Addex Therapeutics Ltd (ADXN) Q3 2024 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Addex Therapeutics Third Quarter 2024 Financial Results and Corporate Update Conference Call. At this time, all participants are in 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 over the conference to our first speaker today, Tim Dyer. Please go ahead.

Thank you. Hello everyone. I would like to thank you all for attending our third quarter 2024 financial results conference call. I'm here with Mikhail Kalinichev, our Head of Translational Science, who will provide an update on our R&D programs. 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 will start this conference call by giving a quick overview of our recent activities and achievements before reviewing our pipeline. I will then hand over to Misha, who will review in more detail our GABAB PAM preclinical program. I will then review our third quarter 2024 financial results. Following that, we will open the call for questions. So we have made excellent progress in our GABAB positive allosteric modulator program with the completion of the R&D phase delivering multiple drug candidates. Our partner, Indivior, has selected a compound for development in substance use disorder and has started R&D enabling studies. Under the terms of the agreement, Addex is eligible for payment of up to $330 million on successful achievement of pre-specified regulatory, clinical, and commercial milestones, as well as a tiered royalties on the level of net sales from high-single-digits up to low-double-digits. Also under the terms of the agreement we have the right to select compounds for development in a predefined list of reserved indications. We have selected a compound to advance our own independent GABAB PAM program for the treatment of chronic cough. We have some exciting data in cough, which Misha will be sharing with you later in the presentation. So now for a quick review of our pipeline. We continue to believe in dipraglurant and are executing our plans to reposition the development for brain injury recovery. Following the disappointing results in epilepsy with ADX71149, we are working with our partner, Janssen, to evaluate a path forward for this program. As mentioned, our partner, Indivior has selected a drug candidate for development in substance use disorders and has started IND enabling studies. We are advancing an independent GABAB PAM program for chronic cough and expect to start IND enabling studies in 2025, subject to securing financing. Our spin-out company Neurosterix has made excellent progress in advancing its pipeline, including starting IND enabling studies with its M4 PAM program. Now I will hand over to Misha, who will give you some more details about our exciting portfolio.

Thanks Tim. Hello everyone. Let me now speak about our GABAB positive ulcerative modulator program, which is partnered with Indivior. The aim of this collaboration is to deliver a better baclofen for substance use disorders. As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, a GABAB orthosteric agonist. Baclofen is FDA approved for treatment of spasticity and is widely used off-label to treat numerous diseases including substance use disorder. 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 better 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. Our partner, Indivior, has selected a GABAB PAM drug candidate for development in substance use disorders and expects to start IND enabling studies in H1 2025. As part of our agreement with Indivior, Addex has exercised its right to select a compound to advance its own independent GABAB PAM program for the treatment of chronic cough. I will now present this exciting opportunity. There is a strong rationale for developing GABAB PAMs for chronic cough. Chronic cough is a persistent cold that lasts 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 overactive cough reflex. There is a large unmet medical need in novel antitussive drugs as current standard-of-care are ineffective in 30% of patients or only moderately effective in up to 60% of patients. In addition, the current treatments carry risks of serious side effects. On the next slide, we show that GABAB PAMs are likely to have a superior tolerability profile in comparison to the current standard-of-care and show no taste-related side effects as seen with newly approved P2X3 inhibitor Gefapixant. Support for using GABAB PAM in treatment of chronic cough comes from the clinical evidence that baclofen, 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 neuronal pathway regulating cough. Therefore, we believe that GABAB PAMs could offer superior efficacy in cough patients. The pre-IND activities including in vivo proof-of-concept, non-GLP talks, and CMC have been completed, and our clinical candidate has shown favorable efficacy, tolerability, and developability profiles. Our clinical candidate has demonstrated a consistent minimum effective dose of 1 mgs per kg and ED50 of 6 mgs per kg in cold frequency. No signs of tolerance were seen after sub-chronic dosing and more than thirty-fold safety margin was demonstrated based on tolerability biomarkers. The IND-enabling studies are planned to start in 2025. The next set of slides describe the in vivo proof-of-concept studies in models of cough. In a model of citric acid induced cough in guinea pigs, acutely administered Compound A delivered a robust antitussive activity profile, reducing the cough number and increasing the latency to the first cough. The antitussive profile of baclofen and the same model, was more modest as cough latency remained largely unchanged. In the same experiment, Compound A was better tolerated than baclofen, as there were no marked changes in respiratory rate, body temperature, and plasma concentration of growth hormone at up to 16 mgs per kg. In contrast, baclofen suppressed respiratory rate, reduced body temperature by near 22 degrees Celsius and increased growth hormone concentration in plasma, starting 3 mgs per kg dose. Thus, we believe we achieved our goal to discover a better baclofen for chronic cough. In a model of citric acid induced cough in guinea pigs, sub-chronically administered Compound A showed signs of improved efficacy and potency and no signs of tolerance in comparison to an acute treatment. As expected, signs related to safety and tolerability of Compound A remained largely unchanged under sub-chronic versus acute treatment regimen. In the model of ATP-potentiated citric acid cough in guinea pigs in a head-to-head comparison experiment, acutely administered Compound A and the P2X3 inhibitor had similar efficacy and tolerability profiles. In summary, we have selected a clinical candidate for chronic cough with a robust reproducible antitussive efficacy of 1 mg per kg and a good PKPD. The compound showed a favorable developability profile in non-GLP tox studies performed in rats, dogs, and non-human primates. We are on track to start IND enabling studies early H1 2025. This concludes our prepared remarks on the progress of our R&D programs. Now I hand it back to Tim.

Now for a review of our Q3 2024 financials. Following the Neurosterix transaction, we were required under the IFRS to identify continuing operations related to our retained business and continued operations related to the divested business [Indiscernible] Neurosterix. All income and expense items related to the discontinuing operations have been replathed under a specific line of comprehensive loss called net profit or loss from discontinued operations. So starting with the income statement, which relates to continuing operations. We recognized CHF0.1 million of income in Q3 2024, compared to CHF0.3 million in Q3 2023. The primary source of revenue is research funding from our collaboration with Indivior, which is recognized as the associated research costs are incurred. Continuing R&D expenses of CHF0.2 million primarily relate to our GABAB PAM program and decreased by CHF0.3 million in Q3 2024, compared to Q3 2023, mainly due to completion of the search phase in June of this year. Continuing G&A expenses of CHF0.5 million primarily relate to corporate development activities and decreased by CHF0.1 million in Q3 ’24, compared to Q3 2023. The finance result in Q3 is primarily related to foreign exchange losses on U.S. dollar cash balances. The share of net loss of associates is CHF0.9 million and relates to our investment in Neurosterix group. Under IFRS, we are required to recognize our share of their results. So now to the balance sheet. Our assets are primarily held in cash. And we completed Q3 2024 with CHF3.3 million of cash held in Swiss francs and U.S. dollars. Other current assets amount to CHF0.7 million primarily related to prepaid retirement benefit obligations annually paid at the beginning of the year. Due to Neurosterix transaction, we expect CHF0.4 million to be reimbursed in the short-term. Current liabilities of CHF0.9 million as of September 30, 2024 decreased by CHF2 million, compared to December 31, 2023, and primarily relate to CRO-related accruals and payables. Non-current liabilities of CHF0.2 million as of 30 September, decreased by CHF0.4 million compared to December 31 ‘23, primarily due to staff transfers to Neurosterix. Now to summarize, we have made excellent progress in our GABAB PAM program with our partner, Indivior selecting compounds for development in substance use disorders and starting IND-enabling studies in H2 of this year. Neurosterix has made excellent progress with their lead M4 PAM drug candidate starting IND-enabling studies in Q3 of this year. Dipraglurant is ready to restart clinical development for brain injury recovery. Our GABAB PAM cough program has demonstrated excellent preclinical efficacy and tolerability with IND-enabling studies ready to start. We are validating partnership with industry, supporting investors and a strong balance sheet, which puts us on a solid position to deliver on our strategic objectives. This concludes the presentation, and we will now open the call for questions.

Thank you, dear participants. [Operator Instructions] And now we're going to take our first question over the phone. And it comes from the line of [Lawrence Phylum] (ph) from Zürcher Kantonalbank. Your line is open. Please ask your question.

Good afternoon. So two financial questions, the first relates to the milestones from Indivior. Could you tell us what would be the next key triggers for these milestones? So in other words, should we expect any trigger pre-clinical and for the clinical stage anything after completion of Phase 1? The second question relates to Neurosterix. We see the losses of Neurosterix increasing on the quarterly basis quarter-on-quarter, which is not unusual considering the phasing of the R&D expense at Neurosterix? What would be the cash autonomy for Neurosterix considering the $63 million they have got on inception? Thank you.

Thanks for the questions. So starting off with Indivior. So we're not at liberty to disclose the detail around the milestones. What I can say is they are pre-specified. And there are clinical milestones. And there are commercial milestones in the [$330 million] (ph). And what I have indicated in the past is they are roughly 50-50 between clinical and commercial milestones. Now on to the second question for Neurosterix. So as you rightly point out, Neurosterix is capitalized with $63 million in financing. You correctly point out that we are recognizing under the accounting rules our share of their net loss. Neurosterix is moving forward a portfolio of very exciting programs and its cash burn is ramping up as those programs move forward into well later stages of preclinical development and then into the clinic. And as I've indicated the M4 positive allosteric modulator program has started IND-enabling studies and fingers crossed we will be filing an IND and moving that program into the clinic in the coming 12-months. Now, the cash of autonomy of Neurosterix, Addex is a passive shareholder, and therefore Addex is not at liberty to disclose information about or details about the financials of the private entity Neurosterix.

If I may, maybe a related question. Do you see a risk for Addex to be diluted over the coming three, four years in Neurosterix?

Do I see Addex being diluted? Well, clearly, as Neurosterix moves its programs forward into later stage clinical development, should it need to raise additional capital, and then as a private entity, Addex would be free to participate in any capital increase as it felt fit. And if it decided not to participate, then it would clearly be diluted. But with $63 million on the balance sheet of Neurosterix, I don't see Addex being subjected to a dilution risk in the near future.

Thank you.

Thank you. [Operator Instructions] Thank you. Thank you, ladies and gentlemen. This brings the main part of our conference to a close and I would now like to hand back to Tim Dyer for closing remarks.

Thank you, everyone, for attending our third quarter 2024 conference call and we look forward to speaking to you all again soon.

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