Vernx Investor Update May 2019

Since our first newsletter in late 2018, Vernx co-founder and chief executive Dr Craig Patch discusses the company’s progress with journalist Anthony Black

Newsletter. Edition 02. May 2019

Isolating a unique and key bacterial species to produce branched chain fatty acids is moving biotechnology company Vernx closer towards commercialising its first product to improve gastrointestinal health.

Dr Patch says isolating the bug is an important initiative towards commercialisation because it enables branched chain fatty acids to be produced in significant volumes.

“So, that’s exciting news because we discovered that we can produce significant and sufficient volumes of branched fats after conducting experiments at La Trobe University,” Dr Patch says. “We conducted experiments on a range of bugs and selected the highest producer. We isolated and grew the bug at a small commercial scale and extracted fatty acids from it.”

“We ran several fermentation trials to produce our fatty acid product, which is code named BG01 – an active ingredient to be included in dietary supplement capsules, infant formula and pharmaceuticals. “

“BG01 is a world first and provides us with the profile we’ve been seeking. We’re most excited that we can manufacture sufficient volumes after isolating the bug.”

Branched fats are a vital fatty acid found in human vernix caseosa and breast milk. It plays an important function in the developing infant gut epithelial, regulating immunity and is a selective microbiome growth promoter.

Dr Patch says any condition where the gut microbiota is disrupted, for example antibiotic treatment, could benefit from branched fats. In addition, preterm infants and formula fed infants are deficient in branched fats, which in turn may lead to significant negative effects on gut health and immunity.

PATENTS

To safeguard its intellectual property, Vernx has filed two new patent applications through patent attorney firm K&L Gates.

The first application covers composition of matter, including the active ingredient BG01, the method of manufacturing and the manufactured product.

The second application focuses on a method to improve the branched chain fatty acid composition in ruminant species milk, such as milk from cows.

“The second application is an exciting development because it does open up new formulations for food and dietary products, which have fewer regulatory barriers to entry and marginally easier paths to market,” Dr Patch says.

“These new patent applications add to our current IP portfolio protection.”

PROGRESS

Dr Patch says Vernx is making measured and sustained progress towards its goal of commercialisation. Vernx is following a regimented plan and is ahead of schedule to take product to market within 12 to 18 months.

Vernx will not be tempted to take any short cuts that can potentially have negative implications at a later date. Rather, Vernx is undertaking comprehensive research and conducting all the necessary trials at a sustained pace along the path to commercialisation.

“We’ve made a lot of progress, largely through our collaboration with La Trobe University, Callaghan Innovation in New Zealand and the University of Texas at Austin,” Dr Patch says.

“While covering every base, working with our research partners has helped to accelerate the program. In response to these new discoveries and new area areas of investigation, we have hired a research and development technologist to help us develop these products further.”

APPOINTMENT SARAH CRENNAN – DIRECTOR OF PRODUCT DEVELOPMENT

Sarah will take on her full time role in June 2019. Prior to her role at Vernx, Sarah was a product development technologist at Fonterra Co-operative Group.

Sarah previously worked as a senior product development technologist at Clover Corporation. She has an extensive background in the invention, trial development, development and commercialisation of nutritional and pharmaceutical products.

Dr Patch says: “Sarah understands product development, how to incorporate our active ingredients into final infant formula products. She understands the regulatory requirements on how to get these products registered and launched. Most importantly she has a track record of getting things done”

“Sarah will further accelerate our program by bringing her extensive experience and skill to our commercialisation program.”

(Full bios on Dr Patch and Sarah Crennan below)

LAUNCH PLANS

Looking ahead, Dr Patch says at this point, Vernx initially plans to launch its products under its own brand, or a strategic partner brand in the dietary supplements market, while providing licensing options to the big dietary supplement companies, firstly in Australia then overseas.

“Australia is our first market and we are fully funded to achieve a launch in this area, but the global market is our ultimate goal,” Dr Patch says. “We’ve already set our sights on the infant formula market and we’re now undertaking background work in this area.”

In the initial phase Vernx products will not be competing directly with finished products on shelves manufactured by dietary supplement and infant formula companies.

Rather, Vernx product will be added to dietary supplements and infant formula as a means of improving manufactured product dietary profile and enhancing gastrointestinal health & wellbeing.

Australia’s enviable reputation as a clean and green dairy producer has led to insatiable Chinese demand for infant formula products. Expect stronger demand for Australian infant formula, pharmaceuticals and dietary supplements going forward in response to a growing number of people in Asia enjoying greater wealth in line with economic prosperity.

TARGET MARKET

Dr Patch says Vernx is targeting an initial launch into the general Australian supplements market, which generates global sales of about $350 million a year, with an eye to the global microbiota and gut health market is expected to reach US$63 billion by 2022 with a CAGR of reaching 8%.

An initial target market will be people taking antibiotics. Vernx BG01 will help adults recover the good bacteria in the gut after taking a course of antibiotics. BG01 would help re-establish the microbiota.

“Our products have several potential market applications,” Dr Patch says. “Another would be to re-establish the good bacteria in the gut following a cleansing of the gastrointestinal tract for a procedure, say a colonoscopy.”

Dr Patch says substantial scientific evidence suggests a lot of gut diseases are due to a poor environment within the gut that promotes pathogenic bacteria. So the bugs cause disease and inflammation.

“What we’re doing is developing the food, or the nutrient base by which those good bacteria can feed on to produce a healthy gut environment,” he says.

Newsletter edition 02 written by journalist Anthony Black, director of BlackMedia. Email: anthonyblack3@bigpond.com or 0418 54 3330

BIOGRAPHIES

DR CRAIG PATCH (CEO/CO-FOUNDER)

Dr Patch is a nutrition innovator with more than 20 years experience dedicated to improving the health and wellness of infants. He was instrumental in the identification, protection, in-licencing, development and spinning out of intellectual property from the Women’s and Children’s Hospital Adelaide to form Premneo Pharmaceuticals Pty Ltd, where he was the founding VP, Development & Innovation. Under his direction, he formed and led a high performance team to develop a novel DHA product to prevent bronchopulmonary dysplasia that was used in a phase-3 multisite NICU clinical trial involving 1273 premature babies. To date, this is the world’s largest nutritional intervention trial targeting premature infants. The product was also awarded GRAS status in the US in 2014. Furthermore, Dr Patch has led the commercial strategy for Clover Corporation Pty Ltd, resulting in the launch of many nutritional ingredients for infants sold globally.

Dr Patch has extensive experience in managing sales and marketing activities in nutrition science and biotechnology. Dr Patch is a also co-inventor of six patent applications, has published more than 70 peer-reviewed articles and has been instrumental in the formation of five start-up companies in the area of social enterprise, nutrition, biotechnology and pharmaceuticals. Dr Patch has a Bachelor of Applied Science, is qualified dietician and has an MBA and a PhD in biomedical science.

SARAH CRENNAN (DIRECTOR R&D/CO-FOUNDER)

Sarah is an innovative product developer in the area of food, medical food, infant formula and pharmaceuticals, with a focus on the health effects of novel fatty acids. She has extensive research and development expertise in microencapsulation, bio-fermentation, manufacturing, process development, product scale up and dairy processing. She has an established track record in new product development leading to commercialisation. Notably, in her role as a senior member of Nu-Mega Ingredients Pty Ltd R&D team, which delivered new nutritional products for infants sold globally. Ms Crennan, is the co-inventor and lead product developer on a number of patents, including a novel DHA product to prevent bronchopulmonary dysplasia in premature infants that was used in a phase II (n=30) and phase III multisite NICU clinical trial (n=1273). This is the world’s largest nutritional intervention trial targeting premature infants and was also awarded GRAS status in the US in 2014. In 2015, the DHA product and associated intellectual property was spun out into a new entity Premneo Pharmacuticals Pty Ltd, of which she was founding senior scientist, R&D. Ms Crennan has a Bachelor of Food Technology (Hons).

Craig Patch