Vincent Perrone - Director, Corporate Communications Steve Shallcross - Acting CEO & CFO.

Analysts:.

Good afternoon, and welcome to the Synthetic Biologics 2017 Year End Investor Conference Call. [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?.

Thank you, Gally, and good afternoon everyone. Welcome to Synthetic Biologics 2017 year end investor conference call. Today, I'm joined by our Acting CEO and CFO, Steve Shallcross; and our Chief Medical Officer, Dr. Joseph Sliman.

Synthetic Biologics issued a press release this afternoon which provided operational highlights and reported our financial results for the full year ending December 31, 2017. The release can be found on the Investors Relations section of our website.

During our call today, Steve will provide an operational update on our microbiome focused clinical programs and 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 Steve.

Steve?.

Thanks, Vincent. Good morning everyone and thank you for joining us today. 2017 was an important year for Synthetic Biologics. We announced key advancements for our microbiome focused clinical program targeting critical unmet needs and the prevention of life threatening gut microbiome infections in GI disorders.

Both of our lead product candidates, ribaxamase or SYN-004 incentin [ph] are Phase 3 ready. During the year the FDA cleared a Phase 2b/3 adaptive designed pivotal trial intended to further evaluate the efficacy and safety at SYN-010 and towards the end of 2017 we began our discussions with the FDA to design a Phase 3 clinical program for ribaxamase.

As a result of these activities, both product candidates are now closer to commercial viability as we continue to evaluate the right path to market for each of these assets.

Importantly, we also reinforced our financial foundation managing our expenses throughout the year and raising the additional $12 million in capital during the fourth quarter of 2017.

We remain committed to our mission to develop best-in-class microbiome focused products and are excited about the potential of our lead candidates to improve clinical outcomes and quality of life for millions of underserved patients.

In 2018, we plan to define an optimal development path for each program that we believe will drive long-term shareholder value. Our two key priorities for 2018 are as follows; first, to continue to work with the FDA to establish the optimal design for the Phase 3 clinical program for SYN-004.

And number two, to continue to aggressively evaluate strategic opportunities including partnership or licensing agreements for one or both of our prepared period late stage assets.

One of those assets is SYN-004 or ribaxamase, our first-in-class oral enzyme which holds the potential to be a destructive yet simple approach to more effective antibiotic therapies.

The use of IV beta-lactam antibiotics increases the risk of developing gastrointestinal infections like Clostridium difficile or CDI and the emergence and proliferation of anti-microbial resistant genes.

Our proprietary formulations of ribaxamase works by degrading certain IV beta-lactam antibiotics within the GI tract to protect and preserve the gut microbiome from CDI, overgrowth of pathogenic organisms and the emergence of anti-microbial resistance or AMR.

Importantly, ribaxamase is designed to survive passage to the stomach and avoid systemic absorptions which does not interfere with the antibiotics ability to treat primary infections. Designed to be taken in conjunction with IV antibiotics, ribaxamase offers a first of it's kind approach to preventing antibiotic mediated CDI and AMR.

As the first development stage drug candidate designed for the prevention of CDI it holds the potential to help combat the more than 0.5 million cases of CDI and the approximately 29 CDI related deaths each year in the U.S.

At a time growing concern around AMR exacerbated by large pharmaceutical companies moving away from the development of new big budget antibiotics, SYN-004 is uniquely positioned to address this growing healthcare crisis by potentially expanding the life span and preserving the efficacy of existing and adequate antibiotic therapies.

We continue our collaborative efforts and discussions with the FDA to design a Phase 3 study protocol which will give us the best chance for success in the clinic. During the fourth quarter of 2017, we presented additional support of results for several exploratory endpoints from our Phase 2b proof-of-concept clinical trial.

These data demonstrated that in addition to significantly reducing primary CDI and new VRE colonization, ribaxamase protected patients gut microbiome from opportunistic bacterial infections and prevented the emergence of resistant genes capable of propagating and proliferating AMR compared to placebo.

These results are consistent with ribaxamase's designed mechanism of action of protecting the gut microbiome for residual antibiotics and thus preventing antibiotic mediated dispiosis [ph]. We are in the process of conforming our originally proposed Phase 3 clinical program protocol to accommodate the FDA's request to include additional antibiotics.

The inclusion of additional antibiotics requires us to carefully reassess our original designed protocol and evaluate the impact that these additional antibiotics may have in the programs complexity, timing and cost.

We remain thoughtful and deliberate in our valuation with the goal of addressing the FDAs request and ensuring that the design of the study protocol will maximize our opportunity for successful Phase 3 clinical program.

Once agreement has been reached on the Phase 3 protocol for SYN-004, we will then have clarity on the financial, clinical, manufacturing and other related resources that will be needed for the successful completion of this program.

This clarity may also be an important element for advancing discussions we may have with potential strategic partners for this asset. We will continue to work closely with the FDA and our targeting and in our Phase 2 [ph] meeting during the second half of 2018. Now turning to SYN-010.

SYN-010, our proprietary modified release formulation of lovastatin lactone is designed to reduce methane production in the GI tract to treat the underlying cause of the symptoms commonly associated with irritable bowel syndrome with constipation. SYN-10 remains an important asset that we believe will deliver long-term shareholder value.

And as we previously stated, we believe the optimal path forward for this asset will be in collaboration with a strategic partner or partners. Therefore, we intend to commence our 2b/3 adaptive designed pivotal study only when we are confident it can be funded from initiation to completion.

We continue to engage in discussions with potential pharmaceutical partners to move this program forward and we'll continue to update you on meaningful developments. As we previously stated, current marketed and development stage therapies are designed to treat the symptom of constipation associated with IBSC but do little to treat pain and bloating.

Additionally, these same products may come with undesirable safety side-effect profiles, the most common of which is diarrhea. As a result, these therapies have struggled to find adoption in several key markets including Europe. We believe this presents an important opportunity for SYN-010.

Towards the end of 2017, we engaged outside consultants to evaluate what the potential regulatory pathway towards EMA marketing approval may entail. Being arms with a clear path towards EMA marketing approval will further support our ongoing efforts with perspective partners in Europe.

This study is expected to be completed by the end of first quarter. While we are keenly focused on advancing our lead assets, our preclinical development pipeline remains robust and we will continue to explore the potential of our formulary and microbiome expertise to deliver additional value from these earlier staged assets.

With that backdrop, I'll review our financial results for the full year. Financial stewardship and cash management remain a top priority for us. Now getting into the numbers. General and administrative expenses decreased to $7.5 million for the year ended December 31, 2017 compared to $10.1 million for the same period in 2016.

This decrease is primarily the result of higher salary expense and related benefit cost incurred in 2016 in connection with the transition of the administrative and financial office [indiscernible] headquarters and higher investor relations, consulting and legal costs in 2016 related to our 2016 equity financing.

Non-cash charges related to stock based compensation was $2.0 million for the year ended December 31, 2017 compared to $2.4 million for the same period in 2016. Research and development expenses in 2017 decreased to $18.8 million from $29.1 million for the same period in 2016.

This decrease is primarily the result of lower ribaxamase and SYN-010 program cost for 2017 as we plan for the future Phase 3 and Phase 2b/3 clinical programs respectively and seek to secure the financial resources necessary for the completion of these clinical programs.

Additional reductions in other research and development activities were partially offset by an increase in indirect cost for medical affairs and manufacturing scale of activities for ribaxamase.

Research and development expenses also include a charge related to non-cash stock based compensation expense of $1.4 million for the year ended December 31, 2017 compared to $1.6 million for the year ended December 31, 2016. We've recorded other income of $10.8 million in 2017 compared to other income of $11.4 million in 2016.

Other income for the year ended December 31, 2017 is primarily due to non-cash income of $10.7 million from the change in fair value of warrants. The decrease in the fair value of warrants was due to the decrease in our stock price from December 31, 2016.

In 2017, we successfully raised $12 million in a privately placed convertible for stock offering and ended the year with cash and cash equivalents of $17.1 million.

In closing, let me say that 2018 is poised to be another pivotal year in the evolution of Synthetic Biologics and we are very excited but the potential of our microbiome focused assets to improve outcomes for millions of patients and deliver significant value to our shareholders.

We intend to continue to prudently manage our capital while continuing to strategically advance our lead product candidates in a robust pipeline. Our priorities are to collaborate with the FDA to define a Phase 3 study protocol for SYN-004 and to evaluate strategic opportunities to enable us to move our lead assets forward.

Since the beginning of 2018, we've committed significant internal and external resources to maximize our opportunities to establish the right collaborative relationships for both of our compounds.

With the support of our dedicated team and committed shareholders, we'll continue to work diligently to bring these important products and the benefits they offer to both, patients and the overall healthcare system to market. With that, I'll turn the call back over to Vincent..

Thank you, Steve. Gally, we'd like to open the phone line to questions.

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

Operator:.

So given that we have no questions in the queue, I just want to make a couple of final closing remarks. First of all, I'd like you to know that we clearly understand the value of our assets and that you have my personal commitment and the commitment of our team that we are keenly focused on unlocking that value for our shareholders.

And second, we've committed significant outside resources to position ourselves to achieve our two key objectives for the year. Thank you again for your continued support and patience and I look forward to continuing to report back to you on our ongoing progress..

Thank you. This completes Synthetic Biologics 2017 year end investor call..