Axsome Therapeutics Inc

NASDAQ:AXSM

Earnings Call Transcript 2018-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to Axsome Therapeutics Second Quarter 2018 Financial Results Conference Call. Currently all participants are in a listen-only mode. Later there will be a question and answer session and instructions will follow at that time. As a reminder, today's conference call is being recorded.

I would now like to turn the conference over to your host, Mark Jacobson, Senior Vice President of Operations at Axsome Therapeutics. Please go ahead.

[Mark Jacobson, SVP, Operations]

Thank you, operator. Good morning and thank you all for joining us on today's conference call. Our financial results press release providing a corporate update and details of the company's financial results for the second quarter ended June 30, 2018 crossed the wire a short time ago and is available on our website at www.axsome.com.

During today's call we will be making certain forward-looking statements. These statements may include statements regarding among other things the efficacy, safety and intended utilization of these investigational agents, our clinical and non-clinical plans, our plans to present or report additional data, and the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development and possible intend to 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 weight on these forward looking statements and the company disclaims any obligation to update such statements.

Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; and Dr. Cedric O’Gorman, Senior Vice President of Clinical Development and Medical Affairs. Dr. Tabuteau will first provide a pipeline update and a review of upcoming milestones.

Following that, Dr. O’Gorman will provide a clinical and scientific update. And then Nick Pizzie will review our financial results. We will then open the line for questions. I shall now turn over the call to Herriot.

[Herriot Tabuteau, Chief Executive Officer]

Thank you, Marc. Good morning, everyone, and thank you all for joining Axsome Therapeutics second quarter 2018 results conference call. In the second quarter, we advanced our CNS pipeline, and we now look forward to several near term clinical milestones. We remain on track to initiate our planned Phase 3 trial of AXS-07 in acute migraine, and to report results from potentially four clinical trials with AXS-05 over the next two quarters. I will now provide a brief pipeline update and then turn it over to Cedric, who will provide further details.

Let us start with AXS-05. Our most advanced CNS product candidate. AXS-05 is a novel oral investigational medicine, which combines glutamatergic, monoaminergic and anti-inflammatory mechanisms of action. AXS-05 is currently in a Phase 3 trial in treatment resistant depression, which we refer to as the STRIDE-1 trial. Enrollment in STRIDE-1 is ongoing. And we anticipate the second final interim analysis, which will be performed to assess efficacy in the fourth quarter of this year.

AXS-05 is also in a Phase 2/3 trial in agitation associated with Alzheimer's disease. We refer to this trial as the ADVANCE-1 trial. Enrollment in ADVANCE-1 is ongoing and we anticipate an interim futility analysis for that trial in the fourth quarter of this year. In June, we announced enrollment of the first patient in the ASCEND study, which is a Phase 2 trial of AXS-05 and patients with major depressive disorder or MDD. We anticipate topline results from this trial in the fourth quarter of this year.

Finally, as a reminder, in April, we announced enrollment of the first patient in a Phase 2 trial of AXS-05 in smoking cessation. This trial is being conducted under a research collaboration with Duke University. Topline results are now anticipated in the first quarter of 2019. With the addition of MDD and smoking cessation AXS-05 is now being evaluated in clinical trials in four separate indications.

Our next product candidate is AXS-07, which we are developing for the acute treatment of migraine. The AXS-07 is a novel oral investigational medicine consisting of MoSEIC meloxicam and rizatriptan. Meloxicam is a new molecular entity for migraine enabled by Axsome's MoSEIC technology, which results in rapid absorption of meloxicam while maintaining a long plasma half-life. In the second quarter, we continued preparations for our planned Phase 3 trial with AXS-07 in migraine, which we anticipate starting later this year.

I will now review some of our upcoming clinical milestones. For the STRIDE-1 trial of AXS 05 in treatment resistant depression, we anticipate an interim analysis for efficacy in the fourth quarter of 2018, and final results in the first half of 2019. With the ADVANCE-1 trial of AXS-05 in Alzheimer's disease agitation, we anticipate an interim analysis for futility in the fourth quarter of 2018, and an interim analysis for efficacy in 2019.

For the ASCEND trial of AXS-05 in major depressive disorder, we anticipate topline results in the fourth quarter of 2018. From the Phase 2 trial of AXS-05 in smoking cessation, we expect topline results in the first quarter of 2019. For AXS-07, we anticipate starting a Phase 3 trial in the acute treatment of migraine in the fourth quarter of 2018. We remain focused on advancing and expanding our pipeline of differentiated CNS assets and are committed to delivering on these upcoming milestones.

Now, for more detail regarding our ongoing clinical programs, I will turn the call over to Cedric for a review.

[Cedric O’Gorman, SVP, Clinical Development and Medical Affairs]

Thank you, Herriot. I will now discuss some of our recent clinical and scientific updates. Enrollment in our STRIDE-1 trial of AXS-05 in treatment resistant depression is ongoing with more than 50% of the targeted number of subjects randomized. As a reminder, in April, an independent data monitoring committee or IDMC found that STRIDE-1 study to be non-futile and recommended continuation of the trial. The IDMC also reviewed the available safety information from the study, and indicated that based on the interim results AXS-05 was safe and well tolerated.

Following on some of the positive outcome of the interim futility analysis, we are on track to report results of the second interim analysis, this one for efficacy on data from the first 60% of target subjects randomized in the fourth quarter of this year. Potential recommendations stemming from the upcoming interim efficacy analysis includes stopping early for efficacy, continuing to full enrollment or stopping for futility.

We are pleased with the ongoing clinical conduct of the STRIDE-1 trial as we aim to find better treatment options for patients suffering from treatment resistant depression. A significant proportion of patients with major depressive disorder or treatment resistant have been previously failed two or more therapies. There are limited treatment options available for these patients.

AXS-05's multiple mechanisms targeting glutamatergic, monoaminergic and anti-inflammatory pathways may offer a unique therapeutic approach for this serious condition while also representing an oral treatment that could be taken into the home without anyone to attend the physician's office for administration.

To further explore the antidepressant potential of AXS-05 in a broader population of depressed patients, we initiated a trial in major depressive disorder or MDD in June of this year. We refer to this trial as the ASCEND trial or assessing clinical episodes in depression trial. The ASCEND trial is a Phase 2 randomized, controlled trial of AXS-05 in MDD. Approximately 74 patients will be randomized in a one-to-one ratio to receive AXS-05 or bupropion for six weeks. The assessments that will be conducted throughout the study include safety parameters, the Montgomery-Åsberg Depression Rating Scale or MADRS, positive clinician-rated scales, as well as patient-reported outcome measures. We believe the data from this study may allow us to characterize potentially distinguishing antidepressant properties of AXS-05 in a broader MDD population. We are on track to report topline results from the ASCEND trial in the fourth quarter of this year.

Our Phase 2/3 trial of AXS-05 for agitation associated with Alzheimer's disease is ongoing. We have plans for an interim futility analysis on the first 30% of target subjects randomized and this interim analysis is anticipated in the fourth quarter of this year. Furthermore, a second interim analysis for efficacy is planned for 2019, and a topline data are expected in the second half of 2019 to the first half of 2020.

We are pleased with the ongoing clinical conduct of the advanced study in Alzheimer's disease agitation. Alzheimer's disease is an irreversible progressive brain disorder that fixed almost 6 million Americans, a number that is anticipated to increase to approximately 14 million by 2050. In addition to cognitive decline, individuals diagnosed with Alzheimer's disease typically experience neuropsychiatric symptoms including agitation, aggression, depression, anxiety, apathy, illusions and hallucination. These neuropsychiatric symptoms are associated with decreased functioning, increased caregiver burden, earlier nursing home placements, accelerated progression to severe dementia, and increased risk of death. Specifically agitation is associated with a significantly higher risk of institutionalization compared to most other neuropsychiatric symptoms, suggesting that effective treatments could delay or prevent nursing home placements. There are currently no FDA approved medications for the treatment of agitation associated with dementia of the Alzheimer's type.

In April, we announced that the first patient was enrolled in our Phase 2 trial of AXS-05 in smoking cessation. More than 40 million Americans smoke and approximately 70% report that they want to quit. Unfortunately success rates are low. Smoking is the largest preventable cause of death and results in a total economic cost in the U.S. of more than $300 billion a year.

The Phase 2 smoking cessation trial is a randomized, double-blind, active-controlled study being conducted under a collaboration with the Duke Center for Smoking Cessation at Duke University. Approximately 60 smokers interested in quitting are to be randomized in a one-to-one ratio to receive either AXS-05 or bupropion for four weeks. The primary outcome measure is the change in smoking intensity.

Smoking intensity will be measured using the number of cigarettes smoked per day salivary cotinine, and carbon monoxide breathes testing. Other outcome measures include smoking abstinence measured using a seven-day abstinence test, adherence to treatment, withdrawal symptoms, stress, anxiety and depression. Based on current enrollment trends, we expect topline results from the smoking cessation trial in the first quarter of 2019.

Turning to scientific presentations, since our last earnings conference call, we delivered three poster presentations at The American Psychiatric Association Meeting in New York in May, The American Society for Clinical Psychopharmacology Meeting in Miami, in May, and the Alzheimer's Association International Conference in Chicago, in July. At these conferences, we presented the scientific rationale for the development of AXS-05 for the treatment of neuropsychiatric disorders, Phase 1 results and an analysis demonstrating the correlation between AXS-05 drug concentrations and improvements in symptoms of depression and agitation in Alzheimer's disease. We expect to present at additional scientific conferences in the months ahead.

We look forward to continuing to drive whole of our clinical programs forward and to providing further updates as they progress throughout the year. I would now like to turn the call back over to Herriot Tabuteau.

[Herriot Tabuteau, Chief Executive Officer]

Thank you, Cedric. I would now like to turn the call over to our Chief Financial Officer, Nick Pizzie, who will review the company's current financial position.

[Nick Pizzie, Chief Financial Officer]

Thank you, Herriot, and good morning, everyone. I will now cover our second quarter 2018 financial results. Starting with our balance sheet, we had $20.4 million in cash at June 30, 2018 as compared to $26.6 million at March 31, 2018.

Turning to the statement of operations, research and development expenses were $5.6 million for the second quarter ended 2018 as compared to $5.0 million for 2017, an increase of $0.6 million. The increase was primarily due to our STRIDE-1 and ADVANCE-1 studies and preclinical work on AXS-05 and AXS-07, which was partially offset by a reduction in the cost of our previously initiated clinical trials and the conduct of preclinical work on AXS-02 and AXS-06.

General and administrative expenses were $2.4 million for the second quarter 2018 compared to $1.7 million for 2017, an increase of $0.7 million. The increase was primarily due to higher intellectual property and legal expenses, external fees associated with the operating as a public company as well as an increase in personnel costs.

Overall, operating expenses in the second quarter of 2018 increased by $1.2 million to $8.0 million as compared to $6.8 million in 2017. Interest and amortization of debt discount expense was $0.3 million for the second quarter of 2018 and 2017, which was associated with our loan and security agreement with SVB.

In sum, the company incurred a net loss of $8.3 million or $0.32 per share for the second quarter of 2018 as compared to a loss of $7.1 million for 2017, or $0.30 per share. We anticipate that our current cash position will be sufficient to fund our anticipated operating cash requirements into the third quarter of 2019. Importantly, we believe that our current financial resources will take us through the next several major clinical milestones, including the next interim analysis and final results of the STRIDE-1 trial for treatment resistant depression, the interim analysis for the ADVANCE-1 trial in agitation associated with Alzheimer's disease, topline results from the ASCEND Phase 2 trial of AXS-05 in major depressive disorder, topline results from the Phase 2 trial in smoking cessation and potentially topline results from our Phase 3 trial of AXS-07 in the treatment of migraine.

That concludes our second quarter 2018 financial review. I’ll now turn the call to Mark to lead the Q&A session.

[Mark Jacobson, SVP, Operations]

Thank you, Nick. Operator, can we please have our first question.

[Operator]

[Operator Instructions] Our first question comes from the line of Robert Hazlett from BTIG. Your line is open.

[Jake Colby, BTIG]

This is Jake Colby on the line for Bert. How do you think about defining success for 05 in the upcoming MDD readout? And what would you need to see the move in the Phase 3 with that program?

[Herriot Tabuteau, Chief Executive Officer]

As you know, we are now conducting two trials in depression with AXS-05, our Phase 3 trial in treatment resistant depression, and this new Phase 2 trial at MDD. The point of launching the study in MDD was to further elucidate the potential for AXS-05 as an antidepressant. It will allow us to really explore the various properties of the drug that could make it differentiating. For example, in one of the scientific presentations recently, we highlighted the fact that [indiscernible] and does appear to share a similar pharmacology to a fast acting antidepressant ketamine. And so this is -- trial of MDD, for example, might allow us to really look at on sort of action that’s the one thing that we would look at. We are also looking at numerous secondary endpoints. And so, with this trial we really have had the potential to give us a lot of information on the potential of AXS-05.

[Operator]

[Operator Instructions] Our next question comes from the line of Matt Kaplan from Ladenburg Thalmann. Your line is open.

[Matt Kaplan, Ladenburg Thalmann]

Good morning. Congrats on the progress. Very impressive. Lot of things going on, and readouts throughout your term. You gave great detail on the AXS-05 programs, and want to talk about those as well. But first off just wanted to get some more detail on the start of the migraine Phase 3, and what that could potentially look like in terms of the number of patients and the design of study.

[Herriot Tabuteau, Chief Executive Officer]

Thanks Matt for the question. So as you correctly pointed out, migraine program with AXS-07 is one of the areas of focus of the company. So we've been focused on making sure that we advance the AXS-05 in two pivotal trials, but also migraine, we believe that this is will be a very significant program for us. AXS-07's profile is potentially very differentiated in the treatment of migraine. So we are on track to initiate that trial this year. So we are targeting the fourth quarter of this year to initiate that Phase 3 trial. In terms of the actual trial design, once we actually launch the study, we will publish a quarter clinical trial that give the exact design of the trial, and we will talk about it in terms of patient numbers. To preview though what the trial design might look like, as you know AXS-07 doesn’t corporate two active agents MoSEIC meloxicam and rizatriptan. And so there would be comparable arms with those individual agents in the trial design. That should not be surprising. And so we are very excited about the potential for AXS-07 for three reasons; one is that we would expect there to be a significant benefit potentially on onset of actions because of a rapid absorption of meloxicam with our MoSEIC technology. We would expect there to be also potentially additive efficacy -- will certainly additive and likely synergistic efficacy between the two active ingredients, one of which rizatriptan is the proven agent in migraine. And lastly, the half-life of meloxicam is long, so it's 20 hours or more. And the reason why that's important is that that could contribute to a reduction in symptom recurrence within a 24-hour period.

[Matt Kaplan, Ladenburg Thalmann]

That’s very helpful. And then turning back to AXS-05, you're looking at into multiple indications are and depression broadly in agitation Alzheimer's. Can you talk a little about its mechanism of action and kind of the futility of the drug kind of broadly? And any indications like you're looking out in potentially others?

[Herriot Tabuteau, Chief Executive Officer]

So the -- one of the differentiating aspects of AXS-05 is its pharmacology. It has numerous mechanisms of actions. One way to think about the mechanism of actions of AXS-05 is this to think about it in terms buckets. It does have monoaminergic mechanisms of action, so for example, serotonin reuptake inhibition, norepinephrine Reuptake inhibition, and of course dopamine reuptake inhibition with the bupropion component. And also, I think some of the focus has been though on its glutamatergic mechanisms of action. It is an NMDA receptor antagonist and sigma-1 receptor agonist. And those two mechanisms of actions -- those two glutamatergic mechanisms of actions are thought to underline the opposing and fast acting antidepressant facts of drug like ketamine.

In addition to those two mechanisms of action, AXS-05 also has anti-inflammatory properties. Both components have demonstrated anti-inflammatory properties in clinical studies as well as in non-clinical studies. The reason why that mechanism of action is important is that there has been a lot of -- recent research showing that patients, who suffer from depression and, especially treatment resistant depression, do have increased levels of inflammatory cytokines. And inflammation does appear to be a significant part of the pathophysiology of depression, and not just depression but also no inflammation is implicated in other CNS disorders.

So that is a mechanism of action of AXS-05 that we have not highlighted a lot in the past, but it's one that we are very aware of and that we think might contribute to the broad applicability of AXS-05 in not only depression, but also in other CNS disorders such as Alzheimer's disease, agitation and numerous other potential limitations, which we highlight and review in our corporate presentation.

[Operator]

Our next question comes from the line of Ram Selvaraju from H.C. Wainwright. Your line is open.

[Julian Harrison, H.C. Wainwright]

Hi. This is Julian on for Ram. Congrats on all the process. Starting with STRIDE-1, just curious when randomization for that trial is expected to be complete? And for the interim efficacy analysis, how much data is expected to be released? And should we expect to see any P values with that readout?

[Herriot Tabuteau, Chief Executive Officer]

So for STRIDE-1, the guidance that we have given is we do anticipate to have the results of the second and final interim analysis in the fourth quarter of this year. And as a reminder, that interim analysis is triggered when 60% of the patients not only have been enrolled but without completed the double-blind phase of the trial. And then with regards to full data readout, we expect a full-data readout from STRIDE in the first half of 2019. So I hope that that gives you some sense of enrollment. And with regards to the interim analysis and what is expected from that in terms of P values, it really depends on what the outcome is of the interim analysis for efficacy. There are three potential outcomes. One is that the study stopped for efficacy in which case we would then anticipate, obviously, announcing some topline results, including P values. And one other possibility -- the second possibility that the study stopped for futility, and the third possibility is that the agency recommend that this study continue to full enrollment.

[Julian Harrison, H.C. Wainwright]

Okay. Got it. Thanks for that. Moving on to ADVANCE-1, it's on the result for the first interim analysis. Is it possible that the perimeters of the trials might be changed such as decision to enroll additional patients?

[Herriot Tabuteau, Chief Executive Officer]

With regards to the interim analysis for the ADVANCE-1 trial, the purpose of that interim analysis is not refi the study. There are two dimensional outcomes to that interim analysis; one is that the study has allowed to proceed the full enrollment or that the study is stopped for futility.

[Julian Harrison, H.C. Wainwright]

Okay, got it. And then two quick ones and then I'll just jump back into queue. Are you able to talk about how enrollments going for the ASCEND trial? And assuming positive data from this trial, what would be the next steps for AXS-05 on as a treatment for MDD?

[Herriot Tabuteau, Chief Executive Officer]

To the ASCEND trial, we initiated that trial in June, enrollment has been going well in that study. And we are on track to report full topline results from that study in the fourth quarter of this year. And with regards to next steps, indication, if the study is positive, then obviously there would be the ability to launch a Phase 3 trial in that indication. One possibility, of course, that we are exploring is potentially combining the efficacy trials in all of our depression programs, TRD as well as MDD.

[Julian Harrison, H.C. Wainwright]

Okay, great. And my last question then I'll jump back into queue. I was just curious what your thoughts are on the competitive landscape for AXS-07? And has it changed it all since the product candidate was originally formulated?

[Herriot Tabuteau, Chief Executive Officer]

We think that AXS-07 has the potential to be the [indiscernible] product for the acute treatment of migraine and that is in comparison to products that are currently marketed as well as products that are currently in development. When we embarked on the development of AXS-05, we examined the major reasons for patient dissatisfaction with current migraine products. As a reminder, this is a very large market. There are approximately 40 million Americans who suffer from acute migraine. But it's also very dissatisfied market. So 70%, approximately, of the patients with acute migraine were dissatisfied. And the literature is very clear. Survey after survey patients identify the three major reasons for dissatisfaction being that one -- the drugs weren't going to worked fast enough, which is understandable if you have a migraine. And two, is that secondly major reason for dissatisfaction is that the growth don’t work well enough or consistently enough either the pain relief is incomplete or sometimes the drug works and sometimes it does not work. The third reason, major reason for patient dissatisfaction is that the migraine comes back. And if you look at the pharmacology and the PJ profile of the AXS-07, to date it has potential to address all of those issues. We are starting with rizatriptan, which is a fairly active triptan. And we would expect there to be added efficacy and potentially synergistic efficacy with meloxicam -- with MoSEIC meloxicam, and combined with the not only the rapid absorption of MoSEIC meloxicam, but the long half-life. We would have expected to really address all those issues. So from a competitive perspective, to summarize, we think that the product is very well positioned.

[Operator]

[Operator Instructions] Thank you. That concludes the Q&A session. I will turn the call back to Axsome CEO, Herriot Tabuteau, for concluding remarks.

[Herriot Tabuteau, Chief Executive Officer]

Thank you all for joining us on the call today. We are committed to finding safe and effective treatments that can make a significant difference for patients suffering from prevalent and disabling CNS disorders. We are pleased with our continued progress so far in 2018. And we anticipate the remainder of the year will be productive, busy and exciting as we focus on achieving our objectives. We look forward to informing you our progress in the months ahead. Thank you again. And operator, you may now disconnect our call.

[Operator]

Thank you, ladies and gentlemen. That does conclude today's conference call. You may all disconnect, and everyone have a great day.