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RICHARD B. HOLLIS – HOLLIS-EDEN PHARMACEUTICALS, INC. (HEPH)
CEO Interview - published 11/17/2008
RICHARD B. HOLLIS founded Hollis-Eden Pharmaceuticals, Inc., in August 1994, and
currently serves as Chairman, President and Chief Executive Officer. Mr. Hollis
has over 29 years' experience in the healthcare industry, has a proven track
record of launching and marketing important new medical products, and a
distinguished career of managing the growth and operations of companies in a
variety of senior management positions. Mr. Hollis began his career in product
sales with Baxter Travenol (today Baxter International), where he specialized in
launching and marketing parenteral, enteral and intravenous solutions to
hospitals and nursing homes. Mr. Hollis next joined Imed Corporation, a world
leader in drug delivery devices in the 1980s, where he rapidly advanced through
numerous sales, marketing and managerial positions. After leaving Warner
Lambert, Mr. Hollis joined Genentech, Inc., as the Bay Area biotechnology
revolution was unfolding. At Genentech, Mr. Hollis was instrumental in the
launch of two blockbuster pharmaceutical products-Protropin (human growth
hormone) and Activase (tissue plasiminogen activator).
SECTOR - BIOTECHNOLOGY
TWST: May we start with a short history of the company and would you describe
your scientific mission?
Mr. Hollis: The company was founded in 1994 and we went public in 1997. The
founding vision we had for the company then is the same as it is today, and that
is to discover new chemical entities that are based on the biochemistry of
endogenous adrenal steroid hormones. It is our belief that these adrenal steroid
hormones have many other metabolites that are converted by tissues in the body,
and that have their own unique signaling properties that regulate biology to
maintain health. Being able to identify these metabolites, understand their
chemical structures, signaling pathways, and their biological effects, allows us
to determine if they are involved in particular diseases. The goal of our novel
drug platform is TO develop those active metabolites or their synthetic analogs
as pharmaceuticals to restore hormonal signaling pathways dysregulated by
disease or the process of aging.
TWST: Would you elaborate on how you are using your knowledge to translate into
product candidates and what is the mechanism of action of these candidates?
Mr. Hollis: Adrenal steroid hormones are all converted from cholesterol in the
body and there have been many successful pharmaceuticals that have been
developed from the metabolome of these steroid hormones. For instance products
derived from similar hormones in the body are pregnenalone, glucocorticoids and
the androstenedione series that converts into androgens and estrogens for
hormone replacement therapy or birth control pills. This is about the extent to
which the pharmaceutical industry has evolved in regard to developing steroid
hormones as pharmaceuticals. We were looking at a new and different class of
steroid hormone metabolites that are converted by the body, identifying those
unique chemical structures and then screening them in biological assays to
determine their role in the body.
We have two candidates in the clinic right now, but we have other steroid
hormone structures that we've identified in the metabolome that are still in our
broad preclinical pipeline. The two product candidates that we should be talking
about today are TRIOLEX and APOPTONE. TRIOLEX comes from a metabolite off this
adrenal steroid hormone conversion that takes place in the body. We optimized
the chemical structure of the compound and then screened it in our in vivo
animal models. The result of our work and knowledge is, we believe, TRIOLEX is
an orally active optimized pharmaceutical that possesses potent anti-
inflammatory properties, such as regulating NF-kappaB without the
immunosuppressive side effects of the currently approved anti-inflammatories.
We believe its role in nature is to restore stress/inflammatory immune response
back to homeostasis.
TRIOLEX is a drug candidate that we are using in diseases such as ulcerative
colitis and rheumatoid arthritis in autoimmune conditions, and in Type II
diabetes, where we are looking at inflammation as the root cause of disrupting
insulin signaling and therefore creating insulin resistance. Our hypothesis in
Type II diabetes is, if you can use this chemical structure to down-regulate the
inflammatory signaling pathways to restore insulin signaling, you should improve
insulin sensitivity and be able to lower hemoglobin A1c, a clinical endpoint
necessary for approval in Type II diabetes. So it's a very nice indication to
demonstrate the anti-inflammatory activity of the compound without the side
effects of the currently approved drugs.
Our second drug is APOPTONE, which is a compound that we are now prosecuting in
a Phase I/II clinical trial for prostate cancer. The reason we are involved in
prostate cancer is because there are many hormone sensitive cancers, including
breast cancer, which could be ideal indications for our class of drug
candidates. We have an open IND for breast cancer, but focusing our clinical
efforts right now in prostate cancer because that is where most of our
preclinical experience is. The mechanism of action for APOPTONE is that it is an
androgen receptor-targeted drug that down regulates the androgen receptor and
causes cell apoptosis, or planned tumor cell death,. So both these compounds are
very exciting and we are looking forward to announcing data from our ongoing
clinical trials in the months ahead.
TWST: As far as TRIOLEX is concerned, are you concurrently pursuing the
diabetes, colitis and rheumatoid arthritis indications?
Mr. Hollis: Yes, we are. Currently, we are in a Phase II clinical trial for Type
II diabetes, where, by the end of this year we will have completed enrollment of
90 patients that are Type II diabetics. We should have a clinical data release
point sometime in Q1 2009 and no later than early Q2. For ulcerative colitis, by
the end of the year we should have enrolled at least 27 patients. We are looking
at doing an interim data release sometime in Q1. For rheumatoid arthritis, we
will complete our safety combination trial with methotrexate by Q1 as well. In
ulcerative colitis, we are looking at treating flares, and if TRIOLEX is
effective in treating flares in ulcerative colitis, that would give us the data
we need to accelerate a Phase II clinical trial in rheumatoid arthritis, while
we are going for the acute indication of treating flares, which is a much
quicker pathway to the market than other forms of rheumatoid arthritis.
TWST: What is the current market for Type II diabetes drugs?
Mr. Hollis: The oral drug market for Type II diabetes is currently about $12
billion per year, and it is projected to grow in the coming years. This is the
epidemic of the 21st century in all developed countries. Actos and Avandia are
the two insulin sensitizers that are approved, and they dominate the market.
They garner about 50% of the annual sales in the oral anti-diabetic market;
their combined sales in past years have been approximately $6 billion annually.
Both those products have recently been given Black Box warnings by the FDA
because they are associated with increased cardiovascular events. And just
recently, Avandia was removed from the treatment guidelines both in the United
States and Europe for its recommended use. So this really demonstrates the need
today for a better insulin sensitizer, which we believe TRIOLEX represents. If
we can actually demonstrate that we can regulate these inflammatory signaling
pathways, improve insulin signaling, improve insulin sensitivity and show an
improvement in hemoglobin A1c with a better safety profile than the currently
approved drugs, we have the potential to dominate those markets. So this is a
very big marketplace that we're entering with incredible opportunity for TRIOLEX
to possibly become a new and safer insulin sensitizing drug.
TWST: What are you targeting for TRIOLEX as far as diabetes is concerned? Does
it have equal efficacy with less side effects than Avandia and Actos?
Mr. Hollis: That is what we believe. I think the safety profile is very
important and that's where the FDA is really concentrating. As in a chronic
indication like Type II diabetes, safety will be a major factor, and these two
currently approved drugs have major issues. Now, I think what we should stress
here is the fact that the currently approved drugs are associated with increased
cardiovascular events. We believe not only in the safety of TRIOLEX compared
with those other products, but also that our treatment could demonstrate
cardiovascular improvement because it is anti-inflammatory in nature.
One of the key inflammatory biomarkers for cardiovascular disease is high levels
of C-reactive protein or CRP. We've been able to demonstrate in our initial
Phase I/II trial that we lower C-reactive protein, which could translate into
cardiovascular improvement. So not only will we have a safer drug in regard to
managing blood glucose levels, but we will also potentially be able to
demonstrate the cardiovascular benefit. So I think if that plays out in our
clinical trials, it will really have the ability to dominate the market for
drugs that are currently approved, and even competitive drugs that are in the
pharmaceutical pipeline. We have a unique approach to Type II diabetes by
treating the disease at the root cause, and the root cause in Type II diabetes
is obesity-induced inflammation. Obesity-induced inflammation is what causes the
insulin signaling disruptions that eventually develops into insulin resistance.
TRIOLEX is treating the obesity induced inflammation, so we are treating the
disease at the root of the problem.
TWST: It seems that the early driver for your company is going to be TRIOLEX.
Would you elaborate further on APOPTONE?
Mr. Hollis: APOPTONE is equally important to us; however it is not as advanced
in the human clinical trials. But we believe that during 2009 it will catch up
to TRIOLEX, and it is extremely important because we have a lot of expertise in
steroid hormones and hormone-sensitive cancers are using hormones as growth
factors. Through our expertise in steroid hormone structures, and also in
medicinal chemistry, we believe we've identified a compound in APOPTONE that is
going to play a major role in hormone-sensitive cancers targeted at prostate
cancer initially. Those markets are also very significant. The prostate cancer
market is approximately a $7 billion market, and we've chosen late stage
prostate cancer because it is a quicker time to market and where we believe we
can demonstrate progression-free survival. We will be using MRIs and CT scans
also to demonstrate the activity of decreasing tumor size. We'll also be looking
at the decrease in circulating tumor cells (CTCs), so there are a lot of markers
we will be looking at with APOPTONE. But the primary clinical endpoint is
improvement in progression free survival. We believe that if APOPTONE can
demonstrate activity in late stage prostate cancer patients, that will bode well
for testing the drug in earlier stages of the disease. So this is a very
important program to us; it's just that it's a little earlier in development
than TRIOLEX.
TWST: Are there any other product candidates or other disease indications in the
pipeline?
Mr. Hollis: That is a very interesting question because if we show efficacy for
TRIOLEX in any of the inflammatory diseases that we are looking at, it will
allow the drug to be expanded into multiple other anti-inflammatory indications.
It also opens up the opportunity for us to explore the use of other similar drug
candidates in our pipeline in a variety of other inflammatory conditions. The
currently approved corticosteroid hormones that are being used today as anti-
inflammatories are based off cortisone. There are nearly 70 million
prescriptions written a year for glucocorticoids. They are used in multiple
diseases of inflammation and autoimmunity, and we believe that if we can
demonstrate that we are just as efficacious as those products without the side
effects of immune suppression, then we can expand TRIOLEX into many other
indications. It could potentially replace the glucocorticoids, and potentially
the biologics as the first-in-line anti-inflammatories.
We currently have a relationship with The Cystic Fibrosis Association, which has
selected TRIOLEX as a candidate for treating CF, which could lead to its
development for other respiratory lung inflammation such as asthma and COPD. The
product can expand into other autoimmune markets as well if it shows any
efficacy in humans in these initial indications associated with inflammation. So
that is a vast pipeline in itself. And if you look at prostate cancer with
APOPTONE, that can move into other hormone sensitive cancers as well such as
breast cancer, which is another enormous market opportunity for us. So just
these two compounds can expand in many other indications and we have two or
three other candidate compounds that we are moving along pre-clinically, but we
haven't accelerated those discoveries into the clinic yet because we are
preserving our resources to demonstrate activity on our initial four clinical
trials. So until the point comes where we can establish the safety and efficacy
in humans in these clinical trials, we will not accelerate the development of
those other indications or products.
TWST: What is the company's burn rate currently and how does the liquidity look
to you?
Mr. Hollis: Our capital structure is really good from the standpoint that we've
been public for 11 years, and we only have 29 million shares outstanding. So we
have really managed our capital judiciously and leveraged it into some major
indications. Moreover, we've done all this in just the last two years with a
quarterly burn rate of about $5 million. For the past couple of years, we have
had approximately a $20 million annual burn rate. Our fixed burn rate is between
$12 million and $13 million annually without clinical trial expenses. So our
capital right now is being infused into these clinical trials.
TWST: Do you have the management team in place to achieve your goals?
Mr. Hollis: Our management team has been in place since the company's going
public in 1997. This is an experienced management team that has been very stable
and very committed and dedicated to our science. This has provided the
continuity and consistency to move this technology forward. If you look at the
backgrounds of most of our senior scientific team, they all have a combination
of Big Pharma experience and also biotech experience in smaller companies. The
team has several decades of experience in this area. Personally for myself, this
is my 33rd year in the industry, and I have been able to gain most of my
knowledge in this field by being in several other successful companies such as
Genentech, where I was in the early and mid-1980s. We believe we have a
management team that is not only well experienced, but very committed to being
able to deliver these compounds as eventual treatments for major diseases.
TWST: How do you feel about where your stock is trading? Do you feel you are
getting enough credit for how far you have advanced as a company?
Mr. Hollis: It's a very interesting question being asked at a time when our
markets are at historic lows, and most biotech companies that are pre-earnings
are not getting a lot of technology value or intrinsic value. Most of the
companies are trading basically near or at cash. So the marketplace is not
operating efficiently in this sector right now from the standpoint of giving
value to companies that have future growth and revenue potential in regard to
the products that they are developing to bring to the marketplace. So this is a
very difficult time in our economy, and it's extremely difficult in the biotech
sector, which is normally a high growth but a high risk area, and investors
today are moving to safe stocks and are really not into risk.
There is not a lot of premium priced into our stock today and we are not happy
about our stock price. We've spent 15 years and $300 million approximately to
bring our drug candidates to these indications. These indications represent
enormous markets, such as Type II diabetes and rheumatoid arthritis where
combined annual drug sales exceed $25 billion. These diseases are currently
served by products in the marketplace today that have value, but still fall
short of optimally treating these conditions. So these are unmet medical needs
and we believe we can bring a better product to the market, and we are in our
human clinical trials now with data inflection points occurring within the next
three to six months. So with the potential revenue opportunity that our products
represent, and then you take a look at our stock price, there is a huge
disconnect. But that's currently on par with the entire sector.
What we believe we have to do is stay very focused on executing our clinical
trials demonstrating the safety and efficacy of our products in humans and being
able to give investors the confidence that this data and the clinical trial
results will bode well for success and potential commercialization. I think at
that point in time, investors will be able to do the economics in regard to
return on investment for our molecules. I believe at that point in time, we are
going to become a very compelling investment story that possibly could be
historic from the standpoint of a company with only 29 million shares
outstanding, currently in Phase II clinical trials in major indications, and
just a few months away from potentially compelling data that may demonstrate our
proof of concept in humans. I think when you do the math here, the economics are
really compelling, and I think that if we can demonstrate our products'
efficacy, we will survive this economic climate where investors are not inclined
to put their money in right now.
TWST: Do you have any thoughts about partnerships?
Mr. Hollis: Those are only considerations at this point. Partnerships would have
to provide two things. Number one, an infusion of capital that's non-dilutive,
and number two, synergy with our company with the science, the distribution
capabilities and the chemistry where both companies share the same common vision
with the compounds. If these things materialize, that could potentially happen.
We are in various stages of discussions with multiple pharmaceutical companies
around the world, and if we have to license some particular rights away to
monetize some of our assets during this economic downtrend, we would certainly
consider that. This is just one of the strategies that we will be looking at
very closely here as we evolve into the future.
TWST: Do you have any thoughts?
Mr. Hollis: I guess my thoughts would be that in economic downturns like this,
there are always opportunities. There is smart money and the ability to
discriminate between technology and products that can succeed or fail. We
believe we are a very compelling investment for these particular reasons. We've
discovered novel innovative first-in-class drug candidates that are based on
endogenous adrenal steroid hormones, and since these are nature's products, they
are basically designed to perform certain functions that can be used in treating
human diseases. So the probability of translation from pre-clinical animal
models to humans is very high because the products originate out of our own
metabolome.
I think we are poised for success in major indications and we've done extensive
pre-clinical studies that project that there should be a high probability of
success. Clinical endpoint data is due over the next three to six months and any
inflection points that show that our technology is safe and efficacious in those
indications will also allow us to expand into several other additional
indications, which increases our economic opportunity even more. We own all of
our intellectual property, and when you do the economics in regard to the
markets that we are pursuing with our compounds, the return on investment could
be historical, if we are correct. I think we are at the inflection points where
we'll be able to demonstrate that probability in the first half of 2009.
I have to believe that we represent a very compelling investment that is going
unrecognized right now in this very tough economic environment. But those
investors who do their due diligence will better understand what we are doing
and the probability of a success in delivering a better product in current
markets that have a vast opportunity. If you take the time to learn what we are
doing at Hollis-Eden, I believe you can't come away with any other conclusion
than it could be a compelling investment.
ly, I believe that there actually is much more at stake here than delivering
better pharmaceutical products to medicine for specific indications. Our
scientific vision rests on a fundamental platform that I believe could alter the
length and quality of human life for generations to come. The longevity
revolution is upon us and as we age our biochemistry changes, and we die from
diseases related to the process of aging itself. If we can restore hormone
signaling involved in pathways that maintain biology and health, I believe we
can prevent or delay diseases associated with aging such as cardiovascular
disease and various forms of cancer, as well as many autoimmune disorders. This
vision is what drives us at Hollis-Eden every day, and it is what I have
committed my life to achieving. All of the employees/shareholders of Hollis-Eden
Pharmaceuticals share this passion to serve humanity. We are a company that you
should want to be right, and I would hope invest in, not only for a return on
investment but for your health as well.
TWST: Thank you. (WT)
RICHARD B. HOLLIS
Chairman, President & CEO
Hollis-Eden Pharmaceuticals, Inc.
4435 Eastgate Mall
Suite 400
San Diego, CA 92121
(858) 587-9333
(858) 558-6470 - FAX
www.holliseden.com
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