@Scoonie that's a nice balanced summary.

@Nnyck777 really helpful post. I never imagined the pricing differential would be so high. (Now we know why the US spends 18% of GDP on health, around double much of the rest of the developed world!) With such a differential, how likely are we to find a grey market developing between Japan and the US? I understand the payers have indicated pricing in line with Qbrexa will be supported, but it looks like an opportunty to me. Apart from the legality and the fact that the Japanese label presumably isn't in English, boy thats a big arbitrage opportunity.

Hah! I knew you'd come back at me over my 70% CoS! (Consider it my 20% "sucker at the table risk premium" ;-))

On sales and marketing strategy, Matt was taking about two channels: 1) direct with a field force of 30 to cover the 4500 prescribing dermatologists and 2) telemedicine with an e-channel. This doesn't look like a difficult product to sell, so they should be able to ramp this up in year 1, to build up to a good selling rate by the end of CY2024. So I'll assume 40 bods in place by year end to cover both channels.

Time to start cranking the handle.

P.S. I remember DW's remark regarding Japan - it was in response to a question I asked him a year or two ago. For big pharma and medical devices Japan is often the 3rd priority after US and EU, because it is a big market and prices generally are very strong. I guess my experience is skewed because big pharma have well-resourced in-country teams to manage the regualtory engagement. No so easy in startup land.

And on the efficacy question, I think the data that has been presented by $BOT earlier this year Presentation is clear on the read out from the Phase III trial.

Slide 5-8

The difference on the end points is statistically signicant at p=0.0001 and p=0.0002, depending on the end point. So, only 0.01% and 0.02% likelihood of the effect being due to chance. The report conclusion is that "85% of patients experienced a statistically significant and clinically meaningful response" and that in "independent" market testing they found that "85% of patients and dermatologists would use and prescribe SB". Market researchers reported that payers rate SB as 4/7 on unmet needs and that in the market researcher experience this is considered a "High" rating.

From my reading that looks like a real product. Am I missing something?

I'm not sure if you're missing anything mikebrisy but as a result of this latest discussion I've gone back through the detail to make sure I haven't which has bought me to this question/concern regarding label negotiations. If I understand correctly prior to FDA approval there must be an announcement that the label has been agreed. As the label content negotiations commenced Q2 (ie: April-23) I would have thought this would have been a relatively straight forward process however it's now moved into Q3 and still no update and therefore wondering if this is cause for any concern as I have no idea on what is considered acceptable regarding timing on such negotiations?

Yes, I saw that too.

Going back through some of the CT reports that I am able to find, I can't find anything of concern on the safety side. And I don't see $BOT having disclosed anything which indicates they aren't expecting a broad label. But how experienced are they?

Here is the PIL from Japan PIL - it looks pretty benign to me.

If there was some negotiation required on the label, then making modifications to take into account FDA feedback might push that milestone back towards the approval milestone. It wouldn't necessarily mean that the approval decsion was delayed. A delay would happen if $BOT weren't able to agree to accept the feedback.

Again, we'll find out in September, if there isn't a positive announcement in September.

That's the thought process I went through, rightly or wrong.

@mikebrisy I wasn’t implying it wasn’t a real product and that it wasn’t a good trial outcome. It was more noting the language used to frame the result as ‘highly’ significant, using emotive language to sell its importance. This is more of an annoyance for me coming from a research scientist background.

@Nnyck777 @Jimmy I can definitely see a potential future where this rolls out without any problems or someone takes them over and the SP should increase substantially in these circumstances. My comments are more around me being comfortable with the management of what I am invested in.

My problem is that I just can’t understand why FreshTracks would effectively give it away. The statement that they are going in a different direction could be true, and I think if they had sold out of the licence deal for $25-40M rather than $8.25M I think I would believe it, but selling it for that price doesn’t really enable them to go in a new direction. I would also think that raising capital would be easier for them if they had the royalty and milestone payments on their books.

@Nnyck777 I also went back and read the earlier 2019 interview, and I thought this was informative of the management quality. I compare this to the Neuren management who have a steady stepwise anpproach annd who I very quickly (rightly or wrongly) got comfortable with Jon and the decisions he made. I got a very different feel on the quality and trustworthy metric with botanix.

I also didn’t really like the explanation that this opportunity fell in their laps, they didn’t seek it out as such but rather it came to them. I read this as their earlier trials didn’t work and this enabled them to pivot the business to this drug. Which is fine but in the context of FreshTracks backing out of the partnership makes me very nervous. When I first saw the buyout of the license I thought it was a master stroke by Bot but now I am unsure.

I am not experienced with biotechs so this may be incorrect, but I would have thought a successful phase 3 trial with a large potential market in the US would have been what larger pharmaceutical companies were looking for and that they would grab it on these results, and then use their size and experience to get FDA approval and roll it out? Is this correct or do you think they generally wait for FDA approval prior to pouncing?

I’m not trying to knock this investment idea but for me I can’t get it to work under my framework

@Slideup I think your challenges are great… that’s the quality of discussion that makes SM worthwhile. And yes, the deal seems a steal, or is it? I can’t yet see any way of resolving the question in my own mind. You are right, $4m does not set them on a "new course"; 3-4 months survival rations doesn’t do it.

I’ve taken a tiny bite. @Nnyck777 has placed rather a big bet.

There’s "no regret" in my current position in the failure case, but I have between today and FDA decision day to form a more complete/informed view of the risk. At the moment, my concern is that my bet is too small. We can’t debate risk appetite, but we can debate chances of success. Bring it on.

Fun, eh?

Got to like the binary event of FDA approval!

Look at Cyclopharm share price when they received a CRL from the FDA! Hopefully they will be second time lucky.

I took a small amount when it fell to 13c The past track record of Matt and Vince turning drugs into multi million blockbusters really appealed to me.

Reminds me of Mark Clark from Capricorn Metals who turned Equigold and Regis Resources into a billion dollar market cap companies with Equigold being taken over.

Or even Bill Beament with Northern Star Resources. Apologies for the reference to gold companies but it is the only example I can find.

But I should remind everyone that management track record isn't always a guarantee.

Ted Dhanik who was one of the co-founders of Myspace is a good example with Engage BDR / CTV now bankrupt.

@Slideup my understanding of the answer to your question is that a lot of acquisitions of biotechs by pharma take place during Phase II and III. Often the acquiring co. has an edge in the therapy area, so that once safety and efficacy data emerge, they are better able to judge the risked value of the target’s lead chemical entity. Phase III is also where the costs ramp up, so can be an added driver. While I believe this to be true, acquisitions occur right across the life cycle because another consideration is the status of the acquirer’s development pipeline as well as their commercial portfolio, and how the target fits in that context.

For $BOT and Fresh Tracks this is less relevant, because Ecclock is already in the market in Japan so there is more data and the risk profile for the US should be much lower. Which all comes back to your original challenge: why was the deal so cheap? If we could get to talk to Matt, that would be worth drilling into.

I would fully expect $BOT to be on the receiving end of approaches, particularly now that they own the drug without any strings, in fact, enhancing M&A attractiveness was part of the reason to extinguish Fresh Tracks rights. It all comes down to how Matt values what they have. My sense, given the Chairman’s background, is that they’ll push for a bullish view. In fact you can already see that in their investor communications which are intended as much for the benefit of acquirers.

@Slideup Your thoughts prompted me to dig deeper into Fresh Tracks

Firstly, while they are flush with cash now, their financial performance has been very poor. Last financial year FY22 they made a huge gross loss on their sales. So there are issues with the way their product is being delivered to customers.

At this point you need to question whether Fresh Tracks should stop what they are doing and look at some other products to develop in their pipeline. With that they need cash so are probably happy with selling their interest.

Secondly I think being a small company, Fresh Tracks maybe does not have time or resources to seek independent advice on the valuation of the agreement given that SB is nearing FDA approval. Valuation is made more difficult that this is in fact a binary event with probability of a positive or negative outcome. This is almost an Advanced Applied Finance question looking at risk neutral probabilities, Damodaran real options etc. etc which I won't bore anyone with as last time it was too much work for me with little reward when sometimes the answer is staring plainly in your face.

The point is, it is very hard to value the agreement so any money offered is probably worth taking.

Finally, maybe Fresh Tracks don't see the agreement as a core part of their business as SB is totally different to what they are developing.

I also want to mention that even the big companies get it wrong. The Karlawinda Royalty which South32 owned is one that sticks in my mind. At that time South32 sold because they didn't see the royalty as a core part of their portfolio. In other words, they were not interested in holding a Gold asset. Or maybe they felt was too much risk as it entered development phase - which is almost a "FDA moment". What they didn't consider is that the developer of Karlawinda was none other than Mark Clark, the guy that created billion dollar market cap companies 3 times over if you include his current position. So you got to imagine how South 32 got this one wrong - I would argue they would be in better financial position had they kept the royalty until the mine started earning money instead of selling before that happened.

Then again your points are valid and maybe Fresh Tracks know a little more than Botanix does regarding chances of FDA approval and how the revenue turns out so it is good to get someone to challenge the narrative.

So I picked the brains of a dermatologist mate about this. An Australian perspective so quite different to a US derm I'd think and probably a very patient/physician oriented thought process - not pharma / small cap mindset. Those caveats aside, he was a little sceptical. Wondered about the potential side effects. I briefly read through some of the data. What is interesting is that using the 5% gel (used in japan) there was a 15% nasopharyngitis and 8.5% dermatitis rate. Smaller numbers but still significant for anticholinergic side effects.

Unless I've read this incorrectly, Brickell used the 15% formulation for the phase III. You can't help but think what the side effect profile might be?

There are alternatives. Injected botox apparently works well but is offered in very limited public clinics and quite expensive in Australia privately. In the US, everything is about the insurer rebates - but Sofpironium Bromide will be easier to use as a topical agent. In the sense its a use it forever and reapply regularly - its the ideal "pharma" product. I don't pretend to know more than the learned comments here already about potential costs to distribute and revenue or the oddity in the FreshTracks deal ... but that's the 2c view from me and my derm buddy.