Addex Therapeutics Ltd (ADXN) Q2 2023 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Addex Therapeutics Half Year 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be the 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 speaker today, Tim Dyer. Please go ahead.

Hello, everyone. I'd like to thank you all for attending our half year 2023 financial results conference call. I am here with Robert Lutjens, our Head of Discovery Biology; and Mikhail Kalinichev, our Head of Transition Science. I draw your attention to the press release and the financial statements issued earlier today, which are available on our website. I also draw your attention to our disclaimers. We will be making certain forward-looking statements that are based on the knowledge we have today. I'll start this conference call by giving a quick overview of our recent achievements before handing over to Robert and Mikhail, who will be reviewing our clinical and preclinical pipeline. I will then review our half year 2023 financial results. Following that, we will open the call for questions. So starting with the highlights. Our partner, Janssen, continued to make excellent progress in executing their global Phase 2 study in epilepsy patients with ADX71149. Cohort 1 of 60 patients has completed the study and Cohort 2 of 50 patients is currently recruiting. An independent interim review committee established by Janssen to review the unblinded data from Part 1 of Cohort 1 recently made its recommendation to continue the study. This recommendation and the decision of Janssen to continue the study is very encouraging and suggests ADX71149 is potentially safe and well tolerated and may have a positive impact on this patient population. Recruitment of Cohort 2 is going well, and we look forward to providing further updates on this important clinical study later this year, including providing guidance on when we can expect to report data. We continue to believe there is value in dipraglurant and have substantially completed our evaluation of future development. We have identified post-stroke recovery as an interesting area for future development and are currently profiling dipraglurant and preclude models as post-stroke recovery and look forward to reporting this data. We are in parallel pursuing discussions with potential partners to advance future development. We continue to be excited by our preclinical pipeline, which has made excellent progress with multiple clinical candidates rapidly advancing to the IND-enabling studies. We have made substantial progress in our collaboration with our partner, Indivior in advancing several novel GABAB PAM compounds into clinical candidate selection. As a reminder, Indivior's primary interest is in substance use disorder. And under the agreement, we have retained the right to select drug candidates for development in certain exclusive reserved indications. We are focusing our own dependent program on COP. During Q2 2023, we've continued to advance compounds through clinical candidate selection with multiple compounds showing excellent efficacy in multiple preclinical models of COP. We recently announced the extension of our collaboration through June 24 with CHF2.7 million of additional research funding committed by Indivior. We expect Indivior and ourselves to select compounds to advance into IND-enabling studies in 2024. We have selected a drug candidate in our mGlu7 NAM program for stress-related disorders including posttraumatic stress disorder and are ready to start IND-enabling studies, however, due to cash constraints. We are currently pursuing collaborative arrangements to advance future development. And last but not least, our M4 PAM program for schizophrenia, which is now a priority program for us, continues to make rapid progress through late lead optimization. At the end of Q2, we entered a compound into clinical candidate selection phase, and we're on track to start IND-enabling studies in H2 of 2024. From a financial perspective, we raised a total of CHF5.7 million funding year-to-date through capital raising activities and continue to pursue discussions with potential partners across the portfolio. We have also recommended a number of cost-cutting measures, which should significantly, reduced our monthly cash burn going forward. And as of today, we estimate that our cash reserves provide us with a run in to 2024. Now I will hand over to Robert, who will give you some more details about our exciting pipeline.

Thanks, Tim. I will start by speaking about our Phase 2 epilepsy study with ADX71149, which is being executed by Janssen. Janssen is making excellent progress with Cohort 1 of 60 patients completed and Cohort 2 of 50 patients currently recruiting well, an independent interim review committee established by Janssen, reviewed the unblinded data from Part 1 of Cohort 1 and recently made its recommendation to continue the study. This recommendation and the decision of Janssen to continue the study is very encouraging. As an introduction to this program, for those of you who are not aware of the details, ADX71149 is a metabotropic glutamate receptor sub-Type 2 or mGlu2 positive allosteric modulator discovered in partnership with Janssen using Addex's proprietary allosteric modulation platform. Janssen have extensively profiled ADX71149 in preclinical models of epilepsy and has demonstrated both stand-alone efficacy and a strong synergistic effect in combination with inhibitors of SV2A such as Keppra and Briviact. Epilepsy is a large multibillion-dollar market opportunity where despite several available treatment options many patients are still in need of improved therapies to treat the seizure. Interestingly, Keppra, while being largely sold as a generic is still leading the market of antiepileptic with close to CHF1 billion sales revenue per year. Over 2 million patients are taking Keppra, but many experienced breakthrough seizures, or a suboptimal response, demonstrating the need for improved treatment options. ADX71149 has been thoroughly profiled in clinical and preclinical studies by Janssen, demonstrating its good safety and tolerability profile and healthy volunteers and patients. Janssen are responsible for the development of the compound and are currently running both Phase 2 study and an open-label extension study in epilepsy patients. It is important to note, we have significant economics in our deal with Janssen. We have prelaunch milestones of CHF109 million, low double-digit royalties on net sales and Janssen are responsible for all costs. Now I would like to show you some of the critical data. We have shown in the past, but let me remind you of the main take-home method, which is the strong synergistic effect obtained when ADX71149 is given in combination with levetiracetam, the active molecule in Keppra. These preclinical studies were formed in the 6-hertz model, which is widely recognized as being a model with high translation of value to characterize the efficacy of antiepileptic drugs. The left graph shows how the effect of levetiracetam is dramatically increased in presence of a low dose of ADX71149, producing a 35-fold shift in its efficacy. On the right graph shows the result obtained when the paradigm was reversed, where our low dose of Keppra induces a 14-fold increase in efficacy of ADX71149. In other words, we obtained an antiepileptic effect with this combination of low doses of ADX71149 and Keppra that was similar to the one obtained with a full dozed Keppra. We hypothesized that this synergistic effect is due to the strong colocalization and similar neurotransmitter vehicle release control function of M2 receptors and SV2A proteins. Taken together, these findings have been instrumental in the decision taken by Janssen to initiate the study of ADX71149 in combination with levetiracetam in epilepsy. This is a Phase 2 double-blind placebo-controlled proof-of-concept study, enrolling patients with focal onset seizures who have suboptimresponse to treatment with levetiracetam or Keppra or brivaracetam, Briviact. Janssen plant grew up to 160 patients with up to three cohorts to test multiple doses. Cohort 1 is completed and Cohort 2 has made significant progress in recruit patients unblinded data obtained in Part 1 for Cohort 1 was reviewed by an independent interim review committee earlier this year who gave the recommendation to continue the study. In this Phase 2 study design, patients establish a 28-day seizure count over a 56-day baseline period prior to being randomized to receive either ADX71149 or matching placebo. The primary endpoint is the time taken to return to their monthly baseline seizure count. The study has two parts, Part 1 being the four-week acute efficacy phase and Part 2 being an eight-week maintenance of efficacy phase. Part 2 includes patients who did not reach their baseline seizure count during Part 1 of the study and continue on their randomized drug or placebo. An open-label extension study is going in parallel or in all patients opportunity to get treated with ADX71149 in combination with levetiracetam or brivaracetam. This will help gathering important information about safety and tolerability of ADX71149 in long-term day-to-day use. This is encouraging news suggesting ADX71149 is safe and well tolerated with potential benefit to epilepsy patients. We look forward to be able to update you with the progress of this study later in the year. I'll now pass it over to Mikhail, who will update you on the dipraglurant and GABAB PAM program.

Thank you, Robert. Following termination of the development of dipraglurant in PD-LID, we embarked on the detailed evaluation of a number of potential indications of interest for future development, including substance use disorder, migraine and the other forms of pay. We have completed this exercise and have identified post strong recovery as an interesting indication for the fuel development of dipraglurant. We believe that the differentiated profile of the program makes it particularly suitable for post-stroke recovery. There is large unmet medical need in post-stroke recovery and rehabilitation. Stroke is a common cause of chronic often lifelong disability as it is an associated with motor, sensory, cognitive impairment and multiple comorbidities. There are over 100 million stroke survivors worldwide, and the number is growing at the annual rate of 5.7 million. There are variety of physiotherapies use with strong patients, but the recovery is slow, and typically mild to moderate. There is an urgent need for pharmacological agents that can facilitate the recovery stimulated by physical therapies. mGlu5 receptor is a suitable target to address post-stroke recovery as it is densely expressed in brain involved in neuroplasticity and modulate [indiscernible] in fact activation of mGlu5 has been observed in the range of neurological disorders including stroke where it placed the role and so-called maladaptive rewiring of the brain following stroke. Inhibition of mGlu5 on the other hand, can facilitate adaptive wiring of the brain, promoting plasticity and creating of new functional pathways moving the neural network towards the pre-lesion state. Exciting new evidence suggests that negative allosteric modulator of the mGlu5 receptor MPEP administered daily in rent following stroke causes a sustained and growing improvement in sensory motor function in comparison to vehicle treatment. Similar improvement can be seen with mGlu5 dipraglurant. Dipraglurant is ideally suited to be used in tandem with physiotherapy in post-stroke patients as it has a fast onset of action and short half-life. It has shown good tolerability in healthy subjects and in Parkinsonian patients showing only mild to moderate CNS-related adverse effects. We have drug product ready and a strong patent position. And believe can become a first-in-class drug to facilitate post-stroke recovery. Let me now switch to our preclinical programs, starting with our GABAB-positive allosteric modular which is partnered with Indivior. The aim of this collaboration is to a new treatment for substance use disorders. Indivior is supporting the research at Addex and have recently committed an additional CHF2.7 million, following a fine funding for us to complete clinical candidate selection activities, in addition to CHF13.8 million total funded so far. As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, GABAB orthosteric agonist. Baclofen is FDA approved for treatment of spasticity and is widely used off-label to treat numerous diseases, including substance use disorders. However, baclofen has a short half life and comes with significant side effects hampering its wider use. Thus, there is a strong need for a baclofen. We believe this can be achieved with positive allosteric modulators, and their differentiated pharmacology having the efficacy of baclofen but longer half-life and improved side effect profile. We are well on our way to meeting this objective with multiple novel drug candidates rapidly advancing through clinical candidate selection phase with the aim to nominate drug candidate ready to enter IND-enabling studies in 2024. As part of our agreement with Indivior, we have the right to select drug candidates from the funded research activities for our own independent GABAB PAM program. We have selected to focus our independent program on cough, and therefore, I'll present this exciting opportunity. There is a strong rationale for developing GABAB PAM for chronic cough. Chronic cough is a persistent cough that lasts for more than eight weeks and can be caused by a variety of factors, including respiratory, infections, asthma, allergies and acids reflux but also possibly by an overactive cough reflux. There is a large unmet medical need in novel antitussive drugs as current standards of care are ineffective in 30% of patients or only moderately effective enough to 60% of patients. In addition, the current treatments carry risks of serious side effects. Support for using GABAB PAMs in treatment of chronic cough comes from the clinical evidence that the agonist is used off-label in cough patients and from the anatomical evidence that GABAB receptors are strongly expressed in the neuronal pathway involved in cost. Therefore, we believe that GABAB PAMs could offer superior efficacy in core patients. On the next slide, we show that GABAB PAMs are likely to have a superior tolerability profile in comparison to the current standards of care and show new taste related side effects, as seen with newly approved P2X3 inhibitor GABAB PAM. Therefore, we believe that GABAB PAMs could be an innovative new treatment of chronic cough, administered once daily via oral dosing and offering improved efficacy and tolerability with fewer non-responder patients also suitable for chronic doses, therefore, significantly improving patients' quality of life. We are working with multiple compounds progressing in late clinical candidate selection phase, and we expect to move into IND-enabling studies in 2024 in parallel to delivering compounds for our partner Indivior. Now I'll pass it back to Robert for an update on our other preclinical programs.

Thank you, Mikhail. Let me start with an update on our M4 PAM program as a potential novel treatment of schizophrenia and other psychosis. Schizophrenia affects approximately 1% of the world population, and patients have 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. This space is seeing a major breakthrough with the advent of a completely novel approach based on activation of muscarinic M4 acetylcholine receptors. The recent positive readout of a third Phase 3 registrational study of CAR XT, a combination of xenominine, a nonselective M1/M4 agonist, and a peripherally restricted pan-muscarinic antagonist strongly validates the M4 receptor activation approach. In addition, a Phase 1b testing of emraclidine and M4 PAM developed by cerebral and schizophrenia patients showed an antipsychotic effect paving the way for our M4 PAM program. Without going into too much detail, the mechanism of action of muscarinic M4 acetylcholine receptors allow us to reduce striatal dopamine tone without directly blocking the dopamine receptors. The strategy used by current antipsychotic agents. This allows to retain a therapeutic effect without the side effects of typical and atypical antipsychotics. Standard of care antipsychotics as well as non-selective muscarinic agents suffer from significant side effects, leading to high treatment discontinuation rate. CAR XT and emraclidine are significant steps up in the realm of schizophrenia treatments, but selectivity issues may still result in suboptimal tolerability. We are, therefore, in our M4 positive allosteric modulation program aiming at identifying highly selective and brain-penetrant molecules, offering potential best-in-class efficacy and liability. We are currently working on a highly differentiated and novel chemical series identified from our proprietary chemical library of small molecules with our specific allosteric modulation biological assays. We have made great progress in optimizing compounds, identifying highly M4 selective compounds, demonstrating an effect in preclinical models of schizophrenia for several lead compounds and have now entered into clinical candidate selection phase, aiming to identify drug candidates ready to enter IND-enabling studies in 2024. On to our mGlu7 negative allosteric modulator program for stress-related disorders including posttraumatic stress disorder, the program has delivered multiple drug candidates and we have selected one to advance into IND-enabling studies. PTSD is a psychiatric disorder, affecting approximately 3.5% of the population and may occur in people who have experienced or witnessed dramatic often life-threatening events such as a serious accident, natural disaster or war. Current treatments rely mostly on behavioral therapy as most pharmacological treatments such as anxiolytics and antidepressants show insufficient benefit leading to a high relapse rate. Novel approaches using psychedelic drugs such as ketamine, MDMA, [indiscernible] [psilocybin] show promise, but are hampered by restricted access and possible serious side effects. Based on the evidence accumulated so far, we believe our mGlu7 NAM has the potential to become a PTSD treatment with better efficacy and tolerability. The rationale for inhibiting mGlu7 receptors as an approach for treating stress-related disorders including PTSD is based on a wide-body of preclinical evidence from the axelytic profile of mGlu7 knockout or knockdown animals to studies using mGlu7 negative allosteric modulators performed at Addex as well as by many other groups. The specific mechanism of our mGlu7 NAM is through modulating specifically the traumatic memory while not affecting other aspects of memory. Our program has identified a lead drug candidate with a profile suitable for once per day chronic treatment. We have established a robust intellectual property position with five patent applications covering our lead and backup compounds guaranteeing a strong protection for our program. We have completed the preclinical package for our lead drug candidate, which pending funding is ready to enter IND-enabling studies. 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 significant progress achieved in our GABAB PAM and M4 PAM programs towards identifying clinical candidate compounds as well as the delivery of mGlu7 NAM candidate ready to start IND-enabling studies are further validation of the quality and productivity of our allosteric modulation platform. This concludes our prepared remarks on the progress of our R&D programs. And now I hand it back to Tim.

Thanks, Robert. I'll now switch to an overview of the financials. Starting with the income statement, we recognized CHF0.6 million of income in Q2 compared to CHF0.2 million in Q2 of 2022. Primary source of revenue continues to be the research funding from our collaboration partner, Indivior. In terms of expenses, R&D expenses were CHF1.9 million in Q2 compared to the CHF5.8 million in Q2 of 2022. This significant decrease of CHF3.9 million is primarily due to the termination of different development in PD-LID in June of 2022 and the winding up of all the costs related to this study. G&A expenses were $1.3 million in Q2 compared to $1.5 million in Q2 of 2022. The decrease of CHF0.2 million is primarily driven by reduced costs of D&O insurance. The finance result is primarily related to foreign exchange losses on U.S. dollar cash deposits. Now on to the balance sheet. Our assets are primarily held in cash, and we completed Q2 with CHF7.2 million of cash held in Swiss francs and in U.S. dollars. Other current assets amount to CHF1.5 million and primarily relate to prepayments in D&O insurance premiums and retirement benefit as well as trade receivables that mainly relate to the research agreement with Indivior. Current liabilities of CHF2.7 million decreased compared to the end of 2022 and primarily relate to R&D, payables and accruals. Noncurrent liabilities relate mainly to retirement benefit obligations. Now to summarize. The development of 71149 in epilepsy is ongoing with Cohort 2 recruiting patients, and we are encouraged by the recommendation of the independent review committee to continue the study. We continue to believe in the value of they put on completing preclinical profiling in post-stroke recovery. In parallel, we are pursuing collaborative arrangements to advance development and look forward to sharing more information on this subject in the future. Our preclinical programs continue to make solid progress towards delivering drug candidates for future clinical development and important therapeutic areas, including stress-related disorders, chronic cough, cognition and schizophrenia. As a reminder, our portfolio was discovered in-house from our pioneering allosteric modulator drug discovery platform. And constantly, we have significant intellectual property in all programs. We have a track record of securing partnerships at the preclinical stage and supported top-tier investors. We recognize that 2023 stock performance and current market capitalization is very disappointing. However, we are having multiple business discussions across our portfolio. And we believe strong believe that if we are successful in executing our near-term partnering strategy that our stock price should move to recognize the value of our portfolio. This concludes the presentation, and we will now open the call for questions.

[Operator Instructions] The first question comes from the line of Boobalan Pachaiyappan from H.C. Wainwright. Please ask you question.

This is Boobalan dialing in for Ram Selvaraju. Firstly, with respect to the proof-of-concept epilepsy trials being conducted by Janssen, I'm curious when the top line data will be released.

Yes, excellent question. So as we pointed out, Cohort 1 of 60 patients is completed. Cohort 2 has been recruiting for some time. So it's well on its way to be recruited. Now if you look on clinicaltrials.gov, Janssen are guiding the completion for April 2024. They're also talking about recruiting up to 160 patients in three cohorts. So at the moment, we are having discussions with Janssen about being able to give some guidance on the answer to your question. So at the moment, we are not able to tell you when results are going to come out. But it very much depends on whether Janssen move into a third cohort, as you can imagine. If you look at what we've said and you look at what's in clinicaltrials.gov, you can imagine that, that is all dependent. So as soon as we have information from Janssen, and we are authorized to communicate, we'll be communicating publicly. And I'm hoping to be able to do that before the end of the year. So I'm sorry, I can't give you a better answer than that, but now you know where we stand.

That's fair enough. And then secondly, with respect to the Indivior collaboration, then might a candidate be advanced into the clinic?

Yes. So, this discovery program has received significant financial resources from Indivior. I mean another CHF2.7 million of commitment added to the CHF13.8 million that's already been spent. And it's been very, very successful. There are multiple drug candidates, and we are -- Indivior a sort of choice, they are profiling many candidates in parallel. We are also profiling a separate set of candidates for chronic cough. And I think we're in a very, very good shape to be able to select a compound by the end of the year, beginning of next year with the ideal profile. I would like to give you more detail about what that ideal profile is. But unfortunately, at the moment, we are keeping that confidential.

That's clear. And then thirdly, do you have any updates on the initiative to unlock value from dipraglurant?

Sorry, can you repeat your question? I didn't quite hear that.

Do you have any updates on the initiative to unlock value from dipraglurant?

Yes. So as Mikhail said, we've done -- we've wrapped up the PD-LID development. We still believe in PD-LID but we believe there are some significant challenges about running clinical studies in PD-LID. So we have decided, following a detailed analysis to go into post-stroke recovery. And we've secured an option to license a use patent of mGlu5 in post-rate recovery. And we are now working with a group and a third party to profile dipraglurant in preclinical models of stroke, post-stroke recovery. And if the data from that preclinical evaluation comes out successfully, we will be moving the compound into post-stroke recovery. In parallel, we are having discussions with multiple partners who have some interest in post-stroke recovery but also have interest in dipraglurant for some of the other disease areas where there's some significant validation. We know where these discussions start. We just never know where they end.

Great. And then one final question from us. Can you discuss your cash runway guidance?

Yes. So we've -- as you can see, we've significantly reduced the cash burn. Many of the activities we've spoken about are being funded through non-dilutive funding and are not being funded by our balance sheet. I mean, the Janssen collaborations funded by Janssen, the whole GABAB program is being funded by Indivior. And dipraglurant stroke is not being funded by us either. So we've managed to even as a dual listed public company, really reduce our cash burn, CHF7.2 million on the balance sheet at the end of June. We're burning well under CHF1 million a month. You can see that the G&A is becoming a significant part of the overall cash runway because as we spend less and less of our balance sheet actually on the R&D. But we are guiding today in our best estimate based on what we're planning to achieve is that we will have cash through into 2024. And if we further cut back on activities, we can probably extend it for even longer.

[Operator Instructions] There are no further questions at this time. And I would like now to hand the conference over to Tim Dyer for any closing remarks.

Thank you. Well, thank you, everyone, for attending our Q2 first half results conference call. We very much look forward to speaking to you again soon, and being able to update you on the progress we're making. I wish you all a very nice day.

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