What is it Scoonie? Make it quick I’ve got a lot of work to get through today.

I have been looking at an ASX listed biotech, based out of Perth Western Australia called PYC.  Market cap $460m (post capital rasie @ 8 cents, currently selling at around 10 cents).

Have you now. Last week you were telling me about a bauxite miner, now a biotech. You know what Scoonie, I think you might be a little bit Schizo. A…little…bit… Schizo.  

These days its probably best not to say things like that. You know, mental health being such a sensitive subject and all that.  

You might trigger someone. 

Don’t tell me what I can and can’t say!!! And, don’t give me any of that touch-feely bulls%#t! 

Anyway what the hell would you know about biotechs!

True, but you don’t have to be a chemistry Phd. Just have to take the time to think things through. And look many of the companies that people think they know about they don’t. Who really knows what goes on at the almighty Macquarie or any insurance company? You’ve got no idea really, your just believing what everyone else is telling you. Anyway, this is not about me. Its about PYC and whether they represent a company worth investing in.  

Eh. Why are you wasting my time with this.

 Because there could be opportunity.

PYC’s business is RNA therapy focused on orphan designated genetic diseases. As we have seen with NEU these have a lower regulatory hurdle, making them easier to get to market. And once in market the drugs can command very high prices. 

What is gene therapy you ask? “ Gene therapy is a medical technology that aims to produce a therapeutic effect through the manipulation of gene expression or altering the biological properties of living cells.”

Its hard to believe, but science is able to use a vector such as a virus or special molecule to enter cells and fix a genetic defect. Closer to home, CSL have done this with their FDA approved Hemgenix used for the treatment of adult haemophilia. Essentially they have used a virus to travel to the liver and deliver a functioning gene that allows the patient to produce the missing blood clotting factor. Costs around $US3.5m for the one off treatment. Just incredible, worlds most expensive drug. 

Roughly, this is what PYC is about. They currently have most advanced programs up and running, the fourth Phelan-McDermid Syndrome is less advanced:

i) Rare eye disease retinitis pigmentosa RP11, a genetic condition for which there is no treatment that results in progressive blindness. Targeting this condition is their drug VP-001. Around 5,000 – 7,000 patient population.  (est $1b annual market)

ii) The second program is for a genetic optical disorder called autosomal dominant optic atrophy (ADOA) for which there is no treatment available. Targeting this condition is their drug PYC-001. Prevalence is around 9,000 to 16,000 suffers in the western world. (est $2b annual market)

iii) Autosomal dominant polycystic kidney disease (ADPKD) is marked by extreme swelling of the kidneys. Currently there is no treatment available other than kidney transplant. Targeting this condition is their drug PYC-003. Prevalence is about 160,000 patients in the US. This is the largest commercial opportunity (est $10b annual market)

iv) Phelan-McDermid Syndrome (PMS). Is on the backburner due to the regulatory obligations in enrolling the required child recruits. And yep, the same condition Neuron (NEU) is currently working on. NEU having released their very impressive topline phase 2 results back in December. 

What makes PYC special is cell penetrating peptides (CPP) that are better able to get the active RNA drug that produces the change, to penetrate into the cell. As you can be readily figured, there is no point in producing the therapeutic molecule if you can’t deliver it to where it is needed.  

As said by CEO Dr Hockings: “To further explain the science, people have a copy for each gene on the two arms of a chromosome, but with the genetic disorders being targeted there’s a mutation in one of the copies that inhibits protein production. 

We are increasing the gene expression to compensate for the unstable protein, by making two units of the protein from the good copy of the gene.  ….. industry is starting to understand that using RNA therapies to increase gene expression is a really smart thing to do”. 

What’s their history?

The guys at PYC, or more correctly their predecessors have been ruining investor’s Christmas holiday plans since 2005. They first listed as a company called Phylogica and have only ever produced disappointment. All their promising tie ups with the likes of Medimmune, Roche/Genentech Johnson & Johnson, Pfizer and Astrazeneca all turned to mud.  

They are head quartered in Perth and have an office in San Francisco. 

Since about 2019, they have completely refocused with a board renewal and new management. The re-focus includes using the in-house expertise to firstly identify and target retinal genetic orphan conditions. There are 3 drugs under active development over the next 18 months with Ph1, Ph2 and Ph3 trials planned.   

What’s the blokes running it like?

The CEO and ED is Dr Rohan Hockings. He’s about 40 years of age MBBS (honours) and spent 4 years working for McKinsey. You have to be pretty cluey to be the CEO of a ASX listed company (usually, but not always), but you want to see a video of him talking about PYC. He’s pretty sharp.  For all his science training, there is also the element of the promoter about him. Which is needed. 

How much of it does Hockings own?

He doesn’t show up with any shareholding in the 2023 annual report. However there is a note that states: “ Subsequent to 30 June 2023, Dr Hockings received shareholder approval to participate in a placement for 18,181,818 shares at price of $0.055 which were issued on 14 July 2023”.   

Unusually the 2023 AR states “Dr R Hockings’ cash salary and fees are paid under a contractor arrangement”. So he doesn’t work for PYC directly. He was paid $395k last year. His father Bernard, a Perth cardio owns about 4.4%.

A fellow by the name of Alan Tribe owns 33%, so he effectively controls it. Seems as though he made his money out of property and sold his WA Ikea franchise 7 years ago. Looks like a big part of his net worth is sitting in PYC. IKEA Australia buys out WA, SA franchisee  

In the April Capital raise Alan Tribe took up his full entitlement in the amount of $24m.

Alan, Rohan and his father might all be drinking mates for all I know. It’s Perth, so there is probably an in-crowd there you and I will never be a part of. That’s OK, as long as they are relatively honest. They do appear to be people who have worked hard for what they have and are not spivs who are about to run off with the petty cash tin.  

The other two board members are Dr Rosenblatt, a US based academic, being at one point Dean of Tufts University School of Medicine. Mr Haddock is also US based and a finance person who has spent 20 years working in and around biotech companies.  

So PYC could be an ASX outlier where maybe outside of Alan tribe who is there because he pretty much owns it, directors were chosen on the basis of competence. You know, people who know what they are doing and are able to get the job done.   

With only 4 on the board, there is also room to build out the board if they need to. 

Dorothy Dixer Bing Videos

Nov 2023 AGM presentation  Bing Videos

NRW presentation April 24  Bing Videos

Have they enough cash?

They raised $75m at 8 cents in April. With the money they already had and a tax rebate coming up they will have a little over $100m.  They claim this will keep them going for the next 18 months. There are enough milestones in that period if they are successful they can likely secure further funding. What they end up doing will no doubt depend on the major shareholder Mr Tribe. If successful or partially successful there are plenty of options: sell out, licence some of their technology, joint venture or raise more cash and go it alone.  

What’s the competition like?

Hard to know really. I do know about a NASDAQ listed company called Regulus Therapeutics that uses RNA technology similar to PYC and is working on ADPKD, the kidney disease. Which is the biggest market PYC is chasing .  

Last month Regulus had a Ph1b readout, link below. 

Regulus Therapeutics Announces Positive Topline Data from the Second Cohort of Patients in its Phase 1b Multiple-Ascending Dose (MAD) Clinical Trial of RGLS8429 for the Treatment of Autosomal Dominant Polycystic Kidney Disease (ADPKD) - Mar 12, 2024 (regulusrx.com)

A rough summary of the results in their words was: "We are pleased with the data we have seen in the second cohort, in particular, the mechanistic dose response, as it continues to validate RGLS8429's potential efficacy in ADPKD".  

The shares jumped from $1.50 to around $2.80 in the days post the above release and are now around $2.00.  Its market cap is only around US$132m. 

On the same day they announced the above they announced: “Oversubscribed US$100 Million Private Placement of Equity”

So the market while not convinced as evidenced by the market cap and the share price change, evidently thinks there is some validity in what they are trying to do.  God knows who else is out there doing this stuff. 

Anything else?

On Tuesday PYC announced the successful safety results on their Non-Human Primates (monkey) trials with ADOA. This means the path is cleared a regulatory submission to enable human trials to commence.  

On April 24 they completed dose range finding studies for its Polycystic Kidney Disease (ADPKD) drug candidate in monkeys. It was positive in safety and high concentrations of the drug found were in the kidneys. This has led the way for human trials for which data will be available in 2025.

Today PYC announced: “The dosing of the fourth cohort of RP11 patients within this Single Ascending Dose (SAD) study has now been completed.” Which I agree is a bit like the mining company saying they now have a drill rig on site. Like I said there is a bit of the promoter about these guys – which is good and bad. 

Anything Else?

You see these little ASX biotech’s talk about getting TGA approval. Means either they have not got the funds to go to the US and never will and/or their science is weak. PYC is squarely focused on 3 drugs and FDA approval. In part that is the rationale for the US office. This is a positive. 

I think you’re piss weak on the scientific analysis Scoonie. You haven’t put in the work. 

Well I am not pretending to know all the scientific ins and outs of it all. However below is some higher-level summary stuff you can have a think about.   

Mr Hoskins talks about having created “humanised models”. That is, they have taken skin sample of affected patients turned them back to a stem cell then turn them forward into the retina cells to create “retina in a dish”. From experimenting on these human samples, they claim to know the drug works. 

With the kidney trials PYC directly took the impacted organ from a transplant patient and were able to test the drug on real affected tissue samples. Which lends the theoretical science some credence.  

In addition in their announcement of the 22/4/24 with respect to the monkey dosage trials: “high concentrations of the drug present in the kidney highlighting the impact of PYC’s proprietary drug delivery technology”.  That’s really important, the carrier or “cell penetrating peptide” is taking the drug to where it needs to go.

Similarly they have reported in the RP11 retinal trials on monkey subject, it is safe and high concentrations of the drug were found in the retina.  

The other point is the 3 drugs are all different. They are independent. Failure of one trial does not impact the other two. 

In addition they have selected genetic conditions where 50% of what you want is already beign expressed by the cell. In other words they have not made it overly hard for them to achieve the outcomes they want

And there is plenty happening. By the end of this calendar year VP-001 should be in or preparing for a PH3 trial, PYC-001 close to completion of Ph1 and the PTC-003 the kidney drug about to go into human studies. Over the next 2 years there will be Ph 1/2 human safety and efficacy readout in all 3 of the above trials.

In some ways the conceptual complexity around what they are doing may be a plus. It may keep some investors away. Contrast with PAA. They have a cannabis derived drug for Motor Neurone Disease. Well everyone can relate to that, gets the market real excited. What Aussie doesn’t like pulling cones on a Sunday afternoon and everyone knows someone with MND. Nice and simple. Even I get it.  

Another factor in PYC having a low profile maybe they are headquartered in Perth. Everyone knows WA’s central station for shonky small caps.  

What the downside?

Well that is clearly that some or all of the 3 drugs (4 if you include the PMS drug) fall over at some point.  

Hoskins indicates the key risk as he sees it, is getting enough of the drug into the right location in the patient without any deleterious side effects. The results of the monkey kidney safety and dosage trial released on the 22/2/24 are very positive on this. Same with the RP11 trial. They are important leading indicators the drug might work.  

Another relevant issue is any readout from the retinal programs is going to take some time, might not know for certain if the two drugs are any good until 2027. This is because the therapy does not reverse already existing sight deterioration. The only way to measure the efficacy of the drug is by measuring a lesser deterioration (hopefully) in the patient’s eye sight over time. So it’s a subtle measure.  

In the case of the kidney drug, there are markers in the urine that are helpful in relatively quickly identifying if the drug is working. Also the FDA has indicated a reduction in size of the bloated kidney will be considered an endpoint. This can be easily measured through imaging.  So the kidney drug development will likely move faster than the two retina drugs. 

 Also it is not a gift, you are paying $460m for an early stage development company.

Nearly half a billion and they are still on the laboratory bench!

RP11 is in dose escalation trials in humans - but you’re right it is not cheap for where it is at. However I would counter, there are strong lead indications that all 3 drugs might work. And the upside is huge.  

Well there is risk/return trade off everywhere. Look at NEU and CU6. You could buy them even at these levels and both could easily 2x from here. But equally there are risks. For instance even for the market’s white haired boy NEU, if they cannot get their new drug NNZ 2591 up you could easy see the share price halve.  Something like PYC, given its early stage and the orphan indications it is chasing, could 5x or more.  The 3 lead drugs they are working on have to date only got stronger over time.

Think you know bloody everything don’t you?

Not at all. Look there is also an element of psychology to it. It’s a bit like Neuren.  John Pilcher battled away for years and everyone who invested lost money and got worn down. Shareholders were all cranky and pissed. But as it turns out, the gold brick was sitting in the long grass just three steps away.  You can see rough parallels with PYC in the April cap raise. They only got $13m from their retail shareholders leaving a shortfall of $21m which they had to place elsewhere.  

There must be a 100 biotech wanabes on the ASX, all with a good tale to tell. You know what you are Scoonie? You’re a dreamer. Just a bloody dreamer. Not only that, you’re a f&%^*# idiot as well. 

I am not asking you tear out and buy. I just think it’s interesting. 

Just in case your in any doubt, I still think you are a f&%^*# idiot.  Thanks for nothing Scoonie.