Minerva Neurosciences, Inc. (NERV) Q4 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Minerva Neurosciences Full Year 2022 Financial Results and Business Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Geoff Race, President of Minerva Neurosciences. Please begin.

Good morning. A press release with the company's fourth quarter and year-end 2022 financial results and business highlights became available at 7:30 AM Eastern Time today and can be found on the Investors section of our website. Our annual report on Form 10-K was also filed electronically with the Securities and Exchange Commission this morning and can be found on the SEC's website at www.sec.gov. Joining me on the call today from Minerva are Dr. Remy Luthringer, Executive Chairman and Chief Executive Officer; and Mr. Fred Ahlholm, Chief Financial Officer. Following our prepared remarks, we will open the call for Q&A. Before we begin, I'd like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors that are more fully detailed under the caption risk factors in our filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission earlier today. Any forward-looking statements made on this call speak only as of today's date, Wednesday, March 8, 2023, and the company disclaims any obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today's call, except as required by law. I'd now like to turn the call over to Remy Luthringer.

Thank you, Geoff, and good morning, everyone. Thank you for joining us today for a review of 2022 and our plans for 2023. During the year, we had multiple interactions with the FDA regarding the regulatory path forward for our lead compound, roluperidone, for the treatment of negative symptoms of patients diagnosed with schizophrenia. In March 2022, we attended a Type C meeting in which the FDA advised on its remaining concerns, which we outlined in our press release in April 2022. Specifically, the FDA was concerned with the applicability of the Phase 2b data conducted in Europe to the U.S. population, and the Phase 3 study has not met the primary end point. In addition, the FDA sought reassurance that Minerva could reliably identify those patients who do not need antipsychotics and how to evaluate the stability of those patients. The FDA also noted that roluperidone may be used by prescribers in a way that differs significantly from the intended monotherapy use and noted that the sponsor has not presented data to show that roluperidone does not interfere with the safety or efficacy of antipsychotic medications. Following the Type C meeting, Minerva provided additional data, which we believe addressed the concerns raised by the FDA. In August 2022, we submitted an NDA for roluperidone for the treatment of negative symptoms in patients with schizophrenia. The submission was supported by results for late-stage, well-controlled studies in patients with moderate to severe negative symptoms and stable positive symptoms of schizophrenia, studies MIN-101C03 Phase 2b and MIN-101C07 Phase 3. Both studies had very similar overall study design. Both are multicenter, multinational, randomized, double-blind, placebo-controlled pilot group studies in which patients received as a placebo 32-milligram or 64-milligram doses of roluperidone. In both studies, if patients were taking antipsychotic treatments that were discontinued, and the short washout period was implemented before being randomized to one of the three arms. Both studies captured comparative placebo-controlled data through the 12-week double-blind period. Both studies also provided long-term exposure data regarding the safety and tolerability of roluperidone and efficacy based on blinded doses of roluperidone, specifically intended to demonstrate the maintenance of continuation of improvement in negative symptoms, the stability of positive symptoms and the low rate of relapses of positive symptoms following 24 weeks study MIN-101C03 and 40-week study MIN-101C07 open-label periods. As mentioned above, with the exception of the duration of the open label period, these two studies were nearly identical with respect to patient population and assessment tools, positive and negative syndrome scale pans, personal and social performance scale, PSP, clinical global impression, CGI. As such, the data from these studies were the basis for the decision to submit the NDA as we believe they provided sufficient evidence to support the long-term safety and efficacy in adults in an area of high unmet medical need and, consequently, merit an in-depth review by the psychiatric division of the FDA. In October 2022, we received a Refuse to File letter, RTF, from the FDA and continued as proposed by the psychotic division, our dialogue at a Type A meeting on November 30. Following that meeting, the FDA confirmed that the RTF remained in effect. We remain committed to developing roluperidone as a potential transformative treatment for those patients with negative symptoms of schizophrenia. And we anticipate further discussion with the FDA over the coming months regarding the status of the roluperidone NDA and the development program. I look forward to provide more information as it becomes available. I will now turn it over to Fred to discuss our financial performance.

Thank you, Remy. Earlier this morning, we issued a press release summarizing our operating results for the fourth quarter and year ended December 31, 2022. A more detailed discussion of our results may be found in our annual report on Form 10-K filed with the SEC earlier today. Cash, cash equivalents and restricted cash as of December 31, 2022, were approximately $36.2 million compared to $60.9 million as of December 31, 2021. In January 2023, we received a refund of our NDA filing fee of $3.1 million from the FDA. This refund was made in accordance with the Federal Food Drug and Cosmetic Act, which allows a fee waiver for a small business submitting its first human drug application. We expect that the company's existing cash and cash equivalents will be sufficient to meet its anticipated capital requirements for at least the next 12 months from today based on our current operating plan. The assumptions upon which this estimate are based are routinely evaluated and may be subject to change. Research and development expense for the fourth quarter of 2022 and 2021 was $3.2 million and $18.7 million, respectively, a decrease of $15.5 million. The decrease in R&D expense was primarily due to an impairment charge of $15.2 million in the fourth quarter of 2021 to the carrying value of in-process research and development related to our MIN-301 development program. Our R&D expense for the years ended December 31, 2022 and 2021, was $14.6 million and $32 million, respectively, a decrease of $17.4 million. The decrease in R&D expense was primarily due to an impairment charge of $15.2 million in the fourth quarter of 2021 to the carrying value of in-process research and development related to MIN-301 as well as lower clinical trial costs during 2022. Noncash stock compensation costs included within R&D expense for the years ended December 31, 2022 and 2021, was $2 million and $2.4 million, respectively. General and administrative expense for the fourth quarter of 2022 and 2021 was $1.9 million and $2.6 million, respectively, a decrease of $0.7 million. G&A expense for the years ended December 31, 2022 and 2021, was $10.6 million and $13.3 million, respectively, a decrease of $2.7 million. The decrease in G&A expense for both the fourth quarter and year ended December 31, 2022, versus the prior year period was primarily due to lower compensation expense and lower legal and insurance fees. Noncash stock compensation costs included in G&A expense for the years ended December 31, 2022 and 2021, was $2.1 million and $2.8 million, respectively. For the fourth quarter of 2022, net loss was $6.7 million or a loss per share of $1.26, basic and diluted, as compared to a net loss of $21.3 million for the fourth quarter of 2021 or a loss per share of $3.99, basic and diluted. For the year ended December 31, 2022, net loss was $32.1 million or a loss per share of $6.01, basic and diluted versus a net loss of $49.9 million for the year ended December 31, 2021 or a loss per share of $9.35, basic and diluted. Now I'd like to turn the call over to the operator for any questions. Operator?

[Operator Instructions] Our first question comes from the line of Andrew Tsai with Jefferies.

Thanks for all the updates. So the first question is, can you possibly remind us the latest and greatest outstanding issues the FDA has following your recent Type A meeting with the NDA? I think last time, you said the FDA did propose a few items in the mine and you'd kind of share it with us. But I'm just curious, what are those things that caused the FDA to issue the RTF and then maintain their stance afterwards?

Yes. Really great question. So clearly, I mean, as we mentioned, yes, we already outlined what were the concerns after the Type C meeting we had with the FDA in April last year. So -- but clearly, I mean I think we've made a lot of progress, but I think the two main points, and as we mentioned as well, are the fact that they're still struggling with the applicability of the Phase 2b study, the C03 study results. Otherwise, they suggested or they have really confirmed that this study is a positive study. But I mean we are struggling is the fact that this study has no U.S. patients. So they want free to be sure that U.S. and non-U.S. patients are similar, I mean, in terms of disease, in terms of negative symptoms and mostly in terms of negative symptoms because, as you know, there is no drug approved for negative symptoms, so they want to be extremely sure about this. So this is the first point. And the second point, they are still having some concerns about the Phase 3 study. And this is due to the fact that we have used a Type 1 correction, which is the Hochberg correction. And as you know, for Hochberg correction, we need to have the tool this hitting a P-value of 0.05. And in our case, it is only the highest dose which has hit a P-value of 0.05. So it's, in my opinion, really technical. And it is not at all telling you if the drug is working or not. But I mean this is the two main concerns. So if you allow me, and let me comment on the two concerns. So the first one, we continue to have the dialogue with the FDA, and we are providing them with data showing that basically, I mean, the patients we have included in ex U.S. or outside the U.S. compared to the patients we've included in the U.S. Keep in mind that for the Phase 3, we had patients from the U.S. are extremely similar in terms of baseline, in terms of the effect of our drug on the negative symptoms and of the overall disease. We even have provided the information of data from other studies, which have been performed by other sponsors in order to make our case even stronger. So I'm really confident that this is something which we will overcome. Now concerning the Phase 3 study, yes, indeed, I mean only the 64-milligram dose hit the 0.05 P-value. But keep in mind that, I mean, as we already disclosed, our NDA is asking for an approval of 64-milligram only as we are not asking for an approval for 32 milligrams. So clearly, I think if you're looking really to what we have seen in the Phase 3 with 64-milligram, it is very, very similar to what we have seen in the Phase 2b study. And something which is extremely important is that, I mean, we have only one key secondary endpoint, if you remember, which was a PSP, which is looking to everyday functioning of the patients. And there, we had a P-value, which was highly significant at 0.016. So clearly, when you are looking to do these patients improve, clearly, they are improving in a significant way with a good P-value in the Phase 2b and in the Phase 3. So clearly, I mean, this is -- what are the issues. I don't know if I answered your question?

Yes, it's very clear. Thanks. And so now it sounds like you're going to talk to them over the coming months about the NDA and so forth. And any thoughts on the timing of the resolution or an outcome of this? Is it also going to be another Type A meeting? Or I don't even know how you classify it, but any clarity around the potential timing of that outcome here?

So I think we cannot be clear about the timing. I mean the dialogue is ongoing, and we hope, obviously, to have the shortest time line. But as we mentioned, I mean this will happen in the next coming few months or few weeks, let me put it like this, basically. But I think if you allow me an additional comment, what we are trying to really bring over as a message, and I think it's a completely fair message, is that we have a lot of information in our NDA. For example, what I was mentioning just before about comparability between U.S. and non-U.S. patients, so we have a lot of information about the functional improvement of the patients because if you remember, PSP, the key primary we had in the Phase 3 was the total score of PSP. But I mean you have 4 sub scores, and we have analyzed the 4 sub scores in details, which again confirms that I mean the drug is improving, functioning in patients. So what we are trying to really bring over as a message to the FDA that the reasons, I mean, I gave you before are no reason to reset high, but our topics, which, first of all, need an in-depth review, an in-depth analysis of our NDA, a dialogue with a sponsor to really go into the details of all the data we have to show that roluperidone is an effective drug for patients suffering from negative symptoms and having a diagnostic of schizophrenia. So this is the dialogue ongoing and in terms of timing networks, they cannot give you more details.

That makes sense. Makes sense. And very last question, to the extent you can share, who at the FDA has been overseeing the NDA application? I'm just curious if it was Billy Dunn. And if so, does this departure change your calculus on anything as it pertains to the NDA?

That was a great question as well. So clearly, I mean, as you know, when you're submitting your NDA and those Type C or Type A meetings are mostly with the psychotic division. That's because, I mean, the decision for Refuse to File is coming from the division, yes, I mean, basically, clearly, I mean, the main dialogue has been with the psychotic division. This side, indeed, Dr. Dunn was also involved, obviously, because he was a person overlooking psychotic division and the other divisions of the neuroscience divisions like already one, two, three years. So yes, indeed, I mean I think what I can say is that Dr. Dunn is known to be a person who is really open to developments or to indications with no approved treatment. And also what is very important is that Dr. Dunn is very keen to not only have a P-value, but is to see a function of improvement, which we have with roluperidone. So clearly, I mean I don't think that, I mean, it will be a problem for us on Dr. Dunn left. But it's clear that he understood that the function of the improvement is important. So I'm confident that the other people still at the FDA will understand. And I think the person who has been nominated in the place of Dr. Dunn is also a person who is very, how to say, knowledgeable and open to innovation. So that's not a problem, but seems to people set in place, we continue to work along the lines to Dr. Dunn has proposed in the past.

Very good. Thanks so much, Remy, for all the updates. Best of luck.

Our next question comes from the line of Douglas Tsao with H.C. Wainwright.

So just as a follow-up. Obviously, there's still some uncertainty. But when you envision the path forward for roluperidone and your interactions with the agency, do you think that one study would potentially be sufficient to address their concerns? Or would you need to potentially run both a monotherapy as well as an adjunct therapy study? Or could that potentially be carried out in one trial?

Like always, a great question. Yes. So to be very clear, I mean the FDA never asked us to run an additional study. I mean so that they asked us, as I already think discussed with you, is that, I mean, they wanted us to continue to feed them with additional information. And as we speak, I mean, this is exactly what we are doing. And your comment about monotherapy and add-on is an interesting one. So clearly, we developed roluperidone in monotherapy for several reasons. As you know, the first reason is to demonstrate that, I mean, we have a specific improvement of negative symptoms because this monotherapy versus placebo is the only way to do it is. I mean you cannot do it if you put, for example, antipsychotic on board because you don't know exactly what is going on here in order to claim the drug-specific effect. And second, I mean, you will unblind the study immediately because I mean you have the side effects of antipsychotics. So this was one of the reasons. The second reason is very important, I think, for patients at the end of the day is that the scientific community and the medical community is now more and more saying that, I mean, all the patients with the diagnostic of schizophrenia should not be treated continuously with antipsychotic. And even more importantly, I mean, there are now data coming out really showing that there is a significant part of the patients with the diagnostic of schizophrenia who do not need continuous treatment with antipsychotics. So this is exactly the patient population we have targeted. Remember, we targeted patients, whereas I needed to have a minimum score of negative symptoms on the PANSS. Just to show the impairment is there, this had to be stable over the last six months and as they needed to have stable positive symptoms. And I mean, when you're looking to our data, what you see that, yes, we have this improvement of negative symptoms of PSP. But I mean these patients stay extremely stable on positive symptoms and in an extremely low level, yes. I mean they are at 14 points when the end of the study, and there are 14 points when they go out of the study. And as you know, the minimum score if you have no symptoms, if you have no positive symptoms, is 7 points. I mean so these patients are completely stable in terms of positive symptoms. And remember as well, I presented also the relapse rates. And the relapse rate we have there is very low, I mean, around 12% over a period of one year, which is below what you see in the placebo randomized withdrawal studies with antipsychotics. So clearly, I think we have demonstrated that, I mean, at minimum, the patient population, we have included does not need continuous treatment with antipsychotics. So I cannot go into the details because we never disclose it, but we have provided also evidence to the FDA that if a patient really needs antipsychotics, he's responding extremely well to antipsychotics. So long story short, to answer to your question about the study, an additional study monotherapy or a study where we are combining monotherapy plus a combination with antipsychotics, obviously, we have worked on this. We thought about it since the beginning of the development of roluperidone. But I think these are really questions you're asking yourself or you're doing after, I mean, you have a complete in-depth review by the FDA of our NDA. And this is usually what the companies have to do post approval. So here, we obviously, as we know, we're completely open for post approval trials. And last but not least, just I mean when you're looking to what we are proposing as labeling, clearly, I mean the labeling is monotherapy for the specific patient population we targeted in our trials. And what we are proposing here, and again, we have data and we have shown this data to the FDA that, if I mean, a patient has a relapse and needs an antipsychotic, the antipsychotic is doing the job, yes, basically. So again, a long story here, but this is a logic. So all what is needed in order to better characterize on and all these kind of things, I think, is post-approval work because we have two well controlled and well adequate studies, and this is normally the basis of an NDA review.

So Remy, I hear your point, but I guess I'm just wondering, and I asked you, I mean, does there come a point where sort of pragmatism needs to rule just because while, yes, there may be a path forward with the existing data set, clearly, the agency has expressed reservations. And if you -- so from an efficiency standpoint, just carrying out another study might just be the most efficient way to go even to some extent, maybe financially at this point. I mean, if we step back and think about when we had the first result from that Phase 3, if you had pivoted to run a follow-up study, that study would have probably read out by now. And then you would be able to go back to the agency or go to the agency with an incontrovertible data set, nothing for them to really question. So I mean, I guess, I don't know if that's -- so I guess at what point do you feel you've exhausted those options?

So clearly, I mean, I hear you very well. And I mean you're not the only one telling us just go on and run another study, but which kind of study do you run? And you started by saying, okay, monotherapy are done. So the question here, and that's the reason why we try really to get complete clarity, again, don't understand something wrong. I mean, I'm convinced that the package we have is enough. Yes. I mean that if I mean, we think about an additional study, we need complete clarity about the study. We need the complete blessing from the FDA about the study because there are some precedents where companies have run a study, thinking that they are doing the right thing. And basically, when they came back with a positive study, this is one of the studies they had to carry out. That's -- or the FDA did not completely agree to this. So we are looking to really get the complete clarity, and I think it is what is driving us. But again, I think we have a package for the FDA jump and redoing our NDA.

But Remy, just to clarify that final point, just to make sure, so everybody can understand because I think it is very important, so as part of your current interactions with the agency, part of that discussion is to get clarity from them on what potential additional studies may be needed?

The answer is no. Yes. What we have clarified...

So you are still simply pursuing -- trying to get the existing data set approved?

Exactly. So I mean we are not discussing about an additional study. We have opened the door since long to do a post-approval studies. But I mean what we are trying to understand is what they need as additional analysis in our data set we have currently. And what we are also discussing is that if you go according to the guidance of Refuse to File, the reason I mentioned at the beginning of this call are not part of a Refuse to File. So what we are trying to understand is what the FDA needs with our data package in order to, how to say, part review. And I think more advancing more becomes clear that indeed, I mean, we have the data needed. So give us a little bit time, and we will give you an update on what is the outcome of this, I think, constructive discussions going on currently.

[Operator Instructions] I'm showing no further questions at this time. I'd like to hand the conference back over to Dr. Luthringer for closing remarks.

Yes, thank you so much. And really thank you, Andrew, and Doug for these important questions. I hope it really clarified that we really have a very, very important dialogue still going on that we will get clarity very soon about what are the next steps. But I mean I think as I tried to explain, we have really a very important data package, which needs to an in-depth review by the FDA, and we are confident that this will happen. And if this review starts, I think everybody will understand that roluperidone is really an important drug to address a huge unmet medical need with no approved treatment in the U.S. So I'm really looking forward to really update you as soon as we have more clarity about the dialogue going on currently with the FDA. Thank you so much for your -- for being with us today.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.