COMPASS Pathways plc (CMPS) Q2 2024 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to COMPASS Pathways' Second Quarter 2024 Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Stephen Schultz. You may begin.

Welcome, all of you, and thank you for joining us today for our second quarter 2024 results conference call. Again, my name is Steve Schultz, Senior Vice President of Investor Relations at COMPASS Pathways. And today, I'm joined by Kabir Nath, our Chief Executive Officer; Dr. Guy Goodwin, our Chief Medical Officer; and Teri Loxam, our Chief Financial Officer. The call is being recorded and will be available on the COMPASS Pathways Investor Relations website shortly after the conclusion of the call, and will be available for a period of 30 days. Before we begin, let me remind everyone that during the call today, the team will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. You should not place undue reliance on these forward-looking statements. Actual events or results could differ materially from those expressed or implied by any forward-looking statements as a result of various risks, uncertainties and other factors, including those risks and uncertainties described under the heading Risk Factors in our most recent quarterly report on Form 10-Q filed with the U.S. Securities and Exchange Commission. and in subsequent filings made by COMPASS with the SEC. Additionally, these forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements, even if our estimates or assumptions change. I'll now hand the call over to Kabir Nath.

Thanks, Steve. Good day, everyone, and thank you for joining us. First, let me welcome two new leaders to COMPASS Pathways. A few weeks ago, we added Lori Englebert as Chief Commercial Officer. And as you saw just this morning, we have appointed Gino Santini, as the new Chairman of our Board of Directors. Lori and Gino both have strong, relevant experience that will benefit COMPASS as we continue to complete our COMP360 Phase 3 clinical trials and build our commercial capabilities. I am pleased that these exceptional leaders have chosen to be a part of our team, which is a reflection of their commitment to the field of mental health and their confidence in COMPASS. Turning to our core program in treatment-resistant depression. We're doing something that has never been done before at this scale and working with many clinical sites that are new to psilocybin research. We're making progress on recruitment in our COMP360 Phase 3 trials. As we discussed on prior quarterly calls, the resources that we added earlier in the year to help accelerate the process of confirming TRD diagnosis have been helpful. We continue to expect the readout for the 6-week primary endpoint top line data from the 005 placebo-controlled trial in quarter four this year. However, we're also needing to spend increased time and resources to support clinical sites to recruit as quickly as possible, while maintaining the highest level of quality in the trials. Recruitment is, therefore, trending towards the end of the year and there's a chance that data could push into January. As a reminder, we expect to need both 005 and 006 for a regulatory submission, and we continue to expect the 6-week primary endpoint or 006 by mid-2025. On today's call, Guy will provide some thoughts on key issues that were discussed during the Lykos' AdCom, and Teri will provide the financial overview. I'll provide some closing comments, and we'll then move to Q&A. Guy?

Thank you, Kabir. The Lykos advisory committee was certainly eventful and it provided some key insights into the FDA's thinking and their requirements for review of therapeutics in this new class of drugs. Three items came into focus: the therapy aspect of the clinical protocol, the issue of unblinding and lack of certain safety data that FDA deemed important to understand. Let me discuss these in order. First, regarding psychotherapy, MDMA appears to increase interactive communication with the therapists during the drug experience. It truly is psychotherapy catalyzed by the drug. This is in contrast with psilocybin, which elicits a subjective inward experience for patients. With COMP360, the patient is supported by a licensed therapist or other medical professionals, mostly for safety purposes. There is no active psychotherapy on the day of drug administration. Most of the administration session is silent, and any interaction is typically to redirect the patient's focus back inwards. The pre-administration preparation ensures patients understand the trial and what to expect on the day of administration, and prepare them to be in the right frame of mind to undergo treatment, not unlike other medical procedures. Patients have two post-administration sessions to provide them with an opportunity to discuss their experience and integrate it into their lives. Second, turning to a discussion of unblinding, context is important here. It is not uncommon in neuroscience for drugs to produce effects that are detectable by patients. It is the absence of such effects that unblinds the patients in trials that are psychedelic. It is the presence of adverse effects, like nausea or somnolence, that are likely to cue the unblinding that may often occur in other trials, for example, of conventional antidepressants or antipsychotic drugs. Such unblinding has not prevented their approval as medicines. As requested by the FDA, our 005 trial is placebo controlled, which will help to characterize a safety baseline, but lack of an active control will make potential unblinding likely. By contrast, our 006 trial was designed similar to the Phase 2b, with a strategy to minimize the potential for unblinding. 006 has three active arms so patients know that they will receive a dose of COMP360, making it more difficult for them to discriminate, in particular, between the 10 and 25 milligram doses. In fact, most participants in the Phase 2b study reported an intensity of psychedelic effects that could have come from any of the doses. In addition, we have also put a cap of 15% on recruitment of patients with prior experience with psychedelic drugs. We believe that this design safeguards the blinding of the trial, and the two Phase 2 trials together will produce a robust package for the FDA. Finally, we are conducting the COMP360 TRD clinical program to the highest standards and we are collecting the range of safety data that would be expected of any pharmaceutical clinical development program, including positive side effect data. For example, we have collected data from the altered states of consciousness questionnaire after every drug administration. This survey is comprised of 94 items covering the full gamut of experiences, both positive and negative, attributable to psychedelic drugs. Looking at the FDA's guidelines and observing the discussion at the Lykos meeting, we are confident that our pivotal program will deliver what the FDA requires to effectively evaluate COMP360 treatment. Let me now hand the call to Teri for the financial overview.

Thank you, Guy. I'll now step through the Q2 financial results. Cash used in operations in the second quarter was $34.4 million, within the guidance range we provided of $32 million to $38 million. Regarding third quarter 2024 financial guidance, we expect net cash used in operations to remain between $32 million and $38 million. Turning to full year financial guidance. We expect cash used in operations to be between $110 million and $130 million, which assumes that we will receive the 2023 R&D tax credit this year. COMPASS continues to maintain a strong financial position, with cash and cash equivalents of $228.6 million at June 30, 2024. This compares with $262.9 million at March 31, 2024. We expect our cash runway to fund operations into 2026. Long-term debt under the Hercules loan facility was $29.4 million at the end of the second quarter. We will continue to manage our cash carefully to advance our pivotal program and to achieve important milestones that we believe will create value for our shareholders. Thank you, and I'll now turn the call back over to Kabir.

Thank you, Teri. While we await the top line data readout for the primary 6-week endpoint in the 005 Phase 3 trial near the end of the fourth quarter, I want to reflect more broadly on our progress. We now have in place a senior management team of seasoned executives who have a passion for treating mental health conditions and decades of relevant collective experience in bringing innovation to patients. We continue to generate all the necessary supporting data for an NDA filing. And our pre-commercial collaborations are yielding valuable learnings, both for us and for potential future sites of care, as we continue our preparations to leverage the commercial delivery network. The commercial marketplace has seen continued growth for interventional psychiatry treatments, such as Spravato, which validates our approach. Finally, I want to thank David Norton for his guidance and commitment to COMPASS Pathways in serving as Interim Chairman of the Board, and we're pleased that he will continue to serve as a highly valued member of the Board after Gino joins us as Chairman in September. We have a strong team in place to continue to execute our Phase 3 program and build the organization for potential commercialization. With the progress we've made, we're well positioned for continued success in TRD and beyond. Thank you, again, for your participation on today's call. And we'll now turn to Q&A, so I will hand this back to the operator.

[Operator Instructions] And our first question comes from the line of Ritu Baral with TD Cowen. Please proceed.

Good morning, guys. Thanks for taking the questions. First question, Kabir, I wanted to just ask about the conduct of ongoing 005. How many DSMB looks have you had? And how is the overall suicidality rate? Looking just given the high background rate of suicides in the TRD population in general and the focus on this, can you give us a sense of conduct? And then I have a couple of follow-ups. Thanks.

Sure. Thanks, Ritu. And just checking that you can hear us?

Yes.

Great. I'll actually hand that first question to Guy, if I may. So, Guy.

Yes. Ritu. We've just recently, as it happened, had a DSMB meeting where -- at which both 005 and 006 were considered, and they'll be there quarterly as you may know. The -- basically, the feedback was that we continue the trials as planned. So with no changes to procedures of any kind.

Great. And then another sort of conduct question. One thing that came up in the Lykos study -- I'm sorry, in the Lykos AdCom, was the fact that they didn't do labs. And I'm just wondering, I want to make sure I understand the scope of the labs that were requested for that therapy versus, I guess, what we normally think of as labs in biotech, including liver levels, kidney function, et cetera, et cetera. Were there any special labs that the FDA was referring to that -- yes, when the discussion focused on the labs?

My understanding -- and obviously, we only kind of got the discussion, we didn't have the background document, so to speak. But my understanding was that they were routine labs that they were doing that were not materially different from what is required for our drugs.

Got it. Helpful. And then last question. Have you seen any impact on your enrollment rates either for 005 or 006 based on the AdCom proceedings? And more specifically, maybe a little more subtly, would you expect, just given how much that's been in the news, for that to potentially impact your placebo rates, such that you might need to take another look at the stats plan or it might change powering? Thanks so much.

Basically, to your last question, no, there's really no suggestion that I know that one trial influences another in quite that way. Clearly, there were a number of issues that were brought up around the use of placebo in general. And that form part of the discussion, the background noise, if you like, that we heard following the AdCom. I mean our sense was that, actually, they were contending sounds some were positive, some were trying to, in a sense, reverse the sentiment that was expressed by the committee. But we haven't really had feedback either from the sites or less directly from patients, or in terms of changes in run rates for ourselves, that suggests any impact at all.

That's great. Thanks for taking all the questions.

Thanks, Ritu.

Thank you. Our next question comes from the line of Leonid Timashev with RBC Capital Markets. Please proceed.

Thanks. I had maybe one follow-up on one of Ritu's questions, and then a second question, if that's okay. So I guess just following up on sort of the discussion around the enrollment trends in the sites. I guess can you talk about how sites have been performing? I mean something that you alluded to, but I guess with respect to screen-in or screen-out periods. And I guess, any anomalies you may have seen on the blinded data from the raters that might require maybe retraining or spending some of that additional time that you referred to. I guess how are you maintaining that site quality?

Yes, I'll start. Thanks, Leonid. So as I said on the call, we are continuing to recruit successfully into both 005 and 006. As we've discussed earlier in the year, the need to actually be better and quicker at getting the TRD diagnosis confirmed and the additional resources we've put in there have been helpful to that. And really, it's just a focus on continued quality, ensuring that we do have the right patients, ensuring that sites are doing everything necessary. We're continuing to be in very close touch with them, visiting them and so on. But I wouldn't say there's anything out of the ordinary or any particular anomalies that we've identified. And certainly no trend breaks post AdCom or anything that suggests a change.

And perhaps I'd add, Leonid, that one of the key quality indicators, if you like, for any trial is retention, and that's remained actually better in some ways than we might have expected. So that's reassuring actually for all phases of the trial. You'll remember, there's a first a phase for the primary outcome, and then subsequent redosing and then open-label treatment phases. And recruitment has maintained -- retention has been maintained into, indeed, the final phase of the trial. So that has been extremely pleasing. It is, of course, unblinded in the sense that we don't know what the results are, but we do know that patients are staying in the study. And where they're not staying in the study, that would be a problem, of course.

Got it. Thanks. Really helpful. And then just maybe a second question related to the concept of the suicidality. I guess as you've been talking to KOLs, I guess, do you have a sense of what might be an acceptable amount of suicidal ideation just given the patient population and the fact that psychiatrist often have some amount of experience managing patients, especially even that SSRIs, have some elevated risk that's on the label. I guess do you have a sense of what might be an okay signal if one does appear on suicidality?

I think the truth is that clinicians who treat depressed patients simply live with suicidality as a fact of the disorder. It's a core symptom. It's therefore ever present really. And they don't actually think in terms, actually, that people looking at clinical trial data tend to do. They tend to see it more as a fact of life. So we don't get the sort of feedback as to what's acceptable and what is not acceptable. Ultimately, of course, the key observation will be the differential rate, if there are any, between the different arms of the study. And that will allow us to make a real and genuine conclusion about this risk, hypothetical risk, and then maybe higher risks in the active arms. We simply at the moment, I think, don't have sufficient data to say, but we will have that data once we have completed our studies.

Well, thank you, guys.

Pleasure. Thank you.

Our next question comes from the line of Charles Duncan with Cantor. Please proceed.

Yes. Good morning, Kabir and team. Thanks for taking our question. Good to hear of the progress. Especially, I'd like to hear some more from Guy on the recent AdCom. But before that, I guess I'm wondering if you can provide a little more granularity on, call it, the news flow yet this year, understand that the analysis may make December versus January a question mark. But do you plan to announce the completed enrollment in 005? And then I'll ask another question to Guy.

Thanks, Charles. So we haven't yet determined whether we will make that announcement.

Okay. That would be helpful to hear. Let's -- moving on to Guy. I guess you did a great job outlining the thoughts post the Lykos AdCom. I'm wondering if there was anything that was surprising to you? It seems like these are issues that you might have considered, especially given the guidance and design of your trial. And so I guess I'm wondering if there was anything -- any new thinking that came out of the AdCom that perhaps you're doing? Or were these considerations that that you had in designing the 005 and 006 program?

I think speaking for ourselves, there were really no surprises in the AdCom. I mean the tone of the AdCom was surprising, as I'm sure anyone listening to it would have agreed at times. But actually in terms of the content, the FDA's contribution, the issues that were discussed, they were not surprising. And they were not something that we hadn't, to some extent, as fully as possible, anticipated.

So you don't feel like there was any real change in the FDA's perspective versus the guidance that was put out earlier?

No, we certainly couldn't detect that, and we simply content that our trials are running as they are on track and with all the considerations that we put into designing them.

And I think if I may just add -- sorry, if I may just add. I mean referring back also to Ritu's earlier question. I mean, essentially, I think what that showed us was that there's no special consideration or free pass for psychedelic trials. They are expected to be conducted to the same levels of rigor, safety, data collection and so on as any other psychiatry trials, and that's not a surprise to us.

And probably consistent with the way you do things. Question on 005 versus 006, this may seem like naive, but can you just remind us as to what is the key question that is being asked in those trials? What would you like to see out of those trials to encourage you that you have a drug that's really novel?

Well, that, of course, is a great question. 005, we would like to see separation from placebo. Other studies have demonstrated that, we would like to do the same. But essentially, we would need to continue to demonstrate safety in that study and safety against the placebo baseline. That's really what it will deliver for us. Our phase -- our 006 study will essentially, if successful, replicate what we saw in 001, the Phase 2 study, which I think was a dramatic demonstration of a dose response effect. And what we would hope to see is whether or not adding a second treatment actually substantially increases remission and response rates. And if that happens, that will also be great news for patients.

And then taken together, Charles, is durability. Clearly, that's a question that we didn't answer in 001 beyond 12 weeks. So that's another key element, particularly out of 006.

Yes. And that durability of interest to a lot of people. And appreciate your good retention comments to the last question. Thanks for taking our questions.

Thanks Charles.

Thank you. Our next question comes from the line of Vikram Purohit with Morgan Stanley. Please proceed.

Hi, good morning. Thank you for taking our questions. We had two, one on the pivotal program in TRD and then one on the pipeline. So for 005 and 006, it sounds like near the end of the year and then middle of next year, we'll be getting the 6-week primary endpoint data. But I was curious when the longer-term follow-up data from both studies might be communicated publicly? And then secondly, on the pipeline, could you just remind us where next steps and your thoughts on development plans stand for both PTSD and also, potentially, bipolar disorder? Thank you.

Thanks, Vikram. So you're right, reconfirming those dates that you mentioned for the 6-week primary endpoints, we haven't talked about when we could expect the 26 weeks. But simply projecting the additional five to six months of data, you can imagine that that's when we would be releasing both of those, but we haven't specifically confirmed that to this point. Regarding PTSD, yes, we continue to believe that, that was a very interesting signal that we showed in what was a small open-label study. So we are developing some designs and protocols around that. We're taking external advice also. And as you're aware, though, the current runway does not contemplate an additional study or set of studies in PTSD, but we're continuing to do the work around what that could look like.

Bipolar disorders obviously remains a great interest to us, but I think it's a rather lower priority at the moment compared to PTSD.

Understood. Thank you.\

Thank you.

Our next question comes from the line of Gavin Clark-Gartner with Evercore ISI. Please proceed.

Hi, guys. Thanks for taking the questions. First, are you able to see the rates of retreatment in Part B of both of the trials? And is that rate different between the two trials?

We -- in principle, we can see raw rates, but we haven't compared them to this point.

Okay. Are you planning to share the overall rates of retreatment at any point prior to the top line? And should we also expect that with the top line release?

I don't think so. These are details that we'll obviously make available in due course, but there are considerations around announcing the top line data relating to blinding, which make it important that we don't cause too much interest in the data, for example, from patients themselves.

Got it. And what's the overall rescue rate -- or rate rescue therapy use? Where is that tracking in both of the trials?

You mean rescue on the day of administration of the drug?

No, just during the blinded portion of the trial, like starting another medication.

Okay. Yes. Well, I mean -- oh, I see. No, we're not tracking that as a group. I mean, essentially, we are blind to the details of the study, for obvious reasons.

Got it. Thanks.

Thanks.

One moment for our next question. And it comes from the line of François Brisebois with Oppenheimer. Please proceed.

Hi. This is Dan on for Frank. Thanks for taking my question. Just a quick one from us. Regarding the Lykos AdCom, one of the focuses was the challenge of disentangling the contribution of psychotherapy to the efficacy of the drug in Lykos' case. In the case of COMP 005 and 206, of course, there's no formal psychotherapy in the trial. Could you talk about your thoughts regarding the FDA commentary around that?

Yes. I mean my understanding originally was that the FDA had approved the design of the study, which, of course, was placebo versus the doses that were eventually used. And so that they were accepting the idea that a drug could enhance psychotherapy. I think it introduces complexity, which is what was discussed in the AdCom. But I think, frankly, we have to wait for what the FDA actually decides. We don't really have clear guidance on what that will be, obviously. We think that we're in a different category, we are not providing a psychotherapy. And so the question of whether a drug versus placebo or one dose versus another is a much simpler decision in terms of deciding efficacy. And I think that's where we rest our current understanding.

Thank you.

Thank you.

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

Hi. Thanks for taking our questions. I have two. So given how important the durability of treatment effect is, especially within the psychedelic therapeutics context, how is COMPASS specifically ensuring that patients don't have any unused use of other treatment modalities or therapeutic post dosing in your Phase 3 trials, because such instances have the potential to obscure durability that could be directly attributable to COMP360 treatment?

Yes. I mean that's a great question. I mean I think we await to see. We are collecting data about co-administration of other drugs throughout the follow-up phase. So we will be able to observationally tell you what the rates are. Actually actively preventing, discouraging patients is obviously difficult. It's simply understood in terms of how the patients get consent, but that's not an objective of the study. But clearly, if there is a clinical need, patients will receive other treatments. And the thing we have to do is to follow what they are, and really work out to the extent to which it really is something that is required for the group of patients we saw. In the highly responsive patients in 001, we did not see high rates of treatment-seeking outside of the trial in up to 12 weeks. We obviously are going much longer, and we will be better informed when we complete the current study.

And just to be clear, Sumant, I mean, patients do in theory commit to no subsequent use of psychedelics. I mean that is an inclusion criteria and it's part of the informed consent. But clearly, we need to monitor that.

Understood. And the second question is more because investors tend to be hyper-focused on the topic of suicidal ideation. So how well studied is this topic when it comes to recreational users of psilocybin? For example, there was a 2022 paper out of Howard on 400,000 or so U.S. adults, that when the U.S. national survey of drug use that are characterized as "lifetime users" of MDMA or psilocybin, and both psychological distress and suicided thoughts were found to have reduced odds in that population.

Yes. Well, I couldn't summarize the data better than you just did. I mean that is what the finding is and that, of course, is widely believed. There are, of course, slightly smaller studies which are concentrated on prospectively identifying people who are going to go and have a psychedelic experience various times. And those studies have shown similarly that there tends to be a reduction in distress, which is associated with acute use of the drugs, not just lifetime under recreational conditions. But of course, we are not really very interested in that. We are interested in how we deliver this as an effective treatment for patients in difficult -- who have experienced difficulties in getting better with other approaches. So our focus is very much more on the clinical experience, as you will understand. But it forms useful safety background, I agree.

Thank you.

Thank you.

Our next question comes from the line of Tom Shrader with BTIG. Please proceed

Good morning. Thanks for taking the questions. I wanted to ask Charles' question in a slightly different way. As we've talked to people about the panel, there was a fair bit of surprise with all the focus on unblinding. A lot of people thought the FDA is pretty comfortable with that, and you certainly gave a very clean description. Do you agree with that, that maybe that wasn't expected?

Well, I think I can only answer whether I expected it. And to be honest, I did expect that to come up. Because it so frequently comes up when I hear, frankly, nonexperts discussing these trials. It is something that a lot of people have got their teeth into, and so it's something that people want to discuss. As you may be well aware, it's not an exact science to define what the effect of unblinding is in different studies. And so it's often an argument based on very unsecure basis, in fact. But it's certainly something that gets people's energies up. And as you see, it certainly caused a lot of energy to be expanded in that meeting.

And I had a quick PTSD follow-up. As we've talked to people, how derisking do you think the PTSD data is on the safety front? People think that the likelihood of a bad experience is much higher in PTSD. So are you confident that you've seen really negative experiences and negotiated your way through them? Or is 22 patients still too small? Thank you.

I think 22 patients are still too small. And in addition, they were quite a highly selected group. So these were patients with adult trauma. It excluded people with what is sometimes called developmental trauma, childhood trauma. And these people often have had much more difficult lives and much more chronic problems. And some of those patients -- that sort of patient were in the Lykos studies, in fact. So we would want to be cautious about how we develop our program, and that's why we're going to take advice on it. But certainly, what we saw was very encouraging from an efficacy and a safety perspective. That's all we can say at the moment. But it is undoubtedly, for some patients with PTSD, we think this has got a high potential.

Great. Thank you for the answers.

Thank you.

Our next question comes from the line of Elemer Piros with Rodman. Please proceed.

Good morning. So Kabir, I think you originally set out to identify and engage 150 sites in 12 different countries. Where do you stand in that -- with that number? And do you think that you have the right number of sites to complete these two trials?

Yes. Thank you. So that number of sites is across both 005 and 006, and it divides roughly, 40 005, and the remainder in 006. So clearly, there 005 -- and again, I was a reminder 005 is U.S. only. So clearly, all those U.S. sites are up and running in 005. There are some U.S. sites up and running already for 006, but a number of the 005 sites will roll into 006 in due course. Ex U.S., we now have sites up and running in the U.K., Ireland, Canada, France, Spain and Sweden, and some other countries still to come. And I would say we are -- as we reconfirm the expectation for 6-week endpoint of 006, we're exactly in line with where we expected to be in terms of bringing those sites online. Ultimately, just to push further sometimes asked, in 006, we ultimately expect the disposition of patients to be roughly 50% U.S., 50% ex U.S.

Thank you very much for that detail. And you also have an MDD trial ongoing. Is there a chance that, that trial, I think it's roughly 100 patients, would read out before 005?

I don't think that's very likely, Elemer. But you never know. If it -- if recruitment goes very well, it's possible. But as you know, it's primarily designed to look at PK/PD in this population. I mean it will be a great interest as an MDD study, but it's -- I think it's unlikely to read out before 006 -- 005, pardon me.

Thank you very much, Kabir.

Thank you.

And as I see no further questions in the queue, I will turn the call back to management for closing remarks.

Thank you, everyone, for your participation on today's call. As we said, we continue to make good progress. We are very focused, as you can understand, on 005 and 006. And continuing to do everything we can to ensure quality execution, that we have the right patients in those trials and that we are able to bring forth really robust data at the appropriate time point. So thank you for your participation and look forward to seeing you all in the next quarter.

And thank you all for participating in today's conference. You may now disconnect.