Vincent Perrone - Director of Corporate Communications Jeff Riley - CEO Steve Shallcross - CFO.

Katherine Xu - William Blair Keith Markey - Griffin Securities.

Good evening, and welcome to the Synthetic Biologics 2017 Third Quarter Investor Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the call over to Vincent Perrone, Director of Corporate Communications at Synthetic Biologics.

Vincent please go ahead..

Thank you, Anita, and good afternoon everyone. Welcome to Synthetic Biologics 2017 third quarter investor conference call. Today, I'm joined by our Chief Executive Officer, Jeff Riley and our CFO, Steve Shallcross.

Synthetic Biologics issued a press release this afternoon which provided operational highlights and reported our financial results for the quarter ending September 30, 2017. This press release can be found on the Investors Relations section of our website.

During our call today, Jeff will provide an operational update on our microbiome focused clinical programs and Steve will summarize our financial results. We’ll take questions after our prepared remarks.

In addition to the phone lines, this call is being streamed live via webcast, which will be archived on our website www.synthethicbiologics.com for 90 days. During this call, we will be making forward-looking statements regarding Synthetic Biologics current expectations and projections about future events.

Generally, the forward looking statements can be identified by terminology such as may, should, expects, anticipates, intends, plans, believes, estimates, and similar expressions.

These statements are based upon current beliefs expectations and assumptions and are subject to a number of risks and uncertainties including those set forth in Synthetic Biologics filings with the SEC many of which are difficult to predict. No forward looking statements can be guaranteed and actual results may differ materially from such statements.

The information on this call is provided only as of the date of this call and Synthetic Biologics undertakes no obligation to update any forward-looking statements contained on this conference call on account of new information, future events or otherwise except as required by law. With that, I'd like to turn the call over to Jeff.

Jeff?.

Thank you Vincent and good afternoon everybody and thanks for joining our 2017 third quarter investor call. It remains an exciting time for Synthetic Biologics. During the third quarter, we remain active as we continue to position our two lead microbiome focused clinical programs in support of their Phase 3 development.

During today's call we will provide a clinical update on ribaxamase, our oral enzyme designed to degrade certain IV beta-lactam antibiotics within the GI tract to protect and preserve the natural balance of the gut microbiome from C. difficile infection, overgrowth of pathogenic organisms and the emergence of antimicrobial resistance.

And our program SYN-010, our compound design to reduce methane production in the gut to treat the underlying cause of the symptoms commonly associated with irritable bowel syndrome constipation form.

Before we dive into our operational update, I would like to turn the call over to Stephen Shallcross, our CFO who will provide an update on our financial results for the third quarter.

Steve?.

Thanks Jeff. During the third quarter of 2017 we continued to effectively utilize our cash as we continue to prepare our two late stage programs for the future clinical trials. We intend to carefully manage overhead as we continue to move forward in these efforts.

Synthetic Biologics 2017 third quarter financials were including the press release which is disturbed over the Newswire earlier today. The company's 10-Q for the quarter ended September 30, 2017 will be filed with the SEC later this evening.

For three months ended September 30 2017, general and administrative expenses decreased 19% to $1.7 million compared to $2.1 million for the same period in 2016.

This decrease is primarily the result of higher salary expense and related benefit costs incurred in 2016 in connection with the transition of the administration and financial office to our Maryland headquarters along with reduced travel expenses, registration fees and legal expenses.

Included in these numbers were charges related to stock-based compensation of $583,000 for the three months ended September 30, 2017 compared to $524,000 for the same period in 2016. Research and development expenses decreased 41% to $4.1 million for the three months ended September 30, 2017 compared to $7.1 million for the same period in 2016.

This decrease is primarily the result of lower ribaxamase and SYN-010 program costs. In addition there were also reductions in our research and development activities offset by an increase in indirect costs for manufacturing and medical affairs.

Research and development expenses include a charge of $317,000 related to stock-based compensation for the three months ended September 30, 2017 compared to $422,000 for the same period in 2016. Other expense was $5.1 million for the three months ended September 30, 2017 compared to other income of $700,000 for the same period in 2016.

Other expense for the third quarter of 2017 is primarily compromised of a non-cash expense of $5.1 million from the change in fair value of warrants that resulted from an increase in our stock price from the prior quarter.

Cash and cash equivalents as of September 30, 2017 were approximately $21.1 million, an increase of $2 million from the December 31, 2016. Our current cash balance reflects the net proceeds from the closing of successful $12 million private placement convertible preferred stock financing during the quarter.

Looking ahead we anticipated cash utilization to remain relatively steady through the end of the year due to diminished clinical costs and our ability to effectively manage our overhead expenses. At this time, I'll turn the call back over to Jeff Riley.

Jeff?.

Thanks Steve. During the third quarter we remain keenly focused on the advancement of our two clinical assets. To that end Synthetic Biologics remains uniquely positioned amongst our biotech peers with two late-stage unencumbered and potentially best-in-class Phase 3 ready assets targeted at addressing largely unmet medical needs.

Our SYN-10 program remains an important component of our microbiome focused clinical portfolio, which we believe will contribute to the growth of our company and provide long-term value to our shareholders.

If you recall, SYN-10 is our proprietary modified-release formulation of lovastatin lactone that is intended to reduce methane production by certain microorganisms in the gut, while minimizing disruption to the microbiome to treat the underlying cause of irritable bowel syndrome with constipation.

As noted above, SYN-10 remains uniquely positioned against other development stage and currently marketed therapies for IBS-C which are designed solely with the intent of increasing GI motility. Such therapies have been shown to have the unpleasant side effect of shifting patients who suffer from constipation to diarrhea.

Data from previously reported Phase 2 studies of SYN-10 demonstrated that in addition to increasing the frequency of complete spontaneous bowl movements SYN-10 also significantly improved abdominal pain and bloating compared to placebo.

With the foundation of our Phase 2b/3 pivotal study in place, we continue to work on solidifying its infrastructure with a focus on identifying, evaluating and delivering opportunities to move this program forward in a manner consistent with the best interest of our shareholders.

During the third quarter, we continued to evaluate such opportunities while engaging in discussions with potential pharmaceutical partners to move this program into the next phase of its development.

We intend to initiate this trial only at a time when the requisite components of its clinical and financial infrastructure are in place to ensure its full timely and successful completion.

Switching gears now to SYN-004 or ribaxamase, which is our breakthrough therapy designated program designed to be first line of defense against antibiotic mediated dysbiosis.

The presence of a healthy robust and well balanced gut microbiome acts as a system of checks and balances to protect against a threat of infection by blocking the overgrowth of opportunistic microbes.

The use of intravenous beta-lactam antibiotics including cephalosporins, is an important risk factor for the development of such overgrowth, which may led to gastrointestinal infections like Clostridium difficile and importantly the emergence and proliferation of resistant genes.

Ribaxamase is engineered to protect and preserve the naturally occurring gut microbiome from antibiotic mediated dysbiosis. Its unique mechanism of action has been shown to be a great residual IV beta-lactam antibiotics after systemic absorption and before they affect the naturally occurring flora of the GI tract.

This is intended to prevent the overgrowth of pathogenic organisms including the onset of CDI and the emergence of anti-microbial resistance. In our successful Phase 2b 412 patient proof of concept clinical trial, ribaxamase achieved its primary endpoint of significantly reducing the risk of developing CDI in patients by 71.4% compared to placebo.

Additional data demonstrate that when compared to placebo, ribaxamase significantly reduced the incidence of new colonization by vancomycin-resistant enterococci or VRE, protected and preserve the naturally occurring composition of native gut microbes and prevented significant changes for the presence of certain anti-microbial resistant genes in the gut resistome of treated patients.

We have taken great strides since the initiation of our ribaxamase program a few short years ago. Ribaxamase and its extension programs SYN-006 and SYN-007 have the potential to positively alter the treatment paradigm for antibiotic therapy by limiting the gut microbiomes inadvertent exposure to IV beta-lactam antibiotics.

Ribaxamase has the potential to not only prevent the onset of primary CDI, but also prolong the efficacy of existing antibiotics in a time of ever growing anti-microbial resistance. Ribaxamase has the unique distinction as the first ever development stage drug candidate to receive breakthrough therapy designation for the prevention of CDI.

This designation is indicative of ribaxamase’s unique and novel approach to CDI and its potential to prevent the more than 500,000 cases of CDI which result in approximately 29,000 CDI related deaths each year in the United States.

Breakthrough therapy designation additionally allows for Synthetic Biologics to maintain ongoing and less formal discussions with the FDA as we continue to develop a plan for ribaxamase's late stage clinical development. During the third quarter, we met with the FDA for an initial Type B meeting.

The purpose of this initial meeting was to broadly discuss the overarching high level drug development plan and pathway towards marking approval for ribaxamase.

Following a review of the data from our Phase 2b proof of concept cycle study, we broadly discussed late stage development opportunities and reviewed timelines for ribaxamase’s clinical advancement.

While this initial meeting was productive in nature, we expect to continue to work collaboratively with the FDA in the coming months to ensure the development of a suitable Phase 3 clinical trial protocol and statistical analysis planned for ribaxamase’s clinical development.

Given the nature of ribaxamase’s unique mechanism of action as a preventative approach to CDI, we want to ensure we are diligent and thoughtful in the development of a clinical trial protocol that provides the optimal pathway and opportunity for a successful and timely completion.

We intend to maintain an ongoing dialog with the agency as we continue to solidify the requisite facets of our Phase 3 development plan, including clinical trial design, cGMP manufacturing and CMC considerations.

Looking ahead, we anticipate submitting the request for an additional meeting with the FDA during the first quarter of 2018 to solidify the details and components of the late stage drug development plan and regulatory pathway for ribaxamase.

We are pleased with the FDA’s recognition of ribaxamase’s potential to fill a dire need and the current void of an approved intervention to prevent this often debilitating and life altering disease. We look forward to sharing additional details of our late stage clinical development plan for ribaxamase as the details become available and as required.

We continue to position our novel portfolio of late stage micro-biome focused assets for Phase 3 development with an eye on commercialization.

During the third quarter, we strengthened our balance sheet with the successful completion of a privately placed stock purchase transaction for the sale of redeemable convertible stock to an affiliate of MSD Partners for aggregate gross proceeds of $12 million.

We intend to use the proceeds from this transaction in support of our ongoing efforts to advance ribaxamase towards Phase 3 clinical trials as well as for general corporate purposes.

The closing of this transaction provides the company with an extended runway as we continue to maintain a lean burn rate focused on cash preservation in support of our two clinical programs.

Moving forward, our goal remains unchanged, to create long term value for our stakeholders, including our shareholders and the millions of patients who stand to benefit from our innovative approach to micro-biome focused research and clinical development. At this time, I'll turn it back over to Vincent.

Vincent?.

Thank you, Jeff. Benita, we'd like to open the phone line to questions.

Would you please describe the procedure to ask questions for our listeners?.

[Operator Instructions] The first question comes from Katherine Xu with William Blair..

So Jeff, can you provide a little bit more detail on the accomplishment of the Type B meeting with the FDA. What exactly was accomplished and is there going to be an additional study to be required for approval? And any other details that you think that you can provide at this moment. Thank you..

It was a great meeting with the FDA. I mean, again, we want to be very clear that it was a Type B meeting, which is something that you get with breakthrough designation. We will likely have more of these meetings before year end as well as one early next year.

It's a collaborative process and the questions that we have and that we need to debate with the FDA are still around what should the label look like, how broad should a label be, which other disease states should we go and things of that natures and which other infections, what is the age of the patients.

If you recall, the Phase 2b study we did was in patients over 50 years old. Do we expand that? There's just a plethora of questions around protocol design that we need to go back and forth with and it's going to take us a bit of time to get that right. To answer your primary question, there will have to be another study.

We don't know the design of it today. We know it will be fairly large and that we’ll have to look at all of these different analyses and subgroup analyses to really get the drug to where we need it to be. That's all I have really at this time.

I can't really go into more detail other than that until we have additional meetings and really flesh out what the protocol will look like, we intend to communicate that to the street as soon as we have a definitive plan in place just like we did with the Phase 2b/3 adaptive study design that we have with SYN-010..

So can you describe the interest level from industry, potential partners on this program?.

Like I told you last quarter, we're talking to everybody Katherine at this point in time. I mean, there are discussions on for both drugs, from disparate companies. There's only a couple that are looking at both drugs together. The industry I think is beginning to look at licensing again.

I think it's been pretty dry for the last two or three years from late stage Phase 2, Phase 3, the classic licensing deals. I think it's beginning to improve.

Ken Frazier at Merck actually signaled that the other day that they were going to begin looking for things at Merck and I would guess that Pfizer said something similar as well in their earnings call. So I believe that the tide is going to turn for the big guys to start acquiring assets and filling their pipeline.

So again, the only guidance I can give you is when we have a deal in hand and it becomes relevant, we'll announce it..

[Operator Instructions] The next question comes from Keith Markey with Griffin Securities..

Couple of questions. I was just wondering if you might explain to us what you mean by -- what you're doing to solidify the clinical infrastructure for SYN-010.

What does that involve?.

It’s Jeff. Essentially, we’ve signaled the street that we're not going to spend the money to do that program ourselves at this time. It's just not something that we can do. We don't want to take the dilution in raising capital nor do we want to do that. So we're looking at building the infrastructure.

We have great CROs over in Europe as well as here in the United States. We've talked to several. I think we have our prime lead CROs for both Europe as well as the United States and we're ready to go.

So again, discussions on the business development side are, it’s highly likely that if we did get a deal, we will be the ones actually doing the work in collaboration with a CRO. So that's what we meant by solidifying the clinical development plan.

We're also beginning to obviously pivot toward more of a commercialization perspective as a company, because we're getting close to the end of this long road, 25th mile and a marathon if you will.

So we are beginning to look at some of the commercialization components, the markets, how we would position the drug and we do have a head of marketing that is looking at all of these things at this point in time as well as manufacturing of both of the drugs. The manufacturing for SYN-010 is fairly bullet proof.

I think we're ready to rock and roll and there is still some work to be done on ribaxamase to make sure that we have cGMP and CMC up and running for that biologic..

And then I was -- that leads very well into the next question.

I think Steve mentioned that there was an increase in manufacturing costs in the third quarter and I was wondering if you could elaborate on what that was for and whether that's going to continue into the fourth quarter?.

So those costs are primarily related to what Jeff was suggesting and that is, we're working on tech transfer issues, working on some scale up matters related to ribaxamase and the validation work that goes along with it. We’ll see a little bit of additional burn in the next couple of quarters.

As we previously stated, our fixed monthly burn is in the $1.2 million to $1.3 million a month range and then you'll see a little residual -- additional residual cost for things like some additional manufacturing work. Nothing significant at this stage though..

Thank you. I would now like to turn the conference back over to Jeff Riley for any closing remarks..

Thanks, Anita. The third quarter of 2017 was one of sustained momentum for Synthetic Biologics. With two Phase 3 ready programs in clinical development, the Synthetic Biologics team is more determined than ever to continue our work of advancing our cutting edge micro-biome based therapies through late stage development and towards commercialization.

We look forward to continued collaborative efforts with the FDA on the advancement of ribaxamase as we prepare for its late stage clinical advancement and to share additional progress during the rest of the year. Thanks again everyone for joining our call and have a wonderful evening..

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect..