BioXcel Therapeutics, Inc. (BTAI) Q3 2019 Earnings Report, Transcript and Summary

Good morning, and welcome to BioXcel Therapeutics' Third Quarter 2019 Earnings Conference Call and Audio Webcast. Before we start, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the Company, we will open up the conference for questions-and-answers after the presentation. [Operator Instructions] Just to remind everyone, certain matters discussed in today's conference call or answers that may be given to questions asked are forward-looking statements that are subject to risks and uncertainties relating to future events and/or the future financial performance of the Company. Actual results could differ materially from those anticipated in these forward-looking statements. These risk factors that may affect results are detailed in the Company's most recent public filings with the U.S. Securities and Exchange Commission, including its quarterly report on Form 10-Q for the quarterly period ended September 30, 2019, which can be found on its website, www.bioxceltherapeutics.com or on www.sec.gov. I would now like to turn the call over to Vimal Mehta, Chief Executive Officer of BioXcel Therapeutics. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining our conference call to discuss BioXcel Therapeutics' financial results and business highlights for the third quarter of 2019. We appreciate everyone's time and attention today as we discuss our third quarter results. We are very pleased with the tremendous clinical advances and strategic initiatives we have made in progressing our pipeline this quarter. To begin, I would like to discuss our lead neuroscience clinical program, BXCL501, and the major milestones we have achieved over the past months. Just to remind everyone, BXCL501 is our proprietary thin film formulation of dexmedetomidine, or Dex, for the treatment of acute agitation. This candidate is designed to be easily administered and have a rapid onset of action that produces a calming effect without excessive sedation. In July, we announced positive topline data from our Phase Ib trial of BXCL501 for the treatment of acute agitation in 135 patients with schizophrenia. This study met its primary endpoint with a rapid and durable reduction impact score. We believe that the outcome of this trial demonstrated that BXCL501 is differentiated from current treatment options, which can often cause unwanted side effects like excessive sedation and, therefore, result in their limited use. With this successful data readout, we plan to initiate pivotal Phase III study in schizophrenia and bipolar patients with acute agitation during the fourth quarter of this year. We are fortunate that these studies are short in duration with a two-hour endpoint. And as a result, we currently believe we will report topline results in the first half of 2020. Following our Phase III trials, we expect to be able to submit our first NDA for BXCL501 during the second half of 2020. We are confident that our initial BXCL501 NDA filing will lay a solid foundation for follow-on indications in dementia and opioid withdrawal and other indications. In addition, with limited treatment options for acute agitation, we continue to examine the potential of BXCL501 for the treatment of agitation and other neuropsychiatric disorders. In parallel with Phase III studies for the acute treatment of agitation in schizophrenia and bipolar patients, we plan to initiate a Phase Ib/II trial for agitation in genetic dementia, Alzheimer's disease in the fourth quarter of 2019. We also expect that this study should read out in the first half of 2020. Success in this indication could significantly expand the market potential for BXCL501. Moreover, we are excited to have launched two strategic initiatives for our neuroscience clinical program as both will expand our current clinical development of BXCL501. First, we are investigating the feasibility of the development of digital device technology that can be used in conjunction with BXCL501 to enhance the prevention and treatment of agitation. Using the device technology, our approach is to sense the individual's increasing state of hyperarousal and alert the caregiver to take the necessary measures to treat patients at the onset of agitation. This should serve to avoid escalation of problematic behavior that can cause injury to the patient and caregiver. Our second initiative is with the U.S. Department of Defense, congressionally directed medical research programs, in which we have received a planning grant to investigate BXCL501 for the treatment of alcohol and substance use disorders related to PTSD and traumatic brain injury. With agitation as an underserved therapeutic area, we are committed to the exploration of additional indications with BXCL501 in order to treat the maximum number of possible patients. This grant is in collaboration with Yale University. With that, I would like to move to the discussion of our immuno-oncology clinical program, BXCL701, or our orally available systemic innate immunity activator with dual mechanism of action. Our Phase Ib/II double combination study of BXCL701 and Keytruda for treatment-emergent neuroendocrine prostate cancer, tNEPC, is currently ongoing. In October, we presented safety and tolerability data from the first cohort at the Annual Prostate Cancer Foundation Scientific Retreat. No serious adverse events or dose-limiting toxicities were observed in the initial cohort. A second cohort is nearly fully enrolled. We expect to announce additional data from the safety and dose escalation portion of the trial in the fourth quarter of 2019 before transitioning to the second stage efficacy portion of the trial. Initial efficacy data readouts of the second stage of the trial are expected in the first half of 2020. The results of the safety portion of the trial of BXCL701 in combination with a checkpoint inhibitor may help establish the full potential of combining an innate immunity activator with several I-O modalities across multiple tumor types. The combination trial of BXCL701, bempeg from Nektar and avelumab from Pfizer and Merck KGaA in pancreatic cancer will start following the completion of Nektar and Pfizer's safety run-in study of bempeg and avelumab and the outcome of that trial. Finally, we strengthened our balance sheet in the quarter raising $19 million in growth proceeds through a public offering of common stock. We believe that we now have sufficient funding to take us through the data readouts in our Phase III studies of BXCL501 for the acute treatment of agitation in patients with schizophrenia and bipolar disease, in addition to other key milestones. With that, I would like to turn the call over to our CFO, Richard Steinhart. Richard?

Thanks, Vimal. Once again, thank you all for joining us this morning, and welcome to our shareholders. For the third quarter of 2019, we reported a net loss of $9 million compared to a net loss of approximately $4.9 million for the third quarter of 2018. Research and development expenses totaled approximately $7.1 million for the third quarter of 2019 compared to approximately $3.8 million for the same period in 2018. The increase was primarily driven by an expansion of research and development activities, including increased personnel costs, clinical trial expenses, professional fees associated with our two lead drug product candidates. General and administrative expenses in the third quarter of 2019 were approximately $2 million compared to approximately $1.3 million for the third quarter of 2018. The increase was primarily due to additional payroll and payroll-related expenses, professional fees and costs associated with operating as a public company. Total operating expenses for the third quarter of 2019 were approximately $9.1 million as compared to total operating expenses of approximately $5.1 million for the same period in 2018. The 2019 results include approximately $800,000 in non-cash stock-based compensation. We had cash and cash equivalents of approximately $40.3 million as of September 30, 2019. We expect cash burn to increase going forward as we progress our two leading drug candidates. That concludes the financial review of our third quarter 2019. Now I'd like to turn the call back to Vimal for any further comments. Vimal?

Thanks, Richard. We are pleased with the progress we have made during this quarter and remain confident in our ability to execute on both our clinical and strategic plans for the remainder of this year and into 2020. We would now like to open the call to questions. Operator?

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Do Kim with BMO Capital Markets. Please proceed with your question.

Good morning. Thanks for taking my questions. First, I think for Vimal, the Phase Ib study for 701, what kind of biomarker data are you collecting for these dose cohorts and for potential signals of inflammation or immune activation? And will you provide those results when you report the safety for cohort 2 later this year?

Thanks Do. Yes, we intend to provide the results for the second cohort this year. I'd like to add that, today, I'm joined by two of my colleagues, Vince O'Neill, who is our SVP and Chief Medical Officer; and Frank Yocca, who is our SVP and Chief Scientific Officer. For regarding your question about the biomarker, I will pass it on to Vince, so he can elaborate on it. Vince?

Thanks Do. Yes. So just to add to what Vimal has said, so we will, in fact, capture a full-size can profile from the prostate study. In addition, all of our patients – actually, in the efficacy portion, not necessarily safety, within the efficacy portion are required to have biopsies. We have the option of a second biopsy on therapy. So we do have biomarkers substantially built into the study.

Okay, great. And in the first cohort, how active is the 0.4 milligram dose? And the efficacy signs that you saw of stable disease, do you consider that meaningful? And how much of a step-up would you expect to see in the 0.6 milligram dose?

Yes. So I would definitely view the first two cohorts as fundamentally safety cohorts with safety outcomes. So it is certainly true to seeing that all patients remained on study, but I wouldn't, from there, rush to make claims on efficacy. I think it's a small number of patients. And really, we're doing the first two cohorts from – primarily from a safety point of view. I mean, that said, it's nice to see no patients progressing, but I'm not sure I would extrapolate that to clean efficacy. I think we need some more patients.

Okay. Thank you. And for 501, what is left to do in the start-up efforts to the Phase III clinical trial before you could start screening and enrolling patients?

So we are having end of Phase II meeting with the FDA, and that is a key step in initiating their trial. After our FDA interaction, we intend to start the trial this year, and we believe we feel very confident about it.

And maybe you could talk a little bit about your commercialization strategy for 501. Will you be looking for regional partners, size of sales force, and what kind of infrastructure you would need?

So that's a great question, Do. In U.S., we have the capability to develop this drug. And outside U.S., particularly in Japan, we don't have much capability to develop the drug or commercialize. So we have started exploring potential partner in Japan and potentially Europe. So we are looking for regional partners, and that effort is ongoing. In terms of the commercialization infrastructure, we have started doing pre-commercialization activities and mapping it out what kind of a commercial infrastructure requirements will be to commercialize the drug. But it is a specialized – places where this drug needs to be sold. So we don't expect the number to be too large, but in the next few months, we will be able to provide more guidance on exact number of sales rep and everybody that will be needed in U.S. to get the best penetration in the marketplace.

Okay. Thanks for taking my questions.

Thank you. Our next question comes from the line of Robyn Karnauskas with SunTrust. Please proceed with your question.

Thank you. Hi, everyone. This is Minh Vong on for Robyn. Thanks for taking my questions and congrats on the progress this quarter. I guess, first, with regards to 501, can you talk a little bit more about your ongoing PK/PD modeling? Can you help us understand how you're thinking through balancing the reduction of agitation with duration and degree of drowsiness maybe if you've seen any – if the correlation is linear, if you've seen efficacy, and maybe if you've been able to identify a dose where you can see clinically meaningful reduction in agitation or even transient effects on drowsiness?

Frank. Thanks for the question Minh. Frank is our CSO and leading the 501 program. He will address that question.

Yes. Hi, Minh. So as you know, we did a fairly thorough dose response in the Phase Ib, and we definitely have an understanding of the PK/PD. What you're talking about more is how do we extrapolate that, say, for example, two adverse events, if you will? And what the data basically has told us right now is that even at the highest dose, we see minimal adverse events. So in terms of relating to PK/PD, even back to the IV, it's been holding up quite well. So our belief basically, right now is that the 180 dose, which was the top dose, really performed very well in reducing agitation in the essence of severe adverse events. So we actually like that dose very much. So it really – the modeling has held up quite true.

Great, thank you. And then one other question on with your initiation to incorporate 501 into a device, can you talk a bit about how you're thinking through device? I mean, can these patients remove those sites on their own? Are they given that option? How strong does it have to be? And if you can comment on just any patient experience you have in this geriatric population, whose wearing devices, if they're familiar or used to wearing watches or devices or anything like that?

So what I can say about that right now is that, we're using our concept, which is the hyperarousal, to drive what we're developing, okay. We're thinking about exactly what kind of exactly what kind of a device, a wearable, how that would fit in terms of the elderly population, if you will? Now there are others who are thinking along these lines as well. They realize that if you can predict the agitation event or the building of the agitation event prior to it actually becoming a full-blown issue that you would benefit clearly from that. So what we're doing basically is we believe that, that event is tied to the hyperarousal event, which is very closely tight to sympathetic activity. And we believe we can pick that up in a number of different ways, including the skin conductance. So our goal right now is to be able to show that there's definitely a correlation between increases in some of these biomarkers and the agitation event. And once we have that, then I think we will focus down very hard on the type of wearable we would give to an elderly patient to make sure that they can't remove it.

Great. Thank you. And then last quick follow-up on, can you remind us that there is going to be any update from the safety run-in of 701 in pancreatic?

So we won't see data from that study this year, it will next year.

Great. Thanks so much everyone.

Thank you. Our next question comes from Sumant Kulkarni with Canaccord. Please proceed with your question.

Good morning. I have a couple of questions and thanks for taking them. The first one is on 501. At what point do you expect to have more clarity on scheduling of the end of Phase II meeting with the FDA?

We have not communicated we have the clarity that what is the scheduling with the FDA on the meeting, but, very shortly, if we are looking or we intend to initiate that trial this year. So we believe that things are progressing well with the FDA that will allow us, but we haven't just given the exact date when the FDA interaction meeting date is.

Sure. And then my next question is on 701. We've seen fledgling safety data there. And we know you're focused on pancreatic and NEPC or tNEPC, but this innate immunity activators has potential other uses? At what point do you think that you can explore more potential combinations without sort of distracting yourself from the effort that you have already in place?

That's a great question, Sumant. I think establishment of safety like 701, in combination with immune checkpoint with Keytruda that we have demonstrated, was a key step in success of this program, and we are progressing on that path. Once we have this established safety besides, as you mentioned, these two chosen indications, we have large potential to explore other opportunities. I will pass this question to Vince, so he can more elaborate like how we are thinking about like once we have complete safety data on 701 with checkpoint inhabitor.

Sure. Thanks, Sumant. So I think as I've alluded to in prior calls, we are interested in testing 701 in the context of either warm tumors or hot tumors or once hot tumors. In other words, those will be patients who had progressed on checkpoint inhibition. I'm confident that the drug will perform well there. Just looking at the recent SITC presentations, we had updates from STING and TLR. So it does certainly seem possible and feasible that you can reverse resistance to checkpoint inhibition. We're using this mechanism. And I think the fact that 701 is an oral drug, I think it just lends itself beautifully to that setting. So I think I said before, we are planning to test those types of questions in an IST setting and very soon actually, and you will hear more about that subsequently.

Got it. And then my last question, again, on 701. On the triple combo study in pancreatic cancer, how long do you expect the Nektar and Pfizer safety run-in trial to last, so you can get going on the triple combo?

Yes. So maybe just to explain that. The design of the study was to combine bempeg and avelumab because that hasn't been done before. And so there's a requirement to have at least some safety data with that. And then added 701, really titrate 701 up, and that was clearly the plan. I think it probably didn't make sense to run two separate Phase Is of those two agents. And for that reason, we've decided with our partners to wait and get the data from – this is a Ib study being run by Pfizer. And so that study is open. And I don't know whether Pfizer has made announcements as to whether or when, rather, they expect to get their full safety data. It will be next year, though. But just to stress that, that study is open and ongoing.

Thank you.

Thank you. Our next question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Please proceed with your question.

Good morning. This is Edward Marks on for Ram. I appreciate you taking the questions. For that pivotal Phase III with 501, you mentioned that initiation's going to happen later this year. I'm wondering, how long after this initiation of enrollment is it likely to take the complete full enrollment? And what are likely to be the most key secondary endpoint in that study?

Frank, do you want to take that?

Yes. So as you know, we completed the Phase Ib study in a very quick time period. So we don't see enrollment as a problem. If we start the study, as we are planning in the end of this year, we see the full enrollment and almost completion of the study occurring within a four to five-month period. So we're very excited about that. And that's for both that – I'm talking about separate studies that would go on for both schizophrenia as well as bipolar.

And also, Frank, question is about the secondary endpoint, like what our secondary endpoint will be?

Yes. So we use the – secondary endpoints, we use the ACES as a secondary endpoint. But we think that the critical secondary measurement, because it really talks to how well the treatment works in the patients and how they respond, is really the CGI. That's really going to be our key secondary endpoint. As in most psychiatric studies, the CGI always sort of brings up the rear, if you will, but it tells you a lot about how the patients feel after treatment.

Okay. Thank you. And then maybe because that study is happening so quickly, is the proof-of-concept Phase Ib trial with 501 Alzheimer's agitation slated to be released before or after that Phase III data in schizophrenia?

So if you're talking about when we're going to present the data, so we actually have an abstract into the ACNP that was accepted. So the ACNP, I believe this year, is December 7 through 11, and it will be presented there.

Okay, excellent. Look forward to seeing that. And then final question just on 701, sort of building on that last question about the combinations, do you have any strategic plans to pursue development of 701 in combination with any additional novel IL-2 targeting modalities after bempeg maybe with some of the information that you've seen from SITC recently?

So it's true to say that we have presented data previously, preclinical data, looking at a number of potential combination partners. It's probably also true to say we haven't pursued. I don't have any immediate plans to pursue these novel combinations as company-sponsored studies. But again, the AST mechanism is really a nice way to signal SIC. It tends to be low dollar for the company, is done at well-respected institutions. And I think that's the setting where we probably will branch out, as I said earlier on.

And the other point, of course remains – 701 combines just by virtue, again, the fact that it's an oral that's taken once-daily combines really beautifully with many other agents, very easy to combine.

Okay. I appreciate that detail. Thank you.

Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back over to management for any additional concluding comments.

Thank you, again for joining our call today. Have a great day, and please reach out to us if you have any additional questions. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Once again, we thank you for your participation, and you may disconnect your lines at this time.