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NovaBay Pharmaceuticals, Inc. |
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November 4, 2013 Issue |
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The Most Powerful Name In Corporate News and Information |
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Addressing Antibiotic Resistance through Aganocide® Compounds |
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Mr. Paulson
received a B.A. from Loyola University and an M.B.A from the University of
Chicago. |
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Interview conducted by: Bud Wayne, Editorial Executive, CEOCFO Magazine, Published – November 4, 2013
CEOCFO: Mr. Paulson, would you give us a brief introductory of NovaBay Pharmaceuticals and about your aim? Mr. Paulson: NovaBay is addressing one of the most serious crisis in healthcare today - the issue of antibiotic resistance. In fact, just recently the CDC issued its first ever report on the growing crisis in antibiotic resistance. By that, we mean that of all of the antibiotics that are currently on the market, some one hundred and fifty are rapidly losing their effectiveness, because bacteria are developing resistance to their effects. The reason, as the CDC notes in its report, is that antibiotics are overused and inappropriately used. Some of the biggest problems are the antibiotics’ overuse in the livestock industry, which many people do not know about. All antibiotics essentially have the same mechanism of action as the first antibiotic that was discovered by Sir Alexander Fleming back in the 1930s when he discovered penicillin. That invariably lends itself to resistance. What NovaBay has done is develop a completely new approach to killing bacteria, virus and fungi with a brand new technology. How did we do that? In effect, we have harnessed the capacity of the blood cell. I will give you a little background here on the science. About a billion times a day, invading microbes, usually bacteria of some kind will challenge our bodies. Our white blood cells, effectively led by the neutrophils, will attack those invading microbes, engulf them, surround them and produce highly potent, chlorine-based molecules that actually eliminate the microbe. The bacteria dies and the macrophages clean up what is left and you avoided a possible infection. NovaBay has found a way to mimic the chemistry that your white blood cells use. You might ask, “Tom, this technology or the chemistry that your white blood cells use has been known for a long time. Why has someone else not been able to do this?” The issue is that these molecules, that your white blood cells produce, are relatively unstable and they have a short half-life. When you think about it, it makes sense. That is because your body only needs them to be potent for seconds or minutes to eliminate the bacteria. What NovaBay has done through medicinal chemistry, is been able to replicate and mimic, in effect, the killing power of these molecules your white blood cells make, namely N-chlorotaurine, in a stabilized form. However, we have restructured the molecule in a way that enables it to maintain stability over two to three years. Therefore, rather than have, maybe a thirty-days of potency that is possible with the natural molecule, we now have two or three years. For the first time it therefore makes the therapeutic power of these molecules commercializable. This is our Aganocide® portfolio of compounds, led by auriclosene. We are deploying that molecule in three different clinical trials right now.
CEOCFO: Would you tell us where this molecule comes from? Mr. Paulson: When NovaBay was formed in 2000 our founder and Chief Executive Officer and Chairman, Dr Ron Najafi, had this idea; could we work on this antibiotic resistance problem by taking a different approach. Could we come at it in different way and use a different model and do a paradigm shift in how we address antibiotic drug development. He focused on the white blood cell as a great opportunity, because our immune system has obviously worked successfully at killing bacteria since the day all of us were born or we would not be around today. Therefore, with that interest he looked at the molecules our white blood cells make, primarily N-chlorotaurine, or NCT. He took these molecules and worked with the chemistry team he recruited to NovaBay to find a way to stabilize those molecules. In fact, our lead molecule, auriclosene, was discovered here at NovaBay. We have composition of matter patents around it, which is the highest form of protection that you can have. We did not in-license from a different company or from academia. This is home grown at NovaBay.
CEOCFO: You mentioned your approach to the great need of fighting the infectious diseases. Would you tell us where you are in clinical trials? Mr. Paulson: I would be glad to, Bud. We are using our lead molecule auriclosene in three different business units that were structured around them; one for urological indications, one is for ophthalmology and one for dermatology. Each one of those business units has a clinical trial under way right now with data announced from one and results expected from the other two trials expected in the next few months. In September, we announced the results from our phase 2 the urology trial identified as treating urinary catheter blockage and incrustation (UCBE). That problem exists with patients that are chronically catheterized. Those would be quadriplegics, paraplegics, MS patients, stroke patients and so on. This condition afflicts approximately 100,000people in the US and we estimate costs approximately $1.5 billion to manage for our healthcare system. We believe that NovaBay, as we announced last month, has a new approach to help these patients, not only in quality of life, but also in reducing morbidity and mortality because of the condition.
We have another trial announcement coming up by the end of the year, this time from our dermatology program, targeting the highly infectious condition of impetigo. Impetigo is estimated to be roughly a $400 to $600 M market around the world. We have partnered that program with Galderma S.A., a private company headquartered in Switzerland, and with its operations in France. It is a joint venture between L’Oreal and Nestle. Galderma is the largest pharmaceutical company exclusively focused on dermatology. We struck a rather lucrative deal with Galderma in 2009. Galderma is now running this global trial for impetigo in the US, Mexico and South Africa. The trial will study about 350 patients. We are expecting results to be reported by the end of the year. We had good Phase 2a data where we saw 95% efficacy in a trial that was run in 129 patients. I hope that we will duplicate those results when the phase 2bdata are announced in December.
Thirdly, we have a program in trial right now, which is also a Phase 2b program for viral conjunctivitis. I am sure that everyone has heard of “pink eye”. There are two primary causes for pink eye. It is either a bacterial infection or a viral infection. While there are plenty of antibiotics to treat the bacterial form of conjunctivitis, there is no product approve anywhere in the world to treat the viral form. We are in clinical studies to address the viral form of conjunctivitis, which is a serious, potentially sight- threatening condition that can affect your cornea to such an extent that you may ultimately need a corneal transplant. We estimate that market to be $700 M globally. We are in a global trial in the US, India, Brazil and Sri Lanka expecting to enroll 550patients and we expect to announce data in the first half of 2014.
Those are the three clinical trials that we have under way. We are gratified that the market responded positively to the clinical data from our UCBE program. UCBE is serious for people who are chronically catheterized. Most people are familiar with a Foley catheter. It is when you are unable to void your bladder voluntarily. You have a catheter inserted through your urethra to your urine automatically have flow out of your bladder. As you would imagine, this environment is obviously very warm and moist and promotes biofilm build up and bacteria building up inside the biofilm. If patients are infected with a bacteria called proteus mirabilis, a rather difficult gram-negative bacteria, they will develop this encrustation with will effectively block their catheters. Because the patients have no feeling in the bladder area they will not necessarily know if their catheter is blocked, their bladders will fill, and it can, at least, lead to leakage as a problem, which is quite embarrassing for the patients. However, more problematic it can lead to urinary tract infections, a backup of infection into the kidneys. It can lead to urosepsis, which is a serious systemic infection and can lead to high morbidity and even mortality. One of the serious conditions is that distension of the bladder can trigger an automatic reflex by your body, a condition called autonomic dysreflexia. However, with autonomic dysreflexia, you will not sense the pain but your nerves will. Your nerves will go into a “flight or fight” response. Your blood pressure will rise dramatically, your heart rate will become rapid and you will have a migraine headache that, from what I understand with patients, is ten times what you would imagine a bad migraine is, for days. It is a potentially fatal condition. This can happen in the middle of the night. Patients can wake up because they do not realize that the catheters are blocked. This usually results in emergency room visits and life saving endeavors. This will give you, not only an indication of the challenges that these patients have and their caregivers, but also the impact on the healthcare system. Some patients may even need to be transported by helicopter to emergency rooms to deal with this life threatening condition.
CEOCFO: Would you tell us about your positive results? Mr. Paulson: There is currently no therapy for these patients. The protocol is a “3 times per day” flushing of the catheter with saline. If you can imagine, for someone who is quadriplegic, flushing three times a day is virtually impossible. People who are paraplegics would even have a challenge. Just the sheer effort translates to low patient compliance. Therefore, what we have is an alternative. Instead of three times per day, our clinical trial tested a therapy effective when used only two times per week, instead of 21 times per week. The trial design for the part 3 of our phase 2 UCBE trial was as follows: A four week blinded therapy of either active of placebo, if you will, of twice a week treatment of our lead compound auriclosene, which is an irrigation flush solution. The patients received our active ingredient twice a week for 4 weeks. Then there was a 2-week “wash out period”. Then the patient received a new catheter and began another 4weeks worth of therapy twice a week with either active or placebo. Therefore, if they received active the first 4 weeks, the second 4 weeks they received placebo, or saline. We would get the catheters back from the clinical trial and we would dissect them and measure blockage. What we were gratified to see is that most of the patients in the trial developed complete blockages while they were on the saline therapy and while using auriclosene therapy the catheters were clean. Therefore, the results were so dramatically different that we were able to achieve statistical significance of very low p values, in the parlance of clinical statistics. We certainly met all of our end points. It makes sense, because if you look at it this way; when you are getting a saline flush, even 3 times a day, you are mechanically clearing the catheter; but not totally. However, what you are not accomplishing is attacking the fundamental problem, which is killing the proteus mirabilis bacteria that is contaminating the catheter. You are merely flushing some of the blockage out of the catheter, so with the residual proteus mirabilis bacteria still present, you are bound to get new encrustations.
However, our auriclosene irrigation therapy kills the bugs that are responsible for the encrustation, so it never forms. The biofilm never converts into this crystalline blockage. That is the benefit. We are not only clearing the catheter, but we are killing the bugs that are responsible for further continuation of blockage. Therefore, we were quite gratified to succeed on all three levels, which are one. We met our end points; two. We achieved statistical significantly better results than placebo and three. Achieved clinically meaningful end points. Therefore, it is a “three bagger” on that regard. One thing to point out; that if we talk about the technology or topical anti infective drug development in general, this space in drug development has the highest success rate of any drug development sector; compared to cardiovascular drugs, cancer drugs, psychiatric drugs, CNS drugs and so on. It is for a very simple reason. We know in our lab studies, invitro studies in our lab studies here in NovaBay, before we even treat the first human subject; we know we have killed the bacteria of virus or fungi that we are targeting. For instance, as I mentioned, in this UCBE trial we know that auriclosene kills the proteus mirabilis bacteria. Therefore, when we enter clinical trials it is not a question of “we hope we kill the targeted bacteria.” We already know that we do that. It is a matter of dosing regimen, concentration of the drug and safety. If you consider other noble efforts of drug development; for instance Alzheimer’s disease, it is very worthwhile effort and someday someone will find a treatment. However, right now science is not quite sure what Alzheimer’s disease is, let alone be able to develop a drug to cure it, as opposed to topical anti infectives that we know will kill the bacteria before we enter the clinic. That goes for all three of our programs.
CEOCFO: Do all of your programs use auriclosene? Mr. Paulson: Yes, they all use auriclosene. It is different formulations – either an eye drop or a dermal gel or an irrigation solution – and different strengths and dosages, but it is the same fundamental molecule.
CEOCFO: Are these all topical applications? Mr. Paulson: Yes, they are all topical, but that means any surface you could reach. For instance, you could treat the sinuses, the throat, the bladder, and the lungs through inhalation. However, auriclosene cannot be used in a systemic fashion. It is not a pill that you are going to take and cure a systemic infection..
CEOCFO: Would you tell us about side effects and whether it kills all bacteria? Mr. Paulson: None of our trials has reported any SAEs or Serious Adverse Events. Any adverse effects we have had are mild and transitory. We have never had a patient drop out of a trial because of a negative side effect. This is after we have treated some 1,300patients already, in all of our trials.
In terms of killing bacteria with classic antibiotics, sometimes you will take an antibiotic and that will indiscriminately kill all of the bacteria, including the helpful ones that aid your digestion, consequently you will have upset stomachs and a great deal of discomfort while you are on therapy. However, since auriclosene does not act systemically, it will not have caused this side effect. In fact, it works to our advantage that if we put auriclosene in a gel on your skin to treat impetigo it is good that it kills the impetigo bugs plus any other bacteria that might be residing near the infection. In addition, in your eye, we not only kill the adenovirus that is responsible for your viral conjunctivitis, but any other viruses that might be on your eye. We have demonstrated effectiveness against herpes or other eye infections that could happen, but we are focusing on adenovirus for now. Then of course, in the catheter, we kill the proteus mirabilis and it is good to kill any other bacteria that might be residing in the catheter. Therefore, we are effective and since auriclosene is not for systemic applications, it will not reach your stomach and kill the useful bacteria that might be residing there. Therefore, we do not have issues on that regard.
CEOCFO: This is all very exciting! How is your company with funding right now? Mr. Paulson: We have a strong balance sheet now. That is a result of our strategy of having our corporate partners pay most of the “freight”, if you will, in a non-dilutive way. We have raised approximately $53 M in the capital markets over the last 13 years since NovaBay was founded. However, our partners have invested another $100 Min NovaBay’s technology, either directly into NovaBay or through funding the clinical trials. Therefore, if anyone has invested a dollar in NovaBay received a “three for one” as part of that investment. In total, over $150 M has been invested in NovaBay’s technology development over the last 13 years. Our last reported finances showed at the end of June that we had approximately $12 M in the bank. That is certainly enough to get us through these two clinical trial results that are coming up over the next six months and actually beyond that. In addition to that, we have milestones as we move through this impetigo trial successfully that would trigger a $3.3 M payment by the end of 2013. We have another partner in Pioneer Pharma, who has licensed our NeutroPhase product for China and South East Asia. They are expected to put in another $3 M by the end of this year. We did a financing last December with Lazard Capital Markets. As part of that deal, we issued warrants that expire this December. Those are worth $6.6 M, with a strike price of $1.50 per share. We are currently in the $1.80 to $2 range. Therefore, we are starting to see many warrants from that deal beginning to be exercised. As I mentioned, that could bring in another $6.6M by the end of 2013.
CEOCFO: Why should investors and people in the business healthcare communities be interested in NovaBay Pharmaceuticals?
Mr. Paulson:
Nothing
drives biotech value like clinical success. After 12 years of development,
all three of NovaBay’s clinical trials in our three business units are
starting to deliver positive data, the first one, very positive results were
achieved. Rarely will you see a biotech company delivering this much advance
clinical data in such a short a period. Therefore, if you are interested in
biotech and in healthcare, NovaBay is worth a look. In addition to the
clinical trial results, we are expecting over the next 6 months, we have a
technology that is protected with strong patent coverage through 2028. In
addition, we have the backing of major Pharma companies putting in
approximately $100 Min our technology after years of due diligence and
clinical development. We also have a team here at NovaBay that has
successfully developed biotech products previously in big Pharma and small
biotech companies. In fact, the head of our ophthalmology program, Dr
Stroman, led the anti-infective drug development at Alcon for 21 years, and
was responsible for developing the leading antibiotic available today for
bacterial conjunctivitis. That is just a sample of the caliber of people
that we have leading the NovaBay organization. We are looking forward to
announcements on our dermatology and ophthalmology trials over the next two
to six months. |
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