WALKING A TIGHTROPE BETWEEN DRUG DEVELOPMENT AND FUNDRAISING
For Christopher J. Schaber, successfully helming Soligenix Inc. involves walking a tightrope between developing a roster of promising drugs and raising the funds to pay for it.
Recently listed on NASDAQ, Soligenix is a late-stage biopharmaceutical company based in Princeton, N.J., that focuses on two very specific areas—rare diseases and biodefense. The company’s therapeutics segment is dedicated to the development of products for orphan diseases and areas of unmet medical need such as cutaneous T-cell lymphoma, oral mucositis, pediatric Crohn’s disease and acute radiation enteritis. Its biodefense segment develops vaccines and therapeutics for military and civilian applications in the areas of ricin exposure, gastrointestinal acute radiation syndrome and emerging and antibiotic resistant infectious disease.
To power Soligenix’s product development pipeline, Dr. Schaber raises funds from a variety of sources, including investors and the U.S. government. Over the course of his career, Dr. Schaber has played a significant role in raising approximately $100 million for his organizations’ initiatives.
In an interview with Ashton Tweed, Dr. Schaber discusses the challenges of fundraising and how to manage the risks inherent in drug development.
Soligenix focuses on both orphan diseases and biodefense vaccines. How do these two areas complement each other?
The main focus of our company is the therapeutic side, where we’re currently focused on cutaneous T-cell lymphoma. We’re actively recruiting for a Phase III trial of our product SGX301, which is a topical ointment containing synthetic hypericin. SGX301 is applied directly to the malignant skin lesions and activated with safe, visible fluorescent light. We also have some very interesting data from a Phase II study with a product molecule called SGX942, containing the active ingredient dusquetide, for the treatment of oral mucositis in patients with head and neck cancer. The Phase II data was very promising and sets the stage for a Phase III trial in 2017. So a lot of our time and energy has been put towards the therapeutic side, specifically these two programs.
A lot of people don’t appreciate that in biodefense we’re really dealing with an area classified as orphan diseases by the FDA. Unlike the typical rare disease where the patient population is extremely small, in biodefense there’s no established patient population. You’re waiting for—God forbid—a catastrophic event, and at that point you could be treating thousands, if not millions, of people. But up until a catastrophic event, there’s obviously no market.
So it’s been a nice little model for us to build out a very diverse, robust pipeline of technologies, but also to work with the government and help to defray some of the expense, which allows us to manage our cash burn very effectively.
Why is government funding so important for Soligenix?
Our biodefense or vaccine business segment is funded entirely by the U.S. government. A lot of what we do on the biodefense side is focused on oversight. We’ve got the proprietary technology and we’re ultimately the developers of it, designing the required studies, but we work through contract laboratories and facilities to oversee the execution. So we’re fortunate enough to have good technology that we benefit from, but not have to use the same level of internal resources to drive those forward like we do with the therapeutic side of our business. We’ve received government funding up to approximately $42 million collectively across those two programs for ricin toxin exposure and gastrointestinal acute radiation syndrome. For a small business like Soligenix, there’s an overhead component that the government covers, including facility-related expenses and reimbursement for certain portions of salaries for those directly working on the programs. The government also pays a management fee to execute on the contract, ranging from five to eight percent of the overall contract. You can redirect those monies to wherever you’d like and we often times put those monies back into the therapeutic side of the business.
What have been your biggest challenges as CEO?
Drug development in and of itself is a challenge. You typically have more failures than successes in this business—it costs a lot of time, energy and money to advance programs and, at the end of the day, some of them work and some of them don’t. But you try to position yourself as best you can for success, and I think we’ve done that because we have more than one drug candidate that has the potential to see approval.
In addition to the drug development risk, it’s been very difficult in today’s markets for small biotech companies to get adequate funding to advance programs and have them reach the finish line. We’ve moved programs along as quickly as we can and raised funding, but we’ve been creative in utilizing other financial instruments like government grants/contracts, the New Jersey Technology Business Tax Certificate Transfer (NOL) Program and partnerships to help us advance development while also offsetting some of our burn, as well.
How many drugs do you currently have in the pipeline?
Right now, we have approximately six programs but we aren’t currently funding all six of those programs. On the therapeutic side, we’re driving forward two programs right now: the cutaneous T-cell lymphoma with SGX301 and the oral mucositis in head and neck cancer with SGX942. On the biodefense side we have our ricin toxin vaccine, RiVax™, and our OrbeShield® therapeutic for gastrointestinal acute radiation syndrome. Both of those programs have received funding by the government. Those four programs are the ones that we are advancing now, and we’re waiting for additional funding opportunities for other programs in the pipeline.
As you’ve said, Soligenix raises money in a number of ways. How do you tailor your fundraising efforts to the company’s products?
On the therapeutic side, we’ve recently completed a partnership with SciClone Pharmaceuticals for the Greater China market. We partnered SGX942, our oral mucositis program for head and neck cancer, and received a nice upfront payment as part of that partnership. Now we’re looking to do that with all of our programs on the therapeutic side.
On the government contract side, the end customer is the U.S. government, so you don’t need to build a commercial organization like you would typically need to do with a therapeutic program. It’s just a matter of being able to manufacture the product and negotiate the pricing with the U.S. government for what they may want to stockpile. So, because we don’t require that level of infrastructure to support a potential procurement contract, we’ve kept the vaccine/biodefense business for ourselves to date. Ultimately, if we are successful at the end of the day with our biodefense products, we’ll sell those to the government at an agreed-to price.
What advice would you give others about fundraising?
It all starts with good science. You need to take a step back, look at your program and say, “Is this something that would be of interest to the potential investor? Is there a need? Is there a clear development path forward? What is the market opportunity and competitive landscape for the disease(s) you are targeting?” Once you feel you’ve passed that hurdle and have these important questions adequately answered, then it’s a matter of conveying that story to potential investors where you think your story will resonate.
Depending on your area, then you can begin looking at resources such as government funding. There’s a lot of funding through small business innovative research grants where you can at least start the process with some early drug development work and, as you build data, then hopefully there’s other opportunities for funding, not only with the National Institutes of Health but also with other government agencies, like the FDA Office of Orphan Products Development. In New Jersey, the NOL Program allows you to make money off your R&D tax credits. That’s worked well for us, at times bringing in as much as half a million dollars or more, to help offset our burn.
Fundraising requires being as creative as possible, not only in looking for individuals to invest in you, but in looking at other instruments, be it through government grants, contracts, the NOL programs in New Jersey, or even debt financing, in which you take a loan out to support development to a key inflection point and use your intellectual property as collateral—although that has the potential to be a little more risky.
How do you prepare for the possibility that a risk won’t pay off?
You prepare for the worst and you hope for the best. When we had our Phase II double-blind trial in oral mucositis enrolling, we obviously didn’t know the outcome and didn’t have a large reservoir of cash. Because we didn’t have a large cash safety net, so to speak, if we did encounter a major stumbling block, it would’ve been difficult to weather the storm. We really walked a tightrope and luckily it paid off for us.
It’s always about trying to get to that next critical milestone, the next key inflection point. Hopefully you have enough cash to get to the next one, and sometimes it’s very tight. We’ve had it work out more often than not, where we’ve achieved that next milestone that allowed us to go out and bring in more cash, or at least position ourselves to pursue a government contract or grant.
Soligenix was listed on the NASDAQ in December 2016. Why was that the right move for the company?
It was a bit of a painful process to get there, but it’s ultimately been good. When I joined Soligenix, it was on the Over-the-Counter Bulletin Board, which is a very difficult place to be. The universe is much narrower on the Bulletin Board than on NASDAQ. You’re limited dramatically in the number and quality of investors that can buy Bulletin Board stock for compliance reasons, so you really have a small audience to work with.
At the end of 2016, we had an active Phase III program for SGX301 with data expected by the end of 2017. We also had positive data in the oral mucositis program with plans to initiate Phase III in 2017. And we also had a Phase III program in pediatric Crohn’s disease cleared through the FDA, although we are not looking to execute on that trial until we identify an additional funding source.
So with these three advanced clinical programs plus government funding, with tens of millions of dollars supporting good biodefense technology, we thought now is the time to get the company off the Bulletin Board and onto NASDAQ to open up that universe of investors. Hopefully, if all goes according to plan in 2017, we’ll start to increase our liquidity, increase our stock price, and position Soligenix for success.
What’s the biggest lesson you’ve learned at Soligenix?
When I first joined Soligenix we essentially had one program in the pipeline, and that program was a Phase III program that ultimately failed. Phase III is that registration study where you submit for FDA approval, so obviously a failed Phase III study is not good. We adapted our approach so that in the future we would try to get more than one program in the pipeline in order to have multiple shots on goal, thereby mitigating risk. We’re mitigating risk to the shareholders while we’re advancing multiple programs to build value. One way to do that is through government grants and contracts, in part, to help offset development expense.
So we learned from the mistake of living and dying by one program or one study. You need to have multiple technologies—if you can fund them—that provide for a more robust pipeline and a little bit more of a safety net for your investors.
What’s next for Soligenix?
A lot of key milestones are coming up, most notably the Phase III study in cutaneous T-cell lymphoma. We’re hopefully going to know by the end of the year where we stand with that study and, if that study is successful, we’ll look to file a new drug application with the FDA in 2018. We’ll also be actively enrolling in our oral mucositis Phase III study, and we’ll have that study up and running if all goes according to plan in 2017. That will hopefully not only mean good things for patients but also for shareholders.
Ashton Tweed would like to thank Christopher Schaber for this interview. If your company needs help from members of the Ashton Tweed Life Sciences Executive Talent Bank, we can supply that assistance either on an interim or a permanent basis. Additionally, if you are among the many life sciences professionals affected by the changes in the industry, Ashton Tweed can help you find the right placement opportunity — from product discovery through commercialization at leading life sciences companies — including interim executive positions and full-time placements. In either case, please email Ashton Tweed or call us at 610-725-0290. Ashton Tweed is pleased to continue to present insightful articles of interest to the industry.