BioXcel Therapeutics, Inc. (BTAI) Q4 2019 Earnings Report, Transcript and Summary

Good morning, and welcome to BioXcel Therapeutics' Fourth Quarter and Full-Year 2019 Earnings Conference Call and audio webcast. Before we start, I would like to inform 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. The 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 annual report on Form 10-K for the fiscal year ended December 31, 2019, which can be found on the Web site 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.

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 fourth quarter and full-year of 2019. We appreciate everyone's time and attention today. 2019 has proven to be a pivotal year for BioXcel Therapeutics, thanks to our experienced and knowledgeable team. We have made significant development strides with our two clinical programs, BXCL501 and BXCL701, positioning the company well to reach multiple important milestones in 2020 and beyond. To start, I would like to discuss our lead neuroscience clinical program, BXCL501, and focus on the key achievements we have accomplished over the last year and thus far in 2020. As a reminder, BXCL501 is our proprietary thin-film formulation of dexmedetomidine, or Dex, for the treatment of acute agitation. We have designed this candidate to be easily administered and have a rapid onset of action, so it can produce a calming effect without excessive sedation. Building on the positive data from our Phase 1b trial in December 2019, we announced the initiation of the SERENITY program, two Phase 3 studies of BXCL501 for the acute treatment of agitation in patient with schizophrenia and bipolar disorder. The trials will separately assess up to 375 patients with each arm of the studies receiving either BXCL501 at 120 micrograms, 180 micrograms, or placebo. Please note we have already manufactured the needed quantity of BXCL501 to complete both the studies, and have delivered the films to the clinical sites for use. This initiation of the SERENITY program brings us one step closer to providing a non-invasive effective treatment option to the millions of individuals who suffer from agitation associated with these neuropsychiatric disorders. Since these files are relatively short in duration and the enrollment of patient is on track, we expect to report top line results in mid-2020. Furthermore, following the completion of these pivotal studies, we plan on submitting our first NDA for BXCL501. It is important to understand that this NDA filing has the potential to be submitted only a few short years after the clearance of the IND, which helps to showcase the efficiency of our Artificial Intelligence approach for identifying and advancing improved therapies. The clinical momentum with BXCL501 does not stop there. Last month we initiated TRANQUILITY, a Phase 1b/2 trial for the treatment of acute agitation and geriatric dementia, expanding the potential utility of this product candidate to an indication beyond the current neuropsychiatric disorders. We expect to report results from this study in mid-2020. With 70% of dementia patients experiencing agitation, and no FDA approved therapies to treat this symptom, there is a high unmet medical need for an effective therapy that does not result in undesired side effects such as excessive sedation. Additionally, since off-label agitation treatments have blackbox warning for the elderly, we believe BXCL501 is a fast-acting easy-to-administer therapy that provides a treatment option for physicians and caregivers who have continuously struggled to treat dementia-related agitation in geriatric patients. Moreover, the TRANQUILITY trial will lay the foundation for our future plans to investigate BXCL501 across the spectrum of agitation in dementia, including Alzheimer's disease, significantly expanding the market potential of this candidate. In addition to these three ongoing trials, in February of this year, we announced that researchers at Yale University have initiated a Phase 2 study to assess biomarkers associated with agitation, including heart rate and EEG in patients with schizophrenia and their response to BXCL501. We feel this trial will not only allow us to further justify BXCL501's calming effect, but also may help to determine physiological changes linked to hyperarousal that can be used as an initial signal of agitation. This in turn could provide caregivers adequate time to deliver BXCL501 before patients experience severe agitation. While we are performing this study solely on patients with schizophrenia, we believe this trial may lead to the exploration of BXCL501 in other indications that also experiences similar hyperarousal, including post-traumatic stress disorder and alcohol-related withdrawal symptoms. Lastly, we are pleased to have received FDA clearance of our IND application for BXCL501 for the treatment of opioid withdrawal symptoms. Opioid overdose is reported to be the number one cause of death in the United States for individuals under the age of 50 years, and the distressing symptoms that are caused by withdrawal are a main reason for continuous drug usage. More effective treatment options are needed to combat this national opioid epidemic, and we believe BXCL501 has the potential to elevate opioid withdrawal symptoms due to its intrinsic potency and its specific mechanism of action. After reviewing the study investigating intervene [attacks] [Ph], we showed promising results on reducing withdrawal symptoms. We are preparing to initiate the release trial in patients experiencing symptoms of opioid withdrawal, expanding the therapeutic opportunity of BXCL501 into a fourth indication. This past year, we have truly built out our neuroscience program in hopes of reaching a broader patient population, and to provide an alternative treatment option that we believe is highly differentiated from the current standard of care. With our ongoing trials, we're gaining experience in treating patients with BXCL501 in disease conditions beyond Schizophrenia. In addition, we're dedicated to the continuous exploration of various indications with BXCL501 as we feel this candidate has the potential to be an efficient treatment regimen for numerous disorders associated with hyperarousal. Thus, our portfolio strategy is to broaden the commercial value of this product candidate creating an advanced neuroscience franchise. Now, I would like to turn the conversation over to our immune-oncology clinical program BXCL701, our orally systemic innate immunity activator, designed with dual mechanism of actions. Back in December, we announced that we're expanding the evaluation of BXCL701 in combination with Keytruda into numerous advanced solid tumors. This open-label Phase 2 basket trial is taking place at MD Anderson, a leading Cancer Center in the U.S. and is evaluating patients with advanced solid tumors who are either naive to or refractory to Checkpoint therapy. We're hopeful that this candidate will help to extend treatment responses to Keytruda when used in combination accelerating the clinical expansion of BXCL501 into a wider range of cancer trials. Additionally, we're currently conducting our Phase 1b/2 double combination study of BXCL501 and Keytruda for treatment-emergent neuroendocrine prostate cancer or tNEPC. In February of this year, we presented safety and tolerability data from the first and second cohort at the American Society of Clinical Oncology Genitourinary Cancer Symposium in San Francisco. We're currently enrolling an expansion cohort to explore the potential benefit of dosing twice a day and plan to report results from the Phase 1B portion of the trial in the first half of 2020 following the readout, we expect to move to the Phase 2 efficacy portion of the trial. 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. Importantly, this past month, we significantly strengthened our balance sheet, securing net proceeds of $60 million in a public offering, this cash together with our current results, provide BioXcel enough cash runway to fund key clinical, regulatory and operation milestones well into 2021. 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 fourth quarter of 2019, we recorded a net loss of $8.3 million, compared to a net loss of $7.1 million for the fourth quarter of 2018. Research and development expenses totaled $6.5 million for the fourth quarter, compared to approximately $6 million for the same period in 2018. The increase was primarily due to an increase in professional research and related project costs, salary and related payroll costs, manufacturing costs offset in part by decrease in clinical trial expenses. General and administrative expenses in the fourth quarter of 2019 were approximately $1.9 million compared to about $1.3 million for the fourth quarter of 2018. The increase was primarily due to increases in salary and related payroll costs and professional fees. With regard to the full-year 2019, we reported a loss of $33 million compared to a loss of $19.3 million for the full-year 2018. Research and development expenses were $25.8 million for the full-year 2019 as compared to $14.6 million for the same period in 2018. General and administrative expenses were $7.8 million for the year 2019 as compared to $5.4 million for the same period 2018. We had cash and cash equivalents of $32.4 million as of December 31, 2019. That concludes our fourth quarter and full-year 2019 financial review. Please note that the December cash numbers do not include our recent financing, which secured $60 million in net proceeds. Now I'd like to turn the call back to Vimal.

Thanks, Richard. We would now like to open the call to questions. Operator?

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from Robyn Karnauskas with SunTrust. Please proceed with your question.

Hi, guys, thanks for taking my question. So, just first up on manufacturing, you mentioned you have enough to get through some of these trials, can you talk to us about how much capacity can you ramp-up to prior to a launch, and what needs to happen for that to occur? And then as far as manufacturing for submission to the trials, you're positive like how much do you have to do, could that delay anything? And then, the second question is more about reimbursement, I get a lot of questions people saying how will this be reimbursed to the hospital, do you need a code, et cetera? Just talk to us about ease of reimbursement. Thanks.

Sure. Thank you, Robyn. This is Vimal Mehta. Regarding the manufacturing, like, we have as we mentioned completed all the batches that are needed to complete our two pivotal trials, SERENITY 1 and SERENITY 2. We've been scaling up and preparing for commercial readiness for CMC. All CMC is done in U.S. So, we don't see any delays in terms of preparing for the launch. So, we feel that we are in good position to continue to scale up the commercial readiness and prepare the material that will be required for launch towards the end of 2021 or early 2022. Coming back to your question regarding the reimbursability, currently we're waiting to complete these two studies, SERENITY 1 and 2, and understand what our key claims are. Then we will initiate discussions with the reimbursability, our payers that, like you know, what is the value proposition, what our pharmacoeconomic benefit we're providing to the whole system and what will be the right pricing? At a high-level, there will be a pricing for the ER and hospital visits, like, when these patients show up, that will be the pricing, and we expect that there will be a pricing for the long-term care centers which are in nursing homes as well as in assisted living centers for dementia patients, and then we are developing this strategy for pricing for opioid withdrawal symptoms that could be more or less maybe a treatment regimen type of pricing. So, I think this is work in progress. As we have indicated, we are in the process of hiring a Chief Commercial Officer, that is expected to come on board soon, and then we will be able to have a session where we can outline our reimbursability and the pricing strategy for the product.

Great, thank you.

Our next question comes from Sumant Kulkarni with Canaccord Genuity. Please proceed with the question.

Good morning. Thanks for taking my questions. First, on the 501 side, we've received some questions from investors in the actual logistics of placement of the film sublingually. We know that in your Phase 2 trials, all the patients were able to place the film themselves. So, could you talk about any of the experiences that you've had so far in terms of placement of the film in the ongoing SERENITY program?

As far as we know so far, what our experience has been with both the program, SERENITY 1 and 2, that continues to be the case, what we observed in our Phase 1b study, we have not heard anything otherwise.

Correct. And on the opioid withdrawal side, there are some questions around the potential for generic Clonidine to be used in that setting off-label. So, could you let us know exactly how Dex might be different? We know there're some selectivity things that are going on there. So, could you please expound on that?

Sure. So, we can outline the fundamental rationale why we decided to develop Dex for that, and I have Dr. Rob Risinger, who is our VP of Clinical Research for this BXCL501 program, he will outline that.

Hi, good morning. This is Dr. Risinger. The principal differences between Clonidine, for example, and Dexmedetomidine in our formulation and in our hands, the Dexmedetomidine has a very long half-life. We'll be exploring the dose range as well as the plasma pharmacokinetics in the upcoming trial for opioid withdrawal. Although Clonidine is used in the United States for opioid withdrawal, we believe there's a certain advantage, because Clonidine is dosed multiple times a day, and there's a fairly complex dose regimen that has to be titrated, for example, adjusted up or down. We believe there'll be a certain ease of use for BXCL501, and we hope to demonstrate that and then that would be a clear differentiating factor from -- for example, generic Clonidine.

Got it. Thanks. And my last question on the 701 side, could you talk about what you think could be the timeline on the safety run-in study for Bempeg plus Avelumab, because that portion of that trial is out of your hands, given it's in your partner's interest to do that?

Currently, in our conversation with our partners, the study is ongoing. They expect that they will have this data completed either like in Q2 or Q3 timeframe. Then we will get that data, and then we will be in a position to initiate the 701. So, as you said, that is little bit out of our control, but partners are committed, and we are working very diligently to move the program forward.

Got it. Thank you.

Our next question comes from Do Kim with BMO Capital. Please proceed with your question.

Hi, good morning. Thanks for taking my question. First on 501, I just wanted to confirm that you started dosing patients in the bipolar study, clinicaltrials.gov hasn't been updated yet, and is there any reason that 501 would behave differently in bipolar patients? Do you think that 501 will be able to calm, let's say, a manic episode and differentiate that between agitation?

So, Do, this is Vimal. We have started dosing patients in bipolar, and the clinicaltrials.gov will be updated shortly. I will pass it on again to Rob Risingerto answer the second part of your question about bipolar, why we think that the drug will behave similarly like schizophrenia. Rob?

So, we have initiated dosing. We've dosed a large number of patients with bipolar disorder and the SERENITY 2 trial. We're seeing a robust reduction in agitation in some patients. Of course, the trial continues and is blinded. So, we're monitoring data as it comes in, and one-third of the patients are receiving placebo. That is a fact. So, we're seeing data that is consistent.

And in case of [indiscernible]?

So, Do, this is Frank, and just to add to this, we know there is a lot of science behind the role of Norepinephrine and mania, which tends to drive the agitation events that occur in these bipolar patients. We know that Norepinephrine is quite high. So, knocking that down, we really believe that we have a very targeted approach here for these types of patients.

Great, that's helpful. And on the financial side, could you provide -- or how we should be thinking about operating expenses for 2020? You have a meaningful ramp in the 501 program with multiple clinical trials, and when do you start thinking about building the commercial infrastructure for 501?

So, Do, that's a great question. As you remember that our both SERENITY 1 and SERENITY 2 trial, as well as dementia trial TRANQUILITY were already funded before we did the [raise] [Ph] in February last month. So, the additional capital will allow us to move forward opiate withdrawal trial, push forward with the late-stage dementia trial, if our data from Phase 1b/2 is positive, and also allows us to do start hiring of the Chief Commercial Officer, and do the pre-commercialization activity. So, that's where we expect that this additional way that we recently did, it allows us and gives us more flexibility, and kind of -- I would say in opioid withdrawal symptoms be able to move forward with the NDA faster. And Richard can outline in terms of the operational, how long this cash can provide us a capital…

Sure, Vimal. So, what we said, and Vimal is right, allow us to do additional things and accelerate programs, and what we've said is that cash should take us well into 2021.

Great. Thank you for taking my questions.

You welcome.

Our next question comes from Raghuram Selvaraju with H.C. Wainwright. Please proceed with your question.

Thank you so much for taking my questions. Can you hear me?

Yes.

Okay. Very quickly, I was wondering if you could just give us a sense of what you expect the potential sequence of data release to be with respect to TRANQUILITY versus the SERENITY 1 and 2 studies. If you have a sense of which of those would be likely to mature first, and also if you could tell us in what kind of sequence you might be able to provide us with the updates on how enrollment is going, or provide us with the specific timeframe around which, for example, completion of enrollment has been accomplished in the SERENITY studies? And also, if you expect the Yale Biomarker Study to readout ahead of both TRANQUILITY and SERENITY, please?

Sure. Great question. Thank you, Ram. In terms of the enrollment, like, we had announced that on December 30, that we have initiated phase study. Phase study has been going as well as we could have expected, or what we observe in our Phase 1b study in terms of enrollment of the patient. The schizophrenia SERENITY started first, then immediately followed by SERENITY 2. And we have, as Rob indicated, those patients in both -- multiple patients in both SERENITY 1 and SERENITY 2. TRANQUILITY dementia trial, we are conducting in this environment, which is in a long-term care setting for the first time. I don't think anybody has conducted a trial, which is for acute treatment of agitation in dementia-related patients in that setting. So, we had some learning, but as far as we've been into it for 60 days or so, we announced it on January 7. Enrollment is progressing very well with that trial as well. In terms of the sequence how the data readouts may happen, as you can imagine the Phase 3 trial, which is pivotal trial is more regimented, and you need to have all the enrollment and hard database lock, so that itself will determine when we can announce the data. In TRANQUILITY trial, it says ending dose study, and we continue to test various doses, and once -- our team has a good handle on the dose, and we have the necessary data that we can take it to the FDA for discussing the next step, then we will be in a position to discuss with those treat that what the top line data is from the dementia for us. So, that's the goal of the study, when do we achieve that goal? In terms of the Yale Biomarker Study, it's a small study with about 20 patients or so. Trial is ongoing. In due course of time we will get a better handle that if data we expect to be finished fast, and once we have the data that is literally a biomarker data, which kind of supports our current trial that are ongoing, and support the mechanism and gives us a window into future what other indication we can expand into. So, that's where I would say that the sequence will look like. SERENITY 1 and 2 continues to be the company's major focus, and dementia continues to be the focal to generate the data, that will allow us to move it into the next stage. And with biomarkers, develop that deeper understanding of the mechanism with or without the drug BXCL501.

Okay. And then, just to clarify, assuming you get positive results from TRANQUILITY, is it possible to envisage you're moving into the pivotal context with 501, specifically in the dementia setting before the end of this year? Is that logistically feasible?

I think most important is going to be interaction with FDA, that what our conversations are with FDA, where once we have that data in our hand, and so I would say I will leave that question that we have not and we are not ready to provide any specific guidance related to where the dementia will be, but our goal as a company is to collect sufficient amount of data as fast as possible to go to the next stage and have a discussion with FDA and start that trial.

Okay. We haven't really talked too much about potential trial design parameters within the context of acute delirium, but I was wondering if you or Frank might care to comment on distinct efficacy outcome measures that you would apply in the acute delirium context to assess the activity profile of 501. In other words, these would be outcome measures that are particular to the acute delirium medication that are different from what you would use typically to assess the drugs impact on agitation in these other contexts in which you are currently studying?

So, Ram, it's a good question that you're asking. Remember that, we throw around the term delirium quite freely, and remember that what we're trying to achieve really is we're focusing on these delirium patients who are agitated. So it's this hyperactive delirium, which is somewhere around 20% to 30% of the total patients. That's really what we are focusing in on at first. Now, there was a study done back when Carrasco in Spain, where they were looking at the ability of Dexmedetomidine given IV to calm patients, who were refractory to Haloperidol, and they basically used a very simple scale, which was the scale that we used in our IV study.

That was a rare scale, right…

Exactly. They were just looking very simply to see, I think we could potentially apply different measures to it to focus in more on the hyperactive portion of it. It's a very similar question I think you're asking is to the questions that we have with dementia as well. Okay, what are the factors? What are the behaviors? What are the things that you're looking for that you want to reduce? So, it's a great question. It's something that we will have to deal with as we move forward with this study.

So Ram, just to be more direct, all of this work is in progress. Delirium trial is in planning stage. And considering the bandwidth of the organization we have two Phase 3 trials currently ongoing, one opiate withdrawal Phase 1b, delirium trial ongoing, and opiate withdrawal is starting soon. So, dementia trial -- opiate withdrawal is starting soon. So, we are in the planning stage with the delirium. We are trying to understand the most important market where hyperactive delirium results in agitation, and once we have zoomed in, we will come back and say what parameters we will measure, what the first trial will look like, but as a general company's strategy has been to use Phase 1b/2 to find the dose. We already know from the prior studies that the drug works in delirium patient. Even in refractory haloperidol patients it worked. So, we have to find the dose to be able to move to the pivotal time. So, that's where we are with a delirium trial currently.

Okay. And then just very quickly on 701, I was just wondering if you envisage continuing to use Bempegaldesleukin in future triple combo regiments, or whether you are thinking at this juncture about potentially shifting to testing 701 in combination with a different trial 2 agonist?

So, I think we are committed to the relationship and we continue to use that, because that's already work in progress, and I will let Vince mentioned that we continue to look at other combination approaches for 701 in combination. Vince?

Yes, sure. Good morning, Ram. I think we've -- maybe touched on this on the previous call. I mean as you know, there are several IL-2 spin-offs out there, and I could probably list three or four that are on our list of potential combination targets and approaches, but as Vimal said, we're committed to the collaboration we have ongoing with Nektar, and that said, they're not the only pegylated IL2 in town. So, we are having those discussions.

Thank you.

Thank you. At this time, I would like to turn the call back to management for closing comments.

Thank you, Operator. 2019 was the year filled with substantial growth and tremendous clinical progress, positioning us for transformative year ahead. We look forward to continuing to share updates throughout 2020. As we are expecting, key clinical updates in the coming months, including pivotal data readout. Thank you again for joining our call today, and we look forward to seeing many of you at the upcoming Healthcare Investor Conferences. Have a great day, and please reach out to us if you have any additional questions. Thank you.

Thank you. This does concludes today's teleconference and audio webcast. You may disconnect your lines at this time and have a great day.