Is this the holy grail of cancer tests?

Trevor Lockett is the CEO and Managing Director of Rhythm Biosciences. Rhythm came out of the CSIRO or at least its technology came out of the CSIRO as did Trevor Lockett and they are developing a test for colorectal cancer, a blood test that is rather than a stool test so much better to deal with blood than poo obviously. The feeling is that that a blood test is much more likely to be done by people rather than a stool test which is what the colorectal cancer people are trying to get everyone to do at the moment as you probably know. It’s a bit of a holy grail, I think, to switch to a blood test instead of a stool test and this Australian company, Rhythm Biosciences, are using CSIRO technology reckons they’ve got it. They’re a fair way off cash flows and they’re burning a couple hundred thousand a month at the moment. They listed in December last year, raised $9 million, the shares are still 20 cents. 

More importantly a significant fund manager, Merchant Funds Management, has come aboard and bought 7% not with new money but bought from people who came into the float, obviously there’s a few people who wanted to just get in and out but anyway they’ve come in with 7% presumably having done some due diligence on the patents and the technology so I think that’s a bit of a vote of confidence and well worth a look. It’s a fascinating interview, I think, with a company that could go all the way but it might, as always with biotech companies, it could take a while. 

Here is Trevor Lockett, the CEO of Rhythm Biosciences.

Trevor, the technology that Rhythm Biosciences owns was developed by the CSIRO, you joined the company from the CSIRO, did you discover it yourself?

I wasn’t an inventor on the technology, it was a project in a portfolio of projects that I led in what was the preventative health flagship back in the early Nineties.  In that we had diet and lifestyle approaches to prevention of bowel cancer as well as early detection as being key areas, and this was one of those technologies that grew out of the diagnostic component of the work that we were doing.  It was led by a person called Dr Leah Cosgrove in CSIRO.

What exactly was the discovery, was it the actual proteins that indicated colorectal cancer?

Yeah, to take it back just a step at the time putting it in the context of time colorectal cancer is a major killer, was a major killer.  Australia has one of the highest rates of bowel cancer globally, it’s been projected that there will be 17,000 new cases of cancer identified in 2018 in Australia with about 4,000 deaths.  What we were seeking to do was to identify a diagnostic or an early detection test that didn’t look at surrogate markers of cancer so currently there was a faecal occult blood test, an FOBT, which has now become a faecal immune test, FIT, and both of those look for blood in the stool but you can bleed in the gastrointestinal tract for many reasons outside of cancer.  We were looking for a cancer specific set of markers and that sent us through a series of about four clinical trials where we took 68 candidate proteins that had been identified as being up or down regulated in cancer and looking to see whether we could find those.  The new intellectual property then was the combination of markers and that led to our patent in 2010 of 10 markers that were the most prospective there.

It’s only a combination of certain proteins that indicate the cancer?

The combination is more powerful than the individual markers in their own rights and so that’s the key component of our intellectual property.

Tell us about the process of that IP moving from the CSIRO to the company.

We had been looking for partners to work with to take the technology further, we had received some grants from the NIH and also from the Bupa Health Foundation which helped us refine some of the technology.

We being your team at the CSIRO?

We being the CSIRO at that time, that’s right.  That didn’t provide us a transition to the marketplace and there was clearly a lot of different development that was needed to go to the market.  CSIRO was speaking in 2014 with Planet Innovation who have technologies around invitro diagnostics, mainly from the infrastructure perspective and we were thinking that here we had content that could go onto a technological platform and there would be a beautiful relationship.  It didn’t fit with Planet Innovation’s plans at that particular time but one of the key people there that we spoke with saw the value of the technology, spoked to a number of other people in the area.  They put together a group that they called Vision Tech Bio and they then did some due diligence on our technology over the course of a year or so and then that led to the license agreement being signed, in the first instance an option to license agreement and then the license agreement being signed in September 2017.

Was Vision Tech then a separate company?

Vision Tech was at that stage I guess an aggregation, so it wasn’t a formed company at the time but now Vision Tech Bio holds the intellectual property and is a wholly owned subsidiary of Rhythm Biosciences.

You said before that you did clinical trials at the CSIRO, are you talking about full phase 1, 2 and 3 trials or just indicative trials to work out which proteins were which?

Yeah, it’s more the indicative trials so with the Institute for Cancer Research we set up a sample collection system which are now used by many people, Victorian Cancer Biobank amongst others, today.  We then use those cases and control samples, so it was all case control work, to filter through the various biomarkers themselves so that told us whether the tests themselves were robust or not but particularly whether they were differentiating cancer from normals.  They will ultimately be used for screening purposes and so we’ll need more sophisticated clinical trials beyond those case control studies and that’s part of what Rhythm will be contributing in the next year or so.

Are the trial authorisation processes different for a test like this then they are for a drug or do you have to go through basically the same thing as if you had a drug?

It’s simpler than the drug situation but they’re different in a number of ways.  The gold standard for these types of studies is a large scale clinical trial of around 10,000 individuals which are essentially people who are at normal risk of having bowel cancer.  I need to qualify saying that this is for a product which is to be marketed for screening of the asymptomatic population and just statistically you’ll get about 70 cancer patients out of the 10,000 you recruit and that’s essentially enough to tell you whether your test detects cancer accurately or not.  The important thing is that that’s also done in a population which is very rich in people who will be cancer free and so they’re some of the parameters.

Can you just run through that again, I didn’t quite understand?  You test 10,000 people and you would normally get 70 people who have cancer, is that right?

That’s right, statistically there would be 70 people who had cancer out of that so it may be anywhere between 50 and 100.  With 100 cancers you’ve essentially got enough people there with cancer to be able to score whether your test is giving you robust proportions of those people accurately diagnosed, do you see what I’m saying?  For example if we had 10 people with cancer and our test found 4 in a larger population that could actually be anywhere between 80 out of 100 and 20 out of 100.  Larger numbers of cancers or other cases are required to be able to get a reasonable estimate of the proportion of patients that you’re accurately diagnosing.

Right.  It’s interesting.  Tell us what would the prostate specific antigen test have gone through?  Which is the blood test for prostate cancer which is the one I know about because I have it all the time.  Is that owned by anybody, that PSA test, or is that just a generalised thing and would it have gone through the same sort of tests?

PSA would have gone through the same test.  PSA is a pretty old test now so while I’m not absolutely certain of the details my expectation is that the core technology, the actual antibody or the test for the prostate specific antigen itself, would no longer be owned by anyone or under patent.  It will have gone through the same core set of testing, so there are case control studies and then there are studies when you move through to get a picture of how that would perform then in a more general population.  It’s just been used for so many years now that there is a body of clinical information that now underscores and essentially surpasses any of the original case control and prospective studies that PSA would have gone through originally.

Has the 15 years or so of data about your study, ColoSTAT, basically shown that it does detect colorectal cancer, can you say that with confidence?

What we’ve published already is that in two clinical trials that were run independently of each other, so that is on independent patients, they were case control studies and in both of those studies our preferred panel of biomarkers detected colorectal cancer with 73% sensitivity at 95% specificity.  What that means is we got 73% of the actual cancers right and it means that we had a false positive rate of 5%.

Does that mean you had a 27% false negative rate?

I guess that’s one way of looking at it, yes, a 73% false negative rate is probably the right way to look at that.

It’s 100 minus 73.

Exactly, there are a few equations in there that you actually use to look at to calculate sensitivity and specificity and they were what was going through my head.  To put that in perspective the stool test that’s used by the National Bowel Screening program currently has about a 66% sensitivity still at around 92% specificity.  What we say is that the test that we are running in its current format or as it was run there was performing at least comparably to the faecal immune test.  What we see as being a key advantage of our technology is that it’s going to be a blood test as opposed to a stool test.  If we have a look at the national bowel cancer screening program currently a very good test, many years of clinical information saying this is a worthwhile test but even with that only 39% to 40% of people offered that test are taking it up.  What we believe and what we’re trying to do is to say if you’re unable or unwilling to do a stool test then consider a blood test.  What we would like to do is to be able to increase the number of people screening for bowel cancer from that 39% figure to around 60% to 70% of people because that’s when screening will be its most effective for the population.

It’s much better dealing with blood than mucking around with poo I guess.

That was almost as simple as our calculation was but there has also been a number of now more rigorous clinical studies that have been done that have born that out as well.

Give us a rundown of the patents that you’ve got, what exactly have you patented and what geography do they cover?

We have one patent or one patent family I guess we consider it as at this stage.  That covers a core of 10 biomarkers, so protein biomarkers, and it covers a range of different combinations of those biomarkers which in our experience have been the most efficacious in being able to differentiate between cases and controls.  That patent has been granted in Australia, China, Europe and in Japan, and is still pending in India, the United States and Brazil.

How broad are the patents?  If somebody comes along and says we’re going to do 12 markers, do they get around it?

They can get around it provided that our markers are not part of what they’re claiming.

They’d need 12 different markers?

Different combinations from what we have, they would need some that were different from the ones that we had as well.

Right.  I note that you’ve got a few big investors, someone has come in recently, haven’t they?

That’s right, Merchant have come in recently and taken on about 7% I think it is.

Yeah, could you tell us what sort of due diligence Merchant did on your patents?

I haven’t spoken to them in that detail to understand what due diligence they have done but they will have looked at the likelihood of them being granted, I guess, and the European granting and the Japan and China granting are actually good and advantageous at this point.  I think the performance of the test as it’s been there and published I think is also another key parameter.  It’s also true that when you try and aggregate too many markers together at any given time you can train your biomarker combination to a specific data set, so overtrain essentially is what we’re talking about.  Those combinations then fall apart when you go to a new population.  It’s partly the number of candidates we have and the quality of the candidates I think which is going to be our differentiator.  There are some other companies that look at different combinations of proteins and we keep a very close eye on them and where they’re developing.

Because obviously a blood test for colorectal cancer would be a bit of a holy grail around the world I imagine.

That’s right, and so in terms of blood tests that are based on proteins as ours is we’ve identified two key companies who are looking at products of similar type, that is blood based proteins in one form or another.  Then there’s also a suite of new companies really that are largely driven by genomics technologies that have colorectal cancer as one of their target diseases.  Some of these work in blood using this technology called liquid biopsy which is really an assessment of DNA which is present in blood.

Right.  How much cash are you burning now?

We spend about $200,000 to $250,000 a month and we got $9 million at the time listing in December.  Our expectation is that that money will take us through to the time of lodging applications for CE marks and for registration on the Australian register of therapeutic goods.  Those applications we are looking to lodge at this stage in late 2019, early 2020. 

Merchant Funds Management didn’t give you new money they just bought from people who came in on the float did they?

They bought from people who came in, yes, from the float. 

What are your plans for commercialisation, how far will you be able to take it?

We believe that we’ll be able to take it all the way that we need to into the market but we’ll need partners to do that and so we would be looking, for example, in Australia as our technology is developed to potentially move it into the area of being an in house diagnostic test which is run in a diagnostic laboratory in Australia.  Early stage in the United States might be in what they call a clear lab, these are labs that do lab developed tests where these tests can be based on clinical performance information, these tests can be run at the request of GPs and doctors and that would be taking us on our way to the accumulation of additional clinical data which would then take us into FDA approval in the United States along with additional clinical trials. 

Do you imagine you would eventually be distributed through all pathologies?

It’s potentially of that sort because that’s why we chose an antibody based test, antibody based tests have been a major core of diagnostic services for a long time now and most laboratories in most places can run these sorts of tests.  We see an opportunity to actually be providers to a whole range of other companies that are running our test as well.

What does the current pricing of blood tests and so on tell you yours might be able to be priced at?

It’s an interesting question, it’s a difficult one to answer.  I think there’s one blood test being currently run in the United States as this is now DNA based test and it’s used to monitor recurrence of disease so it’s a different type of thing really.  Their asking point is about 450 USD per test there and they’re selling tests now.  You take that all the way through to a test like the faecal occult blood test as it currently is, which is antibody based test which sells for about $38 at a pharmacy.  There’s a broad range of prices and if a screening test, for example, attracts a lower price than a test which is now a key part of patient management.  What we can say relatively clearly though is that we’re seeking to have a cost of goods for our test which is under $10. 

Well that’s pretty cheap, that’d be fine.

Hopefully that’s the case but then there are other services that you add onto that like blood collection and transfer, this is actually just a reagent that we’re talking about there but the goal is certainly that this should be an inexpensive accurate test that works for a broad population.

Obviously going for high volumes.

Yes, that’s the point of the screening market.  If we look at Australia, Europe and the United States which are our three starting markets if you think about the national bowel cancer screening program it targets people between 50 and 74 years of age because the rate of diagnosis of bowel cancer increases dramatically after age 50 so if you consider that across those countries there are 250 million people in that age bracket across those countries, about 130 million of those don’t do screening test.  The target population I guess that we have to work with in our target jurisdictions is about 130 million people and of course this test, like the faecal immune test that’s done for the national bowel cancer screening program would be done once every two years.

When we’re talking screening programs are you thinking that most of your revenue is going to come from governments?

Not necessarily, not in the first instance.  We would not presuppose that we would be getting into screening programs in the short term because the screening programs are based in clinical data that is being generated in clinical practice over many years but as we accumulate data, clinical experience and data.  Particularly if our performance looks very good when we go on those larger clinical studies and clinical application, then we would certainly be speaking to governments to see if they were interested in our test either as an adjunct to what they do.  Here I was talking earlier about targeting that sub-population of people who can’t or won’t do a faecal test but equally there may be some value in a test that triages people with a positive faecal immune test to colonoscopy because you’ll understand that there’s been a discussion currently about the delays in getting colonoscopy that 90% of people with a positive faecal occult blood test appear to be waiting between 116 and 180 days for their colonoscopy.  If we were able to assist in triage so we’ve essentially identified those people most at need we can get those people to colonoscopy first but all the other people would always also need to be done.

Triage is also another potential market where again a discussion with governments may be relevant.

That’s great.  I suppose what you need is for the Chinese government to pick it up as a screening tool and you can test a billion people.

That’s true.  One of the interesting things is part of what we’ve done is to go around to various countries as we think about our targets and try to understand how much those countries actually spend on their people who are diagnosed.  There are some very interesting numbers there I think.  The Chinese number currently is relatively small but it’s also true that there’s a very large and growing middle class there that will be able to afford tests of this sort and that was, of course, one of our reasons for taking out patent cover in China as well.

Thanks very much, it’s been great talking to you.

Thank you very much.

That was Trevor Lockett, the CEO of Rhythm Biosciences.