Addex Therapeutics Ltd (ADXN) Q3 2023 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Addex Therapeutics Third Quarter 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.

Thank you. Hello everyone. I would like to thank you all for attending our Q3 2023 financial results conference call. I'm here with Robert Lutjens, our Head of Discovery-Biology and Mikhail Kalinichev, our Head of Translational 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 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 Robert and Mikhail, who will review our clinical and preclinical pipeline. I will then review our Q3 2023 financial results. Following that, we will open the call for Q&A. So starting with the highlights, our partner Janssen completed recruitment of the ADX71149 Phase 2 epilepsy study earlier this month and we've confirmed that data is expected in Q2 2024. I'd like to remind you that an independent interim review committee established by Janssen to review the unblinded data from Part 1 of Cohort 1 made its recommendation to continue the study. This recommendation and the decision of Janssen to continue the study is very encouraging and suggests that 149 is safe and well-tolerated and may be having a positive impact on this patient population. We have made substantial progress in our collaboration with our partner Indivior and advancing several novel GABAB compounds coming through your candidate selection. As a reminder, Indivior 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 preserved indications. We are focusing our independent program on cough. During Q3, we have continued to advance compounds through clinical candidate selection, multiple compounds showing excellent efficacy and multiple preclinical cough. In Q3, we announced the extension of our collaboration through June 2024 with CHF2.7 million of additional research funding committed by Indivior. We expect Indivior and ourselves to select compounds to advance into ING-enabling studies in 2024. We lead a consortium, we led a consortium which has secured €4 million grant to advance our mGlu2N negative modulator cognition program through lead optimization to clinical candidate selection phase. We also continue to believe there is value in Dipraglurant, our Phase 2 ready compound and have substantially completed our evaluation of the future development. We are building post-stroke recovery as an interesting area for future development and are currently profiling Dipraglurant preclinical models of post-stroke recovery. Furthermore, preclinical data was recently published in the journal Brain which strongly supports the rationale for the inhibition of mGlu5 [Ph] receptors as a treatment for post-stroke recovery and the development of Dipraglurant in this important medical need. We are in parallel pursuing discussions with potential partners to advance future development of Dipraglurant. 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 clinical candidate selection phase and is on track to start ING-enabling studies in the second half of next year. From a financial perspective, we continue to pursue discussions with potential partners across the portfolio and highly controlled costs. As of today, we estimate that our cash reserve provides us with a runway through Q1 2024. Now I will hand over to Robert who will give you some more details about our existing pipeline.

Thanks, Tim. Hello everyone. I will start by speaking about our Phase 2 epilepsy study with ADX71149 which is being executed by Janssen. Janssen is making excellent progress and has recently completed recruitment of 110 patients across two cohorts. Epilepsy is a large multi-billion dollar market opportunity where despite several available treatments [Ph], many patients are still in need of improved therapies to treat the disease. As a reminder, ADX71149 is a metabotropic glutamate receptor subtype 2 or mGluR2 positive allosteric modulator discovered in partnership with Janssen using ADX's proprietary allosteric modulation platform. ADX71149 has demonstrated both thermal and efficacy and a strong synergistic effect in combination with inhibitors of SV2A such as Keppra and Briviact. 149 has also been thoroughly profiled in preclinical and clinical studies by Janssen demonstrating its good safety and tolerability profile in healthy volunteers and patients. Janssen is responsible for development and are currently operationally executing both the Phase 2 study and an open label extension study in epilepsy patients. We have significant economics in our deal with Janssen with prelaunch milestones of €109 million, low double digit royalties on net sales and Janssen is responsible for all development costs. To illustrate the synergistic effect seen with the combination of 149 and levetiracetam, the active molecule in Keppra, here is the data obtained in the six hertz psychomotor seizure model widely recognized as having high translational value to characterize the efficacy of anti-epileptic drugs. As a reminder, ADX71149 given alone in this model produces a robust protection against six hertz indecencies with an ED50 determined to be approximately 20 milligrams per kilo. In combination studies with varying doses of levetiracetam, a fixed dose of 149 increased the potency of levetiracetam leading to an approximate 35 fold shift in ED50. Conversely, using a fixed dose of levetiracetam with varying doses of ADX71149, levetiracetam increased the potency of 149 leading to an approximate 14 fold shift in its ED50, suggesting a positive pharmacodynamic relationship or strong synergistic effects for the two molecules when given in combination. This extraordinary effect of a combination of an mGlu2-PAM with an SV2A antagonist has been patented, offering a strong protection for this program until 2035 without additional extensions. This is the Phase 2 study design. The study is a double-blind placebo-controlled proof-of-concept study enrolling patients with focal onset seizures who have suboptimal response to treatment with Keppra or Briviact. As mentioned, the study has completed recruitment of 110 patients across two cohorts evaluating two doses. 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 non-affirmative or matching placebo. The primary endpoint is the time taken to return to their monthly baseline seizure count. The study has two parts, part one being the four-week acute efficacy phase and the part two being an eight-week maintenance of efficacy phase. Part 2 includes patients who did not reach their baseline seizure count during Part 1 of study and continue on their randomized drug or placebo. An open label extension study is ongoing in parallel, offering all patients the opportunity to get treated with 71149 in combination with levetiracetam or brivaracetam. As previously announced in May, an independent interim review committee convened by our collaboration partner rendered to continue the study following review of unblinded data from Part 1, patient Cohort 1. This was encouraging news, suggesting 149 is safe and well-tolerated and potentially offering benefits to epilepsy patients. We look forward to sharing the top line results of Cohort 1 and 2 in Q2 of 2024. I 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 the differentiated profile of Dipraglurant makes it particularly suitable for post-stroke recovery. There is a large unmet medical need in post-stroke recovery and rehabilitation. Stroke is among leading causes of chronic, often lifelong disability as it leads to motor, sensory, cognitive impairments and multiple comorbidities. There are over 100 million stroke survivors worldwide and the number is growing at the annual rate of 12 million. A variety of rehabilitation therapies are used with post-stroke patients, but the recovery is slow and inadequate. There is an urgent need for pharmacological agents that can facilitate the recovery stimulated by rehabilitation therapies. mGlu5 receptor is a suitable target to address post-stroke recovery as it is densely expressed in the brain, involved in neuroplasticity and modulates excitatory-inhibitory equilibrium. In fact, activation of mGlu5 receptor has been observed in a range of neurological disorders, including stroke, where it plays a role in maladaptive rewiring of the brain following stroke. Inhibition of mGlu5, on the other hand, can facilitate adaptive rewiring of the brain, promoting neuroplasticity and creating of new functional pathways moving the neural network towards a pre-lesion state. Exciting new evidence recently published in the Journal Brain suggests that negative allosteric modulator of mGlu5 receptor, MTEP, addressed daily in rats following stroke results in a sustained and growing improvement in sensory motor function in comparison to vehicle treatment. Similar improvement in sensory motor function was observed in animals treated with our mGlu5 NAM Dipraglurant. MRI imaging of the resting state functional connectivity in post-stroke rodents shows that daily administration of MTEP also stimulates intra-and inter-hemispheric connectivity in the brain disrupted by stroke. It is important to note that the improvement in brain connectivity after stroke is known to correlate with functional recovery and is observed across species. Dipraglurant is ideally suited to be used in tandem with rehabilitation therapies in post-stroke patients, and 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, stroke patent position, and believe Dipraglurant 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 deliver a new treatment for substance use disorders. Indivior is supporting the research at Addex and have recently committed an additional CHF2.7 million, 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, a GABAB orthosteric agonist. Baclofen is an FDA approved drug 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 modulator approach 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 COVID. Therefore, I will 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 acid reflux, but also possibly by an overactive cough reflex. There is a large unmet medical need in novel antacids drugs as current standards of care are ineffective in 30% of patients and only moderately effective in up 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 a GABAB agonist is used off-label in cough patients and from the anatomical evidence that GABAB receptors are strongly expressed in airways and in the neural pathway regulating cough. Therefore, we believe that GABAB PAMs could offer superior efficacy in cough patients. On the next slide, we show that GABAB PAMs are likely to have a superior irritability profile in comparison to the current standards of care and show no taste-related side effects, as seen with a 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 suitable for chronic dosing, therefore significantly improving patient quality. 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 to our partner Indivior. I will now pass it back to Robert for an update on our other preclinical programs.

Thanks, 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 filing of an NDA and acceptance by FDA to a drug-type 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 an M4 PAM positive allosteric modulator developed by Cerevel and schizophrenia patients showed an antipsychotic effect paving the way for our M4 positive allosteric modulator 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 represents a significant step in providing a new treatment of schizophrenia patients, before selectivity issues may still result in suboptimal tolerability. Our allosteric modulation approach is providing many advantages over an agonist approach, in particular with absolute receptor subtype selectivity, and without the potential side effects linked to constant receptor activation, such as receptor desensitization and reduced efficacy due to tolerance. The aim of our M4-positive modulation program is to identify highly selective and brain-penetrant molecules, offering potential best-in-class efficacy and tolerability. We are currently working on 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 mGlu2 negative allosteric modulator program for mild neurocognitive disorders associated with Alzheimer’s disease, Parkinson’s disease and depression. The program has been awarded a €4 million grant to allow identification of one or more drug candidates to advance into IND-enabling studies. Mild neurocognitive disorder, or mNCD, is the stage between expected cognitive decline of normal aging and the more serious decline of dementia. Besides being potentially the early signs of Alzheimer's disease, mNCD is also often experienced by patients suffering from -- depression. Overall prevalence is approximately 15%, and augments significantly with age affecting up to 25% of people aged 80 or more. Interestingly, mNCD is currently viewed as an intervention window for delaying the onset of dementia. There is currently no public drug to treat mild neurocognitive disorders. Some drugs such as acetylcholinesterase [Ph] inhibitors are being prescribed, but show limited efficacy and come with significant side effects. There is therefore a strong unmet medical need for better treatment options. Without the details, by inhibiting prenaptic mGlu2 receptors, our negative allosteric modulators will counteract the synaptic deficits observed in mNCD by increasing the excitability of neural circuits involved in cognition. This objective was also followed with positive allosteric modulators of AMPA or AMPAKines, which several pharmaceutical companies tried to develop without success. AMPAKines seemed to induce class-related side effects, and we strongly believe our mGlu2 NAM approach will successfully address mNCD without having these side effects. Besides being potentially the early sign of Alzheimer's disease, mNCD 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. Our project has been awarded a €4 million grant and has one or more drug candidates to enter [Indiscernible]-enabling studies. Eurostars funds highly innovative projects to address unmet needs. Therefore, we see this as a significant validation of our project while providing us with funds for three years. Addex will lead a consortium of highly experienced teams with complementary expertise to fully implement clinical series, clinical candidate selection phase before identifying clinical drug candidates to enter IND-enabling studies by end of 2025. In summary, our drug discovery engine has made great progress with multiple drug candidates advancing towards IND-enabling studies. The renewed commitment of our partner, Indivior and the recent award of a €4 million grant 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 CHF0.3 million of income in Q3 compared to CHF0.4 million in Q3 of 2022. Primary source of revenue is research funding from our collaboration with Indivior. In terms of expenses, R&D expenses were CHF1.8 million in Q3 2023 compared to CHF2.8 million in Q3 2022. The decrease of CHF1 million is primarily due to the determination of Dipraglurant development in PD-LID in June of 2022. G&A expenses were CHF1.2 million in Q3 compared to CHF1.8 million in the same period as 2022. The decrease of CHF0.6 million is primarily due to reduced share-based service costs and decreased D&O insurance. The finance result is primarily related to foreign exchange gains on U.S. dollar cash deposits and to a lesser extent to interest income. Out of the balance sheet, our assets are primarily held in cash and we completed Q3 with CHF4.8 million of cash held in Swiss francs and U.S. dollars. Other current assets amount to CHF1 million and primarily relate to prepaid D&O insurance and retire benefits – related to our agreement with Indivior. Current liabilities CHF1.9 million decreased by CHF1.4 million compared to December 31, 2022 and primarily relate to our R&D payables and accruals. Non-current liabilities of CHF0.3 million decreased by CHF2 million compared to December 31st, 2022 and primarily relate to retirement benefit applications. Now to summarize, the ADX 71149 Phase II Epilepsy Clinical Study completed recruitment of patients and top line results are expected in Q2 of next year. We believe the recommendation of the Independent Review Committee to continue the study is very encouraging and suggests that 149 could be having positive impact on patients. We continue to believe in the value of Dipraglurant and are completing preclinical profiling and post-stroke recovery. In parallel, we are pursuing collaborative arrangements to advance development and look forward to sharing more information in the future. Our preclinical programs continue to make solid progress towards delivering drug candidates for future clinical development and important therapeutic areas in stress-related disorders, chronic cough, cognition, schizophrenia. As a reminder, our portfolio was discovered in-house from our pioneering allosteric modulator drug discovery platform. And currently, 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 the 2023 stock performance and current market capitalization is very disappointing. However, we are having multiple business discussions across our portfolio and strongly believe that if we are successful in executing our near-term partnering strategy, then 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] Now we're going to take our first question over the phone and it comes from Leonel Delgado from [Indiscernible]. Your line is open. Please ask your question.

Hi, thanks for taking my question. So the question is, what can we expect if the epilepsy readout in 2Q 2024 is positive? So the question is basically, what is the immediate implication for Addex in 2024? Thank you.

Yes, so thanks for the question. Well, the immediate implications for Addex, well, as you know, Janssen is operationally executing the study. They're responsible for financing the study. So Addex has very little, well, no control over the future development. And we have very limited visibility. However, we believe that the data that's been generated is received because they've looked at two doses. So should the study be positive, then we would expect the program to be moved forward into a pivotal study. But again, we don't have visibility exactly what the plans of Janssen are with respect to future development.

Thank you.

Thank you. [Operator Instructions] At this moment, there are no further questions over audio lines, and we will proceed to any written questions. And so the first question comes from the line of Peter Alick [Ph]. And the question is, €4 million, Eurostar's grant, when will the money be paid?

Yes, so yes, some of that money comes to Addex, and some of that money goes to consortium partners. And we are expecting that money to be, or a significant part of the money that's allocated to Addex to be received by Addex quite soon. But we are not providing the details of how that money is split at the current time.

Thank you. The next question comes from the land of Jesse Brodkin [Ph]. In the IRB review of unblinded data from 149, were efficacy measures unblinded? Also, were any changes in dosage made between Cohort 1 and Cohort 2?

Yes, so thanks for the question. Yes, so the independent interim review committee had some very clear guidance from Janssen. And they were given clear guidance that they should recommend to stop the study if there is a certain level of split between active dose and placebo. And the fact that they, and also, of course, if they saw any significant safety issues, then they had to recommend stop. Now, the recommendation to continue means that they must have seen at least a signal of efficacy and no safety, significant safety concerns. Now, and that was Cohort 1. Now, what we know is that Cohort 2 is a higher dose than Cohort 1. And this is why we are very encouraged by the combination of the recommendation to Janssen to continue and the fact that Cohort 2 is a higher dose. And now that they have completed recruitment, we are guaranteed of data. I hope that answers your question.

Thank you. [Operator Instructions] The speakers will just give a moment for the last entries. Thank you, ladies and gentlemen. This brings the main part of our conference for a close. And I would now like to hand it back to Tim Dyer for any closing remarks.

Yes, well, thank you everyone for attending the Q3 conference call and the corporate updates. We look forward to speaking to you again soon and just wish you a nice end of your day. Thank you, bye-bye.

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