Growth Companies

CFO Pushes Pharma Startup to Market

Therapix Biosciences needs a big market-cap boost to realize commercial opportunities for its cannabinoid treatments for nervous-system conditions.
David McCannNovember 3, 2017

For the CFO of a pharmaceutical company whose only products are in trials, the future is uncertain and the end is always near.

Josh Blacher

Josh Blacher

Well, almost always. Josh Blacher, finance chief at Therapix Biosciences, is waxing optimistic about prospects for the company’s synthetic cannabinoids that aim to treat conditions of the central nervous system.

The company plans to pursue approval for repurposings of dronabinol, a drug approved in 1985 to treat nausea caused by chemotherapy and later for loss of appetite and weight loss related to HIV infection. Therapix is conducting trials that use compounds based on the drug to treat Tourette syndrome and sleep apnea. It also has reported preclinical data for a compound that would treat mild cognitive impairment, a pre-dementia condition.

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Blacher, who joined the company in March of this year and has 11 years of experience with biosciences firms, is charged with allocating the company’s existing $12 million of cash. That represents what’s left from the $14 million generated by its March initial public offering. Given a low burn rate of $650,000 to $700,000 per month, that money is expected to last through the end of 2018, he says.

Such a low expenditure rate for a pharmaceutical company conducting drug trials is possible only because the Therapix compounds are based on an existing FDA-approved drug. There is no need to conduct expensive Phase 1 studies, which assess the safety of a drug or medical device.

A Phase II-A study for the Tourette’s compound, aimed at proving its efficacy for treating humans, is currently under way at Yale University. And Therapix announced last month an agreement with Assuta Medical Center in Israel to conduct a Phase II-A study of the sleep apnea compound.

Blacher does not anticipate coming to market with the Tourette’s treatment until 2021, or perhaps 2020, following a Phase III study that would involve randomized and blind testing. Obviously, then, the company will need to raise additional funding.

Just getting to market with the Tourette’s drug will probably require an additional $25 million to $40 million, Blacher estimates. The cash would come from a secondary stock offering, which would be enabled by data from a successful human trial.

So, even with the head start Therapix enjoys compared with a drug company developing treatments from scratch, a lot of things have to fall in place. Blacher professes to be confident, though.

“We have some very significant commercial opportunities,” he says. “About 50% of adult Tourette’s patients self-medicate with marijuana because there are such staggering results in the resolution of tics. Since there are no approved synthetic cannabinoids [for this purpose], they resort to smoking pot.”

Unfortunately, he notes, the half-life of marijuana in the human body is only a couple of hours. That means somebody who wants to significantly alleviate their Tourette’s symptoms has to smoke as many as 10 marijuana cigarettes per day. “That’s not a viable business model,” says Blacher. “A viable business model is a pill you can take once a day that’s not going to get you high.”

Therapix hopes to have data from its first Tourette’s trial by early February. The company already has disclosed results for 10 patients that completed three months of treatment, 8 of which experienced positive results.

Assuming the full results are similarly positive, Blacher’s goal will be a big step forward for the company’s market capitalization, which currently stands at $20 million. Even now that market cap is far too low, he says.

“We need to generate that human data, which is currently causing a disconnect with our valuation,” says Blacher. “There is no logical way to a explain a [drug] company with two Phase II-A programs trading at a market cap of only $20 million. It’s illogical.” Therapix regards as its biggest competitor GW Pharmaceuticals, which has a cannabinoid approved for multiple sclerosis, is working on one for epilepsy, and has a market cap of almost $2.9 billion.

Blacher says Therapix is “very conservative” with its general and administrative expenses and has earmarked about 85% of its existing cash to drug trials. But there are important capital-allocation decisions to make, such as whether to go ahead with developing its drug for mild cognitive impairment or go all-in with the Tourette’s and sleep apnea programs.

Also, “Should we start scaling up for commercial production while we’re in the middle of Phase II-A? That would save time in the long run but would cost a significant amount of money. Or should we get to a proof-of-concept for all of our [treatments] and then wait for a fund-raising event later?”

In the meantime, Blacher is spending his time trying to raise awareness of Therapix: working with the investment community, influencing and disseminating the flow of news from the company, “and simply being vigilant about getting out there, telling the story, and evangelizing.”