 25 hit their efficacy endpoints. So basically, I have experienced delivering over and over again success in the clinic.

We have a management team that’s been successful at delivering trials in the clinic. We have the key opinion leaders that have already done trials in this space and they know how to run them and do them. We have a drug that’s proven to be very efficacious in preclinical studies and we have some early clinical data in our Phase 1 study that says we’re going to hit this endpoint as well. All the indications are that it’s a little de-risked opportunity and that we’ve got all the team and processes in place to make this a big success.

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