Addex Therapeutics Ltd

SIX:ADXN

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the Addex Therapeutics First Quarter 2020 Financial Results and Corporate Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Tim Dyer. Please go ahead.

[Timothy Dyer, executive]

Hello, everyone. I'd like to thank you all for attending our Q1 2024 financial results conference call. I am here with Mikhail Kalinichev, our Head of Translational Science, who will provide an update on our R&D programs. I draw your attention to the press release and the financial statements issued earlier today, which are available on our website.

I also draw your attention to our disclaimers. We will be making certain forward-looking statements that are based on the knowledge we have today.

I will start this conference call by giving a quick overview of our recent activities and achievements before reviewing our pipeline. I will then hand over to Mikhail, who will review in more detail some of our clinical and preclinical programs. I will then speak about the recent launch of Neurosterix before reviewing the Q1 2024 full year financial results. Following that, we will open the call for Q&A.

We've made great progress in our GABAB Positive Allosteric Modulator program, which is funded by our partner, Indivior, and are on track for Indivior to select a drug candidate for advancing into IND-enabling studies at the end of this month. As a reminder, under the agreement with Indivior, we have the right to select our own drug candidate after they have selected their candidate and to develop it in 8 reserved disease areas, where Indivior is precluded from developing their candidate.

We have selected chronic cost and expect to complete preclinical characterization in the second half of 2024. We launched Neurosterix with a Series A financing round of $63 million, led by Perceptive Advisors. This is an innovative financing transaction, it provides us with the resources needed to advance our preclinical portfolio without diluting our shareholders' interest in our clinical stage assets and partner programs. As part of the transaction, we received CHF 5 million and a 20% equity interest in Neurosterix, securing the balance sheet and retaining significant upside in the programs for our shareholders. I will speak more about this innovative financing transaction later in the presentation.

Our partner, Janssen, completed the Phase II epilepsy study, evaluating adjunctive ADX71149 administration of patients with focal onset seizures with suboptimal response to levetiracetam or brivaracetam. We reported top line data in May, and unfortunately, the study did not achieve statistical significance for the primary endpoint of time for patients to reach baseline seizure count when ADX71149 was added to standard of care.

We expect the full data set from the study in the second half of this year, and we'll work with our partners to serve the next steps for the program.

Now for a quick review of our pipeline; as mentioned, 71149 has reported top line data, and we are expecting a full data set in the second half of this year. We continue to believe in dipraglurant executing our plans to commence development in both dyskinesia early with Parkinson's disease as well as preparing dipraglurant for a Phase II proof-of-concept study in post stroke recovery.

As mentioned, our GABAB PAM collaboration is coming to the end of the discovery phase with drug candidates on track to start IND-enabling studies later this year. Indivior is executing the substance use disorder program, and we are preparing our candidate for development in chronic cough.

Now I will hand over to Mikhail, who will give you some more details about our exciting portfolio.

[Mikhail Kalinichev, executive]

Thanks, Tim. Hello, everyone. I will start by speaking about dipraglurant and our plan for development in brain injury recovery. Following termination of the development of dipraglurant in PD-LID, we embarked on a detailed evaluation of a number of potential indications of interest for future development, including substance use disorder, migraine and other forms of pains. We have completed this exercise and have identified brain injury recovery as an interesting indication for the future development of dipraglurant.

We believe the differentiated profile of dipraglurant makes is particularly suitable for enhancing the impact of rehabilitation in traumatic brain injury and stroke patients.

There is a large unmet medical need in post-stroke recovery and rehabilitation. Stroke is among leading causes of chronic, often lifelong disability, as it leads to motor, sensory, cognitive impairment and multiple comorbidities. There are over 100 million stroke survivals worldwide, and the number is growing at an annual rate of 12 million.

A variety of rehabilitation therapies are used with post-stroke patients, but the recovery is slow and often inadequate. There is an urgent need for pharmacological agents that can facilitate the recovery stimulated by rehabilitation therapies. mGlu5 receptor is a suitable target to address post-stroke recovery as it is densely expressed in the brain involved in neuroplasticity and modulates excitatory/inhibitor equilibrium.

In fact, activation of mGlu5 has been observed in the range of neurological disorders, including stroke, where it plays a role in so-called maladaptive rewiring of the brain following stroke. Inhibition of mGlu5 on the other hand, can facilitate adaptive rewiring of the brain, promoting neuroplasticity and creating of new functional pathways, moving with neural network towards the prelesion states.

Exciting new evidence recently published in the Journal Brain suggests that the negative allosteric modulator of mGlu5 MTEP administered daily in rats following stroke resulted in a sustained and growing improvement in sensory motor function in comparison to [ vehicle ] treatment.

Similar improvement in sensory motor function was observed in animals treated daily with our mGlu5 NAM, Dipraglurant. MRI imaging of the resting state functional connectivity in post-stroke rodents shows that daily administration of MTEP also stimulates intra and interhemispheric connectivity in the brain disrupted by stroke. It's important to note that the improvement in brain connectivity after stroke is known to correlate with functional recovery and is observed across species.

Dipraglurant is ideally suited to be used in tandem with rehabilitation therapies in post-stroke patients, as it has a fast onset of action and short half-life. It has shown good tolerability in healthy subjects and in Parkinsonian patients showing only mild-to-moderate CNS-related adverse effects. We have a drug product range and a strong patent position and believe the dipraglurant can become a first-in-class drug to facilitate post-stroke recovery. We can also speculate that dipraglurant mediated adaptive rewiring and facilitation of recovery following brain damage can also be seen in traumatic brain injury patients.

Let me now switch to GABAB Positive Allosteric Modulator preclinical program, which is partners with Indivior. The aim of this collaboration is to deliver a new treatment for substance use disorders. Indivior is supporting the research at Addex and have recently committed an additional CHF 2.7 million funding for us to complete clinical candidate selection activities, in addition to CHF 13.8 million total funding so far.

As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas, including -- using baclofen, a GABAB orthosteric agonist. Baclofen is FDA approved for treatment of spasticity and is widely used off-label to treat numerous diseases, including substance use disorder. However, baclofen has a short half-life and comes with significant side effect, hampering its wider use. Thus, there is a strong need for a better baclofen. We believe this can be achieved with positive allosteric modulators and their differentiated pharmacology, having the efficacy of Baclofen but longer half-life and improved side effect profile.

We are well on our way to meeting this objective with multiple novel drug candidates, rapidly advancing through candidate selection phase with the aim to nominate drug candidates ready to enter ID-enabling studies in H2 2024.

As part of our agreement with Indivior, we have the right to select drug candidates from the funded research activities for our own independent GABAB PAM program. We have selected to focus our independent program on cough and therefore, I will present this exciting opportunity.

There is a strong rationale for developing GABAB PAMs for chronic cough. Chronic cough is a persistent cough that lasts for more than 8 weeks and can be caused by a variety of factors, including respiratory infections, asthma, allergies and acid reflux, but also possible by an overactive cough reflex. There is a large unmet medical need in novel anti-tussive drugs as current standards of care are ineffective in 30% of patients or only moderately effective in up to 60% of patients. In addition, the current treatments carry risks of serious side effects.

On the next slide, we show that GABAB PAM are likely to have a superior tolerability profile in comparison to the current standard of care and show no taste related side effects, as seen with a newly approved P2X3 inhibitor Gefapixant. Report for using GABAB PAMs in treatment of chronic cough comes from the clinical evidence of baclofen, a GABAB agonist, is used off-label in cough patients. And from anatomical evidence in GABAB receptors are strongly expressed in airways and in the neuronal pathway regulating cough. Therefore, we believe that GABAB PAM could offer superior efficacy in cough patients.

Thus, we believe that GABAB PAMs could be an innovative new treatment of chronic cough administered once daily via oral dosing and offering improved efficacy and tolerability with fewer non-responder patients suitable for chronic dosing, therefore, significantly improving patients' quality of life.

We are working with multiple compounds progressing in late clinical candidate selection phase and we expect to move into IND-enabling studies in H2 2024 in parallel to delivering compounds for our partner Indivior.

This concludes our prepared remarks on the progress of our R&D programs. Now I hand it back to Tim.

[Timothy Dyer, executive]

Thanks, Mikhail. Now before I move on to the financials, I would like to spend a few moments to speak about the newest Addex transaction.

Due to the excellent progress made by our R&D team in advancing our unpartnered preclinical portfolio, our M4 PAM, our mGlu7 NAM and mGlu2 NAM programs reached a stage of development where they now need significant amounts of financing to progress into the clinic. Unfortunately, given the low market capitalization of Addex, raising the amount of capital needed would have been extremely challenging and highly dilutive to our shareholders. So we decided to spin out these programs and our platform into a new private company and raise the necessary capital directly into the new private company.

We believe this is an excellent transaction for Addex shareholders as it has secured CHF 5 million for Addex and removed the financing overhang on the Addex stock. We have retained 20% interest in Neurosterix, so we can benefit from the upside from advancing the programs into the clinic, which is now secured by the $63 million capital from a high-quality investor syndicate led by Perceptive Advisors.

As part of the transaction, we have divested our allosteric modulator technology platform, including the majority of our staff. However, we have retained -- However, we have entered into a service agreement with Neurosterix to ensure that we can access the skills needed to execute on our business strategy.

Now for the review of Q1 2024 financials. Following Neurosterix transaction, we were required under the IFRS standards to identify continuing operations related to the retained programs and discontinued operations related to the operations and programs that were sold to Neurosterix. All income and expense items related to discontinuing operations have been reclassed under a specific line of the comprehensive loss called net loss from discontinued operations.

Starting with the income statement, which relates to continuing operations we recognized CHF 0.2 million of income in Q1 2021 compared to CHF 0.5 million in Q1 2023, the primary source of revenue is research funding from our collaboration with Indivior, which is recognized as the associated research costs are incurred.

Continuing R&D expenses primarily relate to our GABAB PAM program and remained stable at CHF 0.3 million in Q1 compared to Q1 2023. Continuing operations and G&A expenses were CHF 0.8 million compared to CHF 0.6 million in Q1 2023. The increase of CHF 0.2 million is primarily due to legal fees related to the Neurosterix transaction.

The finance results in Q1 2024 is primarily related to foreign exchange gains on cash held in U.S. dollars and to a lesser extent, to interest income on the U.S. dollar cash deposits.

Now to the balance sheet. Our assets are primarily held in cash, and we completed Q1 with CHF 1.6 million of cash held in Swiss francs and U.S. dollars. Gross proceeds of CHF 5 million from the Neurosterix transaction have been received in April 2024, so are not included in this figure.

Other current assets amount to CHF 0.8 million, primarily related to prepaid retirement benefits annually paid at the beginning of the year. Due to the Neurosterix transaction, we expect CHF 0.6 million of this amount to be reimbursed in Q2 of this year.

Current liabilities of CHF 3.3 million as of March 31, 2024, increased by CHF 0.4 million compared to a like period like date as the previous year and primarily related to CRO-related accruals and payables. Noncurrent liabilities of CHF 0.1 million decreased by CHF 0.5 million compared to December 31, 2023, primarily due to the staff transfer to Neurosterix.

Now to summarize, I hope you have understood how transformative the Neurosterix deal is for Addex. We have strengthened the balance sheet and secured the financing to execute on the development of our preclinical portfolio, including the M4 PAM program for schizophrenia into the clinic and our partnership with Indivior is on track to deliver clinical candidates, ready for IND-enabling studies by the end of June of this year.

Dipraglurant is ready to restart clinical development and they're subject to a number of partnering discussions. Our independent GABAB cough program is also on track to start IND-enabling studies.

We are validating partnerships with industry, supportive investors and a strong balance sheet, which puts us on a solid position to deliver on our strategic objectives.

This concludes the presentation, and we will now open the call for questions.

[Operator]

[Operator Instructions]. And now we're going to take our first question. And it comes from line of Leonildo Delgado from Baader-Helvea.

[Leonildo Delgado, analyst]

A couple of questions through my side. In addition to the CHF 5 million upfront payment, should we expect more upside for Addex when it comes to Neurosterix. And so when would Addex be able to capitalize on 20% equity interest. And so how big would the opportunity be?

[Timothy Dyer, executive]

Okay. Thanks for the question. Yes. So the CHF 5 million. Yes, it's been received in Q2. And Addex has retained its 20% interest in Neurosterix. Neurosterix has got a $60 million on its balance sheet and the post-money valuation of Neurosterix is basically just south of $100 million. So the value at the date of the transaction of the 20% is about $20 million.

Now regarding upside, there was a sale of the carved-out entity, and there are no milestones and royalties on any of the products that were divested into Neurosterix. So the upside for Addex is in its equity interest in Neurosterix.

And I mean there's a number of recent deals around the muscarinic M4. For example, AbbVie bought Cerevel $8.7 billion. BMF bought Karuna at the end of last year for $14 billion. I think the most relevant comparator is that Cerevel you had an M4 PAM, the M4 PAM had just started Phase II. And what's interesting for Neurosterix is the cash that's on the Neurosterix balance sheet and finances, the M4 PAM all way through to a stage very close to where Cerevel was with their M4 PAM program.

So I wouldn't want to speculate about the value upside, but I think you can make your own conclusions that there is significant upside for Addex in that 20% of Neurosterix because Neurosterix is well funded finance to meet some very significant value inflection points being the advancing of 1 or 2 programs into the clinic and through Phase I. I hope that answers your question.

[Leonildo Delgado, analyst]

It answers. Thanks a lot. May be one final question on the Epilepsy program. When do you think Janssen will communicate plans for the ADX71149?

[Timothy Dyer, executive]

Yes. So as mentioned, we've seen the top line results. Unfortunately, the primary endpoint was not met. And we are now doing a full analysis -- or Janssen is doing a full analysis of the full data set. And we are expecting to receive the full data set and the full analysis and have discussions with them about it. I mean, we're talking about H2. We're very hopeful on earlier in H2. Given the timelines to do this, it should come in Q3, we would have thought.

And then we will work with Janssen to work out how best to move the program forward. Now clearly, one option, which is reasonably possible is that the collaboration gets terminated and Addex receives back the molecule and all the backup molecules as well.

So this is one of the -- I would say reasonably probable outcome once the full data set has been reviewed. But again, until we see the full data set, we can't really fully understand whether there is a way forward in epilepsy or not.

[Operator]

[Operator Instructions]. Thank you, ladies and gentlemen. This brings the main part of our conference to close. And I would now like to hand back to Tim Dyer for closing remarks.

[Timothy Dyer, executive]

Well, thank you very much, everyone, for attending the Q1 2024 conference call, and we look forward to speaking to you again soon. Have a very nice day.

[Operator]

That does conclude our conference for today. Thank you for your participation. You may now all disconnect. Have a nice day.