Addex Therapeutics Ltd (ADXN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Addex Therapeutics Full Year 2023 Financial Results and Corporate Update Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tim Dyer. Please go ahead.

Hello, everyone. I'd like to thank you all for attending our 2023 financial results conference call. I'm here with Mikhail Kalinichev, our Head of Translational Science, who will provide an update on our R&D programs. 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 the 2023 activities and recent achievements before reviewing our pipeline. I will then hand over to Mikhail who will review on more detail some of the clinical and preclinical programs. I will then speak about the recent launch of Neurosterix before reviewing our 2023 full year financial results. Following that, we will open the call for Q&A. So to start with the highlights. Our partner, Janssen, has completed the Phase II epilepsy clinical study, and we are now expecting to report data from the study by mid-May this year. I'd like to remind you that independent interim review committee established by Janssen to review the unblinded data from Part 1 of cohort 1 made its recommendation to continue the study. This recommendation and the decision of Janssen to continue the study is very encouraging and suggests ADX71149 is safe and well tolerated and may be having a positive impact on this patient population. We continue to believe there is value in dipraglurant and have substantially completed our evaluation of future development. For dyskinesia and Parkinson's disease, we have worked with experts on a new trial design, which we believe will overcome the recruitment challenges we encountered in the past. However, our preferred strategy for this indication is to secure a partner prior to restarting development. We've also identified post-stroke recovery as an interesting area for future development of dipraglurant and are currently profiling differing preclinical models of post-stroke recovery. Furthermore, preclinical data was recently published in the journal brain, which strongly supports the rationale for an inhibition of mGlu5 receptor as of treatment for post-stroke recovery. We are pursuing discussions with potential funding sources, including industry partners for this interesting potential future development of dipraglurant. In 2023, we announced the extension of our GABAB PAM Indivior collaboration through until June 2024 with CHF 2.7 million of additional research funding. With this additional R&D funding, we have made excellent progress and advanced multiple drug candidates through clinical candidate selection phase. 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 indications. We are focusing our independent program on cost. During 2023, we demonstrated robust efficacy with multiple drug candidates in preclinical models of substance use disorder and cough and are, therefore, well on track to deliver drug candidates for Indivior and for our own independent cost program. We expect Indivior and ourselves to select compounds to advance into IND-enabling studies in the second half of 2024. We led a consortium that was awarded a EUR 4 million grant from the Eurostars grant program to advance our mGlu2 negative allosteric modulators program through to delivery of clinical candidates. This is an exciting program for mild neurocognitive disorders that is currently in lead optimization. Last, but by no means least, we are very recently announced the launch of Neurosterix. With a Series A financing round of $63 million led by Perceptive Advisors, this is an innovative financing transaction that provides us with the resources needed to advance our preclinical portfolio without diluting our shareholders' interest in our clinical stage assets and partner program. I will speak more about this innovative financing transaction later in the presentation. Now a quick review of our pipeline. As mentioned, we are excited to see the Phase II data from our epilepsy program, which is being executed by Janssen. We continue to believe in dipraglurant and are executing our plans to recommence development in both dyskinesia associated with Parkinson's disease as well as preparing dipraglurant for a Phase II proof-of-concept study in post stroke recovery. Our GABAB PAM collaboration is coming to the end of the discovery phase with candidates on track to start IND-enabling studies later this year. Indivior is executing the substance use disorder program, and we are preparing for candidates for development in cough. Now I will hand over to Micha, who will give you more details about our exciting portfolio.

Thanks, Tim. Hello, everyone. I will start by speaking about our Phase II epilepsy study with ADX71149, which has been completed recently by Janssen. Epilepsy is a large multibillion-dollar market opportunity, where despite several available treatment options, many patients are still in need of improved therapies to their -- to treat their seizures. As a reminder, ADX71149 is a metabotropic glutamate receptor subtype 2 or mGlu2 positive allosteric modulator discovered in partnership with Janssen using Addex's proprietary allosteric modulation platform. ADX71149 has demonstrated both stand-alone efficacy and a strong synergistic effect in combination with inhibition of SV2A such as Keppra and Briviact. ADX71149 has also been thoroughly profiled in preclinical and clinical studies by Janssen, demonstrating its good safety and tolerability profile in healthy volunteers and patients. Janssen responsible for development have just completed both the Phase II study and the open-label extension study in epilepsy patients. Results are expected by mid-May this year. We have significant economics in our deal with Janssen with prelaunched milestones of EUR 109 million, low double-digit royalties on net sales and Janssen is responsible for all development costs. To illustrate the synergistic effect, same with the combination of ADX71149 and levetiracetam, the active molecule in Keppra. Here are the data obtained in the 6 Hertz psychomotor seizure model, widely recognized as having high translational value to characterize the efficacy of antiepileptic drugs. As a reminder, ADX71149, given alone in this model produces a robust protection against 6-hertz induced seizures with an ED50 of approximately 20 mix per kg. In combination studies with varying doses of levetiracetam, a fixed dose of ADX71149 increased the potency of levetiracetam, leading to approximately 35-fold shift in its ED50 values. Conversely, using a fixed dose of levetiracetam with varying doses of ADX71149, it increases the potency of ADX71149, leading to approximately 14-fold shift in its ED50, suggesting a positive pharmacodynamic relationship or strong synergistic effect for the two molecules when given in combination. This extraordinary effect of a combination of an mGlu2 PAM with an SV2A antagonist has been patented, offering a strong protection for this program until 2035 without additional extensions. This is the Phase II study design. This study is a double-blind, placebo-controlled proof-of-concept study, enrolling patients with focal onset seizures who have suboptimal response to treatment with levetiracetam, Keppra, or brivaracetam Briviact. In this Phase II study design, patients establish a 28-day seizure count over a 56-day baseline period. prior to being randomized to receive either ADX71149 or matching placebo. The primary end point in this time taken to return to their monthly baseline seizure count. The study has 2 parts. Part 1 being the 4-week acute efficacy phase and part 2 being an 8-week maintenance phase of efficacy phase. Part 2 includes patients who did not reach their baseline seizure count during Part 1 of the study and continue on their randomized drug or placebo. An open-label extension study was ongoing in parallel, offering all patients the opportunity to get treated with ADX71149 in combination with levetiracetam or brivaracetam. As previously announced last year, an independent interim review committee, convened by our collaboration partner, recommended to continue the study following review of unblinded data from Part 1 of patient cohort 1. This was encouraging news suggesting that ADX71149 is safe and well tolerated and potentially offering benefit to epilepsy patients. We look forward to sharing the top line data of cohorts 1 and 2 in mid-May this year. Following termination of the development of dipraglurant in PD-LID, we embarked on a detailed evaluation of a number of potential indications of interest for future development, including substance use disorder, migraine and other forms of pain. We have completed this exercise and have identified post strong recovery as an interesting indication for the future development of dipraglurant. We believe the differentiated profile of dipraglurant makes it particularly suitable for post-stroke recovery. There is a large unmet medical need in post-stroke recovery and rehabilitation. Stroke is among leading causes of chronic often lifelong disability, as it leads to modern sensory cognitive impairment and multiple comorbidities. There are over 100 million stroke survivors worldwide, and the number is growing at the annual rate of 12 million. A variety of rehabilitation therapies are used with post-stroke patients, but the recovery is slow and often inadequate. There is an urgent need for pharmacological agents that can facilitate the recovery stimulated by rehabilitation therapies. MGlu5 receptor is a suitable target to address post-stroke recovery as it is densely expressed in the brain, involved in neuroplasticity and modulates excitatory inhibitor equilibrium. In fact, activation of mGlu5 has been observed in a range of neurological disorders including stroke, where it plays a role in so-called maladaptive rewiring of the brain following stroke. Inhibition of mGlu5, on the other hand, can facilitate adaptive rewiring of the brain, promoting neuroplasticity and creating of new functional pathways moving the neural network towards a prelesion states. Exciting new evidence recently published in the journal, Brain, suggests that negative allosteric modulator of mGlu5 and [ PEP ] administered daily [ rents ] following stroke results in a sustained and growing improvement in sensory motor function in comparison to vehicle treatment. Similar improvement in sensory motor function was observed in animals treated with our mGlu5 non-dipraglurant. MRI imaging of the resting state functional connectivity in post-stroke rodents shows that daily administration of MTEP also stimulated intra and interhemispheric connectivity in the brain disrupted by stroke. It is important to note that improvement in brain connectivity after stroke is known to correlate with functional recovery and is observed across species. Dipraglurant is ideally suited to be used in [ thunder ] with rehabilitation therapies in post-stroke patients as it has a fast onset of action and short half-life. It has shown good tolerability in healthy subjects and in Parkinsonian patients showing only mild to moderate CNS-related adverse effects. We have a drug product ready and a strong patent position and believe dipraglurant can become a first-in-class drug to facilitate post-stroke recovery. We can also speculate that the prevalent mediated adaptive rewiring and facilitation of recovery following brain damage can also be seen in traumatic brain injury patients. Let me now switch to GABAB positive allosteric modulator preclinical program, which is partnered with Indivior. The aim of this collaboration is to deliver a new treatment for substance use disorders. Indivior is supporting the research at Addex and have recently committed an additional CHF 2.7 million funding for us to complete clinical candidate selection activities in addition to CHF 13.8 million total funding so far. 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 substance use disorder. However, baclofen a short half life and comes with significant side effects, 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 effect profile. We are well on our way to meeting this objective with multiple novel drug candidates rapidly advancing through clinical candidate selection phase, with an aim to nominate drug candidate ready to enter IND-enabling studies in H2 2024. As part of our agreement with Indivior, we have the right to select drug candidates from the funded research activities for our own independent GABAB PAM program. We have selected to focus our independent program on cough, and therefore, I will present this exciting opportunity. There is a strong rationale for developing GABAB PAMs for chronic cough. Chronic cough is a persistent cost that lasts for more than 8 weeks and can be caused by a variety of factors, including respiratory infection, asthma, allergies and acid reflux, but also possibly by an overactive cough reflux. There is a large unmet medical need in novel antitussive drugs as current standards of care are ineffective in 30% of patients and only moderately effective in up to 60% of patients. In addition, the current treatments carry risks of serious side effects. On the next slide, we show that GABAB PAMs are likely to have a superior tolerability profile in comparison to the current standard of care and show no taste related side effects as seen with a newly improved P2X3 inhibitor, Gefapixant. Support for using GABAB PAM in treatment of chronic cough comes from the clinical evidence that baclofen, a GABAB agonist, is used off-label in cough patients and from anatomical evidence that GABAB receptors are strongly expressed in airways and in the neuronal pathway regulated cough. Therefore, we believe that GABAB PAM could offer superior efficacy in cough patients. Therefore, we believe that GABAB PAM could be an innovative new treatment of chronic cough administered once daily via oral dosing and offering improved efficacy and tolerability with pure nonresponder patients suitable for chronic dosing, therefore, significantly improving patients' quality of life. We are working with multiple compounds progressing in late clinical candidate selection phase, and we expect to move into IND-enabling studies in H2 2024 in parallel to delivering compounds for our partner, Indivior. Now I hand it over back to Tim.

Thanks, Micha. Now before I move on to the financials, I would like to spend a few moments to speak about the Neurosterix transaction. Due to the excellent progress made by our R&D team in advancing our unpartnered preclinical portfolio, our M4 PAM, mGlu7 NAM and mGlu2 NAM programs reached a stage of development where they now need significant amounts of financing to progress into the clinic. Unfortunately, given the low market capitalization of Addex, raising the amount of capital needed would have been extremely challenging and highly dilutive for our shareholders. So we decided to spin out these programs and our platform into a new private company and raise the necessary capital into the new private entity. We believe this is an excellent transaction for Addex shareholders as it has secured CHF 5 million for Addex and removed the financing overhang on the Addex stock. We have retained a 20% interest in Neurosterix, so we can benefit from the upside from advancing the programs into the clinic, which is now secured by the CHF 63 million capital from a high-quality investor syndicate led by Perceptive Advisors. As part of the transaction, we have divested our allosteric modulation technology platform, including the majority of our staff and significantly reduced our cash burn going forward. However, we have entered into a service agreement with Neurosterix to ensure that we can access the skills needed to execute on our business strategy. Now review of our 2023 financial results. Starting with the income statement. We recognized CHF 1.6 million of income in 2023 compared to CHF 1.4 million in 2022, primary source of revenues research funding from our collaboration with Indivior, which is recognized as the associated research costs are incurred. In terms of expenses -- R&D expenses were CHF 7 million in 2023 compared to CHF 14.7 million in 2022, a decrease of CHF 7.7 million is primarily due to the termination of dipraglurant development in dyskinesia associated with Parkinson's disease and the disbanding of our U.S. clinical team in 2022. G&A expenses were CHF 5 million in 2023 compared to CHF 7.3 million in 2022. The decrease of CHF 2.3 million is primarily due to reduced share-based service costs and decreased D&O insurance costs. The finance results is primarily related to foreign exchange losses on cash held in U.S. dollars, partially offset by interest income on U.S. cash deposits, which we hold to hedge against near-term U.S. dollar-denominated costs. Now to the balance sheet. Our assets are primarily held in cash, and we completed 2023 with CHF 3.9 million cash held in Swiss francs and U.S. dollars. Other current assets amount to CHF 0.4 million, primarily related to R&D prepayments and trade receivables that mainly relate to our agreement with Indivior. Current liabilities of CHF 2.9 million as of the end of December 2023 decreased by CHF 0.4 million compared to the same time in 2022 and primarily relate to R&D payables and accruals. Noncurrent liabilities of CHF 0.6 million increased by CHF 0.5 million compared to December 31, 2020, and primarily related to retirement benefit obligations. Now to the cash flow statement. We started the year with CHF 7 million. We raised net proceeds of CHF 4.5 million in an equity offering executed in April. 2023, we received CHF 1.2 million from the sale of treasury shares and received CHF 1.9 million research funding from Indivior. We spent CHF 9.9 million on our operations. We have an unrealized gain of CHF 0.4 million on ForEx. And U.S. dollar cash balances are converted to Swiss francs, resulting in CHF 3.9 million of cash at the end of the year. Now to summarize I hope you have understood how transformative the Neurosterix deal is for Addex. We've strengthened the balance sheet and secured the financing to execute on the development of our preclinical portfolio, including advancing, the very exciting M4 PAM program for schizophrenia into the clinic. Our Janssen partnership is poised to deliver Phase II data in epilepsy by mid-May this year, which will be an important value inflection point for the program and the company. And our partnership with Indivior is on track to deliver clinical candidates ready for IND-enabling studies by the end of June of this year. Dipraglurant is ready to restart clinical development and the subject of a number of partnering discussions. Our independent GABAB PAM cough program is on track to start IND-enabling studies. Also we are validating partnerships with industry, supportive investors and a strong balance sheet, which puts us on a solid position to deliver on our strategic objectives. This concludes the presentation, and we will now open the call for questions.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of [ Joanne Lee ] from Maxim Group.

This is [ Joanne ] speaking. And firstly, congratulations on the Neurosterix steel. So now that you secured some funding through that deal, what are the upcoming actions, specifically, which program are you prioritizing for advancement?

Yes. So we continue to execute on the Indivior collaboration. So our primary focus is to deliver the clinical candidates so that Indivior can make their selection by the end of June because under the deal, we have the right to then select second choice. They have third choice. We have fourth choice. So that's really our priority because once Indivior are able to select, it means we can also select and that will then give us the candidate that we can advance into the IND-enabling studies for the cough program.

Got you. So I'm getting that the priority would be the GABAB program and the Indivior. So -- I'm aware about that you guys -- you have been releasing some positive preclinical data and are currently in the candidate selection phase. I wanted to ask what's specific criteria are you considering when evaluating potential candidates for this program? And as a follow-up, additionally, regarding the collaboration with Indivior, it's currently set to continue until the end of June. Are you considering independently moving the asset into the clinic? Or are there sort of discussions underway to extend that collaboration further?

Yes. So in addition to the GABAB program, we also have dipraglurant. We've done a lot of work to design a new study in PD-LID. We've also -- we are currently completing preclinical work in the stroke recovery area. Now Alex has continued to dialogue with potential partners, and we continue to have discussions, not only around dipraglurant in PD-LID, but dipraglurant and post-stroke recovery, but also -- and we have started to identify some potential partners for the GABAB cough program. However, you can imagine we are not going to -- we are not free to disclose much information about the GABAB candidates until Indivior has exercised their selection because at the moment, while we have a good idea of which candidates they will select and which candidates we will select until they have formally selected, they have first choice so they could select any of the candidates, which means we are not at liberty to disclose any information about the candidates. And to your question about how we are characterizing and what the target product profile would look like of the different candidates, that's confidential information, and we're not at liberty to disclose it. So I'm sorry about that.

And the next question comes from the line of Raghuram Selvaraju from H.C. Wainright & Co.

Congratulations on all the progress, the Neurosterix transaction in particular. Just wanted to ask, first of all, with respect to the M4 program, can you give us a sense, Tim, of what some of the recent precedent transactions or comparators might be in this space? And what implications that could have for Neurosterix as well as Addex's stakes in Neurosterix going forward, especially if you continue to have development success with work regarding that specific target?

Thank you very much for the question. Yes, at the back end of last year, Cerevel, which is leading the field in muscarinic M4 positive allosteric modulators with Emraclidine. They're in Phase II. They were purchased for a little south of $9 billion by AbbVie. So that's a very nice comparator. We believe our program is about 2.5 years behind this. And clearly, that M&A activity, I would say, sharpened the interest of Perceptive and the investor [indiscernible] that has put the CHF63 million behind in Neurosterix. And then coming pretty quickly after the Cerevel M&A, BMS purchase car and Karuna, which has filed for registration with a product called KarXT. Now KarXT is an M4/M1 preferring agonist. So again, much of the efficacy that's been seen in the Phase III program of KarXT is coming from the -- in schizophrenia, I should say, is coming from its M4 agonist activity, which is a very strong validation again of the M4 PAM approach in schizophrenia. Now -- and again, we are some way off from filing for registration. However, we have CHF 60 million on the balance sheet of Neurosterix. We are owning 20% of it. So you can imagine, we have got the capital to advance the M4 PAM program through Phase I development.

And also, can you just clarify 2 other points. The first is with respect to the other programs that Neurosterix plans to advance, maybe give us a flavor of what the target indications might be beyond schizophrenia or adjunctive therapy in schizophrenia, which probably would be the most appropriate application of the M4 pathway modulator as well as if there are likely to be any future targets that Addex could conceivably retain the right to pursue using the original Addex technology platform or if these are all going to ultimately be taken forward by Neurosterix.

Yes. The technology platform and all the preclinical programs, except for the GABAB PAM are all now in Neurosterix. And therefore, Addex interest in these is through our equity interest, which we plan to protect going forward. So the other targets, which are being financed are the mGlu7 and this is the negative allosteric modulator program for stress-related disorders. And there are a number of very interesting indications in neuropsychiatry, but we're not at liberty to disclose those. Then as the mGlu2 negative modulator program, which has gone across the Neurosterix along with the Eurostar grant that was secured last year. So this has, in addition to the -- of course, some of the CHF 60 million that's sitting in Neurosterix, it also has the Eurostar's consortium grant, which is driving that program rapidly forward with the consortium to the clinical candidate selection, but currently is in lead optimization. And again, this program is for cognition, and cognition is an unmet medical need across a number of new neurodegenerative disorders, sorry. And again, we're not at liberty to disclose the details of some of those indications that we'll be going after. And there is another program on an undisclosed neurological target. And we certainly have the plans within Neurosterix to definitely leverage the platform. But again, I'm not at liberty to disclose details of those activities at the current time.

And just one quick housekeeping item, if I may. Can you tell us whether the equity stake that Addex has in Neurosterix is in any way preferred and/or if Addex might in the future, have the ability or the option or at least would not be restricted in any way from investing in Neurosterix and future funding rounds in order to maintain the 20% equity holding?

Addex has the same rights as the investors. And Addex has the right to participate pro rata in all future financing. And our intention is to protect our 20% interest in Neurosterix going forward. But as you can imagine -- so as you can imagine, we're CHF60 million on its balance sheet, we don't expect to have to participate in a future fundraising for quite some time.

And now we're going to take our next question. And the question comes from the line of Michael Okunewitch from Maxim Group.

Congrats on all the progress this past quarter. So, I guess I'd like to ask just on the epilepsy program. Given that, that data is approaching, could you remind us of the criteria that the IRC were using to determine whether or not to proceed with that?

Yes. So we haven't actually disclosed the criteria. However, there were some criteria. So what we know today is that the independent review committee must have seen at least a signal in cohort 1 for Part 1, so the first 4-week acute efficacy period in cohort 1. So that was 60 patients after 4 weeks. We know that they must have seen at least the signal. Otherwise, they would not have recommended to continue. They also would not have seen any safety and tolerability issues. So those are the 2 things we know because we're not -- in fact, we don't actually know what the criteria were, but we know that -- that's the details that we know and that's what we're allowed to disclose.

I would like to see -- are you at liberty to discuss any of the -- any more granularity on the prelaunched milestone structure for that program, in particular, if any are attached to that Phase II data?

Right. So if you look through the previous disclosure, Alex received a milestone when J&J dosed first patient in Phase I. We also received a milestone when J&J dosed the first patient in Phase II. We're also at liberty to disclose that the EUR 109 million of milestones are all development and regulatory. So there's no sales [ mark ] included in that amount. So I think you can sort of work out and if you look at the amounts of the Phase I and Phase II milestones, you could probably work out when the next milestone is coming, and you can probably work out that it's pretty back-ended. So we're not relying on any cash inflows from this partnership to finance Addex for some time.

All right. And then actually just leads into my last question, just more of a, I guess, modeling and financial angled question. I just wanted to see if you could help me understand what assumptions are going into your runway projection? And then how much of the previous burn rate was dedicated to staff and programs that are now being handled at Neurosterix?

Yes. So we have significantly removed the operating burn of Addex. Now what is not included in our guidance into 2026 is the cash required to fund clinical development of dipraglurant, for example. We have not included the costs required to develop the cost program. What we have included there is the cost of operating Addex. So operating -- being a public company, operating an IR business development, finance activity and some preclinical work on dipraglurant for the stroke indication and some clinical activities to prepare the development plans for dipraglurant in stroke and in the dyskinesia with Parkinson's plus some money to finish off the preparation and the CMC for the GABAB cough program.

And now we will proceed to any written questions. Just give us a moment. We have a few questions on the webcast. The first question comes from line of Michael [ Hoza ], and his question is how high the first milestone payment is to be expected?

I'm sorry, but we're not at liberty to disclose that information. As I pointed out in the response to one of the previous questions, there was a publicly disclosed Phase I milestone and a publicly disclosed Phase II start milestone, but we're not at liberty to guide on the next milestone. I'm afraid.

We have another question from Michael [ Hoza ]. What will be the forecasted expenses in 2024? Do they drop significant and it's from which month?

Yes. So we're not disclosing the details of the forecast. However -- I mean, if you look at the expenses of 2023 will be significantly reduced because all the facilities, all the majority of the staff have moved to Neurosterix. And that is effective the first of March.

We have another question from Michael [ Hoza ]. Why no number can be named of these milestones payments. There are for sure contracts and the amounts are written down? How much is the next milestone payment to be expected? I expect here a clear number.

Well, you'll need to talk to J&J because J&J have not authorized us to give any granularity around the economics of the contract with them. We have a contract. We have confidentiality clauses in the contract, and we respect the confidentiality that we've signed up to. And I hope Mr. Hoffa can respect that position.

There are no further questions. I would now like to hand the conference over to Tim Dyer for any closing remarks.

Well, thank you, everyone, for attending our 2023 conference call, and thank you very much for your questions. And we look forward to speaking to you again soon. Have a very nice day.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.