Addex Therapeutics Ltd (ADXN) Q2 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Addex Therapeutics to Announce Half Year 2022 Financial Results and provide Corporate Update Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tim Dyer. Please go ahead.

Thank you. Hello, everyone. I'd like to thank you all for joining our Q2 2022 financial results conference call. I'm here with Roger Mills, our Chief Medical Officer; and Robert Lütjens, our Head of Discovery, Biology. I draw your attention to the press release and the financial statements issued earlier today, which are available on our Web site. I also draw your attention to our disclaimer. We will be making certain forward-looking statements that are based on the knowledge we have today. I will start this conference call by giving a quick overview of our recent achievements, before handing over to Roger and Robert, who will review our clinical and preclinical pipeline. I will then review our financial results. Following that, we will open the call for Q&A. During the second quarter of this year, we had to take the difficult decision to terminate the development of dipraglurant in dyskinesia associated with Parkinson's disease. This was due to the slow patient recruitment which was attributed to the impact of COVID-19 on the interest of Parkinson's patients to join our clinical study as well as staffing challenges and staff turnover at clinical trial sites. This decision has significantly delayed the development of dipraglurant for PD-LID and negatively impacted the prospects of a marketing approval for dipraglurant. In addition, the inconclusive results from our blepharospasm clinical study was also a significant disappointment, and as a result we have terminated [the development of] (ph) dipraglurant in dystonia. We continue to believe in dipraglurant and are currently evaluating its future development in PD-LID and a number of other disease areas, including pain, substance use disorder, neurodevelopmental disorders and stroke rehabilitation. Despite these setbacks in the development of dipraglurant, we continue to make excellent progress towards achieving our other strategic objectives. Our partner Janssen continues to make significant progress in executing their global Phase 2 study in epilepsy patients. Due to the disruption caused by the Ukraine-Russia conflict and the impact it has had on the recruitment of patients at sites, which were active in these countries, we have revised our guidance for reporting data from epilepsy study from Q4 to Q1 of 2023. We are very excited by our preclinical pipeline, which has made excellent progress with multiple clinical candidates rapidly advancing towards IND-enabling studies. Earlier this week, we announced the extension of our strategic collaboration on GABAB PAM with Indivior and their commitment of an additional $900,000 of research funding to advance drug candidates through to the start of IND-enabling studies. In addition, we have agreed with Indivior to expand our reserved indications to include chronic cough. As a reminder, Indivior's primary interest is substance use disorders. And under the agreement, we have retained the right to select drug candidates for development in certain exclusive reserved indications. Our GABAB PAM funded research effort has progressed to late clinical candidate selection phase with multiple candidates being profiled in secondary disease relevant models. We expect Indivior and ourselves to select compounds early in 2023 to advance into IND-enabling studies. We plan to develop our independent program in Charcot-Marie-Tooth 1A neuropathy, chronic cough and pain. We have made great progress in our mGluR7 negative allosteric modulator program for stress related disorders, and have successfully identified a compound ready to enter IND-enabling studies. We continue to advance a selection of differentiated backup compounds to late clinical candidate selection. Our mGluR2 negative allosteric modulator program for mild neurocognitive disorders associated with Alzheimer's disease, Parkinson's disease and depression has entered clinical candidate selection phase. And last but not least, our M4 PAM program is advancing rapidly through lead optimization. M4 PAM is a particularly exciting target for schizophrenia, especially following the recent positive Phase 3 data from Karuna. On the financing side, the 4.6 million of equity financing completed in July has increased our cash reserves to 12 million at the end of July, providing us with a cash runway through Q2 of 2023. So now, I'd like to hand over to Roger.

Thank you, Tim. I'd like to talk about our drug ADX71149 for epilepsy, which is partnered with Janssen Pharmaceuticals, a J&J company. In the epilepsy market, it's a large market and it is projected to reach approximately $20 billion by the year 2026. The market leader is Keppra and the branded drug is treating over 2 million patients, recognizing over €800 million per year. Obviously, there is extensive generic treatment with the drug as well, which really extends the market further. So a high proportion of refractory patients and a quarter of new patients are refractory to treatment. Current combination of treatments have limited therapeutic effect. Therefore, there's a large underserved patient population in need of improved treatment options. 71149 is a selective oral mGlu2 PAM positive allosteric modulator with a clear mechanism of action in epilepsy. Preclinical models have showed a 35-fold increase in Keppra efficacy when combined with 149, and therefore there's a potential to both reduce Keppra dosing, which will improve efficacy and reduce side effects. In terms of development, 149 has been extensively explored in the clinic with nine Phase 1 and two Phase 2 studies in other indications. Janssen have also recently completed their Phase 1 program in Japan. Currently, the proof of concept study which is ongoing with top line data Tim mentioned expected in Q1 2023. Also, Janssen have recently started a two-year open label extension study, which started this quarter in 2022 and will be open to eligible patients who complete the Phase 2 randomized study. In terms of the partnership, Addex is eligible to receive €109 million in prelaunch milestones and double digit royalties. On this slide, you can see the preclinical efficacy using a pharmaco-resistant mouse epilepsy model, which has high translational value and is strongly predictive of clinical utility. On the left side of the slide, you can see that taking the standard dose of Keppra and adding a low dose of 149, you see a 35-fold shift in efficacy. On the right side, you can see a 14-fold increase in efficacy when Keppra is added to 149. Thus, this is a true synergistic effect and we're excited to see how this unfolds in the clinic. On that point, if we look at this slide, this describes the Phase 2 study, which is currently ongoing. This is a Phase 2 double blind, placebo controlled proof of concept study and enrolls patients with partial onset seizures who have a suboptimal response to treatment with Keppra or levetiracetam. Patients will establish a 28-day seizure count over a 56-day baseline period prior to randomization. They will then be randomized to receive either 149 at 50 milligrams BID or matching placebo. The primary endpoint of the study is the time taken to return to their monthly baseline seizure count. The study has two periods, period one being the four-week acute efficacy phase and period two being an eight-week maintenance efficacy phase. Period two will include patients who did not return to their baseline monthly seizure rate during the first period of the study. And they will continue on their randomized drug or placebo. Data in this study is expected in Q1 2023. The study illustrates the continued commitment of our long-term collaboration partner, Janssen Pharmaceuticals, to this program and to pioneering novel ways to help epilepsy patients. As a reminder, Janssen are covering all costs of development. And we have significant prelaunch milestones of €109 million and double digit royalties on net sales. On the next slide, I just want to remind people, as Tim has mentioned, the continued opportunity we have with dipraglurant. PD-LID affects 200,000 patients in the U.S. and dipraglurant has orphan drug designation in the USA. Substance use disorder 20 million patients in the U.S. and about 2.2% of the adult population worldwide, with pain as a 10% of the adult population diagnosed with chronic pain every year. With stroke rehabilitation, 5.3 million patients with 1 million stroke patients in the U.S. and our 50,000 Fragile X patients in the USA. In terms of clinically validated approach, dipraglurant reduced PD-LID in Phase 2. And Addex compound 10059 reduced pain in patients with episodic migraine. And basimglurant, a similar drug showed that it is currently in Phase 2 for trigeminal neuralgia. Mavoglurant, another mGlu5, has shown effects in cocaine use disorder, alcohol use disorder, Fragile X, et cetera. In terms of status of development, there's extensive preclinical and clinical data, five Phase 1s and Phase 2s proof of concept in PD-LID that have been completed. In terms of intellectual property, composition of matter through June 2025 and strong polymorph patent through 2034 without extensions. Dipraglurant has orphan drug designation in PD-LID in United States with the potential for additional market protection through formulation and the orphan drugs. I want to hand over to Robert. Robert Lütjens: Thanks, Roger. Good morning and good afternoon to everyone. We've made great progress in advancing our preclinical programs. As a reminder, all of our programs were identified in house from our proprietary allosteric modulation discovery platform. The success of our platform is driven by the combination of our unique small molecule chemical library and tailor made proprietary biological screening tools and methods, which we deploy to identify the initial hits and support lead optimization. Today, I would like to share with you the progress we have made in four of our most advanced preclinical programs, the GABAB positive allosteric modulator program, the mGlu7 negative allosteric modulator program, the mGlu2 negative allosteric modulator program, and the muscarinic M4 positive allosteric modulator program. Starting with our GABAB PAM program, which is partnered with Indivior, the aim of this collaboration is to deliver a new generation of treatment for substance use disorders. Indivior is supporting the research of addicts and have recently committed additional funding for us to complete clinical candidate selection. As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, a GABAB orthosteric agonist that has been FDA approved for treatment of spasticity and is widely used off label to treat numerous diseases, including alcohol use disorder, gastroesophageal reflux disease, and various conditions of pain. However, baclofen comes with significant side effect, hampering its wider use and there is a strong need for what we call a better baclofen. We believe this can be achieved with positive allosteric modulators and their differentiated pharmacology having the efficacy of baclofen without its side effects. We are well on our way to meeting this objective with multiple novel drug candidates rapidly advancing through clinical candidate selection phase. We are currently profiling several drug candidates in non-GLP studies with the aim to nominate drug candidates for IND-enabling studies beginning of 2023. As mentioned earlier, we have the right to select drug candidates from the Indivior funded research activities for our own independent GABAB PAM program. I will now speak about the indications we plan to pursue. Firstly, Charcot-Marie-Tooth 1A, a type of inherited neurological disorders that affect the peripheral nerves. People with this disease experience weakness and wasting of the muscles of the lower legs beginning in adolescence. Later, they can also have hand weakness and sensory loss, resulting in a significant reduction in their quality of life. CMT 1A is caused by having an extra copy or duplication of the PMP22 gene and is inherited in an autosomal dominant manner. There's currently no approved drug to treat CMT 1A. However, baclofen has shown beneficial effects in patients. In addition, we have collected robust preclinical data with our own drug candidate in highly translational models of CMT 1A. In these studies, we have demonstrated positive effects on both biomarkers and behavioral measures, suggesting GABAB PAM has the potential to slow or even stop the progression of the disease. We're currently completing preclinical profiling of a proprietary drug candidate in advanced disease relevant models in collaboration with the American Charcot-Marie-Tooth Association. Secondly, there is a strong rationale for developing GABAB PAMs for chronic cough based on studies with baclofen and the role of GABAB receptors in the neural pathway involved in cough. We believe that GABAB positive allosteric modulators could be an innovative potential new treatment with a highly differentiated side effect profile compared to baclofen and P2X3 inhibitors. We're currently profiling our proprietary compounds in disease relevant models of chronic cough. Thirdly, there's also a strong rationale for developing GABAB PAM for various types of chronic pain, including pelvic pain such as bladder pain, cancer pain and pain associated with trigeminal neuralgia. Current medication is largely based on opioids, gabapentin, pregabalin, and assays for bladder pain or [indiscernible] and other antiepileptic drugs for trigeminal neuralgia. These medications are suboptimal as they leave a significant proportion of patients without adequate or any benefit, and carry risk of significant side effects. Again, the GABAB receptor target has been well validated by baclofen, which has shown efficacy in patients with cancer pain and is used off label in patients with bladder pain or trigeminal neuralgia. Now to the status of the program, we have identified multiple novel chemical series with potential for robust novel intellectual property and multiple compounds are in late clinical candidate selection phase, completing non-GLP preparatory studies. We expect to deliver multiple drug candidates for Indivior and in parallel multiple differentiated drug candidates for our independent program for progression into IND-enabling studies in the first half of 2023. We have been progressing significantly our mGlu7 negative allosteric modulator program for post traumatic stress disorder, or PTSD, as we have now identified a clinical candidate drug to enter IND-enabling studies. PTSD is a psychiatric disorder that may occur in people who have experienced or witnessed a traumatic, often life threatening events such as a serious accident, natural disaster, or in total nearly 4% of the world's population. Current treatments are mostly relying on behavioral therapy, as most pharmacological treatments such as anxiolytics and antidepressants show insufficient benefit. Based on established knowledge around the mGlu7 target, such as the anxiolytic profile of the mGlu7 knockout animals and of mGlu7 inhibitors, and the robust preclinical data in multiple in vivo models of the disease we have generated with our current mGlu7 NAM compounds, we have a very strong rationale to progress this project towards the clinic. We have now identified one clinical candidate drug ready to enter IND-enabling studies. And in addition, multiple well differentiated backup compounds. Onto our mGlu2 negative allosteric modulator program for mild neurocognitive disorders, or NCD, and depression. Mild NCD is a stage between expected cognitive decline of normal aging and the more serious decline of dementia. Besides being potentially the early sign of Alzheimer's disease, mild NCD is also often experienced by patients suffering from depression. Developing mGlu2 NAM offers the exciting opportunity to treat cognitive impairment, while also addressing symptoms of depression. Both pro-cognitive and antidepressant effects have been demonstrated in relevant preclinical models with our mGlu2 NAM candidate compound. We believe that mGlu2 [ph] have initiated a Phase 2 proof of concept clinical trial in treatment resistant depression with mGlu2 NAM compound, and they are currently running a drug-drug interaction study with Donepezil suggesting they prepare a study in mild NCD patients with a combination between their compound and Addex [ph]. We aim to be a fast follower to them in our approach with our well differentiated compounds. We're completing lead optimization and have done a clinical candidate selection phase with multiple compounds with the aim to start IND-enabling studies in the second half of 2023. And finally, a few words about our M4 muscarinic and four positive allosteric modulator program for treatment of schizophrenia and other types of psychosis. As you probably know, psychosis has been treated with the same mechanism of action for the last 50 years with limited efficacy and significant tolerability issues, often leading to treatment discontinuation and relapse. The big news in the field came from Karuna Therapeutics who published the positive results of their Phase 3 study of their KarXT compound in schizophrenia patients. KarXT is a combination of xanomeline, a muscarinic M4 receptor agonist, and peripherally restricted muscarinic antagonists. This combination allows to selectively activate muscarinic receptors in the brain while blocking the off target effect xanomeline has because of its poor selectivity. This is a perfect validation of the M4 receptor target and of our positive allosteric modulation approach as we are aiming at identifying highly selective and brain penetrant molecules. In summary, our drug discovery engine has achieved great progress with multiple drug candidates advancing towards IND-enabling studies, the renewed commitment of our partner Indivior, the delivery of a candidate ready to start IND-enabling studies in the mGlu7 program are further validation of the quality and productivity of our allosteric modulation platform. This concludes my prepared remarks. And I'll hand it back to Tim now.

Thanks, Robert. I'll now switch to an overview of the financials. Starting with the income statement, we recognized 200,000 in revenue and income in Q2 2022 compared to 1 million in Q2 of 2021. The primary source of revenue is research funding from our collaboration with Indivior, which we expect to reduce in 2022, as drug candidates move to late stage clinical candidate selection and our partner takes over more of the operational execution of the development. In terms of expenses, R&D expenses of 5.7 million are primarily related to research and development activities on our dipraglurant program and to a lesser extent, our GABAB PAM, mGlu2 and M4 PAM programs. R&D expenses have increased by 2 million compared to the second quarter in 2021, primarily due to the increased activities in dipraglurant clinical development activities related to PD-LID blepharospasm. G&A expenses were 1.5 million in the second quarter compared to 1.8 million in the second quarter of 2021. The decrease of 300,000 is due to the reduced professional fees, which were abnormally high due to one-off expenses of setting up our U.S. shelf registration and At-the-Market American Depository Share Equity Sale program, and which we incurred in the second quarter of 2021. Finance loss of 100,000 in the second quarter of this year related primarily to exchange rate losses on U.S. dollar cash deposits, due to the strengthening of the Swiss franc. Now onto the balance sheet, our assets are primarily held in cash and we completed the second quarter of this year with CHF 8.8 million of cash held in Swiss francs and U.S. dollars. Other current assets 2.1 million relate primarily to prepaid insurance and retirement benefits. Current liabilities of 4 million are consistent with prior years and relate primarily to R&D payables and accruals. Non-current liabilities of 200,000 relate to retirement benefit obligation calculated under IFRS. The decrease compared to prior periods is driven by an increase in the discount rate applied in the calculation. So in summary, Addex has made notable progress in the second quarter. We have a number of programs marching towards the IND-enabling studies. We have an experienced team. We have a pioneering technology platform which has delivered a pipeline. We have a significant IP estate. We have a strong foundation with partnerships, with industry, strong U.S. investors, dual listed on the Swiss Stock Exchange and the U.S. NASDAQ. And we have an exciting news flow coming forward for the rest of the year and into 2023. This concludes the presentation. I will now open the call for questions.

[Operator Instructions]. Dear speakers, we have several questions on the audio. Would you be happy to take them?

Yes.

Thank you very much. Now we're going to take our first question. Please stand by. And the first question comes from the line of Raghuram Selvaraju from HC Wainwright & Co. Your line is open. Please ask your question.

Thank you so much for taking my questions. I have two principal ones. With respect to the 71149 clinical data readout, I was wondering if you could frame for us what you think would be a slam dunk as it were result coming from this clinical trial? And how we should think about the way that might be quantified from an efficacy perspective? And how that might be framed in the context of the current competitive landscape within the target indication?

Yes. Thanks very much for the question. Roger, would you like to handle this one?

Yes. Thanks, Tim. So we've not -- the drug is being developed by Janssen. In terms of the reduction in seizures as expected, we've not described that yet. But I think what we're looking at are patients who are -- the design of the study actually it's really related to much more clinical practice than perhaps traditional endpoints in studies. So we are really looking at patients who have quite extensive seizures and reducing the frequency of seizures over time. And I think it's an exciting program. I think we will see a fairly marked improvement in the active arm or the reporting will be down to Janssen.

Thank you. And then the second question was with respect to dipraglurant. Assuming that you identify an appropriate partner to take forward this asset, what would be some of the core attributes of such a partner, particularly with respect to the way in which they advance the asset and the extent to which they explore its clinical utility?

Okay. Yes, an interesting question. We are discussing with a number of parties across the spectrum of larger to smaller entities. And there is a body of clinical data out there using other mGlu5 negative allosteric modulators, in particular mavoglurant, and it will really depend on -- at the moment, it will depend on the appetite of the partner and their primary interest. We believe in dipraglurant PD-LID. We also believe in the substance use disorder data that's been generated by mavoglurant. We think that's pretty robust. And we're also pretty excited by the rationale in stroke rehabilitation. Neurodevelopmental disorders, we are -- while there's some rationale there, I think there's a lot to be done around the selection of patients and the selection of the endpoint you would measure. But I think at the moment, the discussions are very early stage to really give you much more clarity on what a partner would concretely look like.

Okay, that's really helpful. And if I could just sneak one other one in, if I may. You had commented in your prepared remarks about potential interest in the neuralgia space, if I recall -- if I heard correctly. And I was just wondering whether you had thoughts around how specifically to stratify that patient population as well as potentially design development programs, even if you might not necessarily be the ones conducting those programs directly, in order to specifically deal with the issue that historically has arisen multiple times in such clinical trials in these indications, namely high and unpredictable magnitude of placebo response?

Yes. Back in 2007, Addex ran an acute migraine study and generated positive data with ADX10059, which was a predecessor mGluR5 negative allosteric modulator. So we do have some experience in the migraine field. And again, we do believe in this disease area. Now, as we've said, we are currently evaluating. And again, this is -- the decision to terminate dipraglurant development in PD-LID is pretty recent. So we are very much at an early stage of evaluating the different disease areas. We could go into -- as you know, it's a lot more than just the scientific rationale. It's also the complexity of development, the competitive landscape, and then in parallel, the discussions with potential partners in order to secure a backer to help finance and the operational execution of the development going forward. So I can't really concretely answer your question to what a trial would look like in trigeminal neuralgia. Now there is a -- basimglurant is currently in a trigeminal neuralgia study. So I think there is quite a lot of information available on ClinicalTrials.gov about what their trial looks like.

Thank you.

Thank you. Now we're going to take our next question. Please stand by. And the next question comes from the line of Bob Pooler from valuationLAB AG. Your line is open. Please ask your question.

Thank you for answering my questions. A few questions for me. First, starting with dipraglurant. Although there were a low amount of patients treated, did you see any signals in this patient?

We are really looking at the data and we're not ready to disclose anything at the moment. But we will do it in due course.

Okay. And then on the potential monetizing and partnering of dipraglurant, do you prefer a front ended deal or a back ended deal?

We prefer a front ended deal.

Okay. And 149 on positive results in the first quarter of next year, would that trigger a milestone?

No.

Okay. And then on the Indivior products, there too I think you're having several products probably also potentially going to the clinic with Indivior. Would you also see some milestone payments coming from that part too? In other words, all about to limit your cash reach going forward?

Yes. So we've talked about having 330 million of milestone payments. We have also mentioned that there are sales milestones included in there. We've also said that it's a pretty balanced conventional structure of a deal. However, we have not given any guidance on the timing of milestones. We are expecting to deliver molecules, development candidates for Indivior by March next year. We announced the extension of the agreement. And in addition to the additional funding, we disclosed that the agreement had been extended until the 31st of March. So I think you can read into that that we are at very advanced stages of clinical candidate selection. And that Indivior is expecting to be able to select its development candidates by the 31st of March. And they will then take over the operational execution of that program and advance it into IND-enabling studies, and then into Phase 1 in 2024.

Okay, in 2024. Okay, thank you for answering my questions.

Thank you. [Operator Instructions]. Dear speakers, there are no further questions. Please continue.

Thank you very much. Maybe just a few closing remarks. As you can see, we've made excellent progress in the preclinical portfolio despite the disappointment in the dipraglurant development. We're certainly very excited about seeing the readout from the ADX71149 epilepsy program, which is being operationally executed by Janssen. And as I said, we've revised slightly guidance into Q1 of 2023. I would just like to remind you that we are -- one of our strategic priorities is to execute partnerships across the portfolio as you can see with the progress that's been made in the preclinical portfolio with the number of programs now delivering clinical candidates. I think this is a very reasonable objective to achieve. So we're very confident in getting this executed by the end of the year. So thank you very much for attending our call. And I wish you all a very nice day.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.