Company Overview: Botanix Pharmaceuticals Limited, formerly Bone Medical Limited, is a pharmaceutical company. The Company focuses on developing medical dermatology products for dermatologists and their patients. Its segments include Research & Development and Corporate. The Company's products and pipeline products are all based on drug delivery technology known as Permetrex, which helps solve the challenge of delivering active pharmaceutical ingredients across the skin. The Company's products, which are under development, are focused on modulating the body's endocannabinoid system of receptors which regulates skin function, growth and renewal. Its product pipeline includes BTX1503, BTX1308 and BTX1204. Its BTX1503 is a transdermal gel formulation used for the treatment of serious acne in adults and teenagers. Its BTX1308 is a transdermal gel formulation used for the treatment of plaque psoriasis. Its BTX1204 is a transdermal gel formation used for the treatment of atopic dermititis.


BOT Details

Treated first patient under BTX 1308 psoriasis patient study: Botanix Pharmaceuticals Ltd (ASX: BOT) an emerging global medical dermatology company, is into the development of therapeutics for the treatment of serious skin diseases in Australia. The company offers BTX 1503, which is a transdermal gel formulation for the treatment of serious acne in adults and teenagers; BTX 1308, which is a transdermal gel formulation for the treatment of plaque psoriasis; BTX 1204, which is a transdermal gel formation for the treatment of atopic dermatitis; and BTX 1701, a new product offering for mild acne. Meanwhile, BOT has treated the first patient in its BTX 1308 psoriasis Phase 1b patient study. The study comprised of testing a new formulation of synthetic cannabidiol combined along with the company’s new Permetrex skin delivery technology. This Phase 1b patient study is being conducted in partnership with international psoriasis model experts, Bioskin GmbH. Further, Bioskin has an international recognition for their experience with the ‘psoriasis plaque test’, which is clinically validated and utilised by multiple number of leading dermatology companies. The study is structured to assess the safety and efficacy of BTX 1308 on psoriasis plaques or lesions, which has the ability to compare multiple formulations, and test products at the same time, and on the same patient, which means that the treatment duration can be shortened, while the quality of data can also be increased. The study also represents the third clinical program to start within 12 months for Botanix, which reflects the company's ability to accelerate the addition of clinical programs across a range of skin diseases. Moreover, the Phase 1b patient study comprised of testing BTX 1308 against a vehicle (placebo) and an active comparator in 15 patients at a single study site in Australia. Because all test articles are compared on psoriasis plaques on the same patient, at the same time, and dermatology companies recognize this study protocol as a powerful proof of concept tool. In addition, BTX 1308 offers a potential treatment that will answer three needs with a safety profile that ensures that it can be used for long periods in adolescents and adults. The study is anticipated to take approximately 3 to 4 months to complete and data is projected to be available in 1Q CY2019. On the other hand, BTX 1308 psoriasis’ target market is approximately 7.5m Americans that have psoriasis (most of them have plaque psoriasis). The market size as estimated entails annual costs of injectable biologic treatments in the US as ~US$20bn p.a. The current issue is that the biologic drugs are expensive and have serious side effect issues and there is unmet need of safe and effective topical product for mild to moderate psoriasis.


Financial Performance (Source: Company Reports and Thomson Reuters)

Further development of atopic dermatitis treatment by BTX 1204 during the September quarter: Both Atopic dermatitis (AD) and psoriasis are T-cell mediated inflammatory diseases of the skin. The study of Cannabidiol reflects that it inhibits immune responses through T-helper cell populations (including Th17,Th1 and also Th2) and there is a decrease of IFN-γ amongst others. BTX 1204 meets a number of needs and has the capability to serve as a non-steroidal treatment option, with potential impact of itch, improved safety profile and elimination of severe adverse side effects, ability to be used over long term (>12 weeks), address underlying inflammation, correct skin barrier dysfunction and all this can be done at greater cost effectiveness. The Phase 1b study design was concluded in late May 2018. The results of Phase 1b study data showed that BTX 1204 was twice as effective over the vehicle (with efficacy still increasing) and substantial improvement in the key signs of AD observed, which means, BTX 1204 has possibly a higher efficacy and can potentially exceed the industry performance. Further, despite being a small study, BTX 1204 has showed superiority over vehicle, starting at early time points. This is the first vehicle-controlled study for BOT, that also supports potential for other pipeline products. During the September quarter, BOT had successfully conducted a Pre-Investigational New Drug (Pre-IND) Meeting with the FDA’s Division of Dermatology and Dental Products for BTX 1204. The meeting has provided the company with an opportunity to seek clarification and support from the FDA on the data package and development plan that are required to commence the Phase 2 clinical studies in Australia and the US. Along with it will enable the company to get consensus from the FDA on the required drug development plan for BTX 1204 to support a New Drug Application (NDA). Currently, the company is well advanced for the finalization of the necessary logistical and regulatory arrangements that are required to support the scheduled commencement of a Phase 2 clinical trial. Phase 2 study design is the 12 week randomised, double-blind, vehicle controlled study meant for the  evaluation of the safety and efficacy of BTX 1204 in patients with moderate AD. Due to the efficiencies, BOT can derive well from running two Phase 2 studies in parallel. Meanwhile, the study is expected to complete shortly after the completion of the current BTX 1503 acne Phase 2 trial.



BTX 1204: atopic dermatitis –cannabidiol mechanism of action (MOA) (Source: Company Reports)

Completed pre-clinical testing of antimicrobial BTX 1801: During the September quarter, BOT had successfully completed the pre-clinical testing of BTX 1801, which is a novel antimicrobial. The results of the pre-clinical testing showed that BTX 1801 is very effective at killing methicillin-resistant staphylococcus aureus strains of bacteria when compared to Permetrex or cannabidiol alone. The synergistic response observed reflects the potential for BTX 1801 to treat both acute and chronic skin infections. This along with the inherent anti-inflammatory properties of cannabidiol may increase the value of BTX 1801 to be the antimicrobial of choice for the treatment of skin infections. BTX 1801 is a novel antimicrobial having the potential to address unmet needs in serious skin infections, and has significant market opportunities. The study results also showed that the delivery of cannabidiol with Permetrex can reduce the concentration of the active drug required for the achievement of the highest levels of bacterial killing. During the September quarter, BOT has focused on the completion of a market review and commercial assessment, in conjunction with key opinion leaders, for the identification of the preferred type of skin infection to target initially for BTX 1801, before starting on clinical development.

Business development during the September quarter and strategic partnerships for Permetrex: BOT is working with various partners on additional early stage formulation work and has planned to progress to human skin testing and product characterization in the near term. In October 2018, as part of the annual Fall Clinical Dermatology Conference, the company had presented new data on the Permetrex skin delivery technology, where BOT had compared the amount of cannabidiol that is delivered by its BTX 1503 acne formulation, against competing cannabidiol formulations at much higher doses. The BTX 1503 Permetrex formulation at only 5% cannabidiol concentration has resulted in much more active cannabidiol to the target layers of the skin, than comparative formulations that contained 10% (2x) and even 20% (4x) cannabidiol concentrations in alternative delivery systems. This new data offers additional validation of the superior drug delivery capabilities of the Permetrex technology and supports the potential of BTX 1503 to supply therapeutic levels of cannabidiol to relieve the burden of acne, for millions of patients worldwide. Moreover, these collaborations for Permetrex can help the company to reduce the operational costs incurred and provide viable prospects for future licensing opportunities of the Permetrex platform. In addition, it will  also increase the chances of immediate revenue, as well as revenue arising from milestone payments and royalties, at no additional costs to Botanix.

Cash flows in the September Quarter: For the September quarter, the cash outflows on R&D activities were approximately A$2.6m, and the group had a focus on developing key clinical programs. The company’s focus is on investment in the development of clinical programs, rather than administrative overheads. At the end of the quarter, BOT held A$14.2m in cash, and is expecting to receive approximately A$4m from the R&D tax incentive refund from the ATO during the current quarter.

Decent Outlook: For the coming quarter, the forecast cash outflows are estimated to be approximately A$5.35m with approximately A$4.75m planned to be spent on R&D. This will be primarily spent on the two Phase 2 clinical trials (BTX 1503 for acne and BTX 1204 for atopic dermatitis), the Phase 1b patient study for BTX 1308 (psoriasis) and studies related to other pipeline products (including BTX 1801 for bacterial skin infections). Over the year, BOT expects significant clinical and operational milestones across multiple programs.


Key Catalysts (Source: Company Reports)

Stock Recommendation: BOT stock has fallen 10.20% in three months as on November 08, 2018 to A$0.089. The stock has support at $0.075 and resistance at $0.11. Currently, for all its products the studies are going on in phases. Given the prevailing trials and studies, the top line scenario can kick-up in next 2 years and can lead to a single digit to low double digit rise (%) in stock price with boost also coming in from the overall cannabis sector related developments. Based on the foregoing, we give a “Speculative Buy” recommendation on the stock at the current price of $ 0.089, up 1.136% on November 09, 2018.


BOT Daily Chart (Source: Thomson Reuters)

 
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