Excellent interview Andrew. A relaxed interview subject is always the best subject.

 Background

 PYC has three RNA drugs and their associated carrier peptides for treatment of orphan genetic conditions they are proving up. They are:

i) Retinitis Pigmentosa RP11. Drug

VP-001. Est $1b annual market.

ii) Autosomal Dominant Optic Atrophy

(ADOA). Drug PYC-001. Est $2b annual market.

iii) Autosomal Dominant Polycystic Kidney Disease (ADPKD). Drug PYC-003.

Est $10b annual market.

Interview

Rohan Hockings (RH) indicated the company completely re-focused in 2018 to RNA drug and delivery development.  What we have now is the product of 4 – 5 years of work coming to fruition over the next 18 months.

 RH said there were two parts to the technology, the active RNA drug and the delivery agent the Cell Penetrating Peptides (CPP).

Early “naked RNA drugs” are low effectiveness because they are poor at entering target cells.   That is where CPP come in.

 RH indicated PYC are focused on orphan genetic diseases. These are broadly defined as where there is less than 200,000 suffers in the USA. He indicated the financial incentives for going after these conditions were highly favourable.  

In addition RH indicated the 3 conditions they were developing drugs for all were mutations on a single gene or monogenetic targeting drugs. This he indicated was important because drug developers know exactly what it is they need to target. He also initiated drugs of this type had success rates in clinical trials 5 times that of other types of drugs. RH quoted US company research indicated post lab trials, there was a 64% chance of successful market entry on these single gene condition drugs.

 He also indicated no regulator need for a Ph 3 trial, since there was no existing standard of care.

 RH talked about why they are so confident in their science. That is principally around Japanese technology developed around 10 years ago that permits say a skin sample to be turned into stem cells, then into a specific body organ cells like retinal cells. So you can grow a human retina and test the drug on the lab retina.   As a consequence, RH describes the Phase 2 risk being largely removed in the preclinical setting.  

 RH gave some interesting background on RNA science, and to think about it like this:

DNA makes RNA and RNA makes protein.

CRISPR technology acts on DNA to fix a strand that has a “spelling error”. This represents a one-off change to the patient DNA to rectify a genetic defect. These molecules are large and difficult to get into the cell. Think about like the architect on a building construction.

RNA therapies – act on RNA and are smaller molecules than Crispr drugs. This is what PYC is targeting. The drugs need to be repeat dosed, since there is no permanent cell changes.   Think of them like the Builder on a construction site. RNA therapies are particularly useful at addressing autosomal dominant conditions like PYC is targeting.

Changes to Proteins in the Cell – is like the construction site subcontractor – actually doing something.

How does PYC know to focus on a specific area?

RH said, if trying to catch all the rabbits then will end up catching none. They had a Strategic Review process : Where can they get RNA drug to do something impactful. They settled on the above 3 conditions.  

The mutations they are attempting to treat only appear in one gene. This is called autosomal dominant diseases.  It is where RNA therapies are best applied, and PYC have the CPP technology to get enough of the drug into the cells

Path to Market?

Commercialisation expected in RP11 in 2027 and revenue in 2028.

In 24-26 they hope to do a RP11 registration study

Clinical proof of concept they are working on now. This is the hard part Ph 1 and Ph2 . When complete will sit down with regulator on registration trial.

Will you be manufacturing the drugs?

Rare diseases do not need Big Phara for sales and distribution. Can sell an approved drug through specialist clinicians.

At some point further down the development path if successful, they expect to have buy offers from a larger companies.

Financial Situation

This year had a capital raise of $75m and PYC will shortly have $120m cash inclusive of tax rebates.  

RH: “Our market cap does not stack up. We have better than 50/50 chance and if successful will tap a $1b recurring revenue and 95% margin”. Comparable US companies have a market cap of $5b.

Management concern is PYC is undervalued. Makes PYC think about out-licensing since the ASX market does not recognise the value.

 What is special about PYC technology?

RHs response was interesting:  “Nothing”.

PYC utilises a proven and approved class of drugs utilising existing RNA technology.  PYC apply this in the right context plus PYC have solved the problem of getting more drug into the target cells.

Competitors RNA Kidney disease drug  

Regulus a US company listed on the NASDQ are more advanced than PYC.  RH said exciting data has been recently released – that being missing proteins are shown turning up in the urine of patients.  Also Regulus are showing kidneys shrinking in size.  All positive and similar to PYC. 

However Regulas have trouble around market skepticism in the class of molecule they are using. This is because the FDA has never approved a small RNA modifying molecule like the one they are using. This is because there may be an impact on other body functions. And there is the risk the treatment might be longer term carcinogenic.

In the second half of the year, what readouts would you like to see?

RH: “3 or more patients showing improved visual function before Xmas would make me very happy”

They have seen this recently with one patient, however need to see this with 3 or more patients “for people to take notice”.

If PYC see this, then they will be gearing up for a registrational study in the middle of next year.

Professor Sue Fletcher remains on the Scientific Advisory Board.

Prof Fletcher developed RNA drugs for muscular dystrophy that are FDA approved and now in use. Serepta a US company that developed these drugs went from m/cap of $100m to $20b. RH points out this company is now working on improved peptide cell delivery technology similar to PYC is using that will increase efficacy by around 10 times.

 CEO Worries

i) Access to capital on fair terms.

Alternative path to finance.   Preference at the current market cap would be to licence one of the more mature drugs.

ii) Organisational transition - next year PYC will be running 10 concurrent clinical trials. This will stress the organisation and require increased resources.

 People in the Organisation

RH: Shree is chief of R&D in the Los Angels office – a key role. Shree came from a big company and has built a great team.

Recently PYC put incentives in place for key staff.

Legacy of Phycologica (PYC listed precursor) Failures  

RH: Definitely baggage in Australia, some fund managers will not talk to PYC. In first few years there was nothing to show, but easier now since PYC now have some results.  However it is international and overseas companies that are important who are/will take notice of “globally differentiated science”.

Chair and 30% owner Alan Tribe

RH described as Alan as having a clear vision. PYC would not have survived without his funding.

“Is about to happen”.   3 assets about to go into clinical trials with a 60 – 70% success rate around monogenetic diseases of this type.

RH spoke about the potential annual profit of these drugs being multiples of the current market cap.

“We go 24/7”.

San Francisco Office

RH referred to the value chain split. Lab and clinical expertise largely in Australia. FDA regulatory expertise in the US.  

Phelan McDermid Syndrome (PMS)

PYC has a PMS program. RH outlined why PYC’s approach is more comprehensive than NEU since it is disease modifying and gets to the root of the problem. NEU’s approach addresses a neural pathways, which is only part of the issue.

 In 18 months where should PYC be?

RH: By 2028 hope to cash flow positive   

In 24/25 - 3 clinical proof of concepts to be running

The big one: Kidney disease drug, in the first half next year are intending to get efficacy read outs.

For RP11 registration trial will start in the middle of 2025.

If PYC gets safety profile and initial efficacy readouts, then there will be a step change in the value of the company.  

Anything else investors should be aware of?

Visual functional improvement we are now seeing with RP11. We know from the monkey trial we can get the drug to the back of the eye. And now know can safely administer in humans.

We know from "human retina in a dish" trials we can completely rescue the disease. The images of the improvement tell the story.  So it all should work.

The underlying root cause of the condition is addressed. If you can move the needle in the clinic then the commercial opportunity will take care of itself. Comparable drugs have been shown to reach 80% of peak sales within 18 months  

Scoonie Summary

As a new investor to PYC, you are potentially about to reap in the next 18 months the benefit of 4 years of hard work. Add into the 10 years of failure prior to the recent re-focus. RH is a very engaged and enthusiastic CEO.  It all comes down to your confidence in the science and management.