Addex Therapeutics - Q1 2023

Transcript

Tim Dyer (Board Director and CEO)

Hello, everyone. I would like to thank you all for attending our first quarter 2023 financial results conference call. I'm here with Robert Lütjens, our Head of Discovery - Biology. 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 disclaimer. 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 achievements before handing over to Robert, who will review our clinical and pre-clinical pipeline. I will then review our Q1 2023 financial results. Following that, we will open the call for questions. Our partner, Janssen, continues to make excellent progress in executing their global phase II study in epilepsy patients with ADX71149.

cohort I of 60 patients has completed part 1 of the study and progressed to part 2. An independent interim review committee has been established by Janssen to review the unblinded data from part 1 and recently made its recommendation to continue the study. The recommendation of the independent interim review committee and the decision of our partner, Janssen, to continue the study is very encouraging. Suggests ADX71149 is potentially safe and well-tolerated and may have a positive impact on this patient population. We look forward to providing further updates on the progression of this important clinical study in the second half of this year. We continue to believe there is value in dipraglurant and have substantially completed our evaluations of future development. We have identified post-stroke recovery and pain as interesting areas for future development in addition to PD-LID.

We are currently pursuing collaborative arrangements to advance future development. We continue to be excited by our preclinical pipeline, which has made excellent progress with multiple clinical candidates rapidly advancing towards IND-enabling studies. We have selected a drug candidate in our mGluR7 negative allosteric modulator program for stress-related disorders, including post-traumatic stress disorder, and are progressing this drug candidate into IND-enabling studies. We expect to start dosing in these studies in the second half of this year. We also continue to progress several backup compounds from differentiated chemical series through clinical candidate selection phase. We have made substantial progress in our collaboration with Indivior in advancing several GABAB PAM compounds into clinical candidate selection.

As a reminder, Indivior primary interest is in substance use disorder, and under the agreement we have retained the right to select drug candidates for development in certain exclusive reserved indications, including Charcot-Marie-Tooth, CMT1A neuropathy, chronic cough and pain. During the first quarter, we have been focused on preclinical profiling compounds in chronic cough. We expect Indivior and ourselves to select compounds to advance into IND-enabling studies in 2024. Last but not least, our M4 PAM program for schizophrenia continues to make progress through late lead optimization. M4 PAM is a particularly exciting target for schizophrenia, especially following the recent positive phase III data from Karuna. We continue to pursue partnering discussions across the portfolio to secure financial resource and expertise to advance portfolio into the clinic.

We raised a total of CHF 5.7 million funding year to date through the sale of treasury shares through our Kepler ATM facility, and in April completed an offering to a single U.S. investor of CHF 4.5 million. We continue to focus on conserving cash and prioritizing activities that can bring value to our programs in the short term. These cost control measures have significantly reduced our monthly cash burn going forward. As of today, we estimate that our cash reserve provide us with a runway into 2024. I will hand over to Robert, who will give you some more details about our exciting pipeline.

Robert Lütjens (Head of Discovery of Biology)

Thanks, Tim. Hello, everyone. As mentioned by Tim, we communicated yesterday on the progress our partner, Janssen, has made in advancing our epilepsy program currently in phase II. I will focus on this update today and also present the latest on the rest of our portfolio afterwards. As an introduction to this program, for those who are not aware of the details, ADX71149 is a metabotropic glutamate receptor subtype two or mGlu2 positive allosteric modulator discovered in partnership with Janssen using Addex's proprietary allosteric modulation platform. Janssen have extensively profiled ADX71149 in pre-clinical models of epilepsy and has demonstrated both standalone efficacy and a strong synergistic effect in combination with inhibitors of SV2A such as Keppra and Briviact.

Epilepsy is a large multi-billion dollar market opportunity where despite several available treatment options, many patients are still in need of improved therapies to treat their seizures. Interestingly, Keppra, while being the generic, is still leading the market of antiepileptics with close to $1 billion sales revenue per year. Over 2 million patients are taking Keppra, but many experience breakthrough seizures or a suboptimal response demonstrating the need for improved treatment options. ADX71149 has been thoroughly profiled in preclinical and clinical studies by Janssen demonstrating its good safety and tolerability profile in healthy volunteers and patients. Janssen are responsible for the development of the compound and are currently running both a phase II study and an open label extension study in epilepsy patients. It is important to note that we have significant economics in our deal with Janssen.

We have pre-launch milestones of EUR 109 million, low double-digit royalties on net sales. Janssen are responsible for all costs. I would like to show you some of the preclinical data. We've shown this data in the past. Let me remind you of the main take-home message, which is the strong synergistic effect obtained when ADX71149 is given in combination with levetiracetam, the active molecule in Keppra. These preclinical studies were performed in the 6 Hz model, which is widely recognized as being a model with high translational value to characterize the efficacy of antiepileptic drugs. The left graph shows how the effect of levetiracetam is dramatically increased in presence of a low dose of ADX71149, producing a 35-fold shift in its efficacy.

The right graph shows the result obtained when the paradigm was reversed, where a low dose of Keppra induces a 14-fold increase in efficacy of ADX71149. In other words, we obtained an antiepileptic effect with this combination of low doses of ADX71149 and Keppra that was similar to the one obtained with a full dose of Keppra. We hypothesize this synergistic effect is due to the strong colocalization and similar neurotransmitter vesicle release control function of mGlu2 receptors and SV2A proteins. Taken together, these findings have been instrumental in the decision taken by Janssen to initiate the study of ADX71149 in combination with levetiracetam in epilepsy. This is a phase II double-blind placebo-controlled proof of concept study enrolling patients with focal onset seizures who have suboptimal response to treatment with levetiracetam or Keppra or brivaracetam, Briviact.

Janssen plan to recruit up to 160 patients with up to three cohorts to test multiple doses. cohort I is partly completed and cohort II has started recruiting patients. In this phase II study design, patients establish a 28-day seizure count over a 56-day baseline period prior to being randomized to receive either ADX71149 or matching placebo. The primary endpoint is the time taken to return to their monthly baseline seizure count. The study has 2 parts, Part 1 being the 4-week acute efficacy phase and Part 2 being an 8-week maintenance of efficacy phase. Part 2 includes patients who did not reach their baseline seizure count during Part 1 of the study and continue on their randomized drug or placebo.

Cohort one with 60 patients has completed part one of the study, while part two will complete by end of May and part one of cohort two has started recruiting patients. Data obtained in part one for cohort one was sent to an independent interim review committee to avoid unblinding of study who gave the recommendation to continue the study. This is encouraging news suggesting ADX71149 is safe and well-tolerated with potential benefit to epilepsy patients. We look forward to be able to update you with the progress of this study later in the year. Based on the hypothesis forged in preclinical models, if the synergistic effect seen with a combination of ADX71149 with levetiracetam translates into patients, then we see a huge opportunity to turn our approach into probably the most important novel treatment for epilepsy patients suffering from focal onset seizures.

Now on to dipraglurant, our mGlu5 negative allosteric modulator. While several indications such as substance use disorder or trigeminal neuralgia could be interesting for dipraglurant, we believe the differentiated profile of dipraglurant makes it particularly suitable for dyskinesia associated with Parkinson's disease and post-stroke recovery. We are continuing our exploration with key opinion leaders to establish the future development plans in PD-LID and post-stroke recovery. In parallel, we are pursuing collaborative arrangements to implement these future clinical plans. dipraglurant is a phase II-ready compound with a robust intellectual property protection until 2034 and with significant API and drug product supply to start a new clinical trial as soon as we will be ready to launch it. Let me now update you on our preclinical programs. We continue making significant progress in advancing our preclinical programs.

Let me remind you that all programs have been identified in-house from our proprietary allosteric modulation platform. Success of our platform is driven by the powerful combination of our unique small molecule chemical library and tailor-made proprietary biological screening tools and methods, which we deploy to identify the initial hits and to support lead optimization. I would like to share with you the progress we have made in our GABAA PAM, mGlu7 NAM, and M4 PAM preclinical programs, where we see considerable near-term value creation. Starting with our GABAA positive allosteric modulator program, which is partnered with Indivior. The aim of this collaboration is to deliver a new treatment for substance use disorders. Indivior is supporting the research Addex and have recently committed additional funding for us to complete clinical candidate selection activities, reaching CHF 13.8 million total funding so far.

As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using Baclofen, our GABAB orthosteric agonist. Baclofen is FDA approved for treatment of spasticity and is widely used off-label to treat numerous diseases, including alcohol use disorder, chronic cough, CMT1A, and various types of pain. Baclofen has a short half-life and comes with significant side effects hampering its wider use. There's 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 clinical candidate selection phase with the aim to nominate drug candidate ready to enter IND-enabling studies in 2024 for our partnerships with Indivior.

As part of our agreement with Indivior, we have the right to select drug candidates from the funded research activities for our own independent GABAPAM program. There are several possible indications to explore, validated in man by off-label use of Baclofen, such as Charcot-Marie-Tooth disease, type 1A, chronic cough or pain. We have generated data with our GABAPAMs in preclinical models of CMT1A and pain, and have been focused on preclinical profiling compounds for chronic cough in Q1 2023. Let me today focus on this opportunity. There's a strong rationale for developing GABAPAMs 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 possibly because of an overactive cough reflex.

Support for this approach comes from validation with Baclofen used off-label in several categories of chronic cough and from GABAB receptors strong expression in the neuronal pathway involved in cough. We believe that GABAPAMs could be an innovative new treatment of chronic cough, offering improved efficacy, fewer non-responder patients, and lack of gustatory side effects in comparison to the P2X3 inhibitors. We are working with multiple compounds progressing in late clinical candidate selection phase, and we expect to move into IND-enabling studies in 2024 in parallel to delivering compounds for our partner, Indivior. Onto our mGlu7 negative allosteric modulator program for stress-related disorders, including post-traumatic stress disorder. The program has delivered one clinical candidate drug ready to enter IND-enabling studies, as well as several differentiated backup compounds.

We have established a robust intellectual property position with 5 patent applications covering our lead and backup compounds, guaranteeing a strong protection for our program. PTSD is a psychiatric disorder affecting approximately 3.5% of the population and may occur in people who have experienced or witnessed a traumatic, often life-threatening event such as a serious accident, natural disaster, or war. Current treatments rely mostly on behavioral therapy, as most pharmacological treatments, such as anxiolytics and antidepressants, show insufficient benefit. The rationale for inhibiting mGlu7 NAM as an approach for treating stress-related disorders, including PTSD, is based on a wide body of preclinical evidence from the anxiolytic profile of mGlu7 knockout or knockdown animals to studies using mGlu7 negative allosteric modulators performed at Addex as well as by many other groups.

We have completed a robust preclinical package with our lead drug candidate and are now moving into IND-enabling studies and expect to enter phase I studies in second half of 2024. Finally, a few words about M4 positive allosteric modulator program for treatment of schizophrenia and other types of psychosis. Psychosis has been treated with the same mechanism action for the last 50 years with limited efficacy and significant tolerability issues, often leading to treatment discontinuation and relapse. This is now about to change with the advent of a completely novel approach based on activation of M4 receptors. The recent positive readout of a third phase III registrational study of KarXT. The expected FDA approval strongly validates the M4 approach and our positive allosteric modulation approach as we are aiming at identifying highly selective and brain penetrant molecules.

In summary, our drug discovery engine has achieved great progress with multiple drug candidates advancing towards IND-enabling studies. The renewed commitment of our partner, Indivior, the delivery of candidates starting IND-enabling studies in the mGlu7 program, and the significant progress achieved in our other preclinical programs are further validation of the quality and productivity of our allosteric modulation platform. With this, I hand it back to you, Tim.

Tim Dyer (Board Director and CEO)

Thanks, Robert. I'll now switch to an overview of the financials. Starting with the income statement. We recognized $0.5 million of income in Q1 compared to $0.2 million in Q1 of 2022. The primary source of revenue is our research funding from our collaboration with Indivior. In terms of expenses, R&D expenses were $1.7 million in Q1 2023, compared to $3.8 million in Q1 2022. The significant decrease of $2.1 million is primarily due to decreased dipraglurant-related external research and development activities. G&A expenses were $1.2 million in Q1 2023, compared to $2.2 million in Q1 of 2022. The decrease of $1 million is primarily driven by reduced share-based compensation costs. The finance result is primarily related to positive interest on U.S. dollar cash deposits. To the balance sheet.

Our assets are primarily held in cash. We completed Q1 with CHF 5.6 million of cash held in Swiss francs and USD. Other current assets amount to CHF 1.3 million and primarily relate to prepayment of retirement benefits, as well as trade receivables that mainly relate to a search agreement with Indivior. Current liabilities of CHF 2.2 million are stable and primarily relate to R&D payables and accruals. Non-current liabilities relate to lease liabilities. Now to summarize, the development of ADX71149 in epilepsy is going well with cohort II recruiting patients, and we are encouraged by the recommendation of the independent interim review committee to continue this study. We continue to believe in the value of dipraglurant and are evaluating its future development with a focus on post-stroke recovery.

In parallel, we are pursuing collaborative arrangements to advance development and look forward to sharing more information in the future. Our preclinical program continue to make solid progress towards delivering drug candidates for future clinical studies in important therapeutic areas, including stress-related disorders, chronic cough, cognition, and schizophrenia. As a reminder, our portfolio was discovered in-house from our pioneering allosteric modulated drug discovery platform, and consequently, we have significant intellectual property in all programs. We have a track record of securing partnerships at preclinical stage and supportive top-tier investors. We recognize that 2023 stock performance and current market capitalization is very disappointing. However, we are having multiple business discussions across our portfolio and strongly believe that if we are successful at executing our near-term partnering strategy, then our stock price should move to recognize the value of our portfolio.

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

Operator (participant)

Thank you. Please stand by for your first question. Your first question comes from Boobalan Pachaiyappan from H.C. Wainwright. Boobalan, your line is open. Please go ahead.

Boobalan Pachaiyappan (Director and Senior BioPharma Equity Research Analyst)

Hi, this is Boobalan. I'm dialing in for Raghuram Selvaraju, thanks for taking our questions. Two from us. Firstly, how does the recommendation to continue the phase II trial of ADX71149 potentially increase the likelihood of a positive final outcome?

Tim Dyer (Board Director and CEO)

Thanks for the question. Janssen has established an independent review committee to look at part one, the unblinded part one data from cohort one. If you've been following this study, I mean, the study was originally established just to have one cohort, and then it was modified to have up to three cohorts, looking at multiple doses, with 160 patients. They do not want to unblind the study, this is why they've established this committee. The remit of the committee was to really give a go, no-go decision. Recommendation, I should say, for Janssen then to take a decision. What we know is that the committee has made a recommendation to continue this study.

You know, this suggests that they must be seeing something positive from the data they looked at. Based on the recommendation, Janssen have then decided to continue the study, which we again see as very positive. We certainly believe that this is now. You know, gives us more, I would say increases the probability of a successful outcome of the study. Again, you know, I, you know, this is a clinical study, and I think we all know that, you know, lots and lots of things can go wrong in clinical studies. You know, this is only the data from part 1 of cohort I. This is 60 patients, which were 2 to 1 randomized, and it's the data from the first 4-week period.

Boobalan Pachaiyappan (Director and Senior BioPharma Equity Research Analyst)

All right. Thanks for the detailed color. Secondly, in addition to what is stated in your prepared remarks, has there been any progress in your efforts to identify a potential collaboration partner or maybe licensee for dipraglurant? Thanks.

Tim Dyer (Board Director and CEO)

We, you know, we continue to have discussions with multiple potential partners across the portfolio. You know, we know when we start the discussion, very difficult to predict where we end the discussion. You know, we continue to advance the programs. We continue to generate interesting data, and we continue to have, you know, very encouraging discussions with potential partners. That's all I can really say at this point in time.

Boobalan Pachaiyappan (Director and Senior BioPharma Equity Research Analyst)

All right. Thanks again for taking our questions, and congrats on the progress.

Operator (participant)

Thank you. Please stand by for the next question. The next question comes from Leonildo Delgado at Baader Helvea. Leonildo, your line is open. Please go.

Leonildo Delgado (Director of Biotech and Healthcare Equity Research)

Hi. Good afternoon. This is Leonildo speaking. Thanks a lot for taking our questions. With the current burn rate, it looks to me that cash will only take you through 3Q 2023. You mentioned 2024 in your opening remarks. Does it mean that you're gonna stop all the R&D activities, including the IND-enabling studies, or should we expect rather a personal reduction?

Tim Dyer (Board Director and CEO)

We have no plans to restructure the company. I'm not quite sure where you get your, you know, your position around Q3. You know, we finished quarter with CHF 5.6 million, and we've raised CHF 4.5 million. I think what you have to If you look at the cash burn in 2022, you've got to remember we had an ongoing phase III study with an open label study. This got closed out. We continue to have certain costs related to the closing out of the dipraglurant PD-LID development in Q1. R&D expenses are, you know, continuing to come down. This is why our guidance is that we have cash through into 2024.

Leonildo Delgado (Director of Biotech and Healthcare Equity Research)

Okay. Thank you. Does the positive opinion on the epilepsy study facilitate, in your view, some of the partnering conversations? Do you have something concrete, for example, term sheets on the table? Could you maybe provide some details there? Thank you.

Tim Dyer (Board Director and CEO)

Look, we have multiple discussions with multiple parties across the portfolio. You know, we are not giving this sort of granularity around our business discussions. I think, you know, if you look at the portfolio, if you look at the programs, you know, we have a track record of doing deals at the preclinical stage. We have some very exciting first-in-class programs. The mGluR7, we have a clinical candidate. We have multiple backups. We have a very young IP portfolio in an exciting area. This is first in class. We have an M4 PAM program on an extremely exciting target. The GABAB chronic cough program, you know, is particularly interesting. We're very close to having a molecule that's gonna be ready to go into IND-enabling studies.

We recently saw the takeout of BELLUS for $2 billion, by GSK in the chronic cough space. I think there's plenty of exciting programs that can drive business development within the Addex portfolio.

Leonildo Delgado (Director of Biotech and Healthcare Equity Research)

Thank you.

Operator (participant)

Thank you.

As a reminder, if you do have a question via the telephone, please press star 11 on your keypad. If you have a question via the webcast, please use the Ask a Question tab. We currently have no further telephone questions. Just to confirm, we currently have no further telephone questions.

Tim Dyer (Board Director and CEO)

What's all this about?

Operator (participant)

I will now hand back to you for any web questions.

Tim Dyer (Board Director and CEO)

Yeah. We have a web question about the expected readout of data from J&J. As I said, part 1 of cohort I has completed. There are patients in part 2. We're expecting them to complete quite soon. We know that cohort II is recruiting patients. We're expecting cohort II to recruit in the coming months. They'll be in part 1, they'll move into part 2. We would expect cohort II to be completed probably around the end of the year. We are not giving any firm guidance on when data will be reading out because if you read ClinicalTrials.gov, you'll see that J&J are ready to go up to 3 cohorts.

Certainly, if they introduce a third cohort after cohort two has completed recruitment, then the reporting of data will be pushed out until cohort three is completed. I think you can appreciate that it would be extremely unwise to try and speculate on when the data will be read out or when we will be able to read out the data from J&J.