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How this company that just raised $3.5 million in an IPO plans to disrupt the $24 billion medical dermatology market

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Matthew Callahan

Acne is the most common skin disease in the world, and in 2013 it was reported to cost more than $2.3 billion in prescriptions. While the medical dermatology market was valued at more than $24 billion in 2015, the sector hasn’t seen much innovation in the past decade and the pipeline for products in development is extremely thin.

Botanix is an American company that develops new prescription treatments for serious skin diseases such as acne and it recently listed on the ASX on 15 July in an oversubscribed offer which raised $3.5 million.

The management team believes Australia is the perfect place to list given the ability to fast track clinical and human trials to allow for FDA approval down the line.

Anthill recently spoke with Matthew Callahan, Executive Director of Botanix to discuss in detail why this US pharma is heading half way across the Pacific to Australia to list and what it will do with their funding.

What exactly is Botanix doing?

Botanix is a medical dermatology company developing new prescription medicines to treat serious skin diseases, including acne, psoriasis and atopic dermatitis.

It uses a novel active with a unique 4-way mechanism of action to target the cause and the symptoms of acne. This novel active is delivered into the skin using a new drug delivery technology called Permetrex™, which the company has licensed exclusively.

Botanix’s lead product under development is a topically applied gel for the treatment of serious acne which is a $3 billion market in the US alone each year.

There have been no new medicines approved for the treatment of acne for more than 10 years, so there is significant market opportunity that can be addressed with a successful Botanix product.

What has Botanix been up to lately?

Botanix is creating new prescription treatments for skin diseases that have the potential to disrupt the current market.  Most treatments for acne target the symptoms of acne (the bacterial infection and the inflammation) – only one targets the excessive production of oils and that product has a serious side effect profile, including birth defects, that its use is carefully monitored and limited.

The company will use the funds it has raised to undertake the first clinical trials to study the use of synthetic cannabidiol for skin diseases.

Cannabidiol is currently being studied by many pharmaceutical companies for the treatment of epilepsy, pain, arthritis and schizophrenia amongst other indications, but Botanix intends to be the first company to develop synthetic cannabidiol for skin diseases.

Cannabidiol has been shown in pre-clinical studies to have a unique mechanism of action in skin disease, along with a benign side effect profile.

Despite its interesting potential as new drug for various skin diseases, unfortunately cannabidiol is not readily absorbed by the body and only about 6 per cent of the drug gets into the blood stream.

“If you try and apply cannabidiol to the skin, it’s sticky and has a texture much like lanolin, so it sits on the skin and doesn’t penetrate to get down to the organs of the skin that we are trying to treat,” explained Callahan.

“However, Botanix has managed to solve this issue by licensing a drug delivery technology known as Permetrex™ which is designed to deliver pharmaceuticals into the skin much more effectively than other approaches. This technology allows us to get this novel drug down to the sebaceous glands and skin cells that need to be targeted to interrupt skin disease progression.”

Why has Botanix attracted so much attention?

There are a number of reasons Botanix has received strong investor backing and is getting a lot of attention in the market.

First, Botanix operates in an attractive industry where there is significant unmet patient need – for example, acne is the most common skin disorder in the US, affects 40-50 million Americans and affects 85% of teenagers globally.  More than $3 billion worth of prescription products for acne are sold each year in the USA alone.

Secondly, investors know that despite the huge potential in the medical dermatology market, there have been no new products approved by the FDA to treat acne for more than 10 years, meaning big pharmaceutical players are watching smaller companies like ours with interest.

A great example of this is the recent acquisition of Anacor Pharmaceuticals by global giant Pfizer for US$5.2 billion. This deal shows how global companies are willing to pay top dollar for emerging companies with strong clinical data.

Callahan went on to conclude, “I think investors recognise Botanix have an experienced management team with a track record of successfully building and selling previous biotechnology companies – the Botanix management team have been heavily involved in the regulatory side of matters, given we have more than 10 FDA approvals between us.”

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