VistaGen Therapeutics Inc

NASDAQ:VTGN

Earnings Call Analysis

Advancing Key Trials Amidst Strong Finances

The company, bolstered by favorable PALISADE-2 Phase III trial outcomes and healthy financial standing, is advancing its PALISADE program in social anxiety disorder (SAD), preparing to start crucial remaining studies in 2024, including PALISADE-3 and -4 trials. Research and development expenses have dropped to $4.5 million, while cash reserves stand at $126.6 million, highlighting a reduced net loss and increased financial flexibility. With steadfast commitment, the firm progresses toward pharmacological innovation in neuropsychiatry.

Optimizing Clinical Trials and Addressing Safety

Vistagen is employing significant enhancements to enhance the derisking of their Phase III program, including improvements in surveillance and execution, refined study designs and endpoints, and rigorous adherence to protocol. These advancements, coupled with the removal of factors such as the need for masks and the opportunity for in-person investigator meetings post-pandemic, are raising optimism for even stronger results than the previous PALISADE-2 trial. Additionally, the company has put more stringent eligibility criteria and monitoring measures in place to improve the chances of positive outcomes with fasedienol in upcoming PALISADE-3 and PALISADE-4 studies.

Exploring Repeat Dosing and Potential Label Changes

A new, smaller study involving a repeat dose of the drug within a 10-minute window is being initiated. The goal is to observe any additional benefits this approach may provide to patients, which could potentially inform future labeling. The executives maintain that safety is a primary concern, but so far, they see little to no risk associated with this second dose strategy. This study might reflect the real-world use of their drug, where patients may take multiple doses in a short timeframe.

Seeking Breakthrough Status and Addressing Abuse Potential

Vistagen expresses aspirations of achieving Breakthrough Therapy Designation (BTD) for their fasedienol, which has demonstrated a nonsystemic and nonabusable profile, indicated by positive PAL-2 trial results. While the company already has fast-track designation, BTD remains a target due to the potentially significant efficacy of their product. Vistagen's discussions with the FDA have focused on the abuse potential of the intranasally administered drug. Preclinical studies and clinical observations from an open-label study with 500 subjects indicate no significant adverse events linked to abuse liability. Vistagen maintains confidence in the differentiated safety profile of fasedienol and envisions a future where patients could access the drug without the need for strict control measures like scheduling or REMS, based on their positive safety and efficacy data.

Future Developments and Closing Remarks

Vistagen wraps up the earnings call with an invitation for further inquiries and a commitment to update stakeholders on their progress. They highlight the importance of staying connected to the company news and developments, encouraging investors to sign up for email updates to keep abreast of Vistagen's advancements and future events.

Earnings Call Transcript 2024-Q3

[Operator]

Greetings, and welcome to Vistagen Therapeutics Fiscal Year 2024 Third Quarter Financial Results and Corporate Update. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mark McPartland, Senior Vice President, Investor Relations of Vistagen. Thank you. You may begin.

[Mark McPartland, executive]

Thank you, Doug. Good afternoon, everyone, and welcome to Vistagen's Fiscal Year 2024 Third Quarter Corporate Update Conference Call and Webcast. This afternoon we filed our quarterly report and issued a press release providing an overview of our recent third quarter results and our neuroscience pipeline development. We encourage you to review the release, which can be found in the Investor Relations section of the Vistagen website.

During today's call, we'll make forward-looking statements regarding our business based on our current expectations and information. The forward-looking statements speak only as of today and except as required by law, we do not assume any duty to update in the future any forward-looking statements made today. Of course, forward-looking statements involve risks and uncertainties and our actual results could differ materially from those anticipated by any forward-looking statements we make today.

Additional information concerning risks and factors that could affect our business and financial results are included in our fiscal year 2024 third quarter Form 10-Q for the period ending December 31, 2023, and in future filings that we make with the SEC from time to time, all of which are or will be available on our website and the SEC's website.

Now with that taken care of, I'd like to thank and welcome all our stockholders, analysts and everyone taking an interest in Vistagen. I'm joined on the call today by Shawn Singh, our Chief Executive Officer; Cindy Anderson, our Chief Financial Officer; and Josh Prince, our Chief Operating Officer.

Shawn will provide an overview of our recent results and our progress across our key pipeline programs. A brief opportunity for questions from sell-side analysts will follow the prepared remarks.

I'd like to remind everyone this call is being webcast and will be available for replay after completion. The replay link can be found in the Investor Events section of the Vistagen website. I would now like to turn the call over to our Chief Executive Officer, Shawn Singh. Shawn?

[Shawn Singh, executive]

Thank you, Mark, and good afternoon, everyone. Thank you for joining our call today. Here at Vistagen, we are pioneering neuroscience with an intention to deliver first-in-class therapies for psychiatric and neurological disorders, where there are a few, if any, adequate and differentiated FDA-approved treatment options to satisfy the widespread need of patients whose mental health and whose well-being are adversely affected by their disorders.

Each of our clinical stage neuroscience product candidates is designed with the potential to establish new standards of care and make meaningful differences in how patients manage their disorders to improve their daily lives. Within the last few months, we've seen a renaissance in neuroscience, marked notably by pharma M&A in the neuropsychiatry space valued at about $23 billion.

We are encouraged that novel late-stage neuroscience derived product candidates with differentiated safety profiles have stimulated renewed interest in large market neuropsychiatry programs with the potential to change lives.

We believe each of our clinical neuroactive pherines, led by fasedienol for the acute treatment of social anxiety disorder, is anchored in novel neuroscience and has the potential to produce differentiated product profiles across multiple and diverse large market therapeutic areas with high need for innovation and high need to transform the standard of care including anxiety, depression, women's health and other disorders.

Today, we'll briefly discuss our progress and plans for three of these -- three of our five of our Pherin assets in our clinical stage neuroscience pipeline, fasedienol, itruvone and PH80.

As noted, our lead clinical stage program involves fasedienol and is aimed at transforming the treatment paradigm for adults affected by social anxiety disorder, or SAD, which currently affects the lives of about 10% and of the U.S. adult population with very high opportunity costs in their daily life. While the prevalence of SAD continues to grow, there is still no FDA-approved patient-tailored acute treatment option to help individuals with SAD rapidly and safely address their anxiety when their stressors are upon them in their daily life.

With the positive results from our PALISADE-2 Phase III trial reported last year and a strong balance sheet, we're fully focused on advancing our PALISADE Phase III development program in SAD, with preparations to initiate this year, all key remaining studies planned for that program.

Since our last conference call in November, our team has been diligently focused on the preparations necessary to initiate PALISADE-3, which will be our next Phase III clinical trial of fasedienol for the acute treatment of anxiety in adults with social anxiety disorder. That remains on track to begin in the first half of 2024. That will be followed by PALISADE-4 to be initiated in the second half of this year.

PALISADE-3 and PALISADE-4 will be similar to our successful PALISADE-2 Phase III trial. Both trials will involve a public speaking challenge in a clinical setting, with patient reported outcomes on a Subjective Units of Distressed Scale or SUDS as the primary efficacy endpoint. We believe either PALISADE-3 or PALISADE-4, if successful, together with the positive results from PALISADE-2 may establish substantial evidence of effectiveness of fasedienol in support of a potential NDA submission for the acute treatment of anxiety in adults with SAD.

Last year, we accomplished something that, to our knowledge, has never been achieved, and that is to demonstrate positive Phase III results in an anxiety study with a drug candidate that does not need to be taken up systemically or act directly on neurons in the brain. We look forward to getting back into the clinic soon, the PALISADE-3 to continue driving on our mission to deliver a first-in-class therapy in a large neuropsychiatry market in need of differentiated fast-acting therapies without the risk of sexual side effects, weight gain or abuse liability concerns.

Beyond fasedienol in our Phase III program in SAD, we are continuing to explore various ways to unlock the significant potential our itruvone asset as a differentiated new therapy for major depressive disorder, or MDD. Preparations and planning for a potential U.S. Phase IIb trial by itruvone monotherapy in MDD are ongoing. Again, our mission in this large and unfortunately increasing neuropsychiatry market is to deliver a differentiated therapy to transform the standard of care without the risk of sexual side effects, weight gain or abuse liability concerns.

We also see great potential in our rapid onset hormone-free PH80 nasal spray. Its potential is anchored in the previously unreported positive results from two trials in women's health indications that we announced last year. First is a treatment for vasomotor symptoms or hot flashes due to menopause. And next, for the management of pre-menstrual dysphoric disorder or PMDD.

PH80 showed statistically significant results in both studies. We are preparing to conduct nonclinical studies necessary to submit a U.S. IND to facilitate further Phase II clinical development of PH80 for women's health indications, including the treatment of patients with moderate to severe vasomotor symptoms or hot flashes that are due to menopause.

I'll now turn the call over to our CFO, Cindy Anderson to summarize some of the highlights from our financial results for the third quarter of our fiscal '24. Cindy?

[Cynthia Anderson, executive]

Thank you, Shawn. As Shawn mentioned, I will highlight a few financial results from our fiscal year 2024 third quarter. I also encourage everyone to review our quarterly report on Form 10-Q filed with the SEC earlier this afternoon for additional details and disclosures.

Research and development expense was $4.5 million and $6.9 million for the 3 months ended December 31, 2023 and 2022, respectively. The decrease in R&D expense was primarily due to a decrease in clinical and development expenses related to the timing of such expenses incurred in our Phase III trials of fasedienol and SAD.

General and administrative expense was $3.8 million for the 3-month period ended December 31, 2023, compared to $3.1 million for the period -- prior year period. The increase is primarily due to the increase in compensation related expenses. Our net loss attributable to common share -- stockholders was $6.3 million and $9.8 million for the 3 months ended December 31, 2023, and in 2022, respectively.

At December 31, 2023, we had cash and cash equivalents of approximately $126.6 million.

I will also note that this afternoon, as customary for development stage companies, in our sector, we filed a new shelf registration statement on Form F-3 with the SEC to renew our previous F-3, which was set to expire next month. shelf registration statements on Form F-3 are standard in our industry and are intended to provide us with broad flexibility to improve our balance sheet in the future as may be needed.

As a reminder, please refer to our quarterly report on Form 10-Q filed today with the SEC for additional details and disclosures. I will now turn the call back over to Shawn.

[Shawn Singh, executive]

Thanks, Cindy. So as we wrap up today's call, I want to emphasize that we are very proud and very excited to be focused on reaching another key corporate milestone in the near term. That's the initiation of our PALISADE-3 Phase III trial of fasedienol for the acute treatment of anxiety in adults with SAD.

We will progress through the next phase or corporate development strategies with confidence in our team's expertise to execute our PALISADE Phase III clinical program of fasedienol in SAD, the potential of our robust pipeline for multiple and diverse psychiatric and neurological disorders, and our steadfast commitment to pioneering neuroscience to develop and commercialize truly differentiated treatment solutions.

So on behalf of our whole team here at Vistagen, I want to thank you for your continued support.

[Mark McPartland, executive]

Thank you, Shawn. Operator, we would now like to turn the call over for questions from the sell-side analysts participating on the call today.

[Operator]

[Operator Instructions] Our first question comes from the line of Paul Matteis with Stifel.

[Julian Pino, analyst]

This is Julian, on for Paul. Just a quick one for me. Are you still planning on doing a repeat dose study for fasedienol in SAD. And if so, would you be able to provide any color on that?

[Shawn Singh, executive]

You bet. Thanks, Julian. Yes, we are going to do a repeat dose study. It will be similar in design to PALISADE-3 and to PALISADE-4, and thus obviously, by extension, PALISADE-2. It will be smaller, and it will assess the safety and potential benefit of a second dose of fasedienol that is administered within 10 minutes after the first dose and prior to a public speaking challenge. So similar study design, similar endpoint, obviously much smaller. And the result of that study, part of it's to -- is in agreement with FDA and especially as to any potential safety issue, which we don't anticipate any with repeat dosing.

But it really could inform the labeling and provide some guidance as to whether or not a second dose administered within 10 minutes, which might be the case in a real-world setting, is safe. And as we anticipated could be again, could provide any potential benefit for some patients. So we'll prepare to initiate that study in the second half of this year as we've guided.

[Operator]

Our next question comes from the line of Andrew Tsai with Jefferies.

[Lin Tsai, analyst]

Maybe the first one on PALISADE-3 -- 4, you're employing, obviously some exciting improvements to those programs. So could it be fair to assume that the SUDS separation in those studies could be even greater than what you saw in PALISADE-2 because as you're mitigating for placebo effect, could you be further maximizing the drug effect?

[Shawn Singh, executive]

Well, thanks, Andrew. As you mentioned, I mean we've done quite a few things to further derisk the Phase III program and a lot of lessons learned on the other side of the prior studies and obviously, this is not now a study design and an endpoint that sites and investigators are seeing after a pretty long hiatus in the space of a couple of decades.

So the things that we've done to improve surveillance, improve and further derisk execution of the program. Certainly, that's -- it's a possibility. But there are a lot of things. If you compare the world in 2022 to where we are today in '24, just at a minimum, taking masks out of the equation is a big difference.

Having the ability to have in-person investigator meetings, have the ability to do things that ensure rigorous adherence to the protocol, very [indiscernible] requirements of that protocol consistently across sites. All of those things combined have the potential, of course, to improve even on what we've seen in the past in Phase II and in PALISADE-2. Josh Prince, do you want to add anything to that?

[Joshua Prince, executive]

Sure, Shawn. Thank you. Yes, I think we're very optimistic about our ability to execute a well-controlled study post-pandemic. And it's everything that you talked about, but it's also the things that we're able to do in terms of how we work with our CRO. We're putting feet on the ground in terms of our own monitors going to sites in addition to CRO monitors. We have some additional exclusion criteria to make sure that subjects that are coming into the study have the best chance to have positive results or opportunity to have positive results with fasedienol.

And even things such as eligibility review, making sure that subjects are appropriate subjects before they're going into the visit 2 and visit 3 public speaking challenges. So you put all those things together, and it does give us a fair amount of optimism moving into PAL-3 and PAL-4 compared to what we had when we're executing PALISADE-1 and PALISADE-2.

[Lin Tsai, analyst]

And maybe a follow-up on the repeat dose study that you're initiating in second half. As we think about the 3 arms, what are you in the FDA looking for? Or said another way, what is positive data to you?

[Shawn Singh, executive]

Josh, go ahead and address that?

[Joshua Prince, executive]

Yes. We expect it to be a smaller study. So it's not -- at this point, we don't expect to see powered for statistical significance like you would in the PALISADE-3 or PALISADE-4. But it would give us -- is there any indication that for some patients, an additional dose within 10 minutes could provide some benefit and that essentially can inform the label. So that -- I mean, at the end of the day, for us positive study is, we either see that there is some indication that it could be a benefit or we don't. But either way, there's benefit from the first dose.

[Shawn Singh, executive]

Yes, again, it's really -- and the discussions have been circled around informing labeling downstream and also real-world understanding and some of that taken from open-label activity where people might think more is better within a short period of time. So first and foremost, we have to check the box on safety, which, again, we don't think there's much of, if any, risk there associated with a second dose within that 10-minute window.

For those who don't know, it's -- there's 3 arms before a public speaking challenge, placebo-placebo, drug-placebo, drug-drug. Each of second doses within 10 minutes of the first, and that's upfront of public speaking challenges. So again, taking into account possibilities in the real world that people will use the drug a couple of times rather than staggered as the 15-minute study paradigm required are showed.

So we'll see how it goes. Again, it's a dialogue. It's nice to be knowing we're talking about potential labeling benefits. So that's how we took it. Please remember, these receptors are activated in milliseconds. So it's doesn't take much time to get them moving in the first instance.

[Operator]

[Operator Instructions] Our next question comes from the line of Tim Lugo from William Blair.

[Tim Lugo, analyst]

Congratulations on the progress. For fasedienol, the -- given the nonsystemic nonabusable profile and with a positive PAL-2 trial, could you look to gain breakthrough status with the agency? Is it something you're exploring? Will this -- if you were to get breakthrough status, something that could impact your development path at all? And in your discussions with the agency, do you have enough maybe I guess, preclinical data around abusability or enough animal data around the abusability to have that included in the label.

[Shawn Singh, executive]

Thanks, Tim. Appreciate those questions. So first, as to BTD or breakthrough. Look, that's always an aspiration of any company that's got something in a space that we've got. It's always an efficacy matter with the agency. I think, look, like I said, we just got done doing something. We don't think anybody has ever done that we've seen. And we've certainly got a product profile potential that is different than anything that we see out there. We know the agency is worried about the potential high abuse of benzodiazepines given their drug safety communication on that in the -- during COVID.

We also know that unfortunately, social anxiety disorder and other anxiety disorders lead to depression and then lead unfortunately with increasing prevalence that we are seeing to suicidal ideation. So it's -- we already know we have fast track. It doesn't mean that necessarily fall into breakthrough but certainly something on our mind.

And you're right too, that it is important whether or not we see this drug as potentially being scheduled. As we addressed a while back, especially with the drug that is administered intranasally, one might think, well, is it -- is there some abuse potential there. As we know from the preclinical work we've done, and that we submitted to the FDA. And also clinical work, the large body of work, including the open-label study, about 500 subjects with over 30,000 doses. We just -- we're not seeing TEAs or any certainly no SAEs that are usually associated with abuse liability, even in the longer-term open label.

Mechanistically, it makes sense because the drug isn't taken up systemically. And most importantly, based on the GABA study that we did preclinically and the C14 studies that we did, there's not tissue distribution direct activity on the abuse liability receptors in the brain, opioid, nicotine, dopamine and the like. And not potentiating GABA like say, a benzo would also worked in our favor.

So I think we're very confident as we continue to see clinical data support the preclinical data and the whole package that says this is a differentiated safety profile because of the MOA. We're confident in a go-forward where patients could have the ability to access the drug online on a recurring basis with the drug potentially not being scheduled, no REMS. So we'll see how that continues to go. But what we saw in PALISADE-2, again, no TEA more prevalent than 2%.

In the large open-label study, nothing more prevalent than 5% other than headache at 8.7%. So that's remarkably different than what we often hear when we're listening to commercials and side effects that are associated with particular therapeutic option so.

[Operator]

There are no further questions in the queue. I'd like to hand the call back to Mark McPartland for closing remarks.

[Mark McPartland, executive]

Thank you again, everyone, for participating on the call today. Again, if you have any additional questions, please do not hesitate to contact us by e-mail at [e-mail] or contacting the individuals listed in our press release issued earlier today or the Contact Section of our website.

Again, we also encourage you to register for e-mail updates on our website to stay connected with the latest news from Vistagen and any future events. Thank you for participating on the call today. We appreciate everyone's interest and support. We look forward to keeping you current on our continued progress. This concludes the call. Have a tremendous day.

[Operator]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.