Pursuing Unconventional Paths to Public Markets

By many accounts, health care companies going public were reported at record levels last year, with pharma and biotech firms leading the way. While federal regulators have put into place a firm set of rules to manage public investment, some companies reach the public markets without the traditional Initial Public Offering process. Houston-based Salarius Pharmaceuticals is one such company. In this interview, company Chief Executive Officer David Arthur discusses the company’s pipeline and a pathway towards going public.

Moe Alsumidaie: Briefly describe the transaction that Salarius announced with Flex Pharma at the start of the year.David Arthur: On January 4, we announced an intent to merge with Flex Pharma in what is known as a reverse

David Arthur

merger. We recently filed a Form S-4 with the Securities and Exchange Commission with the intention of completing the transaction in the first half of 2019. When that transaction closes, Salarius will merge into Flex Pharma, change the name of the company to Salarius Pharmaceuticals, Inc. and begin trading on NASDAQ.

MA: What prompted that decision?DA: After completing a highly comprehensive process involving multiple candidates, Flex Pharma chose Salarius as its merger candidate. Flex felt, and I agree, that the science supporting Salarius’ clinical program, the combined company’s financial position, and the Salarius management team offered the most promising pathway to significant near and long-term value creation for both our shareholders. We thought it was an excellent opportunity for Salarius to access the public markets and institutional investors and for Flex Pharma investors to become part of a clinical-stage oncology company targeting the epigenetic causes of cancers.  

MA: How are you planning to direct your financial resources following the merger?

DA: We recently completed a $6.4 million series A raise, and we anticipate that Flex will bring approximately $3.3 to $3.5 million to the transaction. Also, we have tremendous support from the Cancer Prevention Research Institute of Texas ($9.1M remaining of an $18.7M award) and the National Pediatric Cancer Foundation, who is paying a large part of the Ewing sarcoma clinical program. So, the funding and support that Salarius receives is substantial, coming from many areas.

What we're able to do, now that we have a merged company, is take those resources and in 2019 focus on the execution of our clinical programs with our lead compound, Seclidemstat, for which we received IND activation in March 2018.

We are actively treating patients in our lead indication in relapsed and refractory Ewing sarcoma. It is a Phase 1
study that focuses on safety, but also provides the opportunity to look for early efficacy signals. Also, in the first half of 2019 we plan to initiate our second clinical study, which is an advanced solid tumor study that gives us the opportunity to look across a broad spectrum of cancers. It will not only enhance our safety database but also enable us to look for biomarker signals in some well-recognized cancers like castration-resistant prostate cancer, late-stage breast cancer, late-stage ovarian cancer, and some other sarcomas where we have preclinical data.

MA: Seclidemstat is an exciting compound. What differentiates it from other, similar products and how has that informed your clinical strategy?DA: Our clinical strategy is driven by our lead asset Seclidemstat, which we believe is one of only two reversible Lysine specific demethylase 1 (LSD-1) inhibitors in clinical trials. We think the other LSD-1 inhibitors in clinical trials are irreversible LSD-1 inhibitors. As you can imagine, enzymes are in the body for a reason. Irreversible inhibitors permanently bind to the enzyme where a reversible inhibitor binds and releases. So, irreversibly binding and inhibiting of an enzyme may lead to consequences or events that could limit dosing. With reversible binding, you're able to inhibit the enzyme's activity, and through understanding your dosing schedule, we can allow the enzyme to be uninhibited at points and provide the function that is intended.

This has allowed us to build clinical strategies and explore indications, where we think may have a greater probability of success than some of the other molecules that are in clinical development. That translates into our lead indication for Ewing sarcoma, a devastating childhood and adolescent disease with no targeted therapies approved. The standard of care is multi-regiment chemotherapy with possible radiation treatment and unfortunately, often disfiguring surgeries. There are four hundred to five hundred of these patients diagnosed each year in the U.S., and the average age of diagnosis is about 15. These are kids with their whole lives ahead of them.

When you look at the different treatment and success rates, you still have about 40% to 45% of these patients who either don't respond or relapse from the standard of care. With those patients, there's around an 80% five-year mortality rate. Our clinical strategy gives us what we feel offers a significant difference in the lives of these children who have limited choices for treatment. We think we stand a real shot at giving hope to these patients and their families.

MA: So, you’re hoping to develop a less toxic, more effective therapy?

DA: You're right, and we are researching that opportunity with our clinical program. You almost quoted verbatim the mission of the National Pediatric Cancer Foundation (NPCF), which is working towards providing less toxic treatments to patients. That's one of the reasons we've received such tremendous support from the NPCF in the form of grants to help with early-stage development now through their support in helping us implement the Ewing sarcoma clinical study. We're implementing the Ewing sarcoma trial through the NPCF network of research hospitals called the Sunshine Project. It's a great example of industry and foundations focusing on a need by providing funding for these rare pediatric illnesses that many times don't get the development support they need.

MA: Explain the management integration with Flex as you merge into this new initiative.

DA: We envision a very smooth transition through this merger. Being a NASDAQ-listed company will provide a robust platform for Salarius to showcase our potential with institutional investors and ultimately help drive company success. The current Salarius management team is expected to remain in place following the transaction, and I plan to stay as Chief Executive Officer of the combined company. Upon completion of the deal the Salarius clinical pipeline becomes the lead asset of the combined company. Also, Bill McVicar, the current CEO of Flex, will join the combined company board of directors.