A look at Rhythm Biosciences

Glenn Gilbert is the CEO of a biotech called Rhythm Biosciences. We're talking to them because they're actually towards the end of their journey, even though they have only been on the share market for a couple of years, since 2017, and they are in phase three trials now, and expect to finish those at the end of the year, and have their product on the market, in the end, sometime next year. 

The product is a blood test for bowel cancer. As you know, there's a lot of focus on bowel cancer at the moment. The government's posting out about bowel cancer testing kits, because it is one of the cancers that can be detected early. But of course the kits, the detection, the testing that's going on at the moment is to do with stools. You have to muck around with your poo and put it into a vial or something, and not many people like doing that. In fact, hardly anyone at all prefers to do that.  

What we have with Rhythm Biosciences is a blood test. Which, if they can get it up, which it looks like they will, which will undoubtedly become standard practise. So I think that there will undoubtedly be a switch from stool testing for bowel cancer, to blood testing. The blood test that Rhythm Biosciences is selling, called ColoSTAT, was developed by CSIRO beginning in 2003. It's a CSIRO test, now with a listed company called Rhythm Biosciences. It isn't the only one in the world doing blood tests, but it appears to be the cleanest.

There's one in Germany, one in America. One of those appears to also include stools, so it's not quite the same and the other one is a bit more complicated because it uses DNA. Rhythm Biosciences is the only one that looks at protein markers, which are easier to find. In particular, and this is the thing that is worth knowing about it, is that the test can be just plugged into the existing pathology units at Dorevitch, or Melbourne Pathology, or whatever it is, all of the existing pathologists they can just retrofit existing blood test machines with this test. It's easily done. It will be added to the normal blood tests that people get for everything from kidney function, to cholesterol, and you'll be able to just get a bowel cancer test as well. I think it's interesting. It's well worth understanding what's going on here, and a possible little bet on the business if you're interested. 

Here's Glenn Gilbert, the CEO of Rhythm Biosciences.

Well, Glenn, Rhythm Biosciences, you've got a blood test for colorectal cancer to replace the stool sample, which seems to me like a no brainer, of course.  Everyone's going to do blood tests instead of mucking around with their poo.  Of course, the question, I suppose is, and I think this is the case, that you're not the only one in the world doing this, are you?  There's two others that you've talked about in one of your presentations.  There's two other businesses, one in Germany, one in America that are actually doing the same thing.  Is it a case where you're in a fight for the winner takes all situation in this?  Or do you think it's going to end up being enough for all concerned, that business is going to be big enough for everybody?

Thanks, Alan.  The business is more than big enough for all concerned.  I guess the important thing to identify and point out is whilst there are the German and American companies, their blood tests, whilst covering bowel cancer, is a separate test to what ours is.  Ours is a protein-based blood-based test, which is a low cost.  The companies in Germany and in the US, Exact Sciences and Epigenomics, they're a molecular-based tests.  So that factors in things like DNA and other aspects of the test that we don't worry about.

Could you explain what you mean by it?  What does that mean?  They're actually looking at DNA, where you're just looking for a particular protein?

Correct.  They have platforms, and they're looking for DNA within the sample.  With the Epigenomics test, one of their potential cancers that they could detect is bowel cancer.  They will have a platform that they throw blood on, and see which cancer sticks.  Exact Sciences is far more established.  It's a $13 billion market cap company in the US, with a test called Cologuard.  This test is reimbursed for circa US$500 in the States, and only in the States thus far.  Their Cologuard test has a stool or poo component to it, as well as a DNA component.  With that, it needs a specialised lab, it has a higher cost, it's a far more complex test.  Ours is a simple protein-based blood test, and it fits on every single ELISA, which is an immunoassay that’s in every single laboratory all around the world.

And it fits into existing pathology, does it?  It doesn't have to be a different setup within the pathologists?

Yeah, that's right, and that's the beauty about it.  It will fit on all the Dorevitch, and Melbourne Path and Sonic labs all around the world.

Right.  It's interesting, you had a presentation a little while ago, and one of the pages on it said that in a recent colorectal cancer screening adherent study, 83% of unscreened participants preferred a blood test over the stool test.  I'm worried about the other 17%.  I mean, 17% prefer stools over blood?

It's an interesting position, isn't it?  Interestingly, the majority of that came from France.  Nothing against the French.  It's interesting we can determine and find papers that support up to 95 plus percent of people prefer blood tests as opposed to a stool test for bowel cancer screening.  I think that's some of the challenges that the existing screening programs in Australia and all around the world are facing, is a positive obligation, and all the steps involved.  If you position, or consider our test, in a screening population, typically 50 to 74, most of those people in that age group are getting an annual blood test anyway for their full blood test, liver function, cholesterol, thyroid, all the other tests that they get done as an annual check-up.  Why not have an extra box to tick that's a ColoSTAT blood test for bowl cancer screening?  It gets the screening rates up, and it actually can save your life and direct you to a colonoscopy if needed.

One other thing, when you're comparing the efficacy of a blood test versus a stool test, you're talking about sensitivity and specificity.  Your sensitivity that you're quoting is 73%.  What is the difference between sensitivity and specificity?  Secondly, how do your percentages compare with the others?

Sensitivity is the proportion of positives you get correct.  Specificity is the opposite, how many false negatives are you getting?  You could get a 100% sensitive test that you send to everyone in the world, but then that might not be very specific.  We're operating at a 95% specificity, which is quite high and very well-regarded.  In terms of its comparator with the faecal-based test, there are a range of sensitivities that are quoted.  They range from 60s to 70s, however their specificity is a little bit less.  As you would know, the existing faecal test that's used in the national bowel screening program, only detects blood in the stool and you can get blood in the stool for a range of reasons.  Diverticular disease, ulcerative colitis, haemorrhoids, and things of that nature. 

What we hear and see is that you can perform the test, only 40% of people in Australia are actually doing this test, unfortunately.  But you perform the test and then if you get a positive reading to anything that gives blood in the stool, you get referred onto a colonoscopy.  Then you have the colonoscopy as a gold standard diagnostic, as to whether you've got a haemorrhoid, or whether you need surgery.

Yes, what you're saying is that a positive result from a stool test costs quite a lot of money because you've got to go and get the colonoscopy.  Whereas a positive result from a blood test, that's it.  The sensitivity analysis, you've got is 73%, so that means you're getting 27% false positives, is that correct?

No, that just means that there's that 27% that may not get detected the first time and as a screen...

Oh, I see.  It's undetected, right.  Okay.

Correct.  That's actually quite a positive.  There's plenty of data for, say, mammograms for breast cancer screening, that's at a mid-70s sensitivity as well.

Right.  Can we just take a step back now and tell us a bit about the development of your test, ColoSTAT as it's called.  Because it was developed in the CSIRO, wasn't it?  Back in 2003.  What did the scientists at CSIRO actually discover?

17 years ago, in 2003, CSIRO discovered that there's obviously a huge need for bowel cancer, it is the second biggest killer in the world, killing 850,000 people annually.  They realised that screening would be significantly important in catching this disease early.  They reviewed over 68 different biomarkers to determine which ones are elevated in the presence of bowel cancer, and which ones are not in no presence of bowel cancer.  Across the journey, they whittled that number down through a series of case-controlled studies that had over a thousand patients.  Across that journey, the biomarkers went down from 68 to then they got down to 10.  We've now patented and have full rights to all the combination of those 10 biomarkers and now we're taking it to a three to five marker panel moving forward into our clinical trials.

What does that mean, taking it to a three to five marker panel?  You mean you're going to whittle it down further, or what?  What does that actually mean?

Yes.  We will get that number down.  That will help from a cost of goods perspective, and it will also save time in the laboratory for testing.

The fewer the markers, the less it costs.  Is that right?

Generally, yes.

Right, but you've got patents, global patents, have you, over all 10 of those markers?

Correct, and the combinations of, which is important.  So in an ELISA based test, one biomarker on its own may not add all that much value, but the combination of those biomarkers together does.

A certain number of those 10 biomarkers, if a certain number are present, then you've probably got bowel cancer?

Yeah, that's the idea.

I'm talking plainly here, I know my language is not particularly scientific, but I'm sure our listeners are not scientists either.  At what point along the journey was Rhythm Biosciences formed?  I know you IPO'd in 2017, but had you raised money before then?

No, that was when we raised the money.  We raised $9 million, it was heavily over-subscribed.  That was to plan out the development pathway, and also take us through clinical trials where we will be able to submit for a CE mark for Europe, and a TGA application here in Australia.

Have you raised any more money since then?

No, we haven't.

I think you've still got $6 million in the bank, is that right?

That's right.  That is right, yes.

And your market cap is just a bit under $10 million.

$16m today.

$16m today, right.  Sorry, I misread that.  Okay, well, that's good.  One of your problems, I suppose, is that the companies that you're up against are worth quite a lot more, they're much bigger businesses.  They've probably got a lot more cash.  Is that a problem for you?

No, I don't think so.  Our technology will be where the value is.  The good thing about where we're at is the multiple channels that we will be able to access.  If we look at it plainly, we've got all the actual bits of kit, the machines, they're in every single laboratory.  We have the manufacturers of that, and they sometimes work in a printer-ring sort of scenario, where they will give a discount on the actual machine, but they get all their money on the content.  For example, your cholesterol testing and the like.  Currently there is no blood test on any of these machines anywhere in the world that can detect bowel cancer.  This would be a good proposition for them, and a good competitive advantage for those companies.  They are companies like Beckman Coulter, Siemens, Abbott Diagnostics, and those sorts of players.

Right, so they would be your customers, would they?

In one channel, yes, depending on their machines.

And presumably you can retrofit the machines, can you?

Yeah, we can.  There's development that you can do that just needs a little bit of optimisation and tweaking to use scientific language, and you can get onto their platform.  There's obviously the laboratories like Sonic, and Melbourne Pathology, and Dorevitch that are out there trying to get people to go into their labs, and to do the tests.  They're another target customer.  We've spoken about ColoSTAT being a screening tool, but it doesn't need to be.  It can be for those 20, 30, 40, you don't need to wait 'til your 50 to actually get a blood test.  Particularly if you've got a family history.  It can be used for screening, it can be used for recurrence monitoring for those that have already been diagnosed and have been treated for bowel cancer.  Of course, further down the track it has applications towards a companion diagnostic.

You might have a company such as Pfizer, for example, that may have a bowel cancer drug.  Why not give a ColoSTAT test, understand where that patient's at, give them a chemo drug, and then do another ColoSTAT test afterwards to determine two things.  One, how is that treatment going for the patient, are they getting the best possible care?  Secondly, that gives these large companies significant data.  Data on the patient, data on their drug, data on how it works, and adds benefits for all that they can put into their own R&D for the next generation of that drug.

I often go, well, not often, you know, once a year or so go to the doctor and get a series of blood tests on cholesterol, and everything really.  Is the way that yours going to work, that I can add bowel cancer to those sort of packaged up blood tests?

That's it.  That's exactly how it will work.

Right.  Well, that's good, I'll do that.

Absolutely.

The point being, that everyone will do it, won't they?

Yeah, and that's where the huge growth potential is.  Not just financially, but also actually getting people to comply and screen.  Which is, you know, you see recent developments.  For example, the Labor government this week has announced $200 million for free blood tests for the elderly.  There was another investment made to the Jodi Lee Foundation, which is a charity for bowel cancer.  You have the Coalition government making a $10 million investment into bowl cancer screening in January.  The Australian government, and governments all around the world understand that this is a significant problem, and we need to get screening rates up.  So that example you just used in your annual blood test will get that screening rate up significantly.

Tell us where you are at with the clinical trials.  I see that you've recently recruited your first patient in a clinical trial, but it was called Study Seven.  Is that because it's the seventh study?

It is.  We haven't got too creative with our names unfortunately.  Study Seven is our prospective clinical trial.  We're looking to recruit circa a thousand patients.  We have commenced, which is really good for the companies.  It shows that we're taking that step change out of the laboratory, out of the test tubes, and can actually negotiate with ethics committees, and hospitals, and the like.  It's a really important milestone that we've met.  We will look to bring on other sites as well to increase that recruitment rate.  They're probably going to be Melbourne sites.  We're based in Melbourne, so that makes communication that little bit easier.  We would consider other sites in Sydney if need be. 

This trial, once completed, which we're expecting to be at the end of this year, will form part of the clinical package to go into the regulatory applications for a CE mark and TGA applications for Australia.

So how much is this trial going to cost?

We would think $2.5-3 million all in.

Right, so you'll have some money left, afterwards.

Absolutely.

Does this product of yours have to go through three phases of clinical trials, and this is just phase one?

No, this would be an equivalent of a phase three trial, in drug terms, this would be a phase three trial.

Oh, I see, so the first two phases have already happened in the studies one to six?

Yes.  They're all those case-controlled studies that have been conducted.  With over a thousand patients that we've already reviewed samples of, we're quite confident that we have the right markers, and it's just a matter of executing the assay development optimisations, and then rolling it out.

You reckon you'll be putting in applications for approval to the authorities here and overseas, what, at the end of the year?

End of the year, or Q1 next year.  That's our target.

How long does the approval typically take?

Typically, three to six months.

Do you think you might be on the market by the end of next year?

Absolutely.  That's not that far away.

No, no, indeed.  That's right.  Well, that's interesting.  You'd be going from IPO in 2017, to being on the market in, what, the end of 2020?  Or perhaps even earlier.  Anyway, that's pretty fast.

Yeah, and that's the beauty of having, I guess, from Rhythm's perspective, not having to go through that 10, 15 year typical development phase.  That's where we're in a fortunate position that CSIRO have conducted that.

Yes.  Who are the main shareholders in the business?  Who's giving you the money?

We have two major private holders that are very good supporters of the company and what we're doing.  We also have Merchant Opportunities Fund, that have 8.1%.  They're a Perth based boutique company, and they've got a very successful record in investing in the small cap biotech space.  For example, PolyNovo, they've done a terrific job being long term holders of their company.

Yes, we know about PolyNovo, we've been interviewing them.  I see that your biggest shareholder is a German company.  Have they got anything to do with the other German blood test business?

No, no.  Not related.

Right.  Well, very good.  Well, good luck with it, Glenn.  It's been great talking to you, thanks.

Thanks very much, Alan.

That was Glenn Gilbert, the CEO of Rhythm Biosciences.