Intra-Cellular Therapies Inc

NASDAQ:ITCI

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, ladies and gentlemen and welcome to the Intra-Cellular Therapies Fourth Quarter and Full Year Ended December 31, 2018 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to your host, Dr. Juan Sanchez, Vice President, Corporate Communications and Investor Relations. Please go ahead.

[Juan Sanchez]

Thank you, operator. Good morning and thank you all for joining us for today’s conference call. Our earnings press release providing a corporate update and details of the company’s financial results for the fourth quarter and full year ended December 31, 2018 crossed the wire a short time ago and it’s available on our website at intracellulartherapies.com.

Joining me on the call today are Dr. Sharon Mates, Chairman and Chief Executive Officer; Dr. Andrew Satlin, Executive Vice President and Chief Medical Officer; Mark Neumann, Executive Vice President and Chief Commercial Officer; and Dr. Kimberly Vanover, Senior Vice President of Early Stage Clinical Development and Translational Medicine; Larry Hineline, Senior Vice President and Chief Financial Officer; and Michael Halstead, Executive Vice President and General Counsel.

As a reminder, 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 the company’s product development candidates, our clinical or non-clinical plans, our plans to present or report additional data, the anticipated conduct and results of ongoing and future clinical trials, plans regarding regulatory filings, future research and development, our plans regarding the commercialization of lumateperone and possible uses of existing cash and investment resources. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements and the company disclaims any obligations to update such statements.

I will now turn the call over to Sharon.

[Sharon Mates, Chairman and Chief Executive Officer]

Thanks, Juan. Good morning, everyone and thank you for joining us for today’s conference call. 2018 was a productive year for ITCI and we look forward to an even more exciting year ahead as we accelerate our preparations for the potential launch of our first product. During 2018, the FDA accepted for review our NDA for lumateperone for the treatment of schizophrenia. We presented exciting clinical data on several programs and we made substantial progress in building our commercial organization.

On this call, we would like to share with you a summary of our 2018 achievements and discuss our future plans for lumateperone and our innovative pipeline. I will introduce Mark Neumann, our Chief Commercial Officer, who will provide an update on our commercial preparedness. Following Mark’s comments, Andy will provide an overview of our clinical development programs. Finally, Larry will review our financial results and then we will open the line for Q&A.

At ITCI, our mission is to develop innovative treatments to improve the lives of individuals with neuropsychiatric and neurologic disorders. Last year, we reached several milestones towards this mission. In the fourth quarter, the FDA accepted for review our NDA for lumateperone for the treatment of schizophrenia with the PDUFA target action date of September 27. With over 1,900 individuals exposed to lumateperone in 20 clinical trials, we believe our schizophrenia clinical development program provides strong evidence of the efficacy and safety and favorable safety profile of lumateperone for the treatment of schizophrenia. We are excited by the favorable safety and tolerability profile of lumateperone, which has shown placebo-like effects on metabolic measures, body weight and motor parameters. This favorable profile observed in short-term studies has now been extended in long-term studies. We believe this unique profile may address significant unmet medical need for the treatment of schizophrenia and translate favorably to other therapeutic indications, including bipolar depression and other depressive disorders.

We completed patient enrollment in two bipolar depression studies evaluating lumateperone as monotherapy, Study 401 conducted in the United States and Study 404 conducted globally. We anticipate reporting top line results from these two studies simultaneously in the second quarter of this year. In addition, we have commenced a program in major depressive disorder or MDD. We believe the pharmacologic profile of lumateperone supports the potential for potent and rapid anti-antidepressant effect. We have made important progress in our other programs, including the development of our selective phosphodiesterase 1 inhibitor, ITI-214, for the treatment of Parkinson’s disease and heart failure and our preclinical program for substance use disorder with ITI-333. Andy will elaborate on these clinical programs shortly.

We ended the year with $347.5 million in cash and investments which places us in a strong position to advance our development programs and commercial activities. We continue to build our infrastructure across the organization to support the launch of lumateperone and meet our goal of bringing new medicines to patients. Our commercial team continues to expand led by Mark Neumann, our Chief Commercial Officer who joined us in the fourth quarter last year from Amgen. Mark has over 30 years of biopharmaceutical industry experience with a strong track record of building high-performing commercial teams and successfully executing numerous product launches across a range of therapeutic areas. Prior to his time at Amgen, Mark spent 25 years at Bristol-Myers Squibb and held senior U.S. and global commercial roles in multiple therapeutic areas, including neuroscience and cardiology. During his time at BMS, he led sales and marketing for the U.S. neuroscience business unit, which included Abilify.

I will now turn the call over to Mark to provide a brief update on our commercial efforts.

[Mark Neumann]

Thanks, Sharon and good morning everyone. It’s good to be with you. I am very excited to have joined the leadership team here at Intra-Cellular Therapies and to have the opportunity to collaborate on our mission of seeking to improve the lives of individuals suffering from neuropsychiatric and neurologic disorders by bringing new innovative medicines to market. And in line with that mission, I am very pleased that we continue to make strong progress with our commercial preparation in support of our initial launch of lumateperone for schizophrenia later this year pending FDA approval. Critically important to our preparation and launch readiness is hiring strong talent to comprise the commercial leadership team.

So I am pleased to report that we have now hired senior leaders across all the key commercialization functions. Our commercial leadership team has a combined 100 plus years of commercial expertise acquired at companies that include Bristol-Myers Squibb, Allergan and AstraZeneca among others. Each of our leaders has deep industry and extensive launch experience and possesses broad neuroscience knowledge from previous leadership roles of several antipsychotic brands. Our commercial team is continuing to conduct comprehensive market research to understand the needs of physicians, patients and payers and to generate a deep customer insight that will inform the differentiated positioning of lumateperone and our overall go-to-market strategy.

And finally, we are making considerable progress on building the internal infrastructure to support our transition from a clinical stage company to a fully integrated commercial organization, including the implementation of enterprise-wide systems and processes as well as the commercial capabilities necessary to support the successful initial launch of lumateperone into the marketplace shortly after FDA approval. I look forward to sharing more details about the specifics of our commercial strategy and progress on our infrastructure build in the coming months as we get closer to a potential approval later this year. Thank you.

And I will now turn the call over to Andy to provide an overview of our clinical development programs. Andy?

[Andrew Satlin]

Thanks Mark. 2018 was a year of substantial accomplishments for our clinical group and I am pleased to provide some highlights. Last year, we reported that the favorable safety profile of lumateperone observed with short-term treatment in patients with stable symptoms of schizophrenia was replicated with long-term exposure. The first part of this outpatient study conducted in a real world setting that closely resembles current clinical practice included 302 patients who were switched from standard of care antipsychotics to 6 weeks of treatment with lumateperone. Improvements in cardiometabolic parameters were observed, followed by lots of these improvements during a 2-week period in which patients were switched back to standard of care. The results from the second part of Study 303 confirmed and extended the results from the first part by demonstrating that lumateperone administered for up to 1 year was associated with statistically significant improvements from baseline on key safety measures that are often impacted adversely by other anti-psychotics such as body weight and cardiometabolic and endocrine parameters without the motor side effects often associated with these other agents.

Notably, we observed a mean body weight reduction of 1.8 kilograms at 6 months and 3.2 kilograms at 1 year of treatment with statistically significant reductions from standard of care baseline in total cholesterol, LDL cholesterol and prolactin and stable blood levels of glucose, insulin and HDL cholesterol. There were no signs of treatment emergent extrapyramidal side effects, akathisia or dyskinesia. We plan to present further analyses at medical meetings later this year. As you know, we have presented pharmacologic and clinical evidence supporting the antidepressant potential of lumateperone. Specifically, preclinical data demonstrate a positive effect in models of depression.

Pharmacologic assessment indicates that lumateperone as a standalone agent indirectly enhances glutamatergic neurotransmission through both AMPA and NMDA channels in the prefrontal cortex. Downstream of these effects, lumateperone increases phosphorylation of key proteins in the mTOR pathway. These findings, in addition to the serotonin transporter inhibition previously described with lumateperone and the improvements in depressive symptoms seen in patients with schizophrenia, suggests the potential for lumateperone to exhibit potent and rapid antidepressant effects in patients suffering from a range of mood disorders.

Our lumateperone program in bipolar depression and other depressive disorders are underway. The bipolar depression Phase 3 clinical program consists of two monotherapy studies and one adjunctive study. We have completed patient enrollment in both monotherapy studies and anticipate reporting top line results simultaneously in the second quarter of this year. We also intend to evaluate lumateperone’s antidepressant effects in patients with major depressive disorder. In order to explore the effect of different modes of drug administration and the potential for rapid onset antidepressant activity, our program includes the assessment of novel formulations of lumateperone. Pharmacokinetic studies evaluating these formulations are currently ongoing.

I would like to shift now to our ITI-214 PDE1 inhibitor program. In 2019, we plan to advance ITI-214 into a Phase 2 clinical trial for the treatment of Parkinson’s disease building on results of the Phase 1/2 multiple ascending dose clinical trial of ITI-214 in patients with this disorder that we presented last year. In that study 214 at doses from 1 milligram to 90 milligrams was generally well-tolerated with a favorable safety profile with no serious adverse events reported and without promoting or worsening motor complications. Despite the fact that patients were maintained on dopamine replacement therapies, we observed improvements in motor symptoms and reductions in dyskinesias at some doses. Several patients experience profound improvements in motor impairment, while taking 214 only to have these improvements disappear after cessation of 214 treatments.

Reductions in motor symptoms on ITI-214 were demonstrated across multiple scales. In some dose groups, signals of improved motor performance on 214 relative to placebo were found on the total Unified Parkinson’s Disease Rating Scale and two of its subscales, Part 3 reflecting clinician ratings of the motor manifestations of Parkinson’s disease, and Part 4 assessing motor complications including dyskinesias. In addition, 214 reduced dyskinesia symptoms as measured by the Unified Dyskinesia Rating Scale and increased both total on-time and on-time without dyskinesias as rated by patients using the Hauser Patient Motor Diary. We will present additional analysis of this study at future meetings later this year.

Studies with ITI-214 in a preclinical model of heart failure reported last year in the journal Circulation found improvements in cardiac contractility. Based on these results, we initiated an ITI-214 program for the treatment of heart failure. The preclinical data indicates that ITI-214 acts by a novel mechanism of action via modulation of the adenosine A2B receptor signaling pathway and increases cardiac contractility without increasing intracellular calcium.

Importantly, this mechanism is different from beta adrenergic agonism and PDE 3 inhibition and may provide an effective and safer alternative to existing therapies. Our clinical program for the treatment of heart failure is evaluating ITI-214 in a randomized double-blind placebo-controlled study of escalating single doses looking at hemodynamic effects and safety in patients with systolic heart failure. We have completed clinical conduct of the first cohort which evaluated 10 milligrams. This dose of 214 was well tolerated and while the study is still blinded the safety profile supported advancing to the next dose cohort evaluating 30 milligrams.

I will now turn the call over to Larry, who will review the financial results. Larry?

[Larry Hineline]

Thanks, Andy. I will be I will be reviewing our financial results for the year ending December 31, 2018 and provide an overview of our expectations for the use of our cash and investments. Research and development expenses for the year ended 2018 were $132.2 million compared to $79.4 million for 2017. The $52.8 million increase is primarily due to the higher clinical, non-clinical related costs and manufacturing costs for lumateperone, labor cost and to other non ITI-007 related projects.

General and administrative expenses for the year ended 2018 were $30.1 million compared to $23.7 million for 2017. The increase of $6.4 million is primarily due to increased pre-commercialization cost, labor cost and stock compensation expense. Cash, cash equivalents and investment securities totaled $347.5 million at December 31, 2018 compared to $464.3 million at December 31, 2017. We expect total spend for 2019 to range between $225 million to $240 million. Depending on the timing of the events, we expect the spending in 2019 to increase quarter-over-quarter throughout the year. We expect these funds will be used primarily for pre-commercialization activities and related infrastructure expansion and, if our lumateperone NDA is approved for schizophrenia, initial commercialization activities, the development of lumateperone in our late-stage clinical programs, the development of our other product candidates including ITI-214, the continuation of manufacturing activities in connection with the development of lumateperone and general operations.

This concludes our prepared remarks. Operator, could you please open the line for questions?

[Operator]

Thank you. [Operator Instructions] our first question comes from Brian Abrahams with RBC Capital Markets. Your line is open.

[Brian Abrahams, RBC Capital Markets]

Hi. Thank you for taking my questions and congratulations on all the continued progress. I wanted to start by drilling kind a little bit more on the depression program. I was wondering if you could maybe give us a little bit more detail on the formulations that you’re exploring and how those might affect mechanism of action on the glutamatergic transmission or the mTOR pathway and when and how we should think about the timelines and next steps there, when we should expect data for the new formulations and the type of proof-of-concept study you might pursue there to assess the potential for repetitive onset? And then I have a follow-up.

[Sharon Mates, Chairman and Chief Executive Officer]

Thanks, Brian, for all your questions and thanks for the congratulations. We’re going to take this in two parts. I’m going to ask Kim to take the first part of the question and then Andy can chime in with the second part about when we’ll have data, etcetera.

[Kimberly Vanover]

Great, hi. Thanks for the question. So, we’re really excited about the depression program. As you know, the lumateperone has a pharmacological profile consistent with rapid-acting anti-depressant efficacy, it’s acting through serotonin, dopamine and glutamate with its indirect glutamate effect enhancing both an NMDA and AMPA occurrence that’s consistent with the rapid onset of action. For our depression program, we are really excited to advance novel formulation into evaluation and we are we have that program ongoing looking to optimize the rapid onset of the drug in major depressive disorder. Andy?

[Andrew Satlin]

Yes, Kim. Thanks. So, as Kim said, we’re excited about the opportunity for these novel formulations to enhance the rapid onset. The effect of the drug and we are going to be studying that in a proof-of-concept trial that will be starting later this year, which will be dose finding proof-of-concept for depressive anti-depressive efficacy and to explore the onset of action of the drug in this population.

[Brian Abrahams, RBC Capital Markets]

Great. Thanks very much. And then, maybe bigger picture. As we think about the potential launch, and approval and launch in schizophrenia, just wondering if you guys have if there were any sort of takeaways that we should have from the recent panel by by the same division of the FDA where J&J’s esketamine obviously had mixed efficacy data from their pivotal studies. We saw positive vote and view from the FDA. I am Just wondering, obviously it’s a different indication, but to what degree might that provide a context for the way this division thinks about, you’re looking at psychiatric studies that may not have all hit their primary endpoint. You guys are obviously in communication with the FDA on your application, just wondering if you could just give us any sense of whether that’s sort of appropriate context for the way this division considers data.

[Sharon Mates, Chairman and Chief Executive Officer]

Thanks, Brian. I think I’ll take that. So, first, as we’ve said before, in CNS disorders, not all trials are successful. I think I think we’re very pleased to see the outcome that just occurred. I think that we everybody or all of our missions are to bring new and better medicines to patients. So, I think that we’re very pleased to see, one could say, a resurgence in CNS right now of companies bringing better medicines to patients. I don’t think it’s surprising. It has sometimes been surprising to Wall Street, but it is not surprising that in CNS, not all studies are going to be successful. So, and I think you saw that outlined in the ADCOM where several studies were done. And just to reiterate, we believe we do have efficacy data, good efficacy data supporting our filing of our NDA of lumateperone for the treatment of schizophrenia.

[Brian Abrahams, RBC Capital Markets]

Thanks again.

[Operator]

Thank you. Our next question comes from Jessica Fye with JPMorgan. Your line is open.

[Unidentified Analyst]

Hello. This is Ugo on the call for Jessica. Thank you for taking our questions. Just a couple from me. Have you had a mid-cycle communication from FDA at this point? And can you update us on whether they confirmed the ADCOM? You’ve been preparing will be held. And then, also one on the MDD program, when the PR mentioned potentially different modes of administration, would these include sub queue or IV?

[Sharon Mates, Chairman and Chief Executive Officer]

So, I’ll take the first part, and that is that we have ongoing discussions with the agency. They have been very diligently reviewing our application. We don’t believe that we were affected by the government shutdown, they certainly have been doing all of their reviews, inspections, et cetera. So, we’re pleased about that. We – we have told you that we – that we are planning for an ADCOM. Once we have definitive data, we can share that with you as we go forward. You then asked something else?

[Mark Neumann]

Path formulation on the subcu.

[Sharon Mates, Chairman and Chief Executive Officer]

Okay, yes.

[Andrew Satlin]

Well, we’re exploring a number of formulations. And again, as Kim had mentioned, we are looking at whether there may be an opportunity to use these to – just to demonstrate a rapid onset acting – action of the antidepressant drug.

[Kimberly Vanover]

And we’ll tell you more as we go forward and as we – as we gather the data of these different formulations. The goal is to have formulations that are easily administered in the home. So, I wouldn’t be thinking about IV formulations.

[Unidentified Analyst]

Okay, thank you.

[Operator]

Thank you. Our next question comes from Ritu Baral with Cowen. Your line is open.

[Subbu Nambi, Cowen]

Hi, this is Subbu Nambi on for Ritu Baral. Thanks for taking my question. I was wondering if you could provide any color on the PPD trial, how will you top-line the data, is it going to be fact-sized or what should we anticipate? And I have a follow-up.

[Sharon Mates, Chairman and Chief Executive Officer]

Andy, do you want to take that?

[Andrew Satlin]

Yes. As you know, these are trials with a standard design for demonstrating efficacy and safety in a population of patients with bipolar depression. So, we’ve used standard measures. We’ve powered the study appropriately and we’ll be reporting results according to whether we’ve met criteria for success in the trial, and, of course, more detail about what those differences between drug and placebo are at the time that we have full results.

[Subbu Nambi, Cowen]

Got it. And my follow-up question was, are you stratifying the PPD patients on any category, any other parameter like the concomitant medication or any other factors or are you taking any measures to reduce placebo rates, things like that?

[Andrew Satlin]

Yes. So, we are taking a number of measures both in terms of the design of the trial and operationally how we’re conducting it in order to minimize placebo response rates. There are a number – a couple of stratification factors. I’m not sure what has been listed on clinicaltrials.gov, but just appropriate things that you would expect for the population at the study.

[Subbu Nambi, Cowen]

Thank you.

[Operator]

Thank you. Our next question comes from Sumant Kulkarni with Canaccord. Your line is open.

[Sumant Kulkarni, Canaccord]

Good morning. Thanks for taking my questions. First, could you give us any quantitative parameters around how rapid – might rapid action be in the case of lumateperone and this is being contemplated as rescue therapy or maintenance for MDD?

[Sharon Mates, Chairman and Chief Executive Officer]

So, thanks, Sumant. Hi, there. This is Sharon and I’ll start and then I’ll ask anybody else wants to join in – to join in. So, we – in our first studies, we will measure different time point for rapid-acting, so, we’re not only looking at – I’m making this number up one day or something, we’ll look at several different timepoints to see – that’s the whole purpose of the study to see how rapid-acting if rapid-acting lumateperone is in these studies. The second one was the rescue medicine, is that it, I –

[Andrew Satlin]

Maintenance.

[Sumant Kulkarni, Canaccord]

Yes, rescue or maintenance medication for MDD.

[Sharon Mates, Chairman and Chief Executive Officer]

So, as – we are looking at – we do plan to look at lumateperone as an adjunctive treatment in MDD, which might include a maintenance treatment.

[Andrew Satlin]

Yes. As Sharon has mentioned, the initial trial is a proof-of-concept study. We’re looking for efficacy. We’re looking for onset of effect. We’re going to be treating people for long enough in order to get an idea of the duration of treatment that would be needed for an initial acute episode, but we’re going to take it from there with regard to what we do next. So the data will direct us and the findings we have in this trial will direct us toward how we pursue the remainder of the program.

[Sumant Kulkarni, Canaccord]

Got it. And my follow-up is, how are results from the bipolar depression studies going to inform your plans or chances of success for the MDD indication?

[Andrew Satlin]

Again, as you know, drugs that work in major depressive disorder often don’t work in bipolar depression, so, it’s a little bit chancy to try to draw any conclusions about one from the other. Of course, we will look at the effects of the drug in the bipolar studies once we have those and learn what we can, but I wouldn’t expect that would have an impact on how we design and develop the drug for major depression.

[Sharon Mates, Chairman and Chief Executive Officer]

Kim, do you want to add something to that?

[Kimberly Vanover]

Yes, I would just add, based on the pharmacological profile of lumateperone, we have a strong rationale that lumateperone is predicted to be efficacious both in bipolar depression and in major depressive disorder and other depressive disorders.

[Sumant Kulkarni, Canaccord]

Thank you.

[Operator]

Thank you. Our next question comes from Robert Hazlett with BTIG. Your line is open.

[Jake Colby, BTIG]

Hi, this is actually Jake Colby on the line for Bert. Thanks for the question. Most of mine have been asked already, but I just wanted to follow up on the MDD study. And I guess, in addition to looking at rapid-acting profile, so you’re also exploring the potential for longer-acting profiles, the lumateperone in the study? Thank you.

[Andrew Satlin]

So, again, as I’ve said this first study is an acute treatment study, but we will take the learnings from the trial in designing the remainder of the program.

[Jake Colby, BTIG]

Okay, thank you and congrats on all the progress.

[Sharon Mates, Chairman and Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from Matt Kaplan with Ladenburg. Your line is open.

[Matt Kaplan, Ladenburg]

Hi, good morning. Thanks for taking the question. I just wanted to zero in on your kind of pre-commercialization preparation. And if you can give us some more detail in terms of what your thoughts are and how the makeup maybe some of the 30,000 foot view, what sales force will look like in terms of how many and different regions? And then also how are your discussions or have you had discussions from the – from the payers yet in terms of being on formulary and reimbursement and where are those?

[Sharon Mates, Chairman and Chief Executive Officer]

Hi, Matt. Thanks for the questions. And I think I’ll ask Mark to take them on just trying to jot down because he had a lot of questions in there. Okay?

[Mark Neumann]

Yes, thanks, Sharon, and thanks for the question, Matt. As I said in my prepared remarks, we’ve been diligently moving forward with our commercial preparedness and we are very pleased with the progress that we’ve made so far. And we’re confident that we’ll have all the pieces in place to support a successful launch of lumateperone later this year. So, the areas that we’ve been moving forward significantly in or as I mentioned, we now have our senior leadership team in place, I’m very pleased with the group that we have, it’s a very experienced group, a group that has deep industry experience and launch experience, but also importantly has been involved in the neuroscience space and specifically the antipsychotic space for many years. So, the team is really coming together.

That team has been conducting a comprehensive market research, we’re really doing our homework and making sure we understand the needs of all three of our customers, physicians, patients and payers, and generating the deep customer insights that are really going to inform our strategies. And while we’ve been doing that, as I said, obviously as we move from being a clinical stage company to a fully integrated commercial organization, we’re putting in place all of the processes and procedures and systems that are going to be necessary to support that, but also the commercial capabilities that are going to help us to be successful when we do launch.

In terms of the sales force, I think you asked specifically about the sales force. We’ve already hired the Head of Sales and we’ll be hiring the sales management team over the next several months and we expect to share more details about our sales force configuration as we get closer to a potential approval. And as far as the payers are concerned, we have not yet engaged payers. We certainly have been doing our market research and getting advice on the payer landscape. We’ve been following the competitive and clinical situation and we’ve also been following very closely obviously the administration’s proposals that are coming out and we’ve included already having a advisory board meeting with payers that gave us some real important insights to consider as we think about our go-to-market strategy.

[Matt Kaplan, Ladenburg]

Great. Thanks a lot, Mark, for the added detail and good luck.

[Operator]

Thank you. And I’m showing no further questions at this time. I’d like to turn the call back over to Sharon Mates for closing remarks.

[Sharon Mates, Chairman and Chief Executive Officer]

Thank you, operator, and thank you everyone for joining the call. Again, it’s been a very exciting year for us here at ITCI, and we look forward to updating everybody as we continue our journey to bringing new medicines and better medicines to help patients. So, thanks very much. And operator, you can now disconnect the call.

[Operator]

Ladies and gentlemen, this concludes today’s conference. Thanks for your participation. Have a wonderful day.