Mind Medicine (MindMed) Inc

F:MMQ

Earnings Call Transcript 2023-Q2

[Operator]

Good afternoon, and welcome to the Mind Medicine Second Quarter 2023 Financial Results and Corporate Update Conference call. [Operator Instructions] This call is being webcast live on the Investors and Media section of MindMed's website at mindmed.co and a recording will be available after the call.For opening remarks, I would like to introduce Rob Barrow, CEO of MindMed. Please go ahead.

[Robert Barrow, executive]

Thank you, and good afternoon, everyone. Welcome to our second quarter 2023 financial results and corporate update conference call. The press release reporting our financial results is available in the Investors and Media section of MindMed's website, and our quarterly report on Form 10-Q for the quarter ended March 31, 2023, will be filed today with the Securities and Exchange Commission.Joining me today is Schond Greenway, our Chief Financial Officer; Dr. Dan Karlin, our Chief Medical Officer; and Dr. Miri Halperin Wernli, our Executive President.During today's call, we will be making certain forward-looking statements, including, without limitation, statements about the potential safety, efficacy and regulatory and clinical progress of our product candidates, financial projections and our future expectations, plans, partnerships and prospects. These statements are subject to various risks such as changes in market conditions and difficulties associated with research and development and regulatory approval processes that are described in the filings made with the SEC, including the most recent annual report on Form 10-K and quarterly report on Form 10-Q.Forward-looking statements are based on the assumptions, opinions, and estimates of management at the date the statements are made, including the nonoccurrence of the risks and uncertainties that are described in the filings made with the SEC or other significant events occurring outside of MindMed's normal course of business. You are cautioned not to place undue reliance on these forward-looking statements which are made as of today, August 3, 2023. MindMed disclaims any obligation to update such statements, even if management's views change, except as required by law.We are very excited to be providing this financial and business update as we rapidly approach an exciting and critical period for MindMed. Over the past year, we have made significant progress on our R&D pipeline, which has positioned us for a series of important milestones in the coming quarters. Our most advanced lead program, MM-120, or generalized anxiety disorder, or GAD, has seen extraordinary enthusiasm and execution over the past 12 months. In August 2022, we dosed the first patient in our Phase IIb study of MM-120 for GAD. And with the significant momentum we've achieved, we are on track to complete enrollment in patient dosing by the end of the third quarter with top line data on the primary endpoint through week 4 to be reported in the fourth quarter of this year.It is worth a moment of reflection on the significance of this upcoming milestone, given the historical importance and compelling opportunity for lysergide or LSD. LSD is the most studied, storied and perhaps most stigmatized drug in the psychedelic class. And it is our aim that with compelling clinical data from our Phase IIb study, our proprietary form of LSD MM-120 will become 1 of the leading candidates, if not the leading candidate in the psychedelic drug class.Before we dive further into our R&D and financial updates, I would like to highlight the current backdrop of brain health disorders, which has experienced increased visibility due to worsening epidemiology and recognition of its significance on overall well-being with a particular appreciation for the breadth and magnitude of impact that anxiety plays in driving brain health disorders.We've been heartened by the recent comments from the President regarding the need to improve access to mental health care and remain supportive of broad and concrete steps to do just that. Given that the annual healthcare costs for people with a behavioral health condition are 3.5x higher than for those without behavioral health condition, the need for better access to mental healthcare is clear. We believe the reemerging potential of LSD as a pharmaceutical candidate is also mirrored by the growing appreciation of the core nature of anxiety and psychiatric disorders, including GAD in particular.GAD is an often debilitating mental health disorder associated with excessive anxiety and persistent worry, which can lead to significant impairment, including less accomplishment at work and reduced labor force participation, as well as significantly higher rates of other comorbid conditions. And unfortunately, the problem has grown significantly over the past several years.A recent mental health prevalence study that was prepared for the Substance Abuse and Mental Health Services Administration, or SAMSA, found that 10% of U.S. adults report having generalizing anxiety disorder diagnosis, making it the second most common mental health disorder among adults. In comparison to historical studies of the prevalence of GAD, the condition appears to have tripled in the last 2 decades long. This reality is reinforced by the recent emphasis on anxiety screening as last year, the U.S. Preventative Services Task Force, or USPSTF, issued a recommendation to screen for anxiety all children and adolescents age 8 to 18 years and issued a draft recommendation to screen all adults under the age of 65.This growth and prevalence and focus of anxiety disorders has unfortunately not been matched by innovative treatments with the treatment landscape remaining dominated by SSRIs, SNRIs, benzodiazepines and, in more limited cases, antipsychotics. In fact, the last original approved marketing application that was focused on the treatment of GAD was obtained for Cymbalta in 2004.And despite their broad use, which represents approximately $3 billion in annual U.S. revenues, available therapies suffer from a variety of efficacy, safety and tolerability challenges that lead to low rates of compliance and remission. The simple reality is that for many years, GAD has been an overlooked indication precisely because the most used treatment options such as SSRIs appear to be less well equipped to treat anxiety symptoms and depression systems. This presents both in the relatively lower response to SSRIs and GAD versus MDD, but also in the fact that MDD patients with heightened anxiety typically respond less well to current standard of care.Quantitatively, this is displayed by the fact that current therapies for JD have demonstrated a standardized effect size of around 0.4 in clinical trials with some demonstrating a considerably lower response. The research we have conducted with patients and health care practitioners in the U.S. and Europe tells us that there is a significant demand for a new pharmacological class that could offer faster, more profound and more durable efficacy responses as well as favorable safety and tolerability. This is particularly true in the segment of patients who despite having tried currently available therapies continue to experience intolerable anxiety.We believe this is a major contributor to the high degree of enthusiasm we consistently hear from patients, providers and payers on the revolutionary potential of MM-120 and psychiatric disorders. As 1 prominent psychiatrist recently put it, the days of SSRIs and the like are limited. On a related note, in June, FDA released draft guidance for developing drugs in psychedelic drug class. Notably, this guidance highlights the reality that dose response is not well understood to the drug class and emphasizes the need for elucidation of dose response relationship exactly as we are doing. The draft guidance also notes the importance of establishing a standalone drug effect that is in the absence of psychotherapy, which is exactly as we designed our clinical trial over 2 years ago.In our view, our approach is clearly in line with the FDA guidance and importantly allows for consistent study design and treatment delivery paradigm, as we potentially advance into pivotal clinical trials. To our knowledge, our Phase IIb study of MM-120 and GAD is the largest controlled study of LSD ever conducted and will guide the dose selection and development strategy for MM-120 and GAD, as well as deepen our scientific understanding of its clinical effects and its underlying functional mechanisms of action.It's important to point out that we dosed our first patient just under 1 year ago in August of 2022 with activation of all of our clinical sites only occurring at the beginning of 2023. The ability of our team to execute a study of this size so seamlessly and efficiently stand out within the field and also speaks to the quality of the organization we have built at MindMed. It also reinforces our high degree of confidence in our team's ability to launch and enroll future studies in a very efficient manner.Patient dosing enrollment for our Phase IIb trial in GAD is progressing well across our 20 active sites, and we expect to complete study enrollment in the third quarter of this year, with top line results to be reported in the fourth quarter of this year. Patients in the trial are randomly assigned to receive a single administration of either 25, 50, 100 or 200 micrograms of MM-120 or a placebo, and are then followed for up to 12 weeks. The primary objective of this study is to determine the dose response relationship of MM-120 across the 4 active dose arms as measured by the change in Hamilton Anxiety Rating Scale, or HAM-A, at 4 weeks post dosing.The statistical analysis being employed in the study is a multiple comparison procedure modeling, or MCP-Mod, approach a sophisticated statistical approach developed by Novartis, which is especially well equipped to demonstrate dose response and optimize dose selection. This statistical approach, which has received qualification opinions from both FDA and EMA, and superior power and lower estimation areas compared to more traditional designs, which we believe bolsters the probability of success of our approach.As we finalize the statistical analysis plan for our Phase IIb study, we have also made a determination that due to the high powering of our approach, a reduction in the minimum sample size is warranted. And as a result, we are reducing the enrollment target by 10% from 200 patients to 180 patients. We believe this change maintains the statistical power of approximately 90% to achieve the study's objectives. And based on our internal modeling, this is a high degree of confidence in obtaining statistically positive results if we observe an effect size that represents even a marginal improvement over the standard of care.As we rapidly approach conclusion of our Phase IIb study, we are also excited to share our plans for the ultimate formulation we intend to advance for MM-120 product candidate, specifically utilizing Catalent's Zydis ODT technology, as we announced earlier today. Over the past years, we explored numerous advanced dosage forms, with the aim of enhancing pharmaceutical performance and intellectual property protection, creating a product that is difficult to replicate and has the opportunity to demonstrate more attractive pharmacokinetic performance characteristics such as faster absorption, better bioavailability, reduced variability and, as a result, the potential for reduced duration of perceptual activity.Towards this end, we entered into an exclusive license agreement with Catalent that covers all forms of LSD across all major pharmaceutical markets. Catalent is the global leader in enabling biopharma, cell, gene and consumer health partners to optimize development, launch and supply of better patient treatments across multiple modalities. With our agreement, MindMed has gained access to Catalent patented Zydis orally disintegrating tablet, or ODT, technology for use with MM-120.Catalyst's proprietary Zydis technology is a unique freeze-dried, oral solid dosage form that disperses almost instantly in the mouth without the need for water. We believe that the Zydis ODT delivery technology when incorporated into our MM-120 product candidate represents an optimized pharmaceutical product that has the potential to enhance our competitive advantage in the marketplace. We continue to expand our intellectual property estate with the first relevant patent application not expiring until 2042, assuming our patent application claims are issued and granted.To further support this transition, we are also planning to initiate a Phase I pharmacokinetics bridging study to support the advancement of MM-120-ODTs into pivotal clinical trials. We believe this will allow for precise dose selection for Phase III, and provide invaluable data to bolster our intellectual property position. Additionally, we have either completed or in advanced planning to complete all prerequisite studies that we believe will enable an efficient transition from the conclusion of our Phase II clinical program into pivotal Phase III studies.In addition to the session-based delivery of MM-120 and GAD, we are investigating the direct neuropharmacological activity of MM-120 as a serotonin agonists an innovative treatment regimen. One such exploratory approach is our Phase II proof-of-concept study of MM-120 for ADHD. This study is being conducted in collaboration with University Hospital, Basel in Switzerland, and Maastricht University in the Netherlands and is designed to evaluate the therapeutic utility of repeated low doses of MM-120 in adult patients with ADHD.Notably, this is the first study in which MM-120 has been administered outside of a clinical setting. To-date, no SAEs has been reported suggesting the real-world potential of this treatment regimen as well as demonstrating our ability to deliver MM-120 with innovative dose and frequency combination. We expect to enroll a total of 52 participants, who will receive a 20-microgram dose of MM-120 or placebo twice weekly for 6 weeks with the primary endpoint for this study being the mean change from baseline in ADHD symptoms as assessed by the AISRS after 6 weeks of treatment.Enrollment in the study has continued to progress with over 80% of enrollment complete. However, due to controlled substance importation challenges in our Netherlands site, we now anticipate reporting top line results in either the fourth quarter of 2023 or the first quarter of 2024. Our second lien program is MM-402, which is the RNA tumor of MDMA. We believe MM-402 holds promise for its potential pro-social effects and favorable tolerability profile versus Racemic MDMA. The focus of MM-402 development is to develop a regularly administered product that treats the core symptoms of Autism spectrum disorder, or ASD, in particular, social communication difficulties.Remarkably, despite the significant and increasing prevalence of ASD, there are currently no approved therapies specifically targeted and its core symptoms. MDMA often referred to as a pathogen is a synthetic molecule going to enhance feelings of connectedness and compassion. The [ R-MDMA ] in particular is believed to boost serotonin and other neurotransmitter levels in the brain, leading to increased sociability in interpersonal emotional warmth. Preclinical studies of R-MDMA have shown acute pro-social and pathogenic effects, while it's reduced dopaminergic activity suggest that might exhibit fewer similar neurotoxic hyperthermic and abuse-related effects compared to Racemic MDMA or S-enantiomer.With robust preclinical evidence supporting our approach, we're excited to launch the Phase I clinical trial of MM-402 later this year. This trial aims to assess MM-402's tolerability, pharmacokinetics and pharmacodynamics, and we are actively exploring all possibilities to generate early indications of efficacy during development. We expect to gather such data both from neurotypical healthy volunteers and otherwise healthy individuals diagnosed with AST. And currently, we have collaborated with University Hospital, Basel to conduct a comparative Phase I pharmacokinetics and pharmacodynamic study of RS and Racemic MDMA.This study involves enrolling healthy volunteers and is designed to evaluate the tolerability, pharmacokinetics, and acute subjective physiological and endocrine effects with 3 molecules. Successful completion of this study is expected to expedite our understanding of MM-402's pharmacological profile as we progress in the later-stage clinical development. We've been informed by UHP that they anticipate completing enrollment by the fourth quarter of this year and anticipate that data will be presented in the first half of 2024.Next, I would like to turn to our digital medicine updates. Alongside our drug development strategy, we have a suite of digital medicine programs to hold the potential to enhance the adoption, utilization and accessibility of our drug product candidates. As we look at the potential commercial challenges, which are especially important with our product candidate being developed for session-based delivery, we believe our integrated digital applications can significantly contribute to overcoming potential barriers and position our product candidates as ones with the most efficient delivery throughout the patient journey.Similar strategies have been successfully utilized to great success for other groundbreaking therapies, effectively overcoming similar barriers to deliver and enhance efficiency and ease of delivery. This differentiating factor could also afford us even further market protection, making our alternate products extremely difficult to replicate, while maintaining the same degree of safety, effectiveness and ease of delivery, should they ultimately be approved and marketed together.Over the course of 2023, we have seen significant progress in depth at our digital medicine programs and have successfully integrated these digital applications into certain ongoing and planned clinical studies. Our specific approach targets 2 primary clinical periods: activities during a treatment session or intra session and activities between treatment sessions or inter session. Each approach is built on a platform comprising distinct components with some following under the purview of the FDA's definition of medical devices, while others may not be regulated as such.For those that qualify as medical devices, we intend to collaborate with the FDA and other international regulatory authorities to seek guidance throughout the development process with the goal of ultimately obtaining regulatory clearance or approval. To-date, we have significantly advanced the technical, clinical and regulatory execution of our intra session monitoring application, the MindMed Session Monitoring System, or MSMS.Through multiple meetings of FDA, including representatives of both the FDA Center for Devices and Radiological Health, or CDRH, and with the division of psychiatry within CDER. We believe we have targeted a course with the intent to further the integration into our clinical development program for MM-120, with an aim to ultimately obtaining approval for the integrated solution.The path to achieving this objective uses well-established device regulatory pathways in an efficient and unique manner. Specifically, we are leveraging a development pathway in which a version of MSMS designed specifically for use by providers and patients during this [indiscernible] nasal spray treatment session is being advanced in pursuit of a Class II regulated software-as-medical-devices or SaMD clearance via the de novo pathway.In pursuing the CDRH clearance, we are seeking to build a product that we believe will be a useful asset supporting the safe administration of SPRAVATO and a release from the clinic of patients undergoing SPRAVATO treatment. We are also seeking to establish with FDA that the components of our products meet their requirements for labeling. We believe this initial approach to obtain early FDA clearance for MS/MS with SPRAVATO paved the way for a potential rapid regulatory application of a subscript MS/MS version designed for use with MM-120, subject to its potential future approval.To leverage the efficiency of this approach, as we pursue the de novo clearance for MS/MS using conjunction with SPRAVATO, we are in parallel collecting data on MS/MS used in conjunction with LSD from both clinical studies being conducted through our UHP collaboration, as well as studies that are part of our MM-120 development program. This strategy opens the door to potential early clinical integration of MS/MS was a companion device to MM-120 and the potential subsequent pursuit of the combination product label.Given the anticipated episodic nature of treatment of MM-120 in particular, we are also continuing to conduct clinical research with our digital medicine applications to allow for ongoing patient monitoring and engagement outside of the treatment session. We aspire to have the integrated data from in-session monitoring with MS/MS and out-of-session monitoring allow for a deeper understanding and prediction of patterns of response to MM-120 and potential optimization of dosing paradigms on a more individualized basis.Turning to our commercial initiatives. Over the course of 2023, we have continued to attract strong commercial leaders who have successfully launched numerous products, including in complex and highly stigmatized setting. We are continuing to see great progress in these initiatives as we seek to develop a groundbreaking market access strategy, thoroughly document the clinical and socioeconomic impact of our target indication and generate health economic and outcome research data to bolster the value proposition of our product candidate.We recognize and embrace the challenges associated with potentially launching a new therapeutic class in a major market indication. We are also encouraged by the recent growth and uptake of Janssen's SPRAVATO nasal spray, which similarly utilizes a session-based delivery paradigm to the lack of a durable treatment response for SPRAVATO requires patients to spend over 12 hours in the clinical setting across 6 or more visits in the first month of treatment alone.Even still, in the most recent quarter, SPRAVATO sales grew by 99% year-over-year with a greater than $675 million annual run rate. In light of this increasing uptake, and the demonstrated willingness of patients, providers and payers to embrace an innovative intermittent treatment model, should we be successful in demonstrating the safety and effectiveness of MM-120, we believe MM-120 could represent an even more attractive treatment option with more durable and less administratively cumbersome delivery characteristics.As we continue to progress our pipeline, we remain committed to offering greater clarity on our planned commercial model and the path forward for each program, aiming to maximize the impact on uptake of our innovative product candidates. With respect to our intellectual property and market protection strategies, our current patent portfolio includes 57 pending U.S. applications and 19 pending patent cooperation treaty applications. These include applications covering composition, dosing, dosage formulations and methods of treatment, among others, with projected expiration date beginning in 2041.Our market protection strategy has been further strengthened by our recent exclusive license agreement covering use of the Catalent Zydis ODT technology for LSD in all its forms in all major pharmaceutical markets. We continue to retain all rights to our product candidates and we're aggressively protecting and expanding our intellectual property of our portfolio as part of our comprehensive market protection strategy.Over the course of the next several quarters, we anticipate several important intellectual property milestones that we believe will reinforce our optimism about our ability to durably protect our market position for many years. Overall, we are highly encouraged by the progress we have made at MindMed, and we are enthusiastic about the many exciting milestones in the months ahead. We are deeply committed to advancing our organization and providing new life-changing treatment options for individuals suffering from brain health disorders. As we continue our strategy to bring our lead product candidates to market, we firmly believe we are laying a strong foundation for creating enduring value for our shareholders.With that, I'll turn the call over to our CFO, Schond Greenway, to discuss our financial results. Schond?

[Schond Greenway, executive]

Thanks, Rob, and thank you all for joining us today. We will now turn to our financial results for the quarter ended June 30, 2023.As of June 30, 2023, MindMed had cash and cash equivalents totaling $116.9 million compared to $142.1 million as of December 31, 2022. We believe that our cash position allows us to accelerate our preparation for moving quickly into our pivotal program for our lead development candidate, MM-120, and will be sufficient to meet our operating requirements beyond our key development milestones in 2023 and into the first half of 2025. The net cash used in operating activities was $27.2 million for the 6 months ended June 30, 2023 compared to $28 million in the first 6 months ended June 30, 2022.R&D expenses were $14.8 million for the quarter ended June 30, 2023 compared to $9.3 million for the same period in 2022, an increase of $5.4 million. The increase was primarily due to increases of $4.4 million in expenses related to clinical research for our MM-120 GAD study, $0.8 million in preclinical activities, $0.6 million in internal personnel costs as a result of increasing R&D capacities, and $0.2 million in connection with various external R&D collaborations, partially offset by a decrease of $0.5 million in expenses related to our MM-110 program and a decrease of $0.1 million related to our MM-402 program.General and administrative expenses were $14.4 million for the quarter ended June 30, 2023 compared to $7.6 million for the same period in 2022, an increase of $6.8 million. The increase was attributed to professional services fees and expenses related to our proxy contest in connection with our 2023 Annual General Meeting of Shareholders and additional costs to support the growth of our business.Our net loss for the quarter ended June 30, 2023 was $29.1 million compared to $17 million for the same period in 2022.I will now turn the call back to Rob, who will provide some closing comments.

[Robert Barrow, executive]

Thank you, Schond. As we come to a close, I want to extend my sincere appreciation and gratitude for the critical work and unmatched execution that has brought MindMed ever closer to realizing our mission.I'd like to thank our highly talented and deeply committed team, our research collaborators and clinical investigator teams, our investors and many other individuals who have been supportive, including especially our patients and their families. We are working tirelessly to deliver on the therapeutic potential of our pipeline and transform the treatment landscape for many individuals with brain health disorders.With that, I'd like to thank you all again for joining us today, and I'm happy to take any questions.

[Operator]

[Operator Instructions] Our first question comes from Charles Duncan with Cantor Fitzgerald.

[Charles Duncan, analyst]

Yes, Rob and Schond. Congratulations on the GAD enrollment progress and the Zydis deal that looks to be pretty interesting. I know other companies have been satisfied with working that technology. I had just a couple of questions on the ongoing GAD study. And so, we'll start with the 4 different dose levels and placebo. I guess I'm wondering, what do you anticipate for the dose response? And then, secondarily, for moving forward, what is more important to you? Is it a certain P value, or is it responder rate for efficacy? I guess, given that this is not a pivotal study, I would anticipate that the totality of data is most important. But what are you looking for out of this study and when?

[Robert Barrow, executive]

Yes. Thanks so much, Charles. Thanks for the question. So, first, in terms of what we're expecting across the dose levels, certainly what we've seen from historical studies in healthy volunteers gives us some insight in terms of the acute pharmacodynamics of in MM-120 or LSD. But very little, and I think it was highlighted in the FDA's recent guidance, the little is actually known about the relative response to these different doses or really across a broad range with any of the psychodolic drugs. And so, we're going in part of the statistical methodology allows for the nomination of candidate response curves.Now, I think based on historical data where particularly the data that came out of UHP last year, we saw there was a degree of correlation between the magnitude of the acute perceptional effects need the ultimate clinical response in that study. We have an expectation that at higher dose levels in the range, we're studying -- we would see a more robust response. But of course, the entire study is designed to ultimately elucidate what that response curve is.And that translates nicely over into the second part of your question, in terms of what's most meaningful, what's most important moving forward? Certainly, as a dose optimization study, 1 of the key features is to identify a dose that we can transition into subsequent clinical research in pivotal studies. And in connection with that, we're looking to also quantify the magnitude of the effect size at the different doses, but also at the dose we would ultimately then select to take forward. That in terms of an outcome is really key in understanding the magnitude of the effect is going to, of course, drive the patient numbers and the powering of subsequent clinical studies.And so in that context, certainly, from a clinically relevant perspective, we would certainly want to see a response that is in line with or better than the current standards of care, as I mentioned earlier in the call, in effect size of 0.4 or below. So, something there or above would be certainly supportive of moving forward in our view. But obviously, given the historical evidence in some of the preliminary studies of LSD, we think there is a really compelling opportunity. And if we see a higher effect size of even more exciting about the opportunity for it, and of course, it would also imply either higher power or lower required patient numbers as we progress [indiscernible].

[Charles Duncan, analyst]

That's helpful, Rob. If I could ask 1 additional final follow-up question regarding the phenotype of the sample or the patient sample that you're enrolling. You have a pretty broad range, age range, 18 to 74. I guess, I'm wondering what you think about that in terms of heterogeneity, I mean, some of those patients may have had a general anxiety disorder for quite some time. Would you anticipate there to be an age interaction effect? And have you incorporated such analyses into your statistical analysis plan?

[Robert Barrow, executive]

So, I'll make a brief answer and then turn it over to Dr. Karlin, our Chief Medical Officer, to respond further. I think, high level, when we look at the study and we certainly -- the rich data set we'll have coming out of the study, I think we'll have a lot of insight and be able to do many, many layers of analysis to understand both the activity of the molecule and the clinical response. It is not planned as a primary secondary analysis to look at specific age effects or specific effects in terms of the duration of prior diagnosis with JD. But that said, of course, we'll be exploring an exploratory analysis extensively any of the characteristics that could be impactful in forming a design and [ sounds ] good. Dan, do you want to take anything further?

[Daniel Karlin, executive]

Yes. I could just add, and thanks for that question. The GAD is interesting in that it is obviously a heterogeneous diagnosis [ progressive ] age, but also that there is an accumulation of disease burden later in life, which makes it somewhat different than other -- speaking neurotic illnesses. And so, both age as a factor of analysis and duration of illness, because it's certainly possible that [indiscernible] have only recently developed disorder as well. So, we're awfully interested in that and interested in how both the acute effects vary with those factors, and of course, how longer-term efficacy varies with both duration of disease and...

[Charles Duncan, analyst]

My last question is for Schond. As Dan was finished, he tailed off a little bit. So, Schond, quick question regarding the cash. And I think you mentioned it was sufficient to fund -- fully fund into the first half of '25, I think, is what you said. I guess, my question is, do you anticipate being able to operationalize a Phase III study perhaps by the end of '24. And does -- is that cost included in your projections or would that change depending on the design and size of that Phase III?

[Schond Greenway, executive]

I appreciate that, Charles. I think I will kick it over to Rob to talk a little bit about aspects on the Phase III. But as it relates to guidance, we pretty much just said that we are pretty set for having a run rate into the first half of 2025. And obviously, assuming a success, as Rob has mentioned before that the goal is to quickly pivot and move quickly into Phase III. We haven't given any guidance as to the time line on Phase III. I don't know, Rob, if you want to add any additional color there?

[Robert Barrow, executive]

Yes. As Schond said, we haven't given guidance on the specific timeline in the Phase II or initiation of a Phase III study, but certainly we're very much of the mind that we need to be fast and efficient with our development program and move seamlessly through to subsequent phases of development. So, we are undertaking all the preparations and as much engagement in preparation to seamlessly and very quickly transition into the later stage. Regulatory discussions that don't do the launch of those later-stage studies, so as we come to data and as we start to give further guidance on this precise time lines, we'll certainly update as well the impact and obviously the financial guidance associated with any further scoping of the later-stage development program.

[Operator]

Our next question comes from Brian Abrahams with RBC Capital Markets.

[Unknown Analyst]

This is [ Navin ] on for Brian. Congrats on all the progress that you were able to make this quarter. I was wondering if you could give me a little bit more color on the cattle and formulation deal that you had mentioned that with the oral dissolving dosage that you have that you might be able to extend out IP production a little bit more. If you could tell me whether you think that the dissolving dosage would be something that would appear on a potential label? And if the PK can't be replicated by like a typical LSD sublingual dose solid dosing?And then, as a follow-up to that as well, do you think that this formulation will be something that you end up bringing into Phase III, or would be the go-forward formulation or does that kind of depend on how the Phase I trials that you intend to run with pan out?

[Robert Barrow, executive]

Yes. Thanks so much for the question. So, in terms of our dose selection, it is certainly our intent to take for the ODT formulation in the subsequent clinical trials with MM-120, in particular, assuming a successful Phase II study to take it forward in the pivotal clinical trials and to commercialization, looks like the marketing application approved.In terms of the performance characteristics and the predictability, 1 of the key features of the Zydis technology is also the rapid rate of disintegration with drugs that have obviously acute perceptual activity that we anticipate in development and certainly later downstream would result in a period of time in the clinic. Every interval of time is important, and the ability to have a dosage form that integrates almost immediately in the mouth and then gives an opportunity for pregastric absorption to drive faster uptake and absorption in the body could be quite important in terms of differentiating the product from historical products and certainly from an oral capsule or a solid oral dosage form that is subject to gastric dissolution, disintegration and subsequent absorption.So, our view is that it offers a really compelling opportunity to differentiate potentially on the pharmacokinetics and certainly in terms of the dosage form. And based on all that we know in the proprietary information we have about the performance of LSD by modern pharmaceutical standards, this technology, the manufacturing process, all of this is something that we've been able to take additional steps to protect from a property perspective. And also we think would be very difficult, if not impossible, to replicate. The ability to differentiate that product profile, the ability to differentiate, particularly when it comes to things that would potentially have an impact on the safety or the performance of the molecule often can potentially differentiate a product. And really, you can look at some other products to the first part of your question such as Biohaven's Nurtec ODT success has been taken for in clinic and ultimately to launch now, owned and marketed by Pfizer.

[Unknown Analyst]

I appreciate that. And if I can ask a follow-up as well. So, as you're thinking about actually designing some of the pivotal studies moving forward, based upon the FDA's new release guidance on how to run trials for psychedelic where they recommended placebo-controlled trials as well as low and high dose studies or using blinded raiders and dual monitors. How are you kind of -- or how is that newly released guidance kind of impacted your thinking about designing these trials moving forward.

[Robert Barrow, executive]

It's a great question. This is a conversation and an intellectual discussion we've been having with FDA. And I've been a part of both [ Mind ] and other organizations over the past several years. And there is obviously a dynamic with psychedelic drug class, where the acute perceptual effects, particularly high doses, is at risk for functional unwinding. The phenomenology of an administration section of psychedelic is quite unique and quite profound. But it's also really important that we don't lose sight of the fact that almost every potent CNS drug ever developed, but particularly some of the recent ones such as SPRAVATO itself, it has dealt with a similar challenge.The functional and blinding logs not hallucinogenic or psychedelic in nature with SPRAVATO. It is associated and you can see that very, very plainly displayed when you look at the adverse event tables for SPRAVATO versus a placebo. Placebo-controlled research is the gold standard and demonstrating effect. And I think, as we've approached and, of course, explored all of the available potential options we could use for control conditions, it really is the most robust control condition that could be taken forward into any study.And 1 of the significant challenges, and I would note that the FDA guidance certainly discusses this, but leaves -- there's plenty of room for, I think, appropriately so, for subsequent discussions and an agreement with the division in terms of the path forward and appropriate controls. But when we do know and think about the intent of a control condition is both going to aid in the interpretation of safety data, as is noted in the guidance, it will be nearly impossible without a placebo condition to determine the attributability of adverse effects or any sort of safety findings and, therefore, for safety interpretation of placebo it's absolutely paramount.And also really important, if we're actually trying to mitigate a functional unblinding that a control condition that would be used other than a placebo to mitigate that potential functional unblind would have to be a dose that is perceivable, giving someone a dose of LSD, for instance, that doesn't rise to the level of having any sort of perceptual effect doesn't really aid, doesn't really mitigate the risk of functional unblinding while it does hamper the ability to adequately interpret safety conclusions.So, in our view, using a subperception of dose of a psychedelic is really 1 of the most challenging to argue for because it really doesn't aid in the thing we're trying to overcome and does create challenges in terms of interpretation of the study results. So, our view is that the appropriate control in studies with psychedelics in our MM-120 program is to use placebo-controlled research, which again is the gold standard for all clinical research. And it's something that we certainly will be putting forward and feel quite strongly about [indiscernible] development.

[Operator]

Our next question comes from Elemer Piros with EF Hutton.

[Elemer Piros, analyst]

Yes. So, coming back to the Zydis technology. Obviously, there are a number of precedents, you referred to at least 1, and the improvement in onset of action and bioavailability, can we extrapolate specifically to MM-120, what magnitude of improvement could be estimated based on historical data, the number of actual product candidates that have been tested with the technology itself?

[Robert Barrow, executive]

Yes. Thanks, Elemer. Yes, it's a great question. In terms of extrapolation from other molecules, there's a number of physiochemical and other performance properties that dictate the rate of pregastric absorption for any molecule. And certainly, 1 of the strong reasons for proceeding with a Phase I study to characterize exactly that, to characterize the rapid nature of onset, the time to onset of any absorption and the time to onset the perceptional activities will give us the specific insight. So, as we progress through that study very quickly and have the data become available, I think we'll be able to give much more precise and probably be a little bit premature for me to extrapolate from other molecules.But certainly, some of the initial in silico modeling we've done has given us confidence that we would see an opportunity for enhanced performance and enhanced PK profile that will both potentially be differentiated and could be more attractive. And so, that was 1 of the motivating factors for taking that product forward. And as we come to PK data with that formulation, as compared to our Phase II formulation, and what we'll have direct insights can provide a much more extensive answer on the exact difference.

[Elemer Piros, analyst]

Yes. And hearing your commitment to move forward, once you better characterize in Phase I, it certainly appears that it cannot make things worse, it won't disimprove by availability. Is that correct or safe to say?

[Robert Barrow, executive]

Well, it's certainly 1 of the features of a molecule that is highly potent, penetrable and that we know when we give a solid oral dosage forms such as a capsule that then requires a first time and dissolution time a product that is administered in the mouth and then swallowed, for instance, with water, presumably would have a similar degree -- similar profile upon entering the stomach. And so, while we certainly need to demonstrate this and want to characterize the response, we feel like there is a limited downside risk in terms of worsening outcomes for the connects. But again, that is subject to confirmation and why we're moving forward with the PK bridging study.

[Elemer Piros, analyst]

Sure. And my second question is about the draft guidance and the nature of inclusion of placebo and a low dose of the active drug. Do you think that you will have done enough work in this Phase IIb to at least partially satisfy that or do you think that you would have to continue an exploration of identifying what is the true safety profile of MM-120, and what is the differential between the low dose and the presumably most effective dose in terms of clinical effect?

[Robert Barrow, executive]

So, in terms of selection of a dose [ forward ] to be informed by the results from our Phase II dose optimization study, which I think is worth reiterating that the reality is this is the most extensive and rigorous expiration of dose response in a patient population, certainly with LSD, but to our knowledge with any drug in the entire class. So, we'll have a very rich data set and a lot of information that we can then use to support decision-making and proposals for subsequent clinical trials.In terms of characterization of safety, it's really a function of the doses that a sponsor would be intending to move forward and ultimately bring to a marketing application. So, as we identify those doses and see the response, it certainly will inform subsequent development. But I think there's multiple questions that a program can ask. And at times, 1 of the questions put forward is to characterize, of course, the lowest effective dose. That's quite different approach than using a sub-perceptible dose that presumably does not have a robust clinical response and using that sub-perceptible doses, the control condition in movable placebo. That's where we really have focus and with respect to the guidance, I feel that it's really appropriate to bring forward placebo-controlled research into clinical trial [indiscernible].

[Operator]

Our next question comes from Frank Brisebois with Oppenheimer & Co.

[François Brisebois, analyst]

Just a couple here. In terms of the PK for the Zydis formulation, the ODT formulation, do you share when you would expect that data to come out? And is that data that you'll share or just use internally to figure out how to use it in a freight trial.

[Robert Barrow, executive]

Yes. We haven't given guidance to the exact date when it would be available and the extent of the dissemination of those results that may be used primarily for internal decision-making to support dose selection and transition of moving into a Phase II meeting and hopefully assuming a successful Phase II study moving into pivotal studies. But at that point in time, once we have sufficient data and sufficient clarity on the results of that study and the implications for dose selection, we'll certainly be in a position to share more about the outcome of that study.

[François Brisebois, analyst]

Understood. And in terms of the digital efforts, is this something that you'll share? Is it something that you intend to use in Phase III or anything that we should expect to see in the Phase IIb, or is this -- any color there on when we can expect to see data on the digital effort here?

[Schond Greenway, executive]

Yes. So. the digital medicine program, and I'll ask Dan Karlin to speak a little bit further to it, but it is not being used currently in our Phase IIb study. But certainly, as we continue to explore and align with the agency, both CDRH and CDER on the path forward and the inclusion of our digital medicine applications in clinical research. Really want to make sure we have alignment there before we make any commitments to exactly when it would be used in our development program. But certainly, our intent as we progress is to integrate it into clinical research with MM-120 at some point.And we, in parallel, have a number of opportunities through our collaboration to conduct clinical research with our MS/MS system, in conjunction with LSD and also even more extensively was from administrations, which gives us that ability to be really effective, really efficient in our development approach for the CMD product that we could ultimately then leverage over into a product that we aim to be labeled for use with MM-120.

[Daniel Karlin, executive]

And I had [indiscernible], we are currently in the process of collecting data. And prior to inclusion -- certainly in a clinical program, we want to be sure that we were confident that we could interpret and understand any data coming from software medical device product and that CDRH and CDER. We're also comfortable with the interpretability of those data. So that would be an ongoing conversation as we approach the pivotal program as we continue to develop the MS/MS product.

[François Brisebois, analyst]

Okay, great. And then, just lastly, can you just remind us of how understood is the potency difference maybe when you compare psilocybin to LSD. And the amount full that it's different, how understood is that just as we're trying to gauge the dose response and the different doses of your Phase IIb?

[Schond Greenway, executive]

Yes. So, there's obviously -- there are some studies, including with our collaborators at University Hospital Basel that have looked at the comparative effects -- the perceptional effects at least of various doses of LSD and psilocybin. And when we look at that kind of collectively, generally the approximation -- and it is just on approximation, but that 100-microgram dose would correspond more closely to about a 20-milligram dose of psilocybin. And by extrapolation, a few 100 microgram dose would be something more along the lines of 40 milligrams of psilocybin.In terms of, again, those acute participant rated magnitude of perceptual effect. Now the extent to which that correlates with other target engagement and other clinical outcome assessments is certainly a very different question. But when you think of the potency of the molecule, it appears to be about 200x more potent than psilocybin, which, of course, with the dose range we're testing give us a pretty extraordinary range of doses in comparison that will be explored, including when we look at the historical data, including both the 50 -- or all of the 50, 100 and 200 microgram doses, which very well may help us achieve a level of acute perceptional activity that we would think correlates to some degree of clinical response. But that's of course what we're asking in the study and what the data will inform us around in terms of which of those doses, we believe, is most appropriate to take forward based on the response in the disease population.

[Operator]

Our next question comes from Jonathan Aschoff with ROTH MKM.

[Jonathan Aschoff, analyst]

I was curious if you could just a little housekeeping question. This G&A, how much of this 2Q was related to the annual meeting? And so, kind of what might we not expect to see recurring?

[Schond Greenway, executive]

Appreciate that question. We haven't actually broken that out. But if you're looking for kind of a forward cadence on just operating expenses in general, I think the way to probably look at that is, we're getting into kind of the tail end of our Phase II enrollment for MM-120, and also we're on the back end, as Rob mentioned earlier, with our ADHD program, as well as we also are hearing more and more about our MM-402 program. So, I think that if you look at the general cadence in the first half of the year -- I'm sorry, in the back half of the year -- the expenses would be -- you will probably see an uptick on the higher side in the back half of year relative to the first half of the year.

[Jonathan Aschoff, analyst]

So, I mean, G&A should progress at this level, it shouldn't come down, you're saying?

[Schond Greenway, executive]

We haven't given any specific guidance on the G&A line item. I think it's more prudent to look at it just as an overall on the operating expense line for the overall company? And so, again, I think the way they look at it, we haven't given any hard and fast guidance on a number of these different components, but I just want to give you something directional to generally think about

[Jonathan Aschoff, analyst]

Okay. 2H over higher than 1H, got it, for OpEx. So, the onset for 120 as it is now, what is it? And what are you looking for out of ODT 120 for onset?

[Robert Barrow, executive]

So it's great, great question, Jonathan. So, when we look at, again, historical studies of LSD in various forms, it appears that the Tmax has been reported somewhere between 60 and 90 minutes. And so something that would be quite differentiated would be anything -- and again, it's really important that this is a unique drug class. It's a unique product candidate with -- which, of course, brings along unique considerations around the things that could impact the ultimate safety and effectiveness of a product such as the time to onset of those perceptual activities, the ultimate duration of those perceptual activities and, of course, the standard PK metrics such as the Tmax, Cmax, AUC and such.So, anything that brings in the speed of absorption would impact the time to onset potentially of perceptional activity that again -- or the PD effect of the molecules. And so, we're looking at observing faster absorption than what we've seen with oral capsule and ultimately seeking to characterize the differentiation between, again, that's time to first absorption, but also the time to the maximum concentration in those other standard PK characteristics.Anything that brings in that time line, even by a small period of time could be impactful in terms of the duration of the overall response. It could be quite impactful because I think it would be difficult to justify a downstream product such as a generic entrant that had different perceptual time course -- different perceptual profile and assume that it could be reliant on the same sort of activities. So when we see these unique characteristics and unique considerations around a drug class, it's really important that we're -- the precision in terms of the performance of our product.

[Jonathan Aschoff, analyst]

Okay. All right. And you were mentioning pregastric, I guess, you're trying to get around, is there much of a food effect or not really?

[Daniel Karlin, executive]

Well, the food effect would certainly could potentially be impacted by the extent of pregastric absorption, something a formulation, for instance, that absorbs primarily pregastric would be at lower risk for a food effect, of course. So, it drives both the impact of things such as gastric retention, but also the time, the speed to which you see absorption of the API and ultimately that drives the time line to first onset any sort of PD effects.

[Jonathan Aschoff, analyst]

Okay. And can we assume that the dropping of enrollment was overwhelmingly due to -- you're going to go forward with an ODT and you still have close enough to 90% power. So, why bother with 20 more?

[Daniel Karlin, executive]

It was -- that decision certainly was informed as we looked at and finalized the statistical analysis plan, looked at the likelihood of obtaining our primary study objectives and undertook to understand the likelihood of seeing a statistical positive result in the event that we see a clinically meaningful result. And as I mentioned, even if we see marginal improvement over the standard of care where we see effect size of 0.4 or less, it still gives a high degree of confidence in the ability to detect with a statistical and clinically meaningful effect with 180 patients. So, when we look at, of course, any sort of savings and efficiencies we can build into the program, we're always searching for those, and this was an opportunity to do exactly that without having to sacrifice on the power, the [ length ] of success of the study.

[Operator]

Our next question comes from Patrick Trucchio with H.C. Wainwright.

[Unknown Analyst]

This is [ Louis ] signing in for Patrick. I'm going to give you a little breather and ask for the kind of a different question. I'm trying to model the population -- the patient population for GAD. And there has been a recent study saying that according to the increased prevalence rates of GAD and other disorders, I might be familiar with the study in mesalamine [ substances ] disorders. So, this suggests $20 million suffered from GAD in the past year. Can you provide some context on this data specifically if we're looking at a new normal and a 10% prevalence in this post-pandemic era, or do you think this is going to plateau and then come down?

[Daniel Karlin, executive]

Yes. It's of course very difficult to predict epidemiological changes in terms of the prevalence of the individual diagnosis. But we certainly anecdotally, as we're out in the world and engaging with payers, with providers, with patients, we hear over and over and over again, both the magnitude of the problem and several conversations where we talked about we solved for a viral infectious disease pandemic, but we have an ongoing pandemic or epidemic and mental health disorders. And really anxiety as a symptom cluster but generalizing in itself has been something that's been grossly overlooked. And we have new data that shows just how much it's been overlooked, how significant of an issue it is.And so, certainly, the relative lack of focus for innovative new treatments to target GAD over the past couple of decades, the fact that there hasn't been a lot new. And over that same period, we've seen, based on comparison to the historical data to the latest data, we see a substantial tripling of the prevalence of GAD. And to us, that signifies the reality that's been overlooked and it's still a significant unmet need to target GAD patients. And with our study coming, it seems to be, in our view, coming right at the appropriate time where the need has never been greater and our opportunity has never been greater of our extension.

[Unknown Analyst]

If I'm allowed, I'll just ask a quick question on your 402 program. When is the Phase I trial expected to start? And if you're looking at any specific biomarkers [indiscernible] to determine target engagement? And what will be your target population here?

[Robert Barrow, executive]

So, our Phase I study is intended to be initiated by the end of 2023. We also have the parallel study ongoing through our investing initiative through our collaboration with University Hospital Basel, which we've been informed we anticipate being able to report study results from that study in the first half of 2024. As we progress as we get further long in terms of design, what will be speaking more to the specific population and alternative specific endpoints of that clinical program.But certainly, our intent is to characterize the safety of the PK, the pharmacodynamics of MM-402 in healthy volunteers, but also as early as possible in development to bring in patients who are otherwise healthy, but the diagnosis of spectrum to ascertain the acute response to MM-402 administration, both for understanding the pharmacokinetics and safety, tolerability, the PD effects and ultimately trying to get some indication of -- if this is a molecule MDMA and R-MDMA particularly where we want to observe some characterization of the acute effects of the molecule in many -- as we anticipate that would be something that would potentially even impact self-reporting over the course of a day of exposure. So, we are seeking to bring in patients as early as we possibly can in the development program to get some indication that we are seeing activity and, of course, then expanding and continuing on to later stages of development.

[Operator]

There are no further questions at this time. I would like to turn the floor back over to Rob Barrow: for closing comments. Please go ahead.

[Robert Barrow, executive]

Thank you. Thank you, operator, and thanks, everyone. Thanks, everyone, for the questions today. We appreciate you joining us, and look forward to providing further updates.

[Operator]

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a good day.