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Dr. Alan Taylor, Executive Chairman of Clarity Pharmaceuticals spoke to James Posnett, ASX about the company's listings journey, becoming the largest biotech IPO on ASX to date when it listed in August 2021.

James Posnett (JP): Welcome to On the Board. My name is James Posnett. I'm senior manager of listings at ASX, and I'm joined today by Clarity Pharmaceuticals Executive Chairman Dr. Alan Taylor. Welcome, Alan.

Dr Alan Taylor (AT): Thanks, James. Looking forward to it.

JP: Now, there has been a flurry of ASX healthcare IPOs in the past 12 months, raising over a billion dollars in capital. Clarity Pharmaceuticals (ASX: CU6) listed in August this year with a market cap of around $360 million and raised $92 million, making it the largest-ever biotech IPO on ASX. So, first of all, congratulations, Alan, to you and the team.

AT: Thanks, James. It was certainly a fun process.

JP: That's great. We originally met, I think, when you were an investment banker. And then, about eight years ago, you decided to join Clarity. Could we start off by just going over your background and also why you made that switch to biotech?

AT: Yeah, for sure. That's a really interesting question. Before we met, some 20 years ago, I was actually at the bench top as a scientist in a little place called the Garvan Institute. So, I trained as a scientist. I did my undergrad (degree) at Sydney Uni and did my honours at the Kolling Institute at Royal North Shore Hospital.

I then moved across to the Garvan for my Ph.D. and received a scholarship to do that. But during that process, I found what I really loved about science, and I'm a scientist at heart, was more the translation of science -- how we produce products and services out of good science that's been undertaken at institutes like the Garvan or, in particular for our company, the University of Melbourne and ANSTO. So, during that Ph.D. process, I also did a postgraduate finance degree. And as soon as I handed in my Ph.D., I made that shift to investment banking. As you remember, during all those years we did a number of biotech deals and I loved the biotech space.

It was a really good run at Inteq. We had a great time, but a lot of those companies were from the US and not Australia. And, I thought, maybe there's a good opportunity to use my experience and background to shift into the translation of good Australian science. That's when I moved to Clarity, which wasn't really much at that time. It was a shell company with a couple of provisional patents, one out of ANSTO and the University of Melbourne. We have obviously now grown that quite significantly over the last eight years into what is the largest biotech IPO on the ASX, which we're quite proud of achieving.

JP: That's really interesting. Could you give us a bit more information on Clarity and its mission and technology?

AT: Yeah, for sure. Once again, it's a great Australian story as far as the science goes. The secret weapon of science is serendipity, and it just so happens that quite a few decades ago, a gentleman called Professor Alan Sargeson at the Australian National University wanted to develop these cages that were able to hold copper. It sounds a bit odd when you say it like that, but there are these cages or chelators that are able to hold other metals. The benefit of copper is it has this perfect pairing of copper-64 for PET imaging, which is very important in the diagnosis of cancer, and copper-67, which is a therapeutic isotope. The problem with all the other cages was that they leaked. So, he was able to do this really good, what we call basic, chemistry. It was pure chemistry where he was able to hold copper within these cages. They're called sarcophagine cages after a sarcophagus -- what goes in, doesn't come out.

That early work led all the way to Professor Paul Donnelly at the University of Melbourne, who was able to optimise that for the day and age we live, to be bifunctional. As well as holding copper, we could also attach things called peptides or antibodies or small molecules to that, to specifically target the cancers. And he made it easy to use, easy to manufacture, highly stable, and able to hold the copper. So, that great work was then all patented and it moved into Clarity, which was really the vehicle of commercialisation. It then moved into first-in-human studies at the Peter MacCallum Cancer Centre, down in Melbourne. But now, it's evolved into multiple products, because it really is a platform technology, including in rare children's cancers, in neuroblastoma.

. We're doing those studies in the US at this point and looking to do some further work in Australia. We're in prostate cancer with a PSMA agent and running a therapeutic study in the US and we're running a diagnostic study here in Australia. And then we've also just closed out a breast cancer trial with SAR-Bombesin at St. Vincent's Hospital, my old precinct, with Professor Louise Emmett, who's a key opinion leader in this space. We've closed that out now so we can actually utilise that data for filing an IND (Investigational New Drug) in the US to progress larger studies in that market.

JP: It's a great story and it’s also great that we've got radiopharmaceuticals (companies) listed on ASX because obviously it's been quite a globally exciting area. So, just going to the listing itself, why did you list and what were the key considerations?

AT: So, once again, James, we've known each other for a long time, obviously in the capital market space, and it was really finding the right time for Clarity to list.  The ASX made a lot of sense for us: we're an Australian technology, our register was predominantly Australian investors; the ASX is a very entrepreneurial exchange for companies like ours and has evolved over the last eight years to be more so and deeper in its understanding of biotechnology companies. And the time was just right.

So, we're now very well-funded and have a lot of news flow that will work its way through all of our clinical trials in the US and Australia. We have three products in clinical development, which is actually for us six potential products because we have diagnostic and therapeutic for each of those product areas. So, we'll have lots of news flow coming out. And we really just wanted to continue on this, what is a great Australian story, with an ASX listing to evolve and develop our technology further. Really, the ultimate goal is to better treat children and adults with cancer.

JP: And so, you've been through that process now as a company on the other side, as it were. But you were also an investment banker, taking companies to market. What kind of advice would you give to founders and CEOs considering a listing?

AT: It's an interesting question because every company is different. The ASX has evolved significantly off [Australia’s] resources industry, and there are a lot of companies that list very early there. I find that a little bit difficult as it wasn't something I specialised in. We are really specialised in more evolved companies, the mid-market. So, I would always think that, particularly with a science-based company, you really want to start to substantiate your technology in the private market. And I know there are difficulties for some people to source capital in that market.

Once again, my background was not only strategy and science, but also capital raising. So, we were able to raise that capital in the private market to make sure we ticked a lot of those boxes. But that's a very difficult thing to do.

And if founders are finding themselves in that situation, I highly recommend finding someone with those skills and experience who is able to nurture the company up to a time where you're taking a lot of risk away. There are always risks, but taking a lot of the risk away from the technology itself and kicking off at least the human clinical studies themselves. So, you're starting to see what it looks like in humans. That would be my key recommendation.

For us, obviously with my experience with listing companies, we were able to put together very quickly a group of people who I'd worked with before, including legal counsel who I'd worked with for 15, 20 years previously, and then independent accountants and those sorts of things. That was a process I knew through and through. And then we were able to bring on some others.

Before all this, were our lead managers. We had the joint lead managers of Jefferies, who are probably the number one player globally in life sciences. That was coupled with my long relationship with Bell Potter, having done deals with Bells over the years. And I think that was a really good pairing of the two strengths of both of those companies, those banks, to complete what was really interesting because we did it through Covid.

It was the most unique IPO I've ever done because it was all done remotely, like this. I didn't leave my office the whole time and did an international roadshow in a few days one week and a few days the next week, and we were able to close that out. But really that came with working with really good groups like Jefferies and Bell Potter in that process.

JP: There are some really useful insights there, Alan. Thanks for that. I couldn't let you leave without sort of wrapping up on a healthcare-related question and I'll keep it fairly broad. I was interested in your views on the current state of the Australian healthcare sector and its outlook, in your view.

AT: I think I have probably, somewhat once again, a unique view. If we just look at the capital markets, it's good that we're having lots of companies listing and those sorts of things. But a lot of those are generating overseas IP, not that that's a bad thing.

I spent a lot of my career listing US companies. So, I think it's not a bad thing that we have them listed here. But if you talk about the Australian industry, particularly in the translation of science, it'd be great to see more of that flow through. And that relates more to setting up.

We always talk about this ecosystem of translating what is bench-top research and having that entrepreneurial level of influence on early-stage science. So, we can see a lot of that evolving.

We have terrific science here. We have great scientists, even though not in large numbers, but without that funding for basic research and people to be explorative with their research itself and look at new things. And when they get a product, we really need funding to go into the first part of that translation.

For me, coming into Clarity, I could raise that capital, but there are lots of scientists that don't have that network. So, if we have grants and new initiatives from a government level, I think that would be really beneficial. And Clarity was able to be something that was homegrown. We worked with a university and obviously ANSTO, but we start to mimic similar sorts of scenarios that aren't necessarily VCs (venture capital firms) getting in early and looking at plays. But (rather) are looking at other funding structures that we can nurture companies or nurture that early development and bring in an investor network that's able to take on that risk. But obviously there's upside in that as well.

And I'd love to see more and more of that occur on the back of Clarity’s success and that of some others. But certainly, as far as the ASX is concerned, it's great to see some larger companies now in biotech -- a good mix of companies. And so, people can get in at earlier stages and later stages. But it's great to see that mix and certainly a very strong, supportive exchange that's not overly burdened by the high compliance issues of some other exchanges globally. That gives us a little bit more of an entrepreneurial spirit that we can evolve here.

JP: That's great. Thanks, Alan. Well, Clarity is a welcome addition to the peer group. And look, I really appreciate your time today and insights. And I wish you all the best with the business.

AT: Thanks so much, James. I'm sure we'll be speaking a lot in the future. Thanks so much for the opportunity to chat today.

JP: Thank you.