You’re on a lengthy quest to tackle one of humanity’s greatest problems, cancer. How far are you from your goal, in whatever form it takes?
When it comes to developing new drugs, once you’ve discovered a promising substance in the lab, it takes eight to twelve years to go through all the phases of clinical trials before it can be brought to market. We are currently running three such programmes, three substances, where we have transitioned from the laboratory to clinical trials. For all of them, we’re now somewhere around the stage where we should know by the end of this year whether the data is promising and whether it warrants proceeding to the final step in the trial, which is the registrational study or phase three clinical trial. That is the final step, and if it goes well, it means we will have a drug that can be marketed.
Can you quantify the likelihood of that scenario unfolding?
We should know by the end of the year, and we’ll have an answer for all three substances by the middle of next year. If they successfully pass the second phase of clinical trials, there is a 30 to 40 percent chance they’ll be marketed. It’s early days yet, so I would estimate our likelihood of success to be somewhere around 20 percent at the moment. Right at the start of the research, it was well below one percent.
During our interview Ms. Kellner’s assistant called you for an appointment. This leads me to asking how Sotio’s role has changed in the group since Mr. Kellner’s death?
It’s hard to say right now, because the whole group has been going through changes since Mr. Šmejc came on board. But we clearly have the backing of both the family and PPF’s management for the Sotio project to move forward. Mr. Kellner was very enthusiastic about Sotio, it was very close to his heart. He joined meetings that went into quite a bit of detail and enjoyed it. It’s very hard for anyone to catch up quickly with the ten years he spent keenly interested in it. Mr. Šmejc and the Kellner family do have the drive to understand the issues at play, but it will take two years for them to get there. I’m now referring to the complexity of our work and the business landscape we’re competing in. Cancer research is hugely competitive. And the fact that we’re a Czech company trying to compete with Western and American biotechnology companies is both bold and complicated.
And frankly, is it worth it? Take the US biotech sector – surely they’re bursting at the seams and perhaps they’re working on exactly the same thing? And this isn’t even mentioning Asia.
Yes, it’s worth it, but it’s obviously a challenge. The talent, expertise, and professional and business experience are concentrated on the west and east coasts of the United States. Then there’s a bit in Western Europe, but they’re the poor relatives. And then we have a few rare birds in Central Europe. We’re very conscious of that. There’s a lot of competition, and the last two years have not been kind to the biotech industry because of the economic crisis and there isn’t much appetite to invest in something so risky. Smaller companies are used to raising money every two years so they can proceed to the next phase of clinical trials, but they’re not having much success right now. Investment in biotech has tanked over the last two years, being very muted. But because we’re backed by a dependable investor, we have the advantage of not having to stall any of our projects.
Mr. Kellner had a soft spot for Sotio. Can we expect the new PPF management to be more pragmatic – is there any risk that the limits will be reined in?
We haven’t sensed that, but there has definitely been some change, which I’m glad to see. As you progress with a biotech project, the rule of thumb is that each successive phase is a lot more expensive than the one before it. And it’s very common in this business that at some stage of clinical development, big pharmaceutical companies step in, looking for promising substances that biotech companies might have. Conversely, another typical scenario is that at some stage of product development, a biotech company tries to find a solid partner, either to buy the project or to be involved in its ongoing development.
Is that where you are headed right now?
Yes, we’re more open to collaboration with partners. If we see our programmes yielding promising data, instead of resisting, we actively approach pharmaceutical companies and present our results to them. A pharmaceutical company could shoulder some of the costs and provide important know-how. In this respect, Mr. Šmejc has a different, much more rational approach. Mr. Kellner liked to be completely in charge, so the vast majority of companies in PPF’s portfolio were fully controlled by the group. But when it comes to projects as risky as biotechnology, partnerships make a lot of sense.
So an investor could enter Sotio by acquiring part of the company?
There are various scenarios, one being that a biotech-focused investment fund might come along and take a shine to our portfolio.
So how much of Sotio is up for sale?
It’s impossible to say. These interactions do crop up from time to time, but the market is stacked against us, the timing isn’t quite right. So even if this were perhaps our preferred route, which it’s not entirely, the market climate wouldn’t allow it.
But you’re holding some valuable cards now – a 20% chance of launching a drug is a lot.
Yes, but don’t forget that in the last five years there were around 120 biotech IPOs on the Nasdaq exchange. Last year, there were just four. The market is in stasis. Everyone is waiting for the economy to pick up and for funds to whet their investment appetite again. A more appealing scenario for us would be a partnership with a pharmaceutical company, with one of the programmes being licensed.
Have there been any negotiations?
Discussions are ongoing, but I can’t comment on them. I can say that once a programme gets to the clinical phase and we feel that the data looks good, we can then make the pitch to potential partners.
One of your substances going through research has potentially reached a commercial milestone. How big a step forward is that?
The “nanrilkefusp alfa” programme, formerly known as SOT101, has successfully passed the first phase of clinical development. The second phase involves testing on a sample of around 300 people and monitoring both safety and incipient signs of efficacy. If it goes well and we see progress in perhaps a third of the patients, a large, very expensive study involving hundreds, perhaps even thousands of patients will be done. That study will investigate whether the substance statistically increases the odds of survival. And the milestone is that with SOT101, we’ve now gone past phase one and we’re clearly seeing patients who have benefited from it. We’re now running three phase two trials. The real milestone will be when we see which substances it makes sense to start the ultra-expensive phase three with.
How much would that phase cost?
It costs somewhere between fifty and a hundred million dollars, and that’s for each substance separately. But the cost of each substance may differ somewhat.
Is PPF prepared to finance it?
That remains to be seen. It depends on the data when we get to evaluating phase two. Personally, I would us to go down the route of partnering with a big pharmaceutical company. It would elevate us to a whole other level of quality. Coming out of Central Europe, we would suddenly be on the radar in the US biotech world. I would always be in favour of us going down that road when we reach those expensive phases. If the data from the clinical trials looks good, each of these substances could be the subject of a multi-billion-dollar deal with large corporations.
If the second phase doesn’t work for any of these substances, will you call it a day?
It’s yet to be seen. I honestly don’t know. We have three programmes in clinical trials, but there are others in the lab research phase. Sotio’s vision is to focus on what we’re best at, which is researching and putting new molecules through clinical trials. If the big three don’t make it, there are still so-called preclinical programmes in the pipeline that we would continue to work on. And here we’re talking about much lower costs, somewhere in the order of millions of dollars.
If you were to actually bring the research to a successful conclusion in phase three, does that mean you’d have a drug ready to package?
Yes, if it goes through, there will be some sort of marketing authorization process, but that’s just an administrative step. Then it really is ready to package up. But after that, there’s the extremely difficult stage of marketing and commercialising the product amid the enormous competition that is out there now.
And would the box say Sotio on it?
If it was developed by Sotio itself and we were the ones who did the third phase, it would say Sotio. And that means Sotio would become a pharmaceutical company.
Is that the holy grail of your business?
It’s kind of the ultimate, but perhaps rather naive, vision. But discussions about Sotio’s strategic goals are still ongoing.
How crucial and business-relevant would it be to have three available drugs on your desk?
The bottom line is that each drug has patent protection, and when that patent expires, the drug can be produced generically, but the margin on them is lost. So big companies are pushed to keep adding new, innovative drugs to their pipeline that have good results but also patent protection. That’s why they’re willing to pay to make products which look promising, if they can see that the data makes sense to us and that there is a good chance it will work. You’ll find similar transactions in the order of billions of dollars for every product in the last five years. The business potential might then emerge after successfully passing phase two.
I didn’t look at the income statement, even though it’s not really relevant in biotech. There was a loss of 330 million for 2021. What was it last year?
Those are accounting numbers and say nothing about reality. The annual budget is tens of millions of euros, and it shows that it’s just a big and expensive business. When you get to the clinical trial phase, the costs mainly reflect the number of people involved. Each patient represents a significant cost, which can be somewhere in the order of hundreds of thousands of dollars.
Is it fair to say that this year is a major milestone that will seal Sotio’s fate?
Yes, it’s an important time for the company’s future and what happens next for Sotio. Phase one of BOXR1030 and SOT102 will end, and phase two data will be crucial for SOT101. Some pharmaceutical companies in the past invested in substances before or during phase one. Given the market situation, most deals are now done after phase two, where there need to be clear signals on the product’s efficacy. Generally in our industry, the decisions being made now involve much less risk than in the past. The market environment is the worst it has been in the 12 years I’ve worked here, and it’s worse than after the collapse of Lehman Brothers.
author: Jaroslav Bukovský