Botanix adds Payer coverage representing ~65 million commercial lives

Ascent Health, the second largest Payer organisation in the US, will now cover Sofdra™ (sofpironium) topical gel, 12.45%. Ascent Health represents approximately 65 million (or nearly 40%) of US commercial lives.

The Ascent coverage adds to the existing Payer coverage and coverage actively being finalised with Payers. The Company will share updates as coverage is announced in coming months, before our Sales Professionals begin calling on dermatologists

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02880659-6A1237535

DISC: Held in RL & SM

I have just waded through a bunch of previous posts but can't find what Im looking for.

Im pretty sure that someone somewhere mentioned a drug as competition. I am also pretty sure it was Methenamin or Antihydral

It has taken me an embarrassingly long time to twig to this, but I use Antihydral. And so do a significant percentage of Rockclimbers.

Not only does it increase friction by reducing hand perspiration, if applied daily for a week or so before going on a climbing trip - it really toughens the pads of your fingers. This allows you to keep climbing, as you don't lose all the finger off your fingertips - the dreaded "Day-four-skin". After 3 days of over excited climbing you wake up on Day four to discover your pads are bleeding and you can't climb anymore.

So what?

Well, firstly, I just thought it was a cool little nugget that would interest people.

But, secondly, there is clearly a percentage, who knows how large, of baseline uptake of Antihydral that is not by patients suffering from hyperhidrosis. There are approximately 10 million rock climbers in the USA. I reckon 5-10% would get through a tube a year. That is a wild guess. Most of us only use it prior to a climbing trip (holiday) to make sure we can keep climbing.

@mikebrisy does this alter the assumptions and spreadsheets?

HELD IRL

Hiring of sales force team - on track

Telehealth platform (Upscript) - In place and on track

"Payer success continues" (Insurance companies signing/signed up. By all accounts a long and time consuming process. Very important in the scheme of things as it will bring the cost of SOFDRA to zero, for the insured Hyperhidrosis sufferer.

❖ Contracts already signed or currently being signed with Commercial Payers that represent

~80M commercial lives

❖ Finalizing terms on contracts with Commercial Payers representing a further ~80M lives in

the coming weeks

❖ On track to have ~72M Medicaid lives eligible

❖ Contracts signed and being negotiated reflect the expected Payer coverage mix (see chart

previous slide)

❖ Where there are Payer restrictions, those restrictions only limited to those negotiated:

− ensuring that the patient actually has the medical condition per the label; and/or

− the patient confirms they’ve tried an existing product such as Drysol

Patient experience program - On track

Manufacturing - On track

Nb. diagram below refers to the calendar year:

There is not much here that has not been communicated previously.

All in all this is playing out as planned

As discussed here on SM previously, there may not be too much to get excited about until the new calendar year and some sales data from the US, begins to trickle in.

Meanwhile its steady as she goes and stick to the plan/timeline below:

https://investorpa.com/announcement-pdf/20241104/62789.pdf

Botanix Pharmaceuticals Quarterly Activity Report and 4C Quarterly Cash Flow Report

Key highlights

• Botanix is on track to launch its patient experience program in Q4 CY2024
• Botanix has finalised contractual arrangements with a number of key US payers (insurers) which reflect the target financial and patient access restrictions previously communicated, with
• further contracts to be signed in coming months
• Botanix has filled key positions in sales, marketing, sales training and sales operations that will
• support the commercialization of Sofdra
• In September Botanix was featured in both the ASX Small and Mid-Cap Conference and the E&P
• Small Cap Healthcare Conference in concert with a non-deal roadshow
• Cash position of A$67.62 million at September 2024 quarter end with no debt

Full Ann click here

At a glance there is nothing exciting here, but that's fine. Seems to be on track. In line with the plan.

Staff hired and rolling on toward sales in the new calendar year.

Steady as she goes.

Wow out old left field- I am just digesting how this news could impact Botanix’s value.

https://www.durbin.senate.gov/newsroom/press-releases/durbin-leads-senators-in-demanding-answers-from-pfizer-eli-lilly-on-new-telehealth-platforms-amid-concerns-of-inappropriate-prescribing

There will be a senate inquiry into Pfizer and Eli Lilly’s online telehealth platform. Is there room for abuse and over prescribing or a breach of possible kickback laws for drug companies.

I need to do more reading but I wanted to highlight this and kickstart some conversations around this topic.

Botanix uses a telehealth set up and access to a doctor who can prescribe a medication for AHH. It then uses independent rx provider Upscript to dispense this medication. Does this provide Botanix with an arms length protection? Does this protect the overprescribing of said drug and Medicare / Medicaid rebates that the government is worried about in the US. Or does this threaten all online telehealth platforms. A must watch piece of the puzzle for Botanix holders.

This could potentially add a lot of value or place uptake pace in danger if this distribution plan is vetoed by senate.

My gut feeling is that Big pharma running telehealth and distribution networks themselves may be vetoed.

Let me know your thoughts.

Probably no new information here for established BOT enthusiasts, but I found this short interview with Howie McKibbon a snappy summary of the current state and year ahead:

https://m.youtube.com/watch?v=QMijBDHnGgE

Hiring announcement out this morning Click here

At first glance they seem to be hiring some decent talent, who have runs on the board.

The hiring of John Walsh for example is to some extent getting the band back together:

• John Walsh – Vice President, Sales – Mr Walsh was most recently Regional Business Director for Dermavant Sciences (a company previously managed by Mr Ippolito and Botanix CEO Dr Howie McKibbon, which was sold to Organon for up to $1.2 billion recently). Mr Walsh has held senior sales roles with a variety of leading dermatology focused companies including with Anacor and Pfizer.

It seems to this layman that this is a team who have been here before.

Botanix CEO Dr Howie McKibbon's 20 minute presentation at the recent ASX Small and Mid-Cap Conference September 2024 is now available on Youtube

ASX Small and Mid-Cap Conference September 2024 | Botanix Pharmaceuticals Limited (ASX:BOT)

Here's Howie again at the small and mid cap conference. He does mention an AI driven marketing campaign - that's got to be a good thing right?

Botanix with Proactive at ASX Small and Mid Cap Conference

Botanix Ltd CEO Dr Howie McKibbon sits down with Proactive's Tylah Tully live from the ASX Small and Mid Cap Conference in September 2024.

https://www.proactiveinvestors.com.au/companies/news/1056845/botanix-with-proactive-at-asx-small-and-mid-cap-conference-1056845.html

BOT CEO Howie McKibbon - interview

https://ausbiz.com.au/media/botanix-sweating-on-sofdra-launch?videoId=37991

Botanix held a webinar to update the market on the commercial launch of Sofdra.

One of the key points I took away is that the number of diagnosed patients in the US is now thought to be 7 million out of 10 million people suffering axillary hyperhydrosis. Botanix previously had this at 3.5 million diagnosed. If correct that means there are twice as many patients who are aware of their diagnosis and open to trying a new product. 

This may also increase the number of patients able to access Sofdra with no out of pocket expenses. If an insurer requires a patient to have already tried an alternative treatment before authorising Sondra, it seems having a larger cohort of diagnosed patients increases the number of patients who have already tried a competitor and be eligible for $0 out of pocket coverage. This could bring forward the customer adoption rate and accelerate sales.

Where to from here?

So far so good. I’m bullish on the prospects for Botanix, to the point where I’m asking myself: what am I missing?

There is execution risk: it’s possible that all these plans don’t work, or the product doesn’t work, or the customers try it and just switch back to competing products.

The thing is it’s not actually a new product and has been successfully sold in Japan (though a different formulation). So it probably does actually work. We’ll have to see how many patients try it and stick with it. Maybe it’s better than the alternative but not that much better? 

If these commercial plans come off the upside is significant. I’d expect low multiples of the current share price and then up from there if customer retention is good. 

So why does it appear to be overlooked? There’s no revenue yet, so the stock probably doesn’t look attractive on traditional metrics. You have to understand what is in motion. I also wonder if it suffers a bit from being in a less glamorous market: they aren’t curing cancer. This is OK with me but maybe makes it less exciting to follow for some.

The share price has had a good run up over the last 12 months, and I’m weighing up whether to buy more. I’m suffering from some price anchoring here - I bought it earlier when it was cheap, but if I do believe the price remains significantly undervalued then the current price is attractive with less risk than when I purchased previously. I probably will buy more but be patient. I don’t think there’s going to be anything in the next few months to cause a price inflection.

From Stockhead: Click here

Alive and Kicking: No sweat as Botanix readies for US launch of its hyperhidrosis treatment

Health & Biotech

 Tim Boreham

Alive and Kicking is renowned biotech journo Tim Boreham’s new daily wrap covering morning movers and shakers of note in the ASX Healthcare sector, Monday through Thursday.

• Botanix plans a US launch of its anti-sweating treatment in the March 2025 quarter
• Pacific Smiles shareholders have a new offer to get their teeth into
• Bubs Australia enrols its 400th and final infant for US clinical trial

Botanix Pharmaceuticals (ASX:BOT) says it will launch its approved product for excessive sweating in the US in the March quarter of next year, targeting 10 million sufferers of the common but little-known primary axillary hyperhidrosis (PAH).

In June the US Food & Drug Administration green-lighted its topical gel Sofdra, a “novel, safe and effective solution for patients who have lacked treatment options for this socially embarrassing medical condition.”

PAH is sweating over and above what is required to regulate the body’s temperature. We’re talking about shirt-drenching sweat, not something that can be ameliorated with an extra spray of Brut 33.

It’s the third biggest dermatological condition behind acne and dermatitis.

At an investor update this morning, the company said it had recruited 500 patients via the International Hyperhidrosis Society – yes, there is such a thing – with 18,000 to follow.

Meanwhile, the company has hired 27 sales reps across three regions to kick-start the sales and is wooing the small number of physicians – 4500 or so – who prescribe PAH treatments.

The company says seven million PAH patients have been diagnosed over the past 10 years, while three million remain undiagnosed. Given the US population of 336 million, that’s an incidence rate of a not insignificant 3%.

The company stresses that Sofdra will be eligible for reimbursement, with no out of pocket costs for most patients.

Initially, Botanix focused on developing synthetic cannabinoid treatments for skin diseases including acne, atopic dermatitis and psoriasis.

But results were patchy and in May 2021 the company obtained the rights to the sofpironium bromide (renamed Sofdra).

Unlike antiperspirants, Sofdra addresses the underlying problem by suppressing underarm receptors. Technically, Sofdra works by inhibiting M3 muscarinic receptors in eccrine glands at the application site. 

Found throughout the body, these receptors induce a ‘fight or flight’ response, including sweating and salivating, lactation and even urination. 

The excessive sweating comes in three iterations: primary axillary (under the arms), cranio-facial (head and face), palmar (hands and palms) and plantar (feet). The company has FDA approval for the first. 

Initially, the FDA rebuffed the company because of concerns about the wording of instructions in the Sofdra packaging, but these issues proved surmountable. 

However the March 2025 timeline is a slippage from the originally envisaged mid-2024 launch.

Immediately after approval, Botanix raised $70 million in an institutional placement, so it is well placed to lob its first US underarm delivery.

Botanix shares closed one cent higher at 42 cents, ascribing a meaty $770 million market capitalisation.

$BOT have posted the presentation for their Commercial Webinar later this morning at 10:30am.

Presentation

Good clarity on the timeline and how different US market segments will be accessed.

The Feb-25 HY report should give comprehensive (??) feedback from the Patient Experience trial, as well as the initial progress on IHhS (18,000) and Targeted Patient Lists (1 million).

The Feb report will be very significant, as it will provide decent real world commercial sales data from which forecasts will be updated. I expect there will be huge divergence that early in the s-curve, given the conservatism of current forecasts! That is, unless the product bombs!

Very much looking forward to the next 6 months.

Disc: Held in RL and SM

Some back ground info regarding suffers of Hyperhrdrosis from the International Hyperhrdrosis Society Website (sweathelp.org).

It’s quite eye opening to see the impact this can have on one’s life.

Key Facts About the Hidden Costs of Hyperhidrosis

• There are approximately 15.3 million individuals living with hyperhidrosis (Hh) in the U.S. (Archives of Dermatological Research 2016)
• Hyperhidrosis' impact on quality of life is equal to or greater than that of psoriasis, severe acne, Darier's disease, Hailey-Hailey disease, vitiligo, and chronic pruritus. (Eur Med J Neurol 2001)
• The prevalence of anxiety and depression is significantly higher in those with Hh than those without Hh (21.3% vs 7.5% and 27.2% vs 9.7%, respectively). (J Am Acad Dermatol 2016)
• 20% of hyperhidrosis sufferers report problems using computer keyboards, a computer mouse, mobile phones, and touch screens.  (Health and Quality of Life Outcomes 2017)
• 80% of Hh sufferers say they are dissatisfied with their abilities at work; 42% say that Hh prevents them from following a particular career path; 30% say they become frustrated with daily activities. (Brit J Dermatol 2002 & Dermatology 2006)
• Hh sufferers have a 300% greater risk of skin infections.  (J Am Acad Dermatol 2009)
• 60% of Hh sufferers report negative impacts on general health. (Archives of Dermatological Research 2016)
• 40% of Hh sufferers report physical discomfort. (Health and Quality of Life Outcomes 2017)
• 5% of Hh sufferers indicate they take antidepressants or anti-anxiety medications due to their sweating. (Brit J Dermatol 2002)

So $BOT announced today they are going to hold a "Commercial Day Webinar" on 17th September.

Apparently, the market values the statement "to provide a comprehensive update on its commercial launch plans and market insights for Sofdra™"  at $0.05 per share or $90m. Go figure.

(I'm not complaining, as I believe that once the market starts to get a 2-3 year view of the sales profile, there's plenty to more to come. However, the reaction to this "news" gives some insights into the potential choppiness of the ride ahead.)

Happy weekend all.

Disc: Held in RL (8.3%) and SM

Came across this post on Livewire where Lennox Capital fund manager discusses Botanix as a high conviction position:

With binary approval risk in the US no longer being an issue, we think the opportunity in front of the company is immense, especially when you couple that with management’s history of commercialising dermatological products in the US.

I don’t know Lennox Capital at all so don't put any weight in their picks as such, but I do find it interesting to see a fund manager declaring they are bullish, and something to watch for more momentum in the price. Trading volume still higher since the FDA approval but is easing.

informative article in end points https://endpts.com/next-gen-biotech-acquirers-find-ma-momentum-in-q2/

Take overs/ buyouts for 2024- looks to me like there is some room for Dermatology and Neurodevelopmental drugs - nothing on the list so far !

As @Strawman made special efforts to feed the "spreadsheet jockeys" on the call this morning, I thought it only fair to respond in kind.

Matt referred to the potential that Sofdra really takes off, being a case not at all considered in the E&P and EH valuations of $0.47 and $0.55. So I thought I'd have a go a putting some dimensions around that.

Assumptions (details shown in the spreadsheet below)

• Assume sales build to peak over 5 years according to the profile given
• 5% of diagnosed market captured in yr 5
• 2.5% of undiagnosed market capture in yr 5
• 12 scripts per year at 50% persistency (absolute, not progressive/cumulative)
• %GM 76%; SG&A grows at 20%; R&D at 10% of revenue; nominal DD&A (capital light)
• No debt
• SOI grow at 2.5% per annum
• P/E in 2029 of 50 (which is modest if this baby takes off)

Crank the handled and discount back at WACC of 10% and you get a valuation of $12bn, today.

In this scenario, they are writing 2m scripts p.a. in 2029. That's just double the rate in Japan after 3 years. With excellent marketing and execution, that's not inconceivable.

To be clear, this IS NOT my valuation. I am happy to leave my valuation at a "modest" $1.20.

The point is that if we see a strong revenue trajectory in 2Q25, 3Q25 and 4Q25, then this indicates the order of maghnitude change that could possible emerge - which is probably more in line with where Howie and Vince are thinking.

For sure, there is a lot amount of execution risk. But this kind of upside potential means that this morning I've added a further 20% to my RL holding at $0.335, and will align SM accordingly. I want to place a bigger bet here.

I wasn't around to get on the $PNV bus pre-revenue, but I'm damned sure that I'm on this one with a solid position.

I'll write a separate straw with some reflections on the SM meeting later today.

Disc: Held in RL (7%) and SM

The recording for today's meeting is up, but here are some notes:

Botanix Pharmaceuticals, founded in 2016, spent a bunch of time and money looking for suitable applications of the Permetrex drug delivery technology, and relatively recently hit upon an treatment for primary axillary hyperhidrosis (excessive underarm sweating) -- a product called Sofdra that has just got FDA approval and for which there are 10 million estimated sufferers in the US alone.

For those affected, there aren't a lot of good options (existing options range from antiperspirants to invasive procedures like Botox and nerve surgery.)

But this product, which needs a script from a dermatologist, and for which should have minimal cost for (insured) patients, has the potential to be a bit of a game changer.

The company is now looking to gear up to meet expected demand (FDA approval of marketing materials, distribution setup, and launching a patient experience program etc) and expects first revenues later this calendar year.

Targeting early 2025 for sales force deployment. The company is hoping to bypass a lot of traditional pharmacy challenges with direct-to-patient distribution. And aiming for minimal out-of-pocket expenses for patients through insurance negotiations.

BOT is projecting market share of 30% for diagnosed patients and targeting undiagnosed patients through digital and telemedicine efforts.

Focus is on the US market due to high pharmaceutical spend. But exploring partnerships for other markets (e.g., Japan, Australia, Europe).

The team behind the company appears to have serious form, with people like Vince Ippolito (Executive Chairman) and Howie McKibbon (CEO) demonstrating successful track records in dermatology product launches and exits.

Execution on current plans while exploring additional product opportunities.

Potential for expanding Sofdra™'s use to other body parts.

When asked about the potential financials, Matt provided the following insights:

• In the US, there are 10 million people with underarm hyperhidrosis.
• 3.7 million have been diagnosed in the last 12 months.
• A typical new product aims for a 30% market share of diagnosed patients within a few years.
• Targeting 1% of the remaining 6.3 million undiagnosed or non-recently diagnosed patients through digital and telemedicine efforts.
• Each patient using the product 12 times per year.
• A target net revenue of $500 USD per patient per month

In his words, that's a "very big number" -- if my math's is right about US$7billion per year (of which some will be taken by contract manufacturers and other counterparties.)

Matt referenced the following notable exits during the interview and expressed confidence in Botanix's potential to achieve similar outcomes:

• Anacor Pharmaceuticals (Vince Ippolito, the Executive Chairman of Botanix, was the lead commercial officer at Anacor) developed several products, and was acquired by Pfizer for $5.2 billion.
• Medicis Pharmaceutical (Vince was also a senior commercial officer here) was sold for $2.4 billion.

Matt said the team would be disappointed if they didn't achieve a similar outcome.

Of course, there's a lot of execution risk still present, but it does seem like the company is positioned well.

EH’s latest BOT report

Change from ‘Speculative Buy’ to ‘Buy’ and a change of target price from $0.33 to $0.47 now things have been de-risked via FDA approval.

$70m at $0.30 for 233.333m shares - a dilution of c. 15%.

No SPP as suspected.

Use of funds focused on Sofdra.

Thanks to the loyal shareholders.

While it’s easy to be disgruntled, the big picture is that not too far down the track, this business is likely to be worth a lot more.

Overall, I do want this business to have a strong balance sheet, but I still don’t understand why they didn’t raise a few days down the track.

Will look at the price action at the open and see if I can sneak in some more. Unlikely though.

While arguably smart, it's also a little sneaky. Botanix won't be coming out of their trading halt as there will be a capital raise. It will be very interesting to see the details around this. I'm not goint to lie though, I'm disappointed not to see the pop in the share price this morning.

$BOT has announced approval of Sofdra.

(Just seen the ASX announcement come through as I board flight for 2 weeks holiday.)

FDA A{{ROVAL GRANTED

Good Luck to all who hold!

Held i

$BOT into a trading halt pending announcement of FDA Approval for Sofdra.

Looks like a pre-emptive strike to prevent any leaks ahead of them issuing an ASX announcement.

Watch this space.

Disc: Held in RL and SM

Just over a month ago Euroz Hartley published a short term price target for $BOT of $0.33, predicated on their assessment of the typical run-up in SP ahead of an FDA decision. Sure enough, with days to go, SP has passed this target standing today at $0.345.

I have absolutely no interest in short-term trading, as I am placing a 90% risked bet that this will be a much more valuable proposition. Much more over time. That said, it is interesting to watch the volumes and prices.

Last week's "non-announcement" appears to have given the market a little nudge, reminding the hot money out there about the impending FDA decision.

In the success case, on fundamental grounds, I expect the SP to go a lot higher. However, if there is a negative decision, this baby has pumped up enough that any correction will likely be hard indeed.

At time or writing there are still slightly higher volumes in the "BUY" queue (9m) than the "SELL" queue (7m), but things have evened up a little from this morning. But today marks the 3rd conseuctive day of higher than normal volumes.

tick-tick-tick

Disc: Held in RL and SM

Another Analyst firm E and P has started covering BOT with a price target of 0.55c. I won’t share full report but Botanix has shared this with investors. Check their website.

I think the Euros Hartley report is extremely conservative.

Let me preface this with the fact I hold.

If we consider the insurance coverage (meaning significantly higher $$$), the ability to advertise (market) broadly, the ability to use tele-medicine for repeat scripts and the size difference of the market in the US we can assume growth and its use will be faster than Japan.

I am wondering if EH simply didn’t want to publish figures that even had me repeating my calculations because it just seemed to unbelievable.

Of course one needs to temper their enthusiasm, but even using a ridiculously low 5000 sufferers x 12 monthly supplies at $500 USD/m = 30m USD in sales.

With millions of sufferers and BOT providing a viable alternative to current treatment methods it’s hard to believe the target revenue / profit timelines will not he brought significantly forward.

The FDA June announcement will be an interesting one to watch. A positive announcement de-risks the stock and might open the flood gates to significant price appreciation.

Until then speculating makes for interesting times.

Ecclock numbers are up. 44% increase and Kaken’s largest % increasing product. This adds further weight to the recent details and likelihood of uptake in the US as there has been very solid growth in Japan. Kaken predicting further increase in sales for FY 2024.

$BOT have sent existing shareholders and everyone on their mailing list the updated Euroz Hartley report following last weeks Commercial. It is a thorough and well-written report, so I have put screenshot below in this straw.

Its gives a valuation of $0.33, and clearly seems to encourage the pre-FDA SP uplift short term trade. (Not for me)

I prefer to focus on the long term investment proposition in the success case.

Before reading, be aware the EH supported $BOT in the recent capital raise. It is also likely based on my reading of the disclaimer they have been engaged by $BOT as their defence adviser. EH have been paid by $BOT in shares for the advisory services they've provided. So although EH have certified that this is their own opionion, it is clear that it has been prepared benefiting from the EH collaboration with $BOT management and board.

So when I read it, I read it more as the view of $BOT management than of an independent analyst. So, I wanted to make that clear up front.

You can read the report yourself, but I wanted to highlight a few points.

FDA Approval

The imply a CoS of FDA approval in June as 90%

Benchmarking ASX FDA Knockbacks Leading to CLRs

They compare recent ASX companies that received a knockback at FDA approval (listed in Fig 3. on page 4). Of the 7, 5 were finally approved, one withdrawn, and one under review.

However, what is important, is that none of the sample group received knock-backs purely for label/patient information data. All were some combination of safety, efficacy of manufacutring, with one (later approved) not providing details.

%BOT's CRL was was labelling and patient information. The corrected labelling led to 100% compliance in the human factors study.

Therefore I think 90% is a reasonable CoS, and perhaps given $BOT reports of having high confidence of approval following engagement with the FDA in recent weeks, it is hard to understand the basis for a rejection. Should a rejection occur it would be a shock.

Revenue Profile

Figure 8 on Page 7 provide revenue projections. The growth curve looks reasonable. However, to my eye it looks conservative give the gap in the market that SOFDRA addresses. The projection is to only penetrate 1.0% of the market by 2033 - 9 years after launch.

As ever, the drug will only suit some sufferers, and not everyone will respond. In any event there is certainly upside to this if the drug is well-received by the market.

Cautioning my own enthusiasm, I note that the analysis has considered the progress of the drug in Japan in developing their projections. $BOT reported that Kaken have sold 350,000 units in the last 12 months in Japan. The valuation forecast projects the US taking 5 years to get to this. So following launch (assuming approval) it will be instructive to follow the early US profile compared with the experience in Japan. There has to be a bull case to do much better than the EH profile.

Valuation

Of EH's valuation of $0.33, $0.26 comes from SOFDRA and $0.06 from the development portfolio.

My Quick Valuation - Bull Case - SOFDRA is approved in June with minor risk adjustment

I think the EH sales profile is a prudent forecast, and I base my valuation solely on SOFDRA.

On the basis that $BOT achieve an EBIT in 2029 of US$104m, carrying no debt, and applying tax at 30% and USD:AUD 0.67 give 2029 NPAT of A$109m.

With 1,575m SOI, although $BOT will be highly cash generative quite soon, I'll allow some dilution due to share based compensation, so assume SOI of 1,800 in 2029.

That gives a 2029 EPS of $0.061.

I'll deal with the uncertainty via the P/E ratio, ranging from 25 to 45 - probably very conservative for a high growth pharma company.

I'll add a risk premium to the WACC, and discount at 12%.

My unrisked valuation range is: $0.88 to $0.1.56 (but including a margin of safety in the risk premium)

So, now I am going to apply my 90% CoS, and assume that in the 10% failure case

1. There is a net 5% chance that there is a subsequence approval on what ever the residual issues are, and that the profile gets pushed out by another year, leading to a further discount and a further dilution of 10%.
2. There is a net 5% chance that the drug is withdrawn amd the value of the business is $0.06 of the development portfolio.

Boiling all this up together, and I get a risked valuation of: $1.13

What do I have to believe: 1) SOFDRA gets approved some time in the next year, 2) the telemarketing strategy is successful, 3) the product gets some traction over 9 years with 1% of the potential market.

Not a long bow to draw for a Bull Case.

Now at the start of this straw, I speculated that EH are $BOT's defence advisor. If their valuation is truly $0.33 that clearly cannot be true, because as my analysis shows, if you believe the forecast, and had deep pockets, you'd happily put in a takeover offer today of $0.50 to $0.60. The board should send any acquirer away for anything south of $0.60 or even $1.00 IMHO, given the upside which I haven't even attempted to assess.

So there is a lot of risking being applied to the EH analysis, unless I am missing something!

(I note that my fellow $BOT bull @Nnyck777 is at $1.92 ... I'm slowly getting there :-)

Disc: Held in RL and SM

$BOT have issued their 4C.

Highlights

Cash holdings actually increased, thanks to exercise of options.

We're now two months away from the expected FDA decision on Sofdra - one way or another that will be a major SP catalyst, with anything but an approval a major surprise.

Accordingly, $BOT are making good progress in preparations for launch. They've focused activities on the US payers (insurers) and report"

"The Company has now engaged players that account for 80% of covered lives in the US and is pleased with the feedback regarding pricing and the relative absence of obstacles for patients to access Sofdra following planned approval."

So, if the approval is straighforward and goes as expected, then FY25 is going to be an important year!

Disc: Held in RL and SM

Botanix has successfully raised $13.5m via institutional investors in preparation of approval and a launch of their 'Sofdra' product in the USA.

Unfortunately management have made no mention of a retail shareholding placement. I always find such scenarios ridiculous and speaks of the arrogance and contemptuous of management towards their retail investors when capital raising aren't also offered to them. While personally this won't affect me as I already have my fill and would not have participated myself, I feel others in my position should have been offered the opportunity to obtain more shares at the discounted rate. Currenlty the share price is still hovering around $0.15 while institutional investors accessed a price of $0.13.

$BOT are holding their AGM today.

The AGM Presentation has no material new information, but it is a good overview of where they are at. Next milestone is meeting before year end to get FDA guidance on the labelling/PIL feedback that has delayed approval of SOFDRA until mid-CY24.

Presentation has further details on the sales and marketing strategy, including details on sales force, geographic focus and telehealth strategy (recent partnership with UpScriptHealth annoucned separately).

Disc: Held in RL and SM

I wanted to better understand the precedence around the FDA letter holding up approval of sofpironium bromide gel based on labelling and patient information deficiencies.

I found an interesting reference on the subject in JAMA (Sacks et al. (2014) JAMA 311(4) 378-384). The article is a little too dated for my liking, but the information in Table 5 is interesting. (below)

Of 151 drugs not approved in their first cycle, 71 were subsequently approved following resubmission, with 80 not approved during the lifetime of the study.

What is more interesting is that only 4 drugs (2.6%) were not approved first time for labelling alone, and all 4 of these were subsequently approved.

Although the median delay in the study was 435 days this includes the entire population which is dominated by drugs with safey, efficiacy, chemistry, manufacturing and controls issues, many of which would have required further clinical trials. There's no data on the delay for labelling ony.

So this provides some independent support for the CEO's confidence that the drug will be approved when the labelling feedback is addressed.

It is many years since I was a practitioner in the industry, so it is good to know that the 2.6% of labelling rejections aligns with my own intuition that, while not un precedented, a labelling-only knockback is unusual.

In his interview on Ausbiz yesterday Howie McKibbon said "It's something that we anticipated. If we were going to get any feedback from the agency, we would have that much earlier in the cycle. So we were quite surprised that this occurred," which reinforced my own expectation that label feedback is usually addressed in earlier communication between the FDA and applicant, prior to the final decision.

Thinking about this overnight, I think the reason that this didn't happen in this case, is that the instructions relate to the use of the gel applicator, that requires validation in a controlled environment. So, its not just a change to the label (as you might easily do for a pill or capsule) but a patient instruction that has to be validated by observation and requires a supplemental submission reporting the results. I think that is why a resubmission is required and makes me think that maybe Howie shouldn't be so surprised. (It also weakens any argument about conspiracies!)

Source: Sacks et al. (2014)

https://endpts.com/fresh-tracks-pauses-phi-atopic-dermatitis-trial-to-save-money-forge-exit-strategy/

Todays article sighting financial stress as a few of us have concluded. Even with Botanix recent capital Freshtacks may not exist in 12 months with the following stated:

”It appears nothing is off the table regarding the biotech’s exit plans. It is considering financing, mergers, company or asset sales, and licensing, among other options. It’s been mulling its next strategic steps since March.”

It seems to have tried to hold its dermatitis drug following successful phase I trials. However to get this drug through to any further clinical trials it will need a lot more money. Pharmaceutical companies obviously won’t pay as much for a phase I drug. Despite rebranding it doesn’t appear that things are too rosy for Freshtracks.

The big question mark I have around this one is why did Freshtracks agree to close out the licence aggreement for what can only be described as a steal for Botanix. At the time that Botanix bought Sofpironium Bromide they described it as a "Deal structured with minimal upfront payments, with most of the consideration payable in Net Sales milestones and royalties". The recent agreement to close out the licence royalties and milestone payments really doesn't make any sense if you were FreshTracks. FreshTracks were due to get $4m payment when/if the FDA approval is received in late September, so closing out all of the future payments (>$160M potential) for $8.25M seems ludicrously shortsighted by them. This makes me question why would they do this as presumerably there is a good reason. FreshTracks aren't flush with cash but they are also not desperate either and as of March 23 they had $10M in the bank which they said will cover them for the next 12 months. I am also wondering why no other large pharmaceutical company wanted to either buy the rights to Sofpironium Bromide or to buy the potential royalty stream from FreshTracks. I am a bit sceptical about this deal as it seems incredibly onesided in Botanix's favor. Given that until Botanix stumbled upon this drug in early 2022, and prior to that they were trying to develop skin creams from cannabis for achne and rosaca, which failed in phase 2 trials.

This all makes me suspicious that FreshTracks could be the better poker players, and they know/suspect something (as the drug developer) that could become problematic during its market rollout. They have accrued the development costs and are now effectively giving it all away for a total of $13.25m. I doubt this would have recouped their cost of the development of Sofpironium Bromide.

The final nail for me was reading the interview with Alan Kohler where the CEO described the phase 3 results of Sofpironium Bromide as "pretty highly statistically significant". Significance either is or isn't at a specific level, but can't be highly or slightly.

If the drug is legit and Botanix are able to charge $700/ month for the initial target of 300000 paitents with a 5-10% COGS then the financials look impressive and they should do very well, but I have an uncomfortable feeling that this isn't the most likely outcome or the full story. Good luck to holders but I think I will watch this one from the sidelines.

I am reminded by that saying that if you can't see the sucker at the table then it is probably you.

For completeness:

The ultimate research question is why Brickell Biotech sold Sofporonium Bromide to Botanix if the drugs is a) so great b) so potentially profitable? Why wouldn’t they take this drug through FDA approval themselves. 

I think both Botanix and Brickell needed something from each other at the right time. 

Botanix needed a commercial product to add to its pipeline – I think COVID added a legitimate time delay to Botanix’s original pipeline plans. 

A faster pathway to revenue generation would help the market to regain faith in Botanix and hopefully increase the share price and investor returns. A commercial drug plus a phase III and multiple phase II drugs is a much more attractive buyout target for big pharma than just a clinical company. 

Brickell Biotech was a small US clinical stage company. Brickell listed on the NASDAQ in 2019. Prior to this it was valued between $50 to $100 million privately in 2015. 

Brickell underwent 5 funding rounds totalling $33.5 million. The biggest investor were Amorepacific Ventures, Charlie Steifel and Pallisades.

2010 Funding Round 1 - $6.2 million

2013 Funding Round 2 - $7.0 million 

2014 Funding Round 3 - $2.2 million

2015 Funding Round 4 - $10 million

2021 Funding Round 5 - $8.1 million

Bodor Labs licenced SB to Brickell and in 2015 Brickell licenced SB to Kaken for Japan and parts of Asia. Brickell got upfront payments and milestones and tiered royalties which were undisclosed. 

2015 also saw Brickell expand its drug offerings into Posoriasis and Auto-immune disease. In 2019 Brickell acquired Vical for its DNA delivery tech for an undisclosed amount. Needless to say Brickell was a clinical stage company relying on funding rounds and small licensing revenue for SB from Kaken. 

Nasdaq listing was successful and saw Brickell Biotech’s (BBI) SP soar. Positive Phase IIB results for 15% SB impressed the market and the stock hit $3.39. COVID affected biotech badly. In October 2020 the stock price was down to 0.56c and in Nov 2020 the Brickell CFO resigned. 

Final funding round in 2021 for $8.1 million kept Brickell afloat. In Sept 2021 Brickell bought another drug DYRKA program in clinical stages.

The stock price dropped again and by May 2022 it was as low as $0.29c. The problem was that SB would take too long to get FDA approval so there was no immediate revenue possibility. I speculate that with Brickell collecting immunology assets and inflammatory assets that it needed to offload the most advanced sellable asset to inject some enthusiasm back into the share price and to fund the rest of the pipeline. 

However the sale of SB to Botanix  for $9 million upfront and $168 million in future sales and milestones did little for the Brickell share price. FDA approval would be 12 months plus away and so there would be a lag before any future revenue or milestone payments were achieved. 

On June 30^th 2022 it looks like the Brickell Board made a decision to do a reverse stock split 1-45 in an attempt to lift the minimum share price bid back above $1.00, as per NASDAQ compliance requirements.

After the stock split BBI returned to NASDAQ compliance in July of 2022 but that was short lived and Brickell again faced delisting in August, 2022. It was in September this same year that Brickell rebranded and announced a strategic shift into immunology and inflammation fields and away from dermatology. 

I feel like as a clinical stage company Brickell was struggling financially during COVID like most of the market and BOTANIX came along at the right time with a chunk of cash and a possible injection of life back into the stock price which was ailing around and below the $1.00 minimum bid price.  

I suspect Botanix ultimately ended up with the better end of the deal. 

Botanix is now 2-3 months away from potential FDA approval and transition to a commercial pharmaceutical company. All just speculation on my part but I think we will look back at this time as a very strange era in biotech history. I think Vinnie was there with a nice price at the right time and Brickell looks like they needed this. 

Competition to SB

Specifically I have dug into THVD-102. 

I think with any investment research it is important to understand a drug’s potential future revenue and any drugs that might eat potential future market share.

To understand THVD-102 lets follow its journey. There are some very illuminating outcomes and familiar characters. 

THVD-102 was initially developed by TheraVida Inc in 2016. TheraVida developed a proprietary patent protected product for the treatment of hyperhidrosis. The company ran a small phase 2 trial combining Oxybutynin (muscarinic receptor antagonist) and Pilocarpine (muscarinic receptor agonist). Importantly this combination of drugs was a possible step forward in hyperhidrosis treatments. 

Phase 2 trials found that Oxybutynin + placebo treatment performed similarly to the combination therapy of Oxybutynin and Pilocarpine, however there was a statistically significant improvement in associated dry mouth symptoms for patients on the drug combined with Pilocarpine. 

The severity of dry mouth side-effects stopped people wanting to take the Oxybutynin alone. 

This was a desirable outcome, the combined THVD-102 drug was thought to be a potential oral treatment for hyperhidrosis and a competitor to Allergan’s Botox injections.

Enter Roivant Sciences Ltd a self-described next generation “big pharma” company proclaiming that its competitive advantage is that is adaptable and nimble.  With a NASDAQ (ROIV) listing and current shareprice $9.70, Market Cap $7.4 Billion and 758.43 million shares on issue.

Roivant’s Mission statement:

“To improve the delivery of healthcare of patients by treating every inefficiency as an opportunity.”

Roivant’s Goal:

“To identify novel or clinically validated targets and biological pathways in areas of high unmet medical need. Then seek to acquire, in-license or discover promising drug candidates against those pathways or targets.”

Roivant Sciences Ltd has developed an agile “VANT” model. Vants are subsidiaries of Roivant’s Sciences Ltd. These Vants specialise in therapeutic areas including immunology, dermatology and oncology. 

Dermavant  founded in 2014 is Roivant Sciences -dermatology subsidiary. Dermavant’s mission is to advance clinical phase dermatology candidates and is willing to carry out preclinical work. 

Dermavant’s flagship drug is VTAMA (Tapinarof 1.0% cream) which gained FDA approval for treatment of plaque psoriasis in adults, in May 2022. Dermavant purchased all global rights to Tapinarof (except in China) from GSK in 2018. They also assumed the responsibility for all developmental milestones owed to third parties.  Roivant paid GSK US$330 million and agreed to run all phase III clinical trials for both psoriasis and atopic dermatitis. 

Dermavant paid GSK $198 million for the preclinical drug with a further $132 million in developmental milestone payments. 

VTAMA is also a potential treatment for atopic dermatitis in children and adults. The drug yielded positive phase III outcomes as a safe and effective treatment for adult and paediatric (non-steroidal option) for the treatment of dermatitis, in March 2023. 

Dermavant has a history of buying pre-clinical drugs and running phase III themselves (presumably to get the drug for cheap). This has proved to be a winning formula for VTAMA through to Feb 2023 the company had sold 100,000 prescriptions, written by 8,600 unique prescribers for plaque psoriasis. Net product revenue for the December 2022 qrt was US$9.2 million. 

Back to THVD-102 – In 2018 Dermavant bought the rights to TheraVida ‘s hyperhidrosis drug THVD-102 and renamed the drug RVT-504. This deal consisted of an upfront fee and milestone commitments of a undisclosed size. The plan was to run this oral drug through phase III trials and hopefully launch it as a competitor to Allergan’s BOTOX. 

Fast forward to June 2022 and Pfizer partnered with Roivant Sciences in a deal to launch TYK2 inhibitor Brepocitnib for the treatment of dermatomyositis and lupus. 

This was an expensive deal and meant that mothballing several Vant subsidiaries would be necessary. Dermavant lost half its dermatology program funding. RVT-504 for hyperhidrosis was cut. So this drug has not been developed any further. 

Now to the interesting part. Howie McKibbon Botanix Pharmaceuticals current Chief Operations Officer most recently served as Senior Vice President for world-wide commercial operations at Dermavant from 2017-2019. Therefore he would have been very familiar with hyperhidrosis market as he was present at the time of the Dermavant purchase of THVD-102. He had not doubt realised this competitor had mothballed their program and would be years away from being a viable competitor to the more advanced SB program. 

He would certainly be privy to Dermavant’s dermatological program and the fact that this company had a gap in both the acne and hyperhidrosis space. 

Roivant Sciences has certainly been known to partner/ licence and buy rights to pharmaceuticals including pre-clinical drugs. I found it interesting that during recent meetings with share-holders there was a huge stress placed on Botanix being very happy to go to market themselves. Perhaps this was a signal that they would not be willing to take a low offer for a preclinical drug from the likes of companies like Dermavant. They are likely holding out for the big offers once the SB has FDA approval and sales.  All speculation of course. DYOR. 

Pls note the one and only time I have shared this on another forum first. I wrote this in response to a poster's question elsewhere. I have included this on Strawman for completeness of any and all analysis on Botanix Pharmaceuticals.

Botanix pharmaceuticals is no longer a pre-revenue biotech.

Botanix is entitled to royalties for sales of SB from Kaken Pharmaceuticals in Japan. Details are still vague on sales numbers and royalty amounts but will become clearer with the next few 4Cs.

Further news announced yesterday is that Kaken has struck a deal to sell SB into South Korea through Dong Wha Pharmaceuticals. Botanix will be entitled to royalties on sales in South Korea also.

While the company states the sales royalties will not be significant a new territory of SB distribution further derisks this drug. It increases likelihood of FDA approval in the US come September. This will be a direct sales and revenue path of Botanix.

6A1152943_BOT 1.pdf

Botanix has passed mid-cycle review with FDA de-risking Sofporonium Bromides chance of approval in September.

This is a new best in class alternative to surgery. Hence likely to take market share from incumbents on approval. Alternative treatments have a lot of side-effects. https://themarketherald.com.au/__trashed-2023-04-03/amp/

https://www.theaustralian.com.au/business/stockhead/after-neurens-success-which-other-asx-health-stocks-are-knocking-on-the-us-fda-door/news-story/725965da0628dfabb9f7f04833661d08

Interesting post FDA approval of Neuren there is a resurgence in interest of asx biotechs. One glaring omission is Botanix Pharmaceuticals which is awaiting the mid-cycle review for Sofporonium Bromide with the FDA in the next 6 days. There is strong confidence that this treatment for axillary hyper hydrosis will be approved q3 this year. It will be best in class treatment (see previous straws) and has already met stringent Japanese standards and has been approved.

This company has run foul of investors due to mixed acne results in 2019 and is still suffering from poor investor sentiment not unlike PXS.

Interesting article highlighting some fan favourites PME included but also mentions Neuren Pharmaceuticals and Botanix Pharmaceuticals potential to be market giants if dominoes fall the right way. The elusive next CSL many of us are hunting for.

https://www.livewiremarkets.com/wires/is-another-csl-hiding-on-the-asx

#Botanix #FDA filing accelerated #2clinicaltrialsontrackforcompletionQ3

22/23 are shaping up to be pivotal years for this small Australian biotech. Currently sitting with a $68 million market cap and $17 miilion cash on hand. 

I am a strong believer in this company due to the proximity to revenue and the range of potential products. This I believe diversifies the risk of my investment. The conditions targeted are common problems that have lacked innovation for decades. Often competitors such as acne drugs can have severe side effects (e.g. roacutane and suicidal ideation and intolerance to sun exposure). So far synthetic CBD is proving to be incredibly safe in all clinical trials. 

There is a current Product Pipeline of 5 drugs for a range of conditions. 1 pending FDA approval and commercialisation. 

Table 1: Current Product Pipeline

(Source: https://botanixpharma.com/pipeline/)

This week’s announcement was very positive for Botanix Pharmaceuticals next step toward revenue generation. It’s new drug to treat PrimaryAxillary Hyperhydrosis (excess sweating) Sofpironium Bromide (SB) filling for NDA status with the FDA has been bought forward to this quarter. There is a very high chance of FDA approval given that 85% of patients who used SB experienced clinically meaningful improvement in their condition during the Phase 3 trial. Plus SB is already approved and currently being sold in Japan. 

If successful SB will be Botanix' first product to market. 

Botanix announcement confirms commercialisation preparations are already underway. Vince Ippolito President and Executive Chairman released this statement:

“over the coming months Botanix will commence the process of preparing for inspection of its contract manufacturing site and other FDA pre-approval activities.”

Furthermore Rosacea (BTX 1702) Phase 2 Clinical Trial is fully recruited and underway. This clinical trial is crucial in advising synthetic CBD dosage that will be used in upcoming Phase 3 Acne trial. 

The canine dermatitis pilot study (BTX 1204A) is also fully enrolled and due for completion in Q3. This will advise whether future human dermatitis trials will be pursued and provide another quick to market commercialisation opportunity if successful in the veterinary market. 

No doubt many of us are finding it harder to find decent returns in the current markets. I know as someone heavily invested in health care and the tech space my IRL portfolio has seen prettier days.

With the health care index tipping as low as -12.68% compared to the benchmark S&P ASX 200 you can be forgiven for looking away and going to the pub.

However there are some bright spots in amongst the carnage. Kalkine media has just released an article highlighting the best year to date returning healthcare stocks https://kalkinemedia.com/au/amp/news/stock-market/from-imc-to-ala-healthcare-stocks-with-best-ytd-returns

It will be no surprise to current Strawman holders some of the better performing stocks these include:

IMC

Neu

LCT

BOT

ALA

I currently hold Neu and BOT IRL and on Strawman.

Neu has had multiple major milestones over the past 6/12. Its major lift was toward the end of last year however positive momentum has continued in 2022 with YTD returns of 7.96%. Share holders are patiently waiting for the second company inflection point in June this year. Shareholders are optimistic of FDA approval of its drug Trofinetide for the treatment of Rhett Syndrome after a successful Phase 3 study. I am keen to stay invested for this as well as a possible rest of the world deal for this same drug- this could be announced anytime.

BOT has seen even better YTD returns of 41%. Management has been actively recruiting and made recent high caliber hires to join its Board to help with upcoming commercialization. A new Non-Executive Director position has just been filled by Danny Sharp - who has 30 years experience in commercial banking with specialties in healthcare and technology. He also currently sits on the Board of Alcidion (ALC).

The CEO and President of BOT have been hitting the pavement at recent roadshows eluding to a likely upcoming commercial deal with an expanded product line involving their patented skin delivery system Permatrex. They are actively seeking assets to acquire that can quickly and easily utilize the delivery system and be ready for immediate commercialisation. This may provide a revenue stream much quicker than shareholders had been expecting.

It is nice to hold stocks with plenty of cash in the bank and further upcoming inflection points.

Biopharm magazines have frequently mentioned the number of cashed up pharma companies that are looking to buy startups with progressed assets. In an inflationary world that is becoming increasingly difficult to get access to capital, I see the biopharm sector as being a promising anomaly.

Botanix Pharmaceuticals Management

24.09.21

 Botanix has announced the expansion of their Senior management team with the appointment of a new Senior Vice President of Pharmaceutical Development Dr. Jack Hoblitzell PhD. 

The nay sayers could potentially argue this is a sign of bloated management expenses for a company that currently has no revenue outside Australian Government R&D grants. However, it all depends on the calibre of the new recruit. Botanix has been reasonable with cash flow management and managers keep salaries low and opt for future options in their packages. 

Botanix has made no secret of future strategies to add quick revenue streams. The following angles are being pursued:

1) BTX1204A for canines and 

2) Leveraging its exclusive lease of the ‘Permetrex’ delivery system (alcohol free system to improve penetration of drug molecules through the skin). 

A quick LinkedIn stalk and review of Dr. Hoblitzell (why is some random chic from Australia looking at my profile?) suggests that he is a very appropriate hire at this point for the company. 

Dr. Hoblitzell BIO

The press release promoted him claiming he has experience leading world class technical operations to deliver new product launches (tick).

Years of experience with regulatory submissions – wrangling FDA (tick).

Excellence in manufacturing and supply chain management. If anyone else was around for the great acne debacle of 2019 you would get this! CBD was a restricted drug in some states in the US and could not be transported across state lines…..nightmare. (so tick tick).

Experience supporting pipeline development and ACCELERATING the development and SCALE UP for commercial capabilities (tick tick tick). 

Dr. Holblitzell is a registered pharmacist.

Where has he come?

 I note a lot of Pfizer ties revealing themselves for Botanix Pharmaceuticals. 

Formerly: 

Snr Vice President Of Technical Operations at Assertio Therapeutics Inc. May 2020-June 2021 (not there long). Assertio Therapeutics has a $0.04 Billion dollar market cap. This company specialized in pain relief drugs: diclofenac potassium, indomethacin, oxycodone Hcl. 

Dr. Hoblitzell has a fairly long history of overseeing mergers of pharmaceutical companies. This is also a point that Vince Ippolito CEO has frequently addressed that Botanix is a likely buy out target with the number of product pipelines they are developing. Frequently, referencing Jazz pharmaceuticals buyout of GW pharmaceuticals for $7.2Billion for their CBD based epileptic medication. 

Of course everyone invested or researching Botanix Pharmaceuticals is well aware of our illustrious CEOs background. One of the main reasons I have stayed invested. He oversaw the Pfizer buyout of Anacor Pharmaceuticals dermatology platform for $4.5Billion. 

Dr. Holblitzell has also been Senior Director of Pharmaceutical Technology and Global Manufacturing Services at Pfizer. Here he is endorsed by several Pfizer colleagues. At Pfizer he was responsible for the integration of King Pharmaceutical products and processes into the Pfizer co-development and manufacturing supply networks. 

He was also Vice President of Technical Operations at Zyla Life Sciences for 5 years. 

He was endorsed by former colleagues from King Pharmaceuticals where he worked before a buyout by Pfizer. 

Lynn F Palmer Senior Vice President: Technical Operations of Pharmaceuticals at Osmotica Pharmaceuticals (Worked together with Dr. Holblitzell at King Pharmaceuticals) wrote:

“Jack is a practical and effective Pharmaceutical Development Executive. He has effectively  led the development of multiple formulations, and scaled them up to commercial scale. He has extensive industry and technical knowledge of formulation development, product stability, pharmaceutical packaging and equipment capability and setup. I strongly endorse him. “

Pfizer’s brief

 A pharmaceutical company that applies science and global resources to improve health and well-being at every stage of life. Pfizer has a $246 Billion market cap. 

Interesting to note Pfizer looks to “set the standard for quality, safety and value in the discovery, development and manufacturing of medicines for people and animals.” (synergy with animals here as well) 

Summary

He seems like a great get. 

A lot of tie ins with Pfizer for both he and Vince – is this the hope? A Pfizer buyout?

I am really curious as to why a po-dunk back water Perth company with a $64 Million dollar market cap, currently trading at $0.074 per share is attracting these recruits. I certainly have my thesis – the CBD molecule patents and FDA fast track approval status achieved for their anti-microbial platforms are certainly compelling. 

On Tuesday 2nd of Feb 2021 BOT went into a much anticipated trading holt for the release of results of its BTX1801 Clinical Phase 2a study. Preceding weeks had seen BOT share price peak at 18c around the 25th of January in anticipation of results. This was a far cry from the 29c the company reached on 2nd of August 2019 on anticipation of a less mature stage of the company without the anti-microbial drug potential in the mix. 

The share price leading into the anti-microbial BTX1801 announcement was also a much bigger discount to the Cowan investment of 20c per share made by the US company in 2019 in the lead up to BTX1503 acne results.

As investors are aware following mixed results of BTX1503 acne in 2019 the share price more than halved to 12c on October 25th. It continued its gradual decline to as low as 2c around March 2020 before a slow climb back to its recent 18c peak prior to the anti-microbial results. 

Results released on the 3rd  of February 2021 were excellent. Primary end points of the phase 2a study were met. The CBD BTX1801 gel and ointment formulations both successfully and safely reduced Staph infections in the nasal cavity of patients verse a vehicle control. A collective shareholder sigh of relief and anticipation was warranted.

Mr Market had a very odd response to this result.

Each clinical trial stage passage potentially de-risks the drug and improves chances of success and future commercialisation. This process is analogous to climbing each progressive rung of a ladder.  Share-holders would then rightly anticipate share price rises accordingly as each rung is passed in Biotech companies. However despite this result trading saw a closing price of 17c on the 3rd following the announcement and a gradual decline to 13c at close on the 8th of Feb, 2021. This price was near parody to the SP after the disappointing mixed results of the acne BTX1503 drug in 2019. 

The share price does not currently appear to reflect a successful 2a BTX 1801 trial outcome. 

Seemingly the market failed to acknowledge the passage up another rung of the ladder toward a potentially efficacious and safe new anti-biotic class with synthetic CBD BTX1801. This will be the first new class of antibiotics in 60 years. It was also the first human trial in the world to show that CBD can kill Staph aureus in 76% of patients after 5 days of treatment and that it has residual effects for up to 28 days. 

This was a phase 2a study so optimal treatment dosages and comparisons to other drugs on market was not the study design. Safety and early efficacy and formulation methodology are being established. Nothing more nothing less. Was it safe, tick, was it effective, tick.

The meeting of the primary end points of this BTX1801 study can likely be extrapolated to  provide further supporting evidence for the other drugs in the pipeline using synthetic CBD. Acne successfully kills staph aureus. Staph is part of the natural flora of the skin and overgrowth of this bacterial gets into pores causing acne. Ergo reduce bacterial load reduce acne. 

Hence the results are another rung or two up the ladder toward successful commercialisation of potentially 2 pipeline drugs.

Biotech investing is a complex game and one where opportunities can be found and advantages can be had for those with a scientific background. Scientific language seems to be the area of confusion where market price can be won or lost or confusion and games can ensue to the advantage of those who know how to play. What do the primary end points mean? What are p values? What sample sizes carry statistical significance. Market misreads are certainly not unique and hesitation of market responses can be used to traders and investors advantages. However it can also lead share-holders to sell when they should hold or buy more. 

Add to the complexity that traditional value investing rules do not apply when assessing a Biotech. Firstly there is rarely a commercial product producing income in early start up companies. R and D tax refunds are often the only revenue these early stage businesses rely on. Otherwise outside investment from bigger pharmaceutical companies or entities with a vested interest may produce some capital. 

So why would an investor take on the risk of investing in the Biotech? How does one even start to value or understand the market capitalisation of these kinds of companies when traditional metrics are out the window?

Each investor has their own reasons and motivations: some believe in the science or the potential life altering outcomes of the new therapeutic or diagnostic test being developed while others know that the biotech space is traditionally a high risk and high reward play. 

Biotech companies rely on their shareholders to provide working capital to progress from pre-clinical through to often costly phase 3 trials.

I believe value comes from novelty, the problem being solved, the need and the potential addressable market and the number of products in the pipeline of the Biotech. 

So rather than looking at balance sheet and revenue growth the incremental value increases occur with the rungs climbed up the ladder from the pre-clinical proof of concept through to the Phase 1 safety through to the Phase 3 results. All are significant milestones for these companies. 

90% of drugs fail to reach commercial products due to safety issues. Botanix Pharmaceuticals has a SAFE synthetic CBD product across all its drug channels: acne, anti-microbial and rosacea.

In a study of 640 phase 3 novel therapeutics 54% failed in clinical development. So even if a drug makes it to phase 3 less than half will be approved to commercialisation. 57% of those drugs will fail due to inadequate efficacy (Hwang T.J., Carpenter D., Lauffenburger J.C., Wang B., Franklin J.M., Kesselheim A.S. Failure of investigational drugs in late-stage clinical development and publication of trial results. JAMA Intern. Med. 2016;176:1826–1833). BTX1801 reduced Staph infections and destroys the bacteria through destruction of the cell wall. This drug potentially can be used without Staph aureus building resistance to it (lab tests only so far).

BTX 1801 anti-microbial once again has shown to be safe, tick, effective in 2a trials, tick. Given its tolerability and safety profile there are low drop out rates in previous trials and likely to be compliance of participants in trials moving forward. The management team also has experience with following FDA study guidelines given their vast experience at previous companies. Failing to comply with FDA study regulations are another reason trials frequently fail. 

I perceive the biggest likely hurdle for this company is not failure in trials due to efficacy, safety or not following FDA regulations. The biggest risk given COVID is recruitment and trial interruptions moving forward. Hopefully this can be mitigated or future trials can be continued in Australia and New Zealand as opposed to the US to ensure continued timely progression of the companies pipeline. 

Botanix pharmaceuticals is now a company with diverse and maturing product pipeline with a 2b Rosacea trial about to begin Q1 2021. This addresses a unique market in its own right and simultaneously provides an FDA building block toward Phase 3 BTX1503 acne the final phase prior to commercialisation. Further anti-microbial BTX1801 advancement should be fast tracked and phase 2b trials should also begin this year. 

Given this companies progression up the ladder I do believe it is currently significantly undervalued. Share-holders will stay and more will be added to the register to help fund future studies but reward is needed to incentivize new money into Biotech companies. That is the nature of the high risk high reward play. Opportunity costs can indeed be great if money remains parked in these companies without bouts of significant reward. 

It is obviously up to the each individual shareholder to assess whether the progression of the drug pipeline of this company has merit. 

In the next 2-3 weeks Botanix Pharmaceuticals is about to reach a significant clinical milestone in its drug development program. 

Results of  the Clinical 2a Antimicrobial BTX 1801 program is just about due and this will be a huge potential inflection point for this company. 

Share price took a beating on mixed results for its acne phase 2b trial in 2020 seeing the Share price drop from a peak for 29c to lows of 2c. 

Investor faith in this company has waivered. However the Australian arm of these results were incredibly promising. The poor result from the US arm was due to complications in formulation consistency in this country, who was not experienced in the development of the carrier solution Permatrix or in the manufacturing of synthetic CBD used. This issue has since been rectified by sourcing a consistent manufacturing solution for future trials in the US.  

Botanix is developing simultaneous programs:

1)    Entering phase 3 Clinical trials for acne BTX 1503 in 2021

a.     Addressable market currently US$2.9 billion annually in the US

b.     Botanix addressable market estimated to be US $4.2 billion annually and US $7billion by 2024

2)    Completing Anti-microbial 2a testing and data readout Jan 2021

3)    Commencing Rosacea BTX 1702 1b trial in 2021 

a.     Addressable market US$2.6 billion by 2025

Multiple drug development programs I believe somewhat de-risks investment in this company.

Optimism in the antimicrobial  BTX1801 programs success is based on the efficacy of results in previous clinical phase 1 trials and new data recently supplied to the market. The mechanism of action of synthetic CBD has been identified. The drug effects the cell wall of gram positive bacteria allowing penetration and eventual cell death of the bacteria without any apparent development of resistance to the new anti-biotic. This has been shown to eradicate MRSA (Methicillin resistant Staph Aureus bacteria) in both Porcine and Human Invitro studies (human stomach skin harvested from recent abdominoplasties). MRSA has been found to be eradicated completely in a 24 hour period after application of the new formulation. 

Large groups of the population are known to carry MRSA nasally and anally. Self- infection is the route cause of most Surgical Site infections post-surgery. One of BTX1801s major target markets will be post-surgical site infections (SSI). The current anti-biotic most commonly used in SSI control is Bacitracin / mupirocin but it is increasingly ineffective and useless against MRSA. 

WHO (World Health Organisation) has forecast deaths due to anti-microbial resistance to hit 10 million p.a. by 2050. This will overtake expected deaths by Cancer at this point. Estimates suggest that SSI cost the health care systems globally around US$10 billion dollars annually. The addressable market for SSI is estimated to reach $US 5.9 billion annually by 2023. This is a huge market for any new successful anti-biotic to target. 

If successful BTX1801 will be a leading new drug in SSI. No new class of anti-biotics have been successfully developed in the past 30 years. This drug will have first mover advantage plus FDA fast tract QIDP status. Which means fast track of development programs to market plus 5 year exclusivity and a further 5 year protection of markets to competitors. 

Human studies have now been completed, where BTX 1801 was applied nasally over 5 day treatment period in healthy subjects vs a control. Patients were followed for 28 days to see if there was reduction or complete eradication of MRSA. Successful outcomes should see a significant re-rate and restoration of faith in Botanix Pharmaceuticals simultaneous programs. 

Investment in the Acne program alone saw US international investment at 20c per share in 2020. The additional anti-microbial programs success should see this price plus a significant increase based on the huge potential addressable market of SSI. Furthermore Anti-microbials will have other addressable markets – animal anti-biotics etc….. 

The incredible safety profile of this drug will also solidify its game changing status on a global stage. 

The current CEO Vince Ippolito has been responsible for negotiating significant buy outs of dermatological companies by Big Pharma. He was at the helm of Anacor pharmaceuticals when it was bought by Pfizer for $US 5.2 billion. There is a likely buyout potential for Botanix Pharmaceuticals on successful BTX1801 trials. Or at a future stage with further progression of its simultaneous Rosacea and Acne drugs.