The first innovation in the Acne market in more than 20 years

Matthew Callahan is a serially successful entrepreneur. In particular, he has a proven track record in the life science industry and is responsible for more than 4 Food Delivery Association (FDA) product approvals.

Matt Co-founded Botanix Pharmaceuticals (ASX:BOT), his latest biotechnology business in the dermatology industry. Botanix uses a proprietary technology called Permetrex™ to enhance the topical delivery of synthetic Cannabidiol (CBD) into the skin to more effectively solve unmet needs of patients suffering from acne, psoriasis, and has developed into an antibacterial platform. 

In 2019 they announced development of a new antibacterial platform (BTX1801), and had a successful Phase 2 Acne trial (BTX1503). The Successful Phase 2 Acne results confused Mr. Market. They are using the Statistically significant Australian data from the study to go into Phase 3 Acne trials. They had to make separate batches of the drug in the US and Australia (hence the difference in placebo). Going forward, they do not.

For the Phase 3 Trial, the Permetrex batches will be manufactured in bulk in the same lab by a global specialty chemicals company. Management’s actions will ensure there is no inconsistency between jurisdictions, which caused the skewed vehicle response in Phase 2 and subsequent failure to meet the primary endpoint.

Regarding the successful Phase 2 data of the Acne trial, in March 2020, Botanix showed clinically meaningful results. BTX 1503 5% once a day showed statistical significance in overall lesion reduction vs the vehicle (placebo).

On the 1st of August 2019, Botanix raised US$40 million at 0.21c, with new shares outstanding at 946,506,191, which equals a valuation of $198.7 million.

In Q1 2020 Botanix tried an atopic dermatitis Phase 2 study. That failed because it is not related to an infection like Acne and the Antimicrobial developments are. It did not affect other product developments.

Botanix is going into a Phase 2a study for their antimicrobial platformRecruitment started in August 2020 with data due Q4, for a study to kill superbug Staph for Surgical Site Infections (SSI). The opens the doors to other opportunities.

Regarding approximate valuations of BTX 1503 Acne alone, here are 3 diagrams regarding asset values of BTX1503 Acne at different stages. There have been no new Acne treatments in 20 years.

As Atopic Dermatitis failed, I give it no value. It’s a write off. 

As of March 2020, Botanix had breakthroughs in:

  • Acne, going into Phase 3 trials pending a Q2 2020 FDA planning meeting, and
  • Antimicrobial development, targeting Surgical Site Infections (SSI) going into Phase 2a in Q2 2020. They state it can kill MRSA bacteria within 10 minutes of exposure, by a novel mechanism of action, and without allowing resistance to develop.

These need to be valued accordingly.

Scientific papers on Cannabidiol (CBD) & Antibiotic activity research

  1. Research into CBD & Antibacterial activity started in 1976.
  1. Antibacterial Cannabinoids from Cannabis sativa: A Structure−Activity Study, 2008.
  1. When applied in combination with a range of antibiotics, CBD increased anti-bacterial effects of selected antibiotics, depending on bacteria type, 2019.
  1. Cannabidiol is an effective helper compound in combination with bacitracin to kill Gram-positive bacteria, 2020.
  1. Antibacterial Treatment using Cannabinoid Combinations, Botanix patent 2020. Via Google Patents
  1. “Overall, CBD exhibited a strong antimicrobial effect against Gram-positive strains and could serve as an alternative drug for tackling MRSA.”
  1. CBD has potential as a promising therapeutic agent for the treatment of acne vulgaris.

On the 16th of April 2020, Botanix updated the market. They confirmed that the Phase 2 Acne (BTX 1503) FDA meeting was on track for Q2 2020, and the antimicrobial Phase 2a (BTX 1801) was progressing due Q2 2020.

The world needs new antibiotics like BTX1801

“Never has the threat of antimicrobial resistance been more immediate and the need for solutions more urgent,” says Dr Tedros Adhanom Ghebreyesus, Director-General of the World Health Organisation. Only 12 antibiotics have been approved since the year 2000. 

Botanix has cash for approximately 24 months – to 2022

In the 16th of April update, Botanix stated they have enough cash for 24 months. So, I presume that Botanix gets to a Phase 3 Acne trial and finishes the Phase 2 (a and b) Antimicrobial trial.

Botanix Patents can be found here.

Dermatology starting Phase 3 Acne acquisition comparative research

PellePharm: funding and option of merger of $690 million at phase 3 for topical gel

Under the terms of the agreement, LEO Pharma has initially committed $70 million comprised of equity financing and financial R&D support to fund the global Phase 3 trial for patidegib topical gel 2% for the prevention and treatment of Gorlin Syndrome, with LEO Pharma securing an option to acquire all shares in PellePharm. PellePharm and its stockholders could receive up to an additional $690 million including merger consideration, and regulatory and commercial milestone payments.

Allergan bought Vicept in a $275 Mllion buyout package, with 2 Phase 2 Rosacea studies.

Acquisition / development research for antibacterial platforms. To develop ~ $190.5 million

Roivant Sciences and iNtRON Biotechnology announced that they have entered into a global licensing agreement for SAL200, a novel investigational biologic for the treatment of infectious diseases caused by antibiotic-resistant staphylococci. This licensing deal is worth a total of US$667.5M inclusive of milestone payments, with royalties on net sales in the low double digits.

Roche made a deal with Forge worth $190.5 million to work on a new antibacterial drug – to fight antibiotic-resistant gram-negative bacteria.

Studies by Botanix have shown that BTX 1801 is more effective than the market leading decolonisation agent, mupirocin, at decolonising MRSA. The global market for mupirocin is worth about US$228 million a year.

Pfizer bought AstraZeneca’s antibiotic unit in a deal worth $1.5 billion.

The deal, which could be worth more than $1.5bn (£1.1bn) and involves three already-approved antibiotics and two drugs in clinical trials, will comprise an upfront payment by Pfizer of $550m when the deal is completed towards the end of 2016, and a further $175m in January 2019. The American company will also pay up to $250m when certain milestones are reached, and as much as $600m in sales-related payments, plus royalties on certain drugs.

Only 12 antibiotics have been approved since 2000. In the U.S. alone, antibiotic resistance adds $20 billion to $35 billion in direct health care costs each year.

Biotech is expensive and hard, which creates a very high barrier to entry

Developing a new prescription medicine that gains marketing approval is estimated to cost drugmakers $2.6 billion

Probabilities of Success

The probabilities of success were derived from a study conducted by the Biotechnology Innovation Organization (in conjunction with Amplion and Biomedtracker). Data was analysed from 9,985 transitions in the Biomedtracker database over a ten-year period from January 1st 2006 to December 31st 2015. It is the largest study of clinical drug development success rates to date.

Out of 10,000 transactions, likelihood of approval at each stage:

  • Phase 1: 16.3%
  • Phase 2: 24.4%
  • Phase 3: 61.5%
  • Which leads to 88.4% chance of a New Drug Application (NDA)

Botanix analyst reports

After moving into a Phase 3 Acne trial in Q2 2020, 24th October 2019, 0.25c.

After moving into a Phase 3 Acne trial in Q2 2020, 14th November 2019, 0.29c.

After starting a Phase 2a Anti-bacterial trial due Q2 2020, 16th March 2020, 0.25c.

Bell Potter forecasts a gross profit margin of the Acne product at around 50%.

Valuation ranges from research ($US)

With a breakthrough Acne trial in Phase 3: $516m / $690m

Acquisition data for antibacterial platform development: $190m

Categories Research

About Me

My name is Mark.
I’m an investor and was founding team member at a startup.
Founding Investor and did Marketing at CXi Software.
I’m part of an investor community called IO Private.
Mentor at Startupbootcamp Australia.