Relmada Therapeutics, Inc. (RLMD) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Rahul Sood here from Morgan Stanley Healthcare Investment Banking. We are joined today by Sergio Traversa, Chief Executive Officer of Relmada. Very honored and very pleased to have you join us, Sergio. Before I turn it over to you, I would like to remind of 2 things to the audience here. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. The second housekeeping item is we will be asking the audience to submit their questions through the question portal. I see there are a few that are coming in already. We'll use this time, Sergio, to, a, have you walk through the high -- the key points about the company, what's happening at the moment and the -- and any upcoming data points that you would ask the investors to focus on. And then we can get into some of the more fireside Q&A format after that. So with that, it's my pleasure to introduce Sergio Traversa. And Sergio, over to you for a quick intro.

Well, first of all, thank you, Rahul, for the invitation to allow us to present at Morgan Stanley. I believe it's the first time that we present at your conference. So yes, we are very honored to do that. And welcome, everyone. Good morning, good afternoon, depending on which side of the ocean you are, which side of the U.S. you are. Rahul, can I go -- just to give the highlights of what the key points of Relmada are. And so we're a public company trading on Nasdaq, and the symbol is RLMD. And we are focusing on CNS. In particular, the major program that is in the Phase III is now depression. We do believe as the investment highlights, right, why people should look at Relmada as an investment? Well, the focus on CNS and in major depressive disorder is clearly an interesting field. It's a very massive large patient population with pretty sizable unmet need. The opportunity is, I would say, compelling and the -- has also been derisked. Over the last 3, 4 years, we have been working diligently and we generated quite a bit of data that derisked the opportunity in terms of safety and more recently, last year, in term of efficacy with the Phase II results. We are now in the middle of the Phase III program. So we will have several readouts over the next 18 months. In particular, we have the readouts of the 2 major Phase III in depression disorder. Depression, nobody needs to be informed how big is the market opportunity and the patient population. We are talking about 20 million patients in the U.S. only, of which half of them, about 10 million, they're actually in treatment with some drug. Very interesting data point: about 40% of these 10 million patients or about 4 million patients, they require more than one medication. So they combine more than one medication. We spoke about unmet needs. There are about 28 or 29 different drugs approved for depression in the United States and -- as of today. And -- but there are 2 limitations that still has not been resolved satisfactorily. Number one, only like 1/3 of the patients respond well to current antidepressant treatment and another 1/3 of this patient, they respond something but not very satisfactory, and 1/3 of patients don't respond at all. So do we have a new class of drug, a drug that is part of a new class of drug, the NMDA antagonist that can respond well to current present would be very, very important. The second limitation is the time to response. With all the existing medication approved, one exception is J&J, Spravato, that is a hospital drug. All these drugs, they take between 3-4 up to 6-8 weeks before they show their effect. So you have a limited percentage of patients that respond. And for all the current medication, it takes at least a month before you -- there is any results in term of efficacy. We do believe that esmethadone, the drug that we are developing, can help and is addressing these 2 unmet needs. One, we have seen the efficacy data that we can touch on in a second. We have an effect that is starting to be statistically significant for the 3-4 days. And we have seen a response rate in patients that did not respond to the current -- previous treatment, the traditional antidepressant, we have a response rate that is approaching the 60%. So 2 out 3 patients that did not respond to either treatment, they responded in Phase II to esmethadone. We feel very confident about safety. We did an extensive Phase I program where the dose-limiting toxicity at 6x the therapeutic dose that we proposed is nausea. So nothing clinically relevant with a tolerability and safety profile that approach the one of placebo. So we feel very comfortable about the safety of esmethadone. What has attracted a lot of interest is the efficacy data in Phase II, was 7 days in treatment and a follow-up 7 days after without taking the medication as an add-on therapy to patients that failed at least 1 up to 3 previous medication in the current depression episode. In the first 7 days, the -- both doses that have been tested, 25- and 50-milligram, were statistically significant after 4 days of treatment. And the effect has been prolonged out to the 7 days. And when the patient, they stopped taking the medication, 7 days after without taking the medication, the result, we are still highly statistically significant. Safety and tolerability, we are comparable to the Phase I program. And so this will allow us to move to this, I would say, massive Phase III program. But before we touch on the Phase III program, the -- I would like to touch on one specific item that is -- it derives from the name of the drug, esmethadone. They resemble the parent drug that is methadone. Now I'm not -- I can really say with a straight face that esmethadone very little or nothing to do with the parent drug. And to demonstrate that, we run a study called HAP, Human Abuse Potential study, where we compare esmethadone, 3 different doses up to the maximum tolerated dose with oxycodone that is, unfortunately, is a widely abused drug everywhere, especially in the United States. Well, the results have been very clear. The -- all doses of esmethadone is highly statistically significant with 4 zeroes after the comma -- after the point, sorry. And so it's demonstrated that esmethadone has very -- nothing to do with any an opioid or any narcotic that is the parent drug. Phase III, it's very simple. We only used one dose of esmethadone, the 25 milligrams. The 2 doses were comparable in Phase II. And so we keep it simple, 2 arms placebo; and the 25 milligrams, 2 parallel Phase III. Design is exactly the same, plus the 12 months traditional long-term safety study. Plan is to generate results of this program sometime in the middle -- or first to second half of -- sometime in next year. We're also running a monotherapy study that is just esmethadone on top of any other drug. And this one, we also should have the results a little bit early. That will be the first readout that we'll see in the first half of next year. With that said, I would go back the word to Rahul that can ask any question, and I would be very happy to answer.

Thank you, Sergio, for that excellent walk-through of the state of play at Relmada right now. It looks like a lot of interesting things being done. How should we -- I guess, before we get to the catalyst point here, talk a little bit about the ongoing pivotal trials and anything that you can -- that you've seen so far which has been a surprise in the trials that are going on for the lead asset.

Yes. Sure. Well, Phase III just started at the beginning of this year. So I mean it's a little early to draw any conclusion. It is up and running. We have recruited patients in all the 2 add-on therapy and the monotherapy strategy and the long-term safety. In the Phase II, well, surprising -- I would not say that this was a major surprise, but clearly, having dealt with depression over the last -- all my career since I was involved at Lilly with the development and launch of Prozac is the effect size, right, is the magnitude of the effect. The speed of action we know from Johnson & Johnson's Spravato that NMDA antagonist ketamine, esketamine and esmethadone, they work very fast. So our, it's oral, so it took a little longer, but we are still talking about 3-4 days, the big separation between placebo and the active drug. But the magnitude of this efficacy, that was pleasantly surprised. I mean in effect size, effect size, it measured the efficacy of a drug not considering the number of patients. So it's a more pure way of measuring if a drug works or not. And it goes from 0 to 1 in the effect size in the Phase II, considering where a total of 62 patient in 3 arms, so 20 patient per arm, was 0.7:1. Just to give you a comparison, I contribute to the development of fluoxetine, Prozac. The effect size of Prozac, that is an approved drug, is about 0.3. With all the limitation that we saw that in the Phase II that it's usually Phase III you get results that is not exactly the same. And -- but still, the effect is 2 to 3x the effect of a current very successful antidepressant like fluoxetine. So that was a pleasant. We do believe the drug works well. But it works, right, very, very, very effective. So that was somewhat a little bit of a surprise.

Can you talk about the 2 arms that you're running right now? What's the -- what are the key differences between the 2 arms there?

The 2 trials? The RELIANCE I and II? There is no difference. They have exactly same design, same everything. It's 2 arms, placebo and 25 milligrams. So the most simple trial design. And the end point is at 28 days. So we need to get approval, we need to show statistically different MADRS score difference between placebo and 25-milligram of esmethadone at day 28. That would bring the chronic label claim. If the drug shows, as we expect and we hope, statistically significant also at day 7, that is the secondary end point, then the label will reflect rapid-acting sustained efficacy for chronic use in depression.

Got it. And Sergio, talk to us a little bit about what are the expected catalysts? When should we expect news coming out of these trials? You mentioned it's a 28-day study. Can you just give us -- the audience here some sort of a time frame?

Sure. Well, the next 18 months, it will be, right -- we'll see the results of, I would say, 20 years of work. So we will have all the readout. The first one is material but it is not going to be like extremely material. We are running a second study comparing esmethadone to ketamine to show that esmethadone, as we have seen in Phase I and Phase II, does not have the limitation of ketamine/esketamine that is a psychotomimetic delirium hallucination kind of side effect. Again, we haven't seen them. I would be surprised if they show up in this study. That readout will be in the first quarter. It is more a safety and labeling kind of study results. But it's important to show that not only we have nothing to do with the narcotic opioid, but also we don't carry the limitation of esketamine that is a relatively successful Johnson & Johnson drug. And then it's going to be the monotherapy results. That would be the first catalyst in the first half of next year. And then mid next year, second half, we'll have the results of the other 3 remaining RELIANCE I/RELIANCE II. It is the 2 Phase III as an adjunctive treatment of depression and the long-term safety study that -- we don't give for granted anything. We're always worried about everything. But safety so far is really not something that concerns us at. So 18 months, we will know if we have a drug or not. And we do believe -- we hope, but we do believe we do have one and a good one.

Got it. So very important sort of time frames coming up for the company over the next 12 to 18 months here. Staying on the point of -- you talked about the Human Abuse Potential studies that were done. What are your expectations on the scheduling of the drug, assuming the profile of the drug as you know currently?

Right. Well, I can tell you what -- we have a very good team of adviser: the former high officer of FDA; NIDA, that is National Institute for Drug Abuse; and DEA, the Drug Enforcement Agency. So altogether, when we've seen the data from the HAP study, the 124 comparing oxycodone, they said it's as clean as an abuse study can be. And based on this data, the drug will be Schedule V or nonscheduled at all. Most likely would be Schedule V when it will get approved, assuming the Phase III program works. And then with market data, we'll show that this drug is really not abusable, it will probably be a nonscheduled drug.

And are there different commercial scenarios based on you're assuming the safety profile and the use profile reads out as you -- it has indicated so far. What are your expectations around the commercial opportunity? And how could that be impacted assuming a movement in scheduling of the drug?

Yes. So thanks. That's a great question, Rahul. The data we showed in July comparing esmethadone with oxycodone, we do believe they highly derisked the old program, not that we had any doubt, but it's nice to see it in a controlled study specifically designed to show that there is big difference between a narcotic highly abused esmethadone. So the big difference in terms of market potentially is the Schedule II. Schedule II is where morphine, oxycodone, amphetamine, like Adderall, they're all Schedule II. And from the market research that we have done, it shows that a Schedule II has the potential. It is 3 to 5x smaller than in all Schedule II. We asked a significant number of neurologists and psychiatrists. When they prescribe the drug that is not Schedule II, they don't even think about what the other schedules are. So Schedule III, IV, V and nonschedule, from a prescription perspective, there is no difference. So we do believe that, yes, there is no way that the drug would be Schedule II based on the data that we have just generated. So now we can work and believe that the drug will have the full potential. Not going to put any number on the revenue potential depending on the price. But clearly, when you have like a 10 million patient population, and remember, my -- if it works like Prozac. Prozac became a $3 billion drug at peak worldwide, mostly in the U.S., at $3,000 a year price. That tells you. And there were similar drug SSRI on the market. And still, that size of the market is remarkable. So it's going to be a big drug. We can get it done and get it approved. It's going to be a big drug.

So let's talk about how do we -- how do you plan on getting it done, your go-to-market strategy for the lead asset here. Talk to us a bit about any progress and any developments that may have happened on the commercialization side, your thoughts on going to market, bringing the drug to market through your own sales force, building up the infrastructure or using partners, for example, in reaching out. So very open-ended question, but over to you.

Yes. It's very open. But Rahul, this is always one of the most difficult question to answer because there are like -- first of all, it's going to be a very nice problem to have, right, you have to decide to partner the drug or to sell it by ourselves or eventually just to sell your asset and put it in the hands of a larger infrastructure. So I'll tell you what is my and, I believe, the Board reference. Partnering is probably the last of the options. Reason being that when you partner, the -- you lose control. You still carry all the risk. So -- although I've seen -- we both have seen example of good partnership that generated a lot of value. The goal for myself, the Board and everybody at Relmada is to maximize the value of the program in the interest of the patients and of the stakeholders, right? And so our partnership will be probably the last of the choice, but if it's well designed, it can work. Going by ourself, we have one company similar to us. I would avoid the name, but everybody knows it. They decided to go by themself. And we don't know it because they did not have other alternatives or was a decision. So we'll see if the drug gets approved what the results can be. There are other example that companies that did it recently on CNS, and they've been pretty successful. So it's an option that -- it is valuable, although it would not be the #1. Based on my 36 years in the industry now, a drug that addresses a 10 million patient population in the U.S. only, not considering Europe and Asia where the patient population is as large as the U.S., the -- probably having the old program in the hands of somebody that has an infrastructure that already -- it's up and running would be the best in the interest of patients and all the stakeholders. Now we don't have anything on the table so we can -- having is a nice conversation. Of course, things can change moving forward. Clearly, what will make the big difference is the data, right? How compelling is going to be the Phase III data will dictate what the best strategy will be and will be more option.

That makes sense, Sergio. In terms of -- and this is a question from the audience here, in terms of when you would be in a position to share more details on your go-to-market -- further details on go-to-market strategy. Expand on what you just said. Should we expect those details to come as you're getting closer and closer to the readout of the Phase III trials?

Realistically, well, we are thinking now how to do it and -- but before we will make any major investment in term of time, energy, we are still like a 15-, 20-people company. So it's -- that one is an effort that require time and capital. So I would say that realistically and prudently is after the monotherapy data, right? If we get good data in monotherapy, then we will -- it's not mathematic, but we'll have a good chance that we see good data as a add-on therapy as well. And based on what we have seen so far, right, safety and efficacy in Phase II, I would say if we can identify the major risk now, it is not safety, it is not clinical risk, it's execution. And we are all fully committed to execute this program in the best way possible. It took a little bit more time to design it because we want to avoid the risk and the setback that other companies that had in the same space in CNS and depression. So after the monotherapy data in the first half of next year, we will be able to give a more precise idea of what the strategy will be. And we do believe after this data, probably whoever has any idea or any intention to look at us as an opportunity for getting a good program, will get more interested. Before phase -- before monotherapy, it's going to be a little difficult to attract interest of partners and potential like strategic partners.

Got it. Very well. Now we have 5 minutes left here. I guess there are 2 questions, both are coming in from the audience and where I was going to go as well. You announced the acquisition of rights to psilocybin and Derivates Program. Talk to us a little bit about this program. And what's the time line for getting this program into the clinic?

Yes. So thanks for the question because we're trying to keep a low profile on the psilocybin and Derivates plan because we don't have any data to share as of now that we have generated. But since you asked, I'd like to answer all the question and in the best way possible. So this one was an opportunity that was too good to -- not to take. And we made this acquisition of these rights at a relatively convenient economics. And the reason is that the inventors of this program are the same investor as methadone, and we work very actively over the last -- since the company started. So we get some special interest because the inventor will continue to work on the problem. Now in term of when we will be able to share something that would indicate when we are in the clinics, I would say probably sometime mid-next year. There is a big difference between psilocybin program and the Derivates, right? And I'll be a little bit more specific on this. We are now manufacturing the psilocybin, the API. Psilocybin has been around -- I did my thesis in pharmacology in 1985 on psilocybin. And so I have a particular interest on this. But there is like a very large number of safety data. So we will leverage -- we are leveraging the safety package and -- for the psilocybin to go straight into the Phase II program. So if we do everything right and with a little bit of luck, we could be in Phase II in the second half of next year. The Derivates is a new chemical entity, so that will take more time. We have to do the old preclinical and -- but the psilocybin, it will be -- we hope to be in Phase II sometime in the middle of next year. Manufacturing is a limitation, and we are doing some preclinical in rodent that would help, right, to design the Phase II program. What I can tell you, what I can share with you and the audience is that we have nothing to do with the other companies that develop in psilocybin as a psychedelic for depression. We are not doing anything in psychiatry. So there is no -- there is synergies, but there is no competition or overlapping with esmethadone. We go versus neurodegenerative diseases at doses a lot lower than the psychedelic dose and used chronically. So instead of like the psychedelic dose and then held by psychotherapy in psychiatric, we got neurodegenerative at doses a lot, lot lower for chronic use. I hope I answered the question.

No, you did. That's very helpful. I guess one last question from my end, and this is -- a lot of folks in the audience want to know this as well. Remind us about your cash position? And how should we think about your cash run rate, given what you have on the balance sheet right now?

Well, as a banker, I would be surprised if you did not ask me that question, right? Yes. At the end of June, we had $109 million in the bank with no debt. Burn is $17 million to $20 million, maybe $22 million a quarter. Now we have a full-fledged Phase III program. So we know pretty precisely what the burn is. So we have, I would say, 5 quarters of cash. That will be very well enough to get through the monotherapy data. And if we can push it a little bit, we can go through the old program. But definitely, the monotherapy data, we have well enough cash to get there.

Right. Sergio, thank you so much for joining us today. It's been great chatting with you. And hopefully, the audience has found this very informative as well. Thanks a lot. And is there -- I will turn it over to you for any closing remarks you would want to make.

Well, thank you. Closing remarks, thanks for -- everyone that has attended and listened to the presentation, and thank you Rahul and Morgan Stanley for the invitation. And I can wish everybody a wonderful end of the day and a nice weekend. So thank you.

All right. Thanks, everyone. Thank you for joining us. This would conclude our session with Sergio Traversa at Relmada Therapeutics.