Axsome Therapeutics, Inc. (AXSM) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Axsome Therapeutics conference call. [Operator Instructions] As a reminder, today's conference call is being recorded. And I would now like to turn the conference over to your host today, Mr. Mark Jacobson, Senior Vice President of Operations at Axsome Therapeutics. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us on today's conference call. A press release announcing that Axsome has entered into an exclusive license agreement with Pfizer crossed the wire a short time ago and is available on our website at axsome.com. During today's call, we will be making certain forward-looking statements, and these statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our investigational agents, our clinical and nonclinical plans, our plans to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development, and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today's date, and the company disclaims any obligation to update such statements. Joining me on the call today from Axsome's management team are Dr. Herriot Tabuteau, Chief Executive Officer; Dr. Cedric O'Gorman, Senior Vice President of Clinical Development and Medical Affairs; Mr. Nick Pizzie, Chief Financial Officer; and Mr. Dave Marek, Chief Commercial Officer. After the presentation, we will open the line for Q&A. And following Q&A, Herriot will provide some concluding remarks. I shall now turn the call over to Herriot.

Thank you, Mark. Good morning, everyone, and thank you for joining us on the call. We are very pleased to announce that Axsome has entered into an exclusive license agreement with Pfizer, which has the potential to accelerate the development of an existing Axsome product candidate and which adds a new Phase III product candidate to our late-stage CNS pipeline. The agreement provides Axsome an exclusive U.S. license to Pfizer's clinical and nonclinical data and intellectual property for reboxetine. Reboxetine is the active pharmaceutical ingredient in AXS-12, which Axsome is developing for the treatment of narcolepsy. The agreement also provides Axsome exclusive rights from Pfizer to develop and commercialize esreboxetine, a new Phase III stage product candidate now referred to as AXS-14 in the U.S. for the treatment of fibromyalgia as well as for other additional indications. Esreboxetine is the SS-enantiomer of racemic reboxetine. In 2 efficacy clinical trials conducted by Pfizer, one Phase III and one Phase II, AXS-14 met the primary endpoints and statistically significantly improved the symptoms of fibromyalgia. In consideration for the license and rights, Pfizer will receive $11 million in Axsome stock in upfront cash and up to $323 million in regulatory and sales milestones. The valuable clinical and nonclinical data under this license will enable us to potentially significantly accelerate the clinical development and commercialization time lines for AXS-12 in narcolepsy while reducing development risks and costs. As a reminder, we recently completed and announced positive results for Phase II trial of AXS-12 in the treatment of narcolepsy and are preparing to advance AXS-12 into Phase III development for the treatment of narcolepsy this year. Through this agreement, we have also expanded our CNS pipeline with AXS-14 for the treatment of fibromyalgia. With the planned advancement of AXS-12 into Phase III this year and with the addition of AXS-14, our pipeline now contains 4 differentiated Phase III stage CNS product candidates. Axsome has 3 pending U.S. patents covering AXS-14 and 2 pending U.S. patents in Orphan Drug designation covering AXS-12. Both AXS-12 and AXS-14 are new chemical entities. This license agreement with Pfizer demonstrates Axsome's continued growth and commitment to developing new effective medicines that have the potential to significantly improve the lives of the millions of people affected by distressing CNS disorders. I will now provide further details on the agreement such upon the status of AXS-12 and provide a brief overview of AXS-14 and the clinical data generated to date with this new product candidate. Under the terms of the agreement, Axsome will receive from Pfizer an exclusive U.S. license, the Pfizer data for reboxetine and esreboxetine encompassing a full range of nonclinical studies and short-term and long-term clinical trials. The license data includes results from a positive Phase III and a positive Phase II trial of esreboxetine in the treatment of fibromyalgia. Axsome will have the exclusive right and full responsibility of developing AXS-14 or esreboxetine in the U.S. for the treatment of fibromyalgia and for other indications. Outlined here are the financial terms. Pfizer will receive shares of Axsome common stock having a value of $8 million based on the average closing price of Axsome's common stock for the 10 prior trading days. Pfizer will also receive an upfront cash payment of $3 million, up to $323 million in regulatory and sales milestones and tiered mid-single to low double-digit royalties on future sales. Pfizer will also have a right of first negotiation on any potential future strategic transactions involving AXS-12 and AXS-14. Benefits of the transaction include the acceleration of the development of AXS-12 for narcolepsy and expansion of Axsome's late-stage pipeline with AXS-14. With a full array of completed nonclinical studies and a large clinical database for reboxetine and esreboxetine encompassing more than 5,000 patients, the agreement reduces or eliminates the need to conduct certain nonclinical and clinical studies. Importantly, the agreement expands Axsome's CNS pipeline with a new Phase III stage product candidate that has already demonstrated efficacy in fibromyalgia in completed late-stage trials. This agreement, therefore, advances our mission to accelerate the development of life-changing medicines for the many people living with difficult-to-treat CNS disorders, now including fibromyalgia. As discussed, reboxetine is the active pharmaceutical ingredient in AXS-12, which we are developing for the treatment of narcolepsy. Narcolepsy is a chronic, debilitating neurologic condition characterized by excessive daytime sleepiness and cataplexy. Existing treatment options for narcolepsy are limited, and only one agent is currently approved to treat both cataplexy and excessive daytime sleepiness. In our recently completed Phase II trial, AXS-12 demonstrated statistically significant reductions in cataplexy attacks, excessive daytime sleepiness and improvement in cognitive function and sleep quality as compared to placebo in narcolepsy patients. We intend to initiate Phase III development of AXS-12 in narcolepsy this year as previously disclosed. Axsome has Orphan Drug designation for AXS-12 in the treatment of narcolepsy and 2 pending U.S. patents covering AXS-12. I will now provide a brief overview of AXS-14, which is under development for the treatment of fibromyalgia. Fibromyalgia is a debilitating chronic CNS disorder characterized by widespread pain, fatigue, disturbed sleep, depression and cognitive impairment. It affects approximately 5 million Americans, approximately 90% of whom are women. Treatment options for fibromyalgia are limited with only 3 pharmacologic treatments currently approved by the FDA. These agents have variable efficacy and do not address all the symptoms of fibromyalgia. AXS-14 or esreboxetine has demonstrated positive results in late-stage clinical trials in fibromyalgia. Axsome has 3 pending U.S. patents covering the AXS-14. AXS-14 has the potential to address a fuller range of fibromyalgia symptoms with currently approved treatments. Notably, AXS-14 has shown effectiveness on symptoms of fatigue. This is an important finding because fatigue is one of the most common in disabling symptoms of fibromyalgia. AXS-14 is SS-enantiomer of racemic reboxetine, which is a potent and highly selected norepinephrine reuptake inhibitor. AXS-14 is a more selective isomer and enhances descending norepinephrine inhibition. It is a different pharmacologic approach than current treatments and is administered once daily. Shown here are results from a randomized, double-blind, 8-week, 267-patient Phase II trial of esreboxetine or AXS-14 in fibromyalgia. AXS-14 met the primary endpoint, demonstrating a highly statistically significant reduction in pain as compared to placebo. And significant improvement in function measured using the fibromyalgia impact questionnaire as compared to placebo. AXS-14 also resulted in highly statistically significant improvements in fatigue measured using the multi-dimensional assessment of fatigue scale and in the patient global impression of change as compared to placebo. AXS-14 was also evaluated in a randomized, double-blind, 14-week, 1,122-patient Phase III trial in the treatment of fibromyalgia. Patients were treated with AXS-14 at doses of 4, 8 or 10 milligrams daily for placebo. The study met the 2 primary endpoints, demonstrating highly statistically significant improvements compared to placebo in the weekly mean pain score and in the fibromyalgia impact questionnaire total score. Similar to the results in the previous trial, in this Phase III trial, AXS-14 also demonstrated a highly statistically significant improvement in fatigue measured using a global fatigue index for the 4 and 8-milligram doses and in the patient global impression of change for all doses as compared to placebo. Overall, in 2 randomized, double-blind, placebo-controlled trials, AXS-14 or esreboxetine significantly improved symptoms of fibromyalgia, including fatigue, one of the most disabling symptoms of the disease as compared to placebo. In these 2 trials, AXS-14 treatment also significantly reduced the impact of fibromyalgia and provided global and recognizable benefits to patients. I would now like to turn the call over to the operator to begin the Q&A session. Operator?

[Operator Instructions] Your first question comes from the line of Marc Goodman from SVB Leerink.

This is Roanna on the line for Mark. A really interesting deal. I was curious if you could talk a little bit about what led up to this agreement? And if there is a particular reason why Pfizer did not want to pursue this asset?

Well, thank you for the question. In terms of what led up to the agreement is, as you know, we have been developing AXS-12 [Audio Gap] now as you know, reboxetine is a new chemical entity in the U.S. And so therefore, continued development in order to enable an NDA filing would require nonclinical studies as well as a full array of clinical data, which would be required in the [indiscernible] safety database. So this deal made sense. Pfizer has a broad array of nonclinical studies, which have already been completed as well as the long-term safety database encompassing thousands of patients. So it just makes sense to partner with Pfizer in order to accelerate the development of AXS-12. And then with regards to your question around AXS-14, they're just disclosures from Pfizer -- public disclosures state that esreboxetine was discontinued from clinical development for fibromyalgia as part of an overall portfolio review. And that portfolio review occurred around the time of the live acquisition. And that it was not discontinued for safety or lack of efficacy. Strong clinical data we just reviewed. The data has been out. And importantly, that portfolio decision was made before the Phase III results were available.

Got it. Great. And just one more question, if I may. I was looking at the pain reduction score for esreboxetine, and it looks like if you took placebo-adjusted value, it's around like 0.5. I was wondering if you could help us understand, is that clinically meaningful? Or what is the clinically meaningful bar for pain reduction in fibromyalgia?

That is definitely clinically meaningful. And I think another way to look at [Audio Gap] by patients. So patients reported that they felt better and that their symptoms were improved. If you look at the patient global impression of change, for example, that was highly statistically significant. And in addition to that, there was a significant improvement in function. So fibromyalgia, as you know, has numerous symptoms.

And your next question comes from the line of Raghuram Selvaraju from H.C. Wainwright.

This is Edward Marks on for Ram. So to start off, I was wondering if esreboxetine applicable in narcolepsy. And does it have a similar effect to the racemic mixture indication or not? And then speaking of the racemic mixture, does it also have similar activity against fibromyalgia versus SS-enantiomer?

Well, great. Thank you for the question. So just to be clear, esreboxetine has not been studied in narcolepsy. So the 2 agents that have been studied in different indications. So we've been developing AXS-12 for the treatment of narcolepsy, and we generated data there. And from the data that we shared with AXS-14 that has been studied in fibromyalgia, so different indications.

Okay. And so just to be clear, none of the preclinical data yet has looked at narcolepsy for AXS-14?

That is correct.

Okay. And then looking at the deal terms, I was wondering, does the right of first negotiation imply right of first offer. And then just assuming, yes, what amount of time has to elapse before you guys can seek other offers on AXS-12 or AXS-14.

Yes, what we've disclosed is that Pfizer has the right of first negotiation on any potential strategic transaction with AXS-12 or AXS-14. So we've not disclosed further details than that. But what this shows is that, obviously, there is interest should we decide to out-license the product or enter into other strategic collaborations with regards to these 2 agents.

Okay. And then does Pfizer -- is -- or Pfizer -- is Pfizer retaining the ex U.S. rights to esreboxetine? Or do they have any specific co-promotion rights within the U.S.?

There are no specific co-promotion rights in the U.S., and this is a U.S.-only license for us. So therefore, Pfizer retains all ex U.S. rights.

Excellent. And then just last quick question, I'm wondering if esreboxetine has applicability in other areas like restless leg syndrome or any other indications that you guys are looking at?

So we -- so under the license, Axsome has the right to develop AXS-14 for all indications. And right now, the focus is on fibromyalgia. This was the data that has been generated, that is most late-stage and -- but AXS-14 has been studied by Pfizer in other indications. And we'll be exploring the data for those other indications and making a decision. But right now, the focus is on fibromyalgia.

Your next question comes from the line of Myles Minter from William Blair.

And congrats on the license here. I'm just wondering if you can provide any more granularity on exactly how you believe licensing out these nonclinical and early stage clinical data set could accelerate that reboxetine development time line. That's the first question. I've got a follow-up after that.

Yes, Myles, we had a little bit of trouble hearing you. We've been having some technical difficulties since we're out here at JPMorgan. Could you just repeat that question for us, please.

Yes, sorry, just on the nonclinical and clinical data sets that you've licensed from Pfizer, how do you specifically expect that to accelerate the reboxetine development time line in narcolepsy? If you can provide more granularity there, that would be great.

Yes, absolutely. So the -- with regards to the acceleration in the time line, it could be significant is -- as part of the data set that we have licensed, it includes nonclinical data. As you know, new chemical entities are required to have a 2-year carcinogenicity data. So those studies, by definition, take at least 2 years to conduct. So those are part of the data set that we have licensed. So the -- when you think about the potential acceleration, we think that it could be as much as 2 years, but at least 1 year.

Okay, beautiful. And then just on the Pfizer public release on the discontinuation of esreboxetine, I know you said it's part of their -- review of their portfolio agents, but there was a quote in there saying that they do think that it did not provide meaningful benefit over currently approved therapies. You said that they didn't have the Phase III data set on hand when they made that decision, I'm wondering whether these differences in fatigue and cognition showed up in that Phase II data set. Did they know that making that public announcement? And what gives you confidence that you've really got a good drug for fibromyalgia on your hands here? That's it for me.

Sure. What gives us confidence is the data. The data was very strong and show efficacy across a broad range of symptoms. And yes, that decision was made prior to the conclusion of the Phase III trials. So we refer you to statements that Pfizer has made, so we can't really speak for them, and we would not. But what we're really excited about of the very strong clinical data demonstrated in 2 efficacy trials that were placebo-controlled, were highly significant that showed improvements across a broad range of symptoms and showed also differentiating features, for example, the impact on fatigue. There -- the -- there was a patient form, which was conducted by the FDA not too long ago on fibromyalgia because this is an area of high unmet medical need. And fatigue was reported as one of the most disabling symptoms of the disease. So we're very gratified to see that AXS-14 not only did improve pain and function but also improved fatigue.

Your last question comes from the line of Eddie Hickman from Guggenheim.

This is Eddie on for Yatin. Congrats on the deal. Just 2 quick ones for me. Regarding the clinical data that you've gotten of these 5,000 patients that have been on these drugs. Can you give us a breakdown of how many have been on 12 versus 14? And does that include the full safety data for both of these drugs, the full safety data set? And then can you give us a reminder of the IP status you have for both 12 and 14 now?

Right. So the -- so we have not disclosed the breakdown of the number of patients between the AXS-12 and AXS-14 4,000 to 5,000. What we can say is that both of those data sets include and encompass, long-term safety exposure for both drugs. So -- and that's really important because, as you know, that would be important to enable an NDA filing. And then with regards to the IP status, for AXS-12, as you know, we have been granted FDA Orphan Drug designation in the U.S. for AXS-12 that provides 7 years of protection. We've also filed patent applications with -- for AXS-12 and should those issue, then that would give us even greater runway. And then for AXS-14, we do have 3 pending U.S. patents and if those issued, that would give us significant runway. Both AXS-12 and AXS-14 are new chemical entities in the U.S., and that provides automatic exclusivity of 5 years. And then the patents would obviously extend that significantly.

There are no further questions at this time. I turn the call back over to the presenters.

Well, thank you again for joining us on the call this morning. We are now better positioned to continue the development of AXS-12 in narcolepsy, which is slated to begin Phase III development this year, and we are excited to broaden our CNS portfolio with a new Phase III stage asset, which is the AXS-14, which has demonstrated efficacy in fibromyalgia. 2020 promises to be a year of continued clinical and regulatory progress for us. In addition to initiation of Phase III development of AXS-12 in regulatory interactions regarding AXS-14, we expect this year 2 NDA filings, one for AXS-05 in MDD and the other for AXS-07 in migraine. We expect top line results from our ongoing Phase III trial of AXS-05 in treatment-resistant depression and Alzheimer's disease agitation, and top line results from our ongoing INTERCEPT trial of AXS-07 in the early treatment of migraine. Our recently completed financing provides us with a strong balance sheet, which allows us to effectively execute on these milestones. We look forward to keeping you updated on our progress throughout the year. Thank you.

This concludes today's conference call. You may now disconnect.