Addex Therapeutics Ltd (NASDAQ:ADXN) Q3 2022 Results Conference Call November 11, 2022 10:00 AM ET
Company Participants
Tim Dyer – Co-Founder, Board Director and CEO
Rob Lütjens – Head of Discovery, Biology
Mikhail Kalinichev – Head of Translational Science
Conference Call Participants
Tim Dyer
Hello everyone. I’d like to thank you all for joining our Quarter Three 2022 Financial Results Conference Call. I’m here with Rob Lütjens, our Head of Discovery, Biology and Mikhail Kalinichev, our Head of Translational Science.
I draw your attention to the press release and the financial statements issued earlier today, which are available on our website. I also draw your attention to our disclaimer. We will be making certain forward-looking statements that are based on the knowledge we have today.
I will start this conference call by giving a quick overview of our recent achievements, before handing over to Robert and make sure he will review our clinical and preclinical pipeline. I will then review our third quarter financial results. Following that, we will open the call for questions.
Our partner, Janssen Pharmaceuticals, continues to make significant progress in executing their global Phase 2 study in epilepsy patients and are on track to complete part 1 of the study in Q1 2023. We continue to be excited by our preclinical pipeline, which has made excellent progress with multiple clinical candidates, rapidly advancing toward IND-enabling studies.
Previously, we announced the extension of our strategic collaboration are gathered the positive allosteric modulators with Indivior and their commitment of an additional $900,000 of research funding to advance drug candidates through to the site of IND-enabling studies.
As a reminder, Indivior’s primary interest is in substance use disorder. And under the agreement, we have retained the right to select drug candidates for development in certain exclusive reserved indication.
Our GABAB PAM fund research effort has progressed to late clinical candidate selection phase with multiple candidates being profiled in secondary disease relevant models. We expect Indivior and ourselves to select compounds in 2023 to advance into IND-enabling studies. We plan to develop our independent program in Charcot-Marie-Tooth 1A neuropathy, chronic cough and pain. We have also made great progress in our mGluR7 negative allosteric modulator program for stress related disorders, and have successfully identified a compound, which is now ready to enter IND-enabling studies.
In addition, we continue to advance a selection of differentiated backup compounds to late clinical candidate selection phase.
Our mGluR2 NAM program for mild neurocognitive disorders associated with Alzheimer’s disease, Parkinson’s disease and depression has entered clinical candidate selection phase. And last but not least, our M4 PAM program is advancing rapidly through lead optimization. M4 PAM is a particularly exciting target for schizophrenia, especially following the recent positive Phase 3 data from Karuna.
On the financing side, CHF 4.6 million equity financing completed in July has increased our cash reserves to CHF 10.4 million at the end of September, providing us with a cash runway through Q2 of
2023.
Now I will hand it over to Robert, who will give you some more details about our exciting pipeline.
Rob Lütjens
Thanks, Tim. Hello, everyone. I’d like to start by speaking about our epilepsy program followed by different rounds before handing over to Mikhail.
ADX71149 is an mGlu2 positive allosteric modulators discovered in partnership with Janssen Pharmaceuticals, Johnson & Johnson Company. Our two companies collaborated for the discovery of this compound and Janssen is responsible for its progression in clinical development.
Addex initially identified the chemical starting point using its unique allosteric modulation platform and the two teams work together to optimize compounds until delivery of ADX71149. The compound has completed nine Phase 1 studies and two proof of concept studies in [Technical Difficulty] showing that ADX71149 is a well tolerated drug. It was then demonstrated that ADX71149 showed antiepileptic effects in preclinical models of epilepsy, but also that [Technical Difficulty] in combination with most commonly used [Technical Difficulty] the active molecule in [Technical Difficulty]. The effect is dramatically enhanced. I will show this in the next slide. But first, let me talk about the opportunity we have in epilepsy.
Today even though the treatment options are multiple, epilepsy is still large unmet medical need, as many patients are in need for alternative or improved treatment for this. Keppra, an SV2A antagonist, while being largely sold as a generic is still leading the market and epilepsy, estimated at close to $20 billion. Following the strong preclinical validation of [Technical Difficulty] epilepsy models, our partner decided to move ADX71149 into Phase 2 study evaluating potential to treat patients with partial onset seizures [Technical Difficulty] in combination with levetiracetam.
In May, an open label extension study was announced, allowing patients [Technical Difficulty] access to ADX71149 and in September inclusion criteria were extended to include patients on [Technical Difficulty] second generation SV2A antagonist. This Phase 2 study is now well on its way, and we’re expecting [Technical Difficulty] results for part 1 in Q1 2023. As a reminder, Janssen is covering all costs of development. And we have significant prelaunch milestones of €109 million and double-digit royalties on net sales.
Here is the compelling data obtained by Janssen colleagues in the 6Hz model, a highly predictive model of epilepsy, with a combination of ADX71149 and Keppra, and which has been instrumental in the decision taken by Janssen to move this program into epilepsy.
The left graph shows how the effects of levetiracetam is dramatically increased in presence of a low dose of ADX71149, producing a 35-fold shift in efficacy. And the right graph shows the results obtained when the paradigm is reversed, where a low dose of Keppra induces a 14-fold increase in efficacy of ADX71149.
Take home message here is that we see a strong antiepileptic effect with a combination of low doses of ADX71149 and Keppra, similar to the one obtain with full dose of Keppra. And I should mention that this combination is a result of a true synergistic effect, not just an additive or pharmacokinetic effect, as it was demonstrated using a method called [Technical Difficulty] analysis.
This is the [Technical Difficulty] being currently tested in patients. And what we [Technical Difficulty] preclinical models translate into patients then our approach [Technical Difficulty].
A few words on the study design. This is a Phase 2 double blind placebo controlled proof of concept study and is enrolling patients with focal onset seizures who have suboptimal response to treatment with levetiracetam [Technical Difficulty].
Patients will establish a 28-day seizure count over 56-day baseline period, prior to being randomized to receive either ADX71149 at 50 mg bid or placebo matching placebo. The primary endpoint is the time taken to return to their monthly baseline seizure. The study will have two parts: part 1 being four-week acute efficacy phase and part-two being an eight-week maintenance. Part 2 will include patients who did not return to their baseline monthly seizure rate during part 1 of the study, and they will continue on their randomized drug. Results from part 1 of the study are expected in Q1.
And now a quick update on dipraglurant or mGlu5 negative allosteric modules. Dipraglurant has significant potential in a number of disease areas, including PD-LID, substance use disorder, pain, stroke recovery, and neurodevelopmental disorders. The program has completed Phase 1 and a Phase 2 proof of concept study in PD-LID patients, demonstrating safety and tolerability. Despite the recruitment challenges we experienced earlier this year in our pivotal PD-LID program, we strongly believe the potential of [Technical Difficulty] to bring significant benefit to these patients.
Furthermore, the program has been awarded orphan drug designation for PD-LID in the U.S. where there are approximately 200,000 patients, making this a significant commercial opportunity. We are currently pursuing multiple business discussions related to dipraglurant for multiple indications and plans to restart development once [Technical Difficulty].
I will now hand over to Mikhail, who will give an update on our preclinical program.
Mikhail Kalinichev
Thank you, Robert. Hello, everyone. We have made significant progress in advancing our preclinical programs. As a reminder, all our programs were identified in-house from our proprietary allosteric modulation discovery platform. The success of our platform is driven by the combination of our unique small molecule, chemical library and tailor-made proprietary biological screening tools and methods, which we deploy to identify the initial hits and support lead optimization.
Today, I would like to share with you the progress we have made in four of our most advanced preclinical programs: the GABAB positive allosteric modulator program, mGlu7 and mGlu2 negative allosteric modulator program, and muscarinic M4 positive allosteric modulator program.
Let me start with GABAB, which is partnering with Indivior. The aim of this collaboration is to deliver a new treatment for substance use disorders. Indivior is supporting the research of addicts and have recently committed additional funding for us to complete clinical candidate selection activity.
As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, a GABAB orthosteric agonist. Baclofen is FDA approved for treatment of spasticity and is widely used off label to treat numerous diseases, including alcohol use disorder, gastroesophageal reflux disease, or GERD, and various conditions of pain. However, baclofen has a short half life and comes with significant side effect, hampering its wider use. Thus there is a strong need for a better baclofen.
We believe this can be achieved with positive allosteric modulators and their differentiated pharmacology, having the efficacy of baclofen but longer half life and improved side effects. We are well on our way to meeting this objective with multiple novel drug candidates rapidly advancing through clinical candidate selection phase.
We are currently profiling several drug candidates in non-GLP studies with the aim to nominate drug candidates for IND-enabling studies in 2023.
As mentioned earlier, we have the right to select drug candidates from the Indivior funded research activities for our own independent GABAB PAM program. I will now speak about the indications we plan to pursue.
Firstly, CMT 1A or Charcot-Marie-Tooth 1A disorder, a type of inherited neurological disorder that affects peripheral nerves. People with this disease experience weakness and wasting of the muscles of the lower legs starting early adolescence. Later, they can also have hand weakness and sensory loss, resulting in a significant reduction in their quality of life.
CMT 1A is caused by having an extra copy or duplication of the PMP22 gene which is inherited in an autosomal dominant manner. There’s currently no approved drug to treat CMT 1A. However, baclofen has shown beneficial effects in patients. In addition, we have collected robust preclinical data with GABAB PAM in highly translational models of CMT 1A.
In these studies, we have demonstrated positive effects of chronic treatment on both biomarkers and behavioral measures, suggesting GABAB PAM has the potential to slow or even stop the progression of this disease.
We’re currently completing preclinical profiling of a proprietary drug candidate in advanced disease relevant models. We are conducting these activities in collaboration with the American Charcot-Marie-Tooth Association.
Secondly, there is a strong rationale for developing GABAB PAM for chronic cough, based on off label use of baclofen in several categories of chronic cough and the role of GABAB receptors in the neural pathway involved in cough. We believe that GABAB PAMs could be an innovative potential new treatment of chronic cough, offering improved efficacy, fewer non-responder patients and lack of gustatory side effects in comparison to P2X3 inhibitors. We’re currently profiling our proprietary GABAB PAM in disease relevant models of chronic cough.
Thirdly, there’s also a strong rationale for developing GABAB PAM for various types of pain, including pelvic pain such as bladder pain, cancer pain and pain associated with trigeminal neuralgia. Current medication is largely based on opioids, gabapentin and pregabalin, non-steroidal anti-inflammatory drugs for bladder pain, or carbamazepine and other antiepileptic drugs for treat trigeminal neuralgia.
These medications are suboptimal as they leave a significant proportion of patients without adequate or any benefit and carry risk of significant side effects. Again, the GABAB receptor target has been well validated by baclofen, which has shown efficacy in patients with cancer pain and is used off label in patients with bladder pain and trigeminal neuralgia.
Now to the status of the program, we have identified multiple novel chemical series with potential for robust novel intellectual property, and multiple compounds are in late clinical candidate election phase, completing non-GLP preparatory studies. We expect to deliver multiple drug candidates for Indivior and in parallel, multiple differentiating drug candidates for our independent program for progression into IND-enabling studies in 2023.
We have made significant progress with our mGluR7 negative allosteric modulator program for stress related disorders, including post-traumatic stress disorder, or PTSD, as we have selected a clinical candidate drug to enter IND-enabling study. PTSD is a psychiatric disorder, affecting approximately 3.5% of the population worldwide. And they occur in people who have experienced or witnessed a traumatic, often life threatening event, such as serious accidents, natural disaster or war. Current treatments are mostly relying on behavioral therapy, as most pharmacological treatments such as anxiolytics or antidepressants show insufficient benefits.
Based on established knowledge around the mGluR7 targets, such as the reduced anxiety in mGluR7 knockout animals, and anxiolytic profile of mGluR7 inhibitors in multiple in vivo models of the disease, we have a very strong rationale to progress this project towards the clinic. Our clinical candidate drug ready to enter IND-enabling studies and addition in multiple chemical theories are identified as backups.
On to our mGluR2 negative allosteric modulator program for mild neurocognitive disorders, or mNCD and depression. mNCD is a stage between expected cognitive decline of normal aging and the more serious decline related to dementia. Besides being potentially the early sign of Alzheimer’s disease, mNCD is also often experienced by patients suffering from depression.
Developing mGlu2 NAM offers the exciting opportunity to treat cognitive impairment, while also addressing symptoms of depression. Both pro-cognitive and antidepressant effects have been demonstrated in relevant preclinical models with our mGlu2 negative allosteric modulator candidate compound.
We believe that Merck have initiated a Phase 2 proof of concept study with their mGlu2 negative allosteric modulator compound and they’re currently running at drug-drug interaction study with Donepezil suggesting they prepare a study used in mNCD patients with a combination — with a compound and [indiscernible]. We aim to be as fast forward to them in their approach with our well-differentiated compounds. We have completed lead optimization and have begun clinical candidate selection phase with multiple compounds with the aim to start IND-enabling studies in the second half of 2023.
And finally, a few words about our muscarinic M4 positive allosteric program for treatment of schizophrenia and other types of psychosis. As you probably know, psychosis has been treated with the same mechanism of action over the last 50 years with limited efficacy and significant tolerability issues, often leading to treatment discontinuation and relapse.
The big news in the field came from Karuna Therapeutics who published the positive result of their Phase 3 study of their KarXT compound in schizophrenia patients, and who are on-track to submit new drug application to FDA in 2023. KarXT is a combination of xanomeline and muscarinic M1 and M4 receptor agonist and trusted — a peripherally restricted muscarinic antagonist. This combination allows to selectively activate muscarinic receptors in the brain, while blocking the off target effect of xanomeline. This is the perfect validation of the M4 receptor target and of our positive allosteric modulator approach as we are aiming at identifying highly selective and brain penetrant molecules.
In summary, our drug discovery engine has achieved great progress with multiple drug candidates, advancing toward IND-enabling study. The renewed commitment of our partner Indivior, the delivery of a candidate ready to start IND-enabling studies in the mGlu7 program are further validation of the quality and productivity of our allosteric formulation platform.
This concludes my prepared remarks and I hand it back to Tim.
Tim Dyer
Thank you, Mikhail. I’ll now switch to an overview of the financials.
Starting with the income statement, we recognized CHF 0.4 million [ph] of income in Q3 2022 compared to CHF 0.8 million in Q3 2021. Primary source of revenue is research funding from our collaboration with Indivior, which we expect to reduce in 2022 as drug candidates move to late stage clinical candidate selection and partner takes over more of the operational execution of the development.
In terms of expenses, R&D expenses were CHF 2.8 million in Q3 2022 compared to CHF 2.9 million in Q3 of 2021. The decrease of CHF 0.1 million is primarily due to reduced development activities.
G&A expenses were CHF 1.8 million in the third quarter compared to CHF 1.5 million in the equivalent quarter in 2021. The increase of CHF 0.3 million was primarily due to increased share-based compensation costs. The finance gain of CHF 60,000 in Q3 2022 relates primarily to exchange gains due to the strengthening of the U.S. dollar in the period.
Now to the balance sheet. Our assets are primarily held in cash and we completed Q3 with CHF 10.4 million of cash held in Swiss francs and U.S. dollars. Other current assets 1.3 million relate primarily to prepaid insurance and retirement benefits. The decrease relates to reductions in prepayments to CROs. Current liabilities of CHF 4.1 million are consistent with prior years and relate primarily to R&D payables and accruals.
Non-current liabilities of CHF 0.2 million at the end of Q3 relate primarily to lease liabilities, the decrease compared to last year is driven by an increase in the discount rate applied in the calculation of the retirement benefit obligations, resulting in retirement benefit obligations, calculated under IFRS, becoming a small asset.
Now to summarize, our partner Janssen is on track to complete part 1 of the Phase 2 epilepsy clinical study with results expected in Q1 2023. We are putting plans together for future development of this in parallel pursuing a number of licensing discussions with objective to — prior to restarting development activity. We continue to make good progress in advancing our preclinical programs towards the clinic, entering multiple partnering discussions across the portfolio.
As a reminder, our portfolio was discovered in house from our pioneering allosteric modulator drug discovery platform and consequently we have significant intellectual property on all programs. We have a track record of securing partnerships at the preclinical stage in support of top tier investors. We recognize our stock performance and current market capitalization of 10 million is very disappointing. However, we strongly believe that if we are successful in executing our near-term partnering strategy, our stock price should move to recognize the value of our portfolio.
This concludes the presentation. I will now open the call for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And the first question comes from the line of [indiscernible].
Unidentified Analyst
A couple of questions. The first one, could you provide more details on your BD efforts? And more specifically, how optimistic are you on posing a deal? And if yes, possible timeline and the earliest deal might be close? Second question is, please shed light on the main goal of the part 1 of the epilepsy study and what follows after part 1?
Tim Dyer
So, on the BD efforts, I don’t think it would be prudent of me to enter into discussions or details. What I can say is that we have a portfolio, programs. A number of those programs are not partnered. dipraglurant is mGluR5 negative allosteric modulator, been into the clinic, it’s demonstrated a safe and good tolerability. And we have entered into discussion with multiple potential partners for its development. Different partners have different indication priorities. And we are pursuing these discussions in parallel. We believe in the assets but we also believe that restarting development makes sense with a partner on board.
I will talk about getting a deal done this year. We are moderately confident about getting something done by the middle of next year. Now, on the rest of the portfolio, GABAB is partnered — or partly partnered with Indivior, however because we’re still at the R&D stage, relevant candidates have not been selected by Indivior. It’s very challenging to enter into partnership discussions on our part of the GABAB program. And therefore, GABAB is less advanced in partnering discussions with third parties. And mGluR7, there is a nominated candidate, well profiles — ready to go into IND-enabling studies. This program is attracting the interests of multiple parties and we are pursuing discussion on programs.
The mGluR4, due to — I’m sorry, the M4, due to the data that was in Phase 3 from Karuna, this is attracting some interest. But again, this is indeed optimization. So, there are multiple theories being evolved. And again this is a much earlier program and an earlier stage discussion.
And then, on the mGluR2 NAM another compound where there is a fair amount of validation. And again, this is in cognition, which is a very interesting area, we began attracting some interest from multiple parties. I hope that helps to give you a little bit more detail.
Now with respect to the epilepsy, so there is part 1. So, you have 60 patients 2 to 1 randomized between active and placebo. And it’s a four-week period. And the endpoint of part 1 is time — is what the difference between the active group and the placebo group with respect to time to baseline seizure counts. This data is expected to be delivered to our partner in Q1 of 2023. And our partner will then take certain decisions around the program.
Now part 2, patients, the way the study is designed is that the patients within part 1 and will move into part 2, and assuming that they did not reach their baseline seizure count. And then, the data from that eight-week period will report out later in 2023. That’s really all we can say about the progress at this time.
Operator
Thank you. [Operator Instructions] There are no further questions at this time. I would now like to hand the conference over to Tim Dyer for closing remarks.
Tim Dyer
Well, thank you everyone for attending the Q3 conference call. We very much look forward to keeping you updated all our progress through regular press releases. And we look forward to speaking to you on our next conference call, which will be in 2023.
Operator
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
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