In October 2017, pharmaceutical company Nuformix (NFX) took an important step in its journey by raising money through a London Stock Exchange listing via an RTO.
The RTO and parallel £2.3m placing was the result of a realisation that the company needed to take its products and technology up the value chain and into clinical trials if it was to maximise its commercial potential.
When we spoke to Nuformix CEO Dr. Dan Gooding for a conversation about the company’s strategy, he described this as a “catch 22” situation for Nuformix and similar technology businesses - the need to raise investment to transform the business and its products, at a point when the underlying technology was in its infancy.
The outcome was an RTO that the company completed on the 16th October 2017, which Gooding said gave Nuformix the capital to execute the first stage of its strategy for its two lead programmes NXP001 and NXP002.
With this money raised, and some RTO administrative delays behind them, the Cambridge company is now looking forward to receiving the results of studies that will be key to advancing the next stages of the company’s strategy.
Dr. Dan Gooding recently sat down with Vox Markets for a Q&A to discuss the company’s decision to take investment, what the funding is being used for, and how it fits into the company’s long-term ambitions - read it below.
As for any pre-revenue company with a new technology, investment is required to transform your business, and in the context of our sector, we needed to raise a relatively small amount. Our model is not particularly cash consumptive at this early stage, plus it is comparatively risk averse versus traditional biotech. But, we know the commercial rewards are there – certainly for the two lead programmes in our pipeline.
So, what does drug development look like? You try and validate your product in various models. On one end of the spectrum you’ve got a single study in a test-tube, and on the other end you’ve got 20,000 patients in a clinical trial, and there are various steps along the way. After founding the company, our seed capital only allowed us to work at best at a pre-clinical level. Despite early deals and collaborations, we were unable to validate our technology in the clinic. That became the catch 22 situation. Drug companies wanted clinical data as a minimum requirement to consider in-licensing – ideally, they want to take in products with minimal risk to get to market. We thought our technology could achieve great things, but the income from licensing our patents and technology early wasn’t giving us the quantum we needed to enter the clinic for our key products. So, we knew we had to raise investment. The question was how we did that.
Roughly two years ago, but it was about finding the best path.
By taking on a listing, we’ve raised the funds we need for early clinical studies but we also created a platform to be ambitious. We seek to use known drugs in new ways. That’s important because if a drug is already marketed, you know that its safe and not going to cause problems for patients. Also, it means that regulators already have access to safety data that allows us to go straight to patients - this safety data is somebody else’s data that sits with regulators which we can re-use. Regulators will take a view on that data and say: “We agree that that drug is safe, so you can go into clinic without generating more safety data”. This saves a lot of time and cost, which is key when you’re talking about pharmaceutical development.
So, for us, the first piece of the puzzle is going into a small human study and showing that we’ve done something to a known drug that makes it different from what already exists, and importantly different because our modification enables us to use it for a new disease in a way that wasn’t previously possible. Demonstrating that is quite a short, risk-reduced and lower-cost clinical study to do, but it’s meaningful in our case as it proves that the patent position we have on a modified drug form protects something critical that unlocks its use in a new disease. We try to target diseases where there are very few effective therapies currently, hence the point of trying to do something that changes that situation for patients rapidly, who aren’t currently getting therapies that they need.
So, after we demonstrate how our proprietary forms of known drugs offer something new, what’s the game plan? For NXP001, we’re developing a generic version of an existing product. However, making a generic orally efficacious product is actually really difficult for this drug and is covered by robust patents. We’ve got a way around these patents, meaning we’ll be allowing drug companies to enter an attractive market that they currently can’t access. So once we’ve shown we can deliver the drug effectively without infringing the existing IP, that’s where we get off - we can continue to commercialise that. And that’s what our first deal on NXP001 with NSB is all about.
NXP002 and our future products are different because we actually want to take a drug say from asthma in Japan to use globally in a fibrotic condition. So, in this case we now need to perform patient studies to support a disease switch to prove that our drug is effective. Now that will require further funding at the appropriate time once we have the next data set through – which we’ve already talked about in prior announcements – and looks very encouraging. So that’s why us being on a platform with our Standard Listing supports our ambition. Once we’ve built value through our initial programmes, we’ll be in a strong position to raise further capital to perform patient studies and of course re-invest milestone revenues when they’re received. This will grow the value of the business substantially in my view, by demonstrating how our products deliver innovative treatment in major disease areas that are currently underserved.
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So, that’s our game plan. Raise a small initial investment, show that what we’ve got does what it says on the tin, then actually generate revenue from some of those early stage products post validation in clinic. Then we will try to build out between 2 to 5 programs that are similar to NXP002 - which is where we will need more money to conduct proof-of-concept studies in patients.
At the moment, the kind of clinical studies we’re funded to conduct take around 10 healthy volunteers - on day 1 they take the marketed form of the drug, then on day 2, they take our form. And you measure the concentration of the drug in their blood versus time, over say 24 hours, and you compare & contrast. These are called pharmacokinetic studies.
All we are looking for from that first study for NXP001 is that our version of the drug has pretty much got the same time versus concentration profile of the currently marketed product.
In the NXP002, we are actually looking to show that we can deliver the drug for longer with reduced variability. This drug has failed in late stage efficacy studies in the past & we think we’ve got a solution to what caused that problem. Once we’ve demonstrated our solution to that delivery problem in healthy volunteers, then we want to take it into patients. So small numbers of healthy volunteers help us show that we’ve solved drug delivery problems and after we’ve solved those problems, we then go and use those improved products to treat conditions that they wouldn’t otherwise have been able to effectively treat.
We’ve made consistent statements regarding our strategy to fund future R&D from licensing income – certainly during NFX’s early stages. The cashflow forecast from our RTO prospectus always showed a cashflow minima while we waited for our first tranche of IP-licensing revenue and the recently published auditors report supports our current position and the next 12 months.
It’s true that revenue has become more important given the increased costs of the protracted RTO. Our burn rate is low – that’s always been part of our strategy. Additional investment is made solely into IP and R&D – primarily for our lead programmes where we’re committed. Investment here better ensures success against key commercial milestones but also maximises future value by validating additional commercial optionality for these lead products.
We continue to discover and develop new products to broaden our pipeline and build further value. But we can do that very cost effectively in-house, and where we do this in collaboration, our partners contribute to those costs.
Milestone payments will come when we present the data that triggers the associated payments – first up from Newsummitbio Pharma (NSB). We’ve worked with NSB, our Chinese license-partner, for four years – and have continued to work with them after their acquisition by Yatai Pharmaceuticals in 2017. Clearly there are now much greater resources available as NSB is part of a much larger group. NSB were cited in our Prospectus as a current development partner, having previously worked on three cocrystal based products for which the company received £400k in IP licensing fees.
Yes – we’re in advanced discussions for the out-licensing of a new asset, which we believe will generate upfront revenues plus further development milestones. These activities were stated in our Operational Update of July 2nd.
We want to pursue our strategy of funding R&D from revenues – certainly until we complete a significant event relating to our lead products in terms of validating the technology and demonstrating commercial milestones.
We expect the funds raised and licensing revenues will take us through both of our first pharmacokinetic studies for our two lead programmes – no change expected there. In parallel we’re still able to invest into pipeline growth in-house and into joint development collaborations. Crucially, we remain on track to secure a £2m milestone in Q1 2019 for NXP001.
As I mentioned, our burn rate remains low, especially given the nature of our R&D activities and this is one of the strengths of our model. Our cashflow projections are in-line with our strategy for the next 12 months, as per the published auditor report - albeit in light of slightly higher transaction costs than anticipated in completion of the RTO.
Our first milestone payment is forthcoming – we’re currently awaiting the results of studies which should trigger the first payment. We’re slightly behind our original schedule on this. We’ve incurred a slight delay in achieving the first milestone as we decided to include an additional product prototype for study to validate NXP001’s wider commercial potential. This will also provide a stronger data set as we look to secure out-licensing agreements for other territories for NXP001.
Of course - NSB is a Subsidiary of Yatai Pharma, listed on the Shenzen Stock Exchange. It sells and develops a broad range of products in China and has a market cap of around $1bn.
We’ve formed a strong working relationship with NSB as a technology development and China marketing partner and NSB currently has China market rights to four Nuformix patents, including NXP001, with negotiations on-going for other Nuformix assets.
NSB are currently concluding studies on our prototype NXP001 formulations. When those studies deliver the data we expect, the first £500k milestone is triggered. Beyond that Nuformix is managing all activities relating to the second £2m payment, exclusively using partners in the UK.
The majority of NSB’s focus is on the internal China market and taking Western technologies into China – this was the origin of the relationship. Since then, Nuformix has received £400k in IP licensing fees from NSB for previously licensed products.
Following our first licensing agreements, we have successfully transferred our technology to China for previous programmes and expect the same outcome for NXP001.
Not directly, but through their parent company, Yatai, or other existing NSB partner companies.
NSB have delivered in the past and the underlying cocrystal technology is working in their hands, as proved by the three previous products we’ve transferred to China to NSB.
Yes – and we await more data from each programme before furthering discussions. Both lead products have multiple commercial opportunities globally.
Our pre-clinical studies answer key questions that allow us to progress to the next stage – both technically and commercially.
For NXP002, we expect to announce completion of our pre-clinical IPF programme during the second half of 2018. This data, because of the origin of tissue we are using, puts us exceptionally close to the patient. Our initial data was very positive, and we expect that to be further confirmed in our wider study which is currently reaching a conclusion. We look forward to keeping investors informed regarding that programme.
The operational update addresses all timelines for lead programmes and collaborations. These timelines have not changed.
We hope to announce the formation of more collaborations, which is another strength of our model. Joint development programmes help share risk in development and allow Nuformix to effectively broaden its product portfolio and increase our prospects for success in development and eventual out-licensing.
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