COMPASS Pathways - Earnings Call - Q3 2020

Transcript

Speaker 0

Thank you, operator. Good morning or afternoon to everyone, and welcome to today's call to review Compass Pathways Results for the three months ended 09/30/2020. With me on the call are George Goldsmith, Chairman, Chief Executive Officer and Co Founder Lars Vilder, President, Chief Business Officer and Co Founder and Piers Morgan, Chief Financial Officer. You may have seen the press release we issued this morning M.

Eastern Time. It includes our financial results for the three months ended 09/30/2020 as well as a business update. The press release is also available on the Investor Relations section of our website. Our results for the three months ended thirtieth September twenty twenty are also being filed with the SEC on Form six ks. George will begin today's call with a business update on our recent progress.

Tiers will follow with a review of our financial results for the quarter. We will then open the call to questions and expect the call to last approximately sixty minutes. The call is being recorded, and the recording will be available on the Compass Pathways Investor Relations website shortly after the conclusion of this call. During the call today, the team will be making forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. In some cases, forward looking statements can be identified by terminologies such as may, might, will, could, would, should, expect, intend, plan, objective, anticipate, believe, contemplate, estimate, predict, potential, continue and ongoing, or the negative of these terms or other comparable terminology, although not all forward looking statements contain these words.

The forward looking statements on this call are neither promises nor guarantees, and you should not place undue reliance on these forward looking statements because they involve known and unknown risks, uncertainties and other factors, many of which are beyond Compass' control and which could cause actual results, levels of activity, performance or achievements to differ materially from those expressed or implied by these forward looking statements. These risks, uncertainties and other factors include, among others, pre preclinical and clinical development is lengthy and uncertain, and therefore, our preclinical studies and clinical trials may be delayed or terminated or may never advance to or in the clinic. And those risks and uncertainties described under the heading Risk Factors prospective filed with the U. S. Securities and Exchange Commission on 09/21/2020 and in subsequent filings made by Compass with the SEC, which are available on the SEC's website at www.sec.gov.

Except as required by law, Compass disclaims any intention or responsibilities updating or revising any forward looking statements made during this conference call in the event of new information, future developments or otherwise. These forward looking statements are based on Compass' current expectations and speak only as of the date hereof. And with that, I will now hand over to our Chairman, CEO and Co Founder, George Goldsmith.

Speaker 1

Thank you, Tracy. Welcome, everyone, to our first quarterly update call as a publicly traded company. As you know, earlier in the year, we completed an upsized IPO on NASDAQ and raised first proceeds of $146,600,000 Our American depository shares began trading on the NASDAQ Global Select Market on the September 18. As some of you may be new to Compass, I'll take a few minutes to give a brief introduction. Compass Pathways is a mental health care company dedicated to accelerating patient access to evidence based innovation in mental health.

Our focus is on improving the lives of those who are suffering with mental health challenges and who are not helped by current treatments. We are pioneering the development of a new model of psilocybin therapy in which our proprietary formulation of synthetic psilocybin COMT-three sixty is administered in conjunction with psychological support. COMM-three sixty has been designated a breakthrough therapy by the U. S. Food and Drug Administration or FDA for treatment resistant depression.

We are currently conducting a Phase 2b clinical trial of psilocybin therapy for treatment resistant depression and plan to recruit up to two sixteen patients. As we indicated in our press release earlier today, we are making steady progress with this trial with the addition of a new site in Berlin hold on one second a new site in Berlin this month, we will now have 21 trial sites in 10 countries across Europe and North America. While the COVID-nineteen pandemic has impacted our trial, our plan to report data from this trial in late twenty twenty one remains unchanged. We are working closely with our trial sites to carefully assess the ongoing COVID-nineteen situation and will always put the safety of patients and our teams above everything else. Over the last few months, we have continued to strengthen our Board and leadership team.

In September, we were delighted to welcome Linda Mcgoldrick to the board. Linda brings health care and life sciences experience from a range of public and private companies and nonprofit organizations, including Financial Health Associates International, Zillion Inc, Veos plc and Kaiser Permanente International. In 2018, Linda was appointed by the Governor of Massachusetts to serve on the state's Health Information Technology Commission. Earlier this week, we welcomed Greg Rizlik to our team as Senior Vice President, Data Science, Machine Learning and Digital Health Research. Greg is a data scientist and artificial intelligence executive.

He is an instructor at Stanford Continuing Studies and has held senior positions at MINDESTRONG and at Tesla. Digital health and digital technology will be core to the future of mental health care, and Greg will add tremendous expertise to our digital team. Stephen Schultz will join us on 01/2020 as Senior Vice President, Investor Relations. Stephen has more than thirty years experience in Investor Relations and joins us from Pharmaceuticals. To round off our senior management hires earlier in the quarter, Steve Levine joined us as Vice President, Patient Access.

Steve was formerly Founder and CEO at Actifine Neurotherapies and Sarah Beta was appointed our Head of Therapy Research and Training, having come to us from AESO Digital Health, where she was Chief Clinical Officer. Turning to other developments. In August, we entered into a sponsored research agreement with the University of the Sciences in Philadelphia to establish a drug discovery center. The center is also exploring and developing optimized psychedelic and other compounds targeting the five HT2A receptor, a receptor in the brain that has been implicated in mental health illnesses. This work is in its early stages, but will enable us to broaden our portfolio beyond psilocybin therapy.

Our primary focus is, of course, on the development of our psilocybin therapy. In July, we were granted our second UK patent, adding to our U. S. Patent and German utility model. The patent includes claims covering crystalline psilocybin, pharmaceutical formulations, medical uses and the method of manufacturing.

Patent granted in December 2019 was a subject of a petition for post grant review filed in February 2020. The petition was dismissed on the merits in August. We continue to work with a number of academic and other partners to accelerate research or to provide our COMT-three sixty psilocybin for use in their independent studies. For example, we are providing funding and support to the Aquilino Cancer Center at Adventist Healthcare Shady Grove Medical Center in Rockville, Maryland. In August, the Aquilino team launched the first clinical trial of psilocybin therapy with simultaneous administration and one on one patient support to treat depression in cancer patients.

Simultaneous administration with one to one support could potentially help to accelerate clinical trials and access, for patients. And this trial is an important milestone in developing that. The first psilocybin administration session was successfully administered, last week. With all patients receiving psilocybin combined with a one to one support from specially trained therapists. Finally, earlier this month, we joined the psychiatry consortium, an international collaboration of medical research charities and pharmaceutical, companies focused on the challenges of identifying and, validating novel drug targets to address the unmet therapeutic needs of people living with mental health conditions.

We will work alongside psychiatry consortium members and academic partners to advance research projects providing support through access to funding, expertise and commercialization know how. The psychiatry consortium seeks project proposals from the global psychiatric research community via biannual open calls for applications. The next call for applications will open in January 2021. We are a mental health care company, and our vision is a world of mental well-being. We are facing an urgent crisis in mental health care.

Every forty seconds, someone in the world dies from suicide. And in that same time, twenty people attempt suicide. We can and must do more to help the millions of people who are suffering with mental health challenges and do not have access to any options. With that, I will now hand over to Piers, who will share give you an update on our financial results for the third quarter. Peers?

Speaker 2

Thank you, George. You, George. As George mentioned, we completed in September 2020 our upsized IPO of 8,625,000 American Depository shares or ADSs, which represent 8,625,000 ordinary shares at a price of $17 per ADS. This included 1,125,000 additional ADSs issued upon the exercise in full by the underwriters of their option to purchase additional ADSs. The ADSs began trading on the NASDAQ Global Select market on the 09/18/2020.

The net proceeds from our oversubscribed IPO were approximately $132,900,000 after deducting underwriting discounts and commissions and offerings expenses. We held cash and cash equivalents of $196,500,000 at thirtieth September twenty twenty compared with $67,600,000 at 06/30/2020. This is expected to fund operations into 2023. I will now recap our financial results for the three and nine months ended 09/30/2020. The loss from operations for the three months ended 09/30/2020 amounted to $13,500,000 compared to $6,300,000 for the prior year period.

The loss from operations included non cash share based compensation expense of $5,200,000 for the three months ended 09/30/2020, compared to $1,800,000 of non cash share based compensation in the prior period. The loss from operations for the nine months ended 09/30/2020 amounted to $39,900,000 compared to $13,900,000 for the prior year period. This loss from operations included non cash share based compensation expense of $16,600,000 for the nine months ended 09/30/2020 compared to $2,500,000 non cash share based compensation in the prior period. Research and development expenses were $6,900,000 for the third quarter of twenty twenty compared to $3,100,000 for the same period last year. The change was primarily related to increased activities associated with our ongoing development of COMM-three 60 as well as increased share based compensation and other increases in personnel costs to support the development of COMM-three 60.

Research and development expenses were $18,800,000 for the nine months ended 09/30/2020 compared with $8,000,000 during the same period in 2019. General and administrative expenses were $6,600,000 for the third quarter of twenty twenty compared to $3,100,000 for the same period in 2019. The increase was primarily related to share based compensation expenses as well as higher legal and professional fees, personnel and consulting expenses and facilities costs. General and administrative expenses were $21,100,000 for the nine months ended thirtieth September twenty twenty compared with $5,900,000 during the same period in 2019. Other non operating items net amounted to an expense of $3,100,000 for the three months ended 09/30/2020 compared to an income amount of $600,000 for the corresponding period in 2019, primarily related to the impact of movements in foreign exchange rates on the translation of cash balances.

Other expense was $1,500,000 for the nine months ended 09/30/2020 compared with other income of $1,900,000 during the same period in 2019. The net loss was $16,700,000 or $1.3 loss per share for the third quarter of twenty twenty compared with $5,700,000 or $0.73 loss per share during the same period in 2019. And the net loss for the nine months ended 09/30/2020 was $41,500,000 or $3.9 loss per share compared with $12,000,000 or $1.68 loss per share during the same period in 2019. And with that, we will now open the line for questions. Thank you, operator.

Speaker 3

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

Speaker 4

Good morning guys. Thanks for taking the question. Protocol modifications, or considerations, you might be adding to the trial with the new, COVID wave? And then further I wanted to ask a follow-up question on the recent publication in Genomic Psychiatry. I think the the dose and the dosing paradigm in that trial is different than in the current Phase II.

And I was wondering, your thoughts on that paradigm and whether that might be incorporated into, forward clinical trials. Thanks.

Speaker 2

Hello

Speaker 1

sorry I will take that. I apologize. Our plan to report hello can you hear me?

Speaker 4

Yep, we can.

Speaker 1

Hello, we can hear you. Okay, great. Thank you. Our plan to report data by late twenty twenty one remains unchanged. But obviously this is subject to the impact of COVID which no one can really predict at this point.

We're working closely with all of our trial sites to carefully assess the ongoing COVID situation and always put the patient safety and team safety above everything else, as I stated. We do continue to make steady progress over the last months. And we're opening a new trial site in Berlin, as I mentioned. So that will be increasing our sites to 21 sites in 10 countries. So that's our response to the COVID.

We stand firm with our current prediction, in terms of the report out. The headline in terms of the recent JAMA study is, we developed very carefully with regulators on both sides of The Atlantic the current protocol used for Phase IIs because it answered some really important questions, including the most tolerable dose and the durability of a single dose. Until we have that information, we don't really see, a reason to be then looking at different dosing paradigms, because that's actually required by regulators as a foundation for, developing psilocybin therapy.

Speaker 4

Great. Thanks for taking the questions.

Speaker 3

Thank you. Our next question comes from Your line is open.

Speaker 5

Thanks for taking my question. So the Oregon legalization of psilocybin as medical therapy update is a little reminiscent of the trends we saw to legalize medical marijuana. How are you thinking about this update? What are the opportunities or the threats that may ultimately present to COMPAS if any? And are you aware of any other states' progress efforts to legalize SELA-seven?

Thanks.

Speaker 1

So, to be clear, what has been passed is a two year period to explore options to actually conduct this process so that it will be effectively designed and developed. So the two year process now starts for that. I think in general, from our point of view, we share the long term goals of those who involved both in the legalization efforts, but those who voted for this, which is that mental health conditions simply aren't treated well enough for enough people and we need new options. So we're in agreement on that. What I think we differ on is that, it's really important that according to regulators on both sides of the Atlantic, and we've met with a very large number of regulatory agencies, there simply isn't yet enough evidence of safety and efficacy of psilocybin therapy, which is why we're doing our trials.

And it's also not clear, in the Oregon model who would pay for the therapy. So we believe, as we've designed and developed COMPASS, that the review and approval through regulatory agencies is really the best way to ensure the safety, efficacy and quality of any medicine or therapy. As such, we're developing COMM-three sixty psilocybin therapy through clinical trials and are currently running the Phase 2b for psilocybin therapy for treatment resistant depression. COMM-three sixty, our proprietary formulation of psilocybin therapy is being developed to meet the quality criteria associated with the regulatory standards for medicinal therapy. Again, that's quite different than what's being looked at in Oregon.

And then lastly, our commitment to patient safety includes the training of licensed therapists who are going to provide support to our patients in our FDA clinical approved trials. So, I think that there are quite a number of differences. We also believe that because we're committed to access, the clinical evidence and regulatory approval are prerequisites for reimbursement consideration. This means that we believe that our strategy of regulatory approval is the safest and most effective way to get psilocybin therapy if it's approved into the health system, reimbursed and made available to all those who might benefit from it. So that's the Oregon story.

I think in terms of other countries or other places where this is being looked at, there are various levels of decriminalization, which is essentially to prevent prosecution of people for using these substances. But it's different than legalization. And again, legalization, even in Oregon, is under these carefully controlled circumstances, which are being developed and articulated over two years. So there are a variety of these different things. In terms of its impact on our work, we see that our focus through reimbursement and access for patients continues to be a model that we're committed to in implementing.

Thank you.

Speaker 3

Thank you. And our next question comes from Esther Hong with Berenberg. Your line is open.

Speaker 6

Hi, thanks for taking my questions. So just a few. There are multiple investigator initiated studies ongoing. Results are expected over the next twelve months. How should we think about how these studies read through to COMPASS's program?

Second, data from the ongoing Phase 2b trial, COMM-three 60, they're expected next year. Can you speak a little bit about assumptions, expectations, what are the powering assumptions? And then third, although a bit maybe a little bit early, what would a Phase III program look like for COMM-three 60? How many trials do you expect will be required? And any additional details?

Thanks.

Speaker 1

Okay, I guess I will start that. So, the first question, could you repeat the questions? I'm sorry. First question I asked by the time you got to three. Let's do one more time.

It would be easier for me.

Speaker 6

Okay. So first question, so there's multiple investigator initiated studies ongoing. Yes.

Speaker 5

I can respond to that.

Speaker 1

So yes, there are multiple investigator initiated trials, some of which are using COMM-three 60, some of which are not. Obviously, for any regulatory program, the focus is on the drug product that is going to be regulated. So we certainly will be looking closely to the results of our IIS studies or of our studies we support with our psilocybin to bolster our safety databases. We are, again, not designing those IISs. It's a part of our program.

And it's a way that we can help facilitate research and generate early signals. Other studies that are being done by others may contribute to interesting results, which we will be looking out for, but it should not have any direct impact on our program. Second question?

Speaker 6

Second question, assumptions, expectations around the Phase 2b trial.

Speaker 1

These really haven't changed. So the Phase two trial has been underway. We do plan to have it complete, as we said, at the end of next year, barring any additional impacts from COVID. It has been powered. Ninety percent likelihood of detecting a six point difference in MADRS at three weeks.

And it continues to progress as we expected. And the only change which has been shared has been elimination of an upper age limit in The United States. That's a change that's been made. But no additional changes have been made recently.

Speaker 6

And then And

Speaker 1

then question three.

Speaker 6

Question three, last question. What would a phase three program look like? How many trials? Would it be something similar to what was required for esketamine?

Speaker 1

It's really hard to forecast what might be needed in that. Obviously we're looking at different scenarios, but those scenarios are largely based on what we'll find in Phase 2B. So I think this is really dependent upon what we will see in Phase two, and the nature and size of the effects. And that will really lead us into having clarity about our Phase three program.

Speaker 6

Great. Thank you.

Speaker 3

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

Speaker 7

Good morning. Thanks for taking my questions. I have a few here. So the first one, we know you're evaluating safety and efficacy of COM360 in a clinical trial program. But if you had to pick a key risk to achieving your stated goals in your Phase two trial that's ongoing, would that risk be along safety or efficacy lines or something else such as the ability to achieve blending, for example, on the very low dose?

That's my first question.

Speaker 1

Thank you for the first question. We don't anticipate, we've developed these trials in close collaboration with regulators on both sides of The Atlantic as well as a very significant group of people who've done research in TRD. So we believe that the trial has been effectively designed, so we don't have concerns along any of those dimensions from a design perspective. Obviously the clinical research is in progress and we will determine what happened at the end of the trial. So I can't really comment beyond that.

Am I missing something? Is there a follow-up you'd like to ask there?

Speaker 7

No. I'll move on to my second question. I kind of got

Speaker 8

it at this

Speaker 7

so given the nature of these psilocybin trials, is there any chance to have an interim look on the Phase II that's going prior to late twenty twenty one?

Speaker 1

There is always an opportunity to do that. We've chosen not to do that. Largely we want to conduct the trial as it's been designed. And our team is fully behind that.

Speaker 7

And my final question is, maybe a little premature, but I'm going to ask it anyway. How is the company thinking about potential pricing of a product like this when it makes it to the market? And also how much support will you need to have or give to the existing center infrastructure at the time when you're able to launch this product?

Speaker 1

You are correct in your assertion that it's premature to talk about pricing until we have any view of efficacy and patient response. In terms of the support, that's something that we are learning to do and looking at as we develop our therapist training through clinical trials.

Speaker 7

Thanks a lot.

Speaker 3

Thank you. We have a question from Patrick Chuquillo with H. C. Wainwright. Your line is open.

Speaker 8

Hi, good morning and afternoon. I have a few questions. I think the first one is just a key focus is on the inclusion of digital solutions and the possibility of predicting relapses or remission. So I'm wondering, where are we in the development of those solutions? And then should we anticipate IP around the digital technologies?

And if so what's the timing for an update on the IP on this front or the IP around COMM three sixty broadly?

Speaker 1

Thank you for the question. We are right now developing and will be sharing plans as they become clearer in terms of the areas of digital phenotyping and digital therapy support. So that will be forthcoming, but those plans are being developed as we speak. Finally, in terms of your second question, I'm sorry.

Speaker 8

Just in terms of an IP update around the digital phenotype?

Speaker 1

Of course. So, we will continue to, reflect intellectual property in that area as it's developed. And again as we announce our various patent grants etcetera that will become visible to everyone.

Speaker 8

Got it. And then, you know, the feasibility of the simultaneous administration was demonstrated in the Phase I study. I'm wondering if you can, kind of go through how that was demonstrated and specifically how the feasibility of simultaneous administration is being evaluated in the clinical development plan as we go forward? And specifically how, if at all, is the COVID pandemic impacting the ability to evaluate COM360 with simultaneous administration?

Speaker 1

So right now what we were able to demonstrate is that up to six people could receive one on one support in a shared simultaneous administration setting as healthy volunteers. That work was completed with no safety concerns emerging from that. And that then was the basis, as I mentioned, for submission of the ACCOLINO protocol, which also uses simultaneous administration with one on one support. And that's the first study in patients with that model. And again, the first session was conducted last week.

So we will be watching that in a patient population. And so that's the first question. Could you repeat your second question please?

Speaker 8

Yeah, just is the COVID pandemic, is that impacting the ability to evaluate simultaneous administration?

Speaker 1

It really doesn't. I mean the only way that would impact our simultaneous administration assessments which will be, you know, again done in specific studies would be if there are difficulty in recruiting that we've experienced no such thing yet. So we don't see any link between COVID and simultaneous administration studies and evolution of that model.

Speaker 8

That's helpful. Thank you very much.

Speaker 1

Thank you.

Speaker 3

Thank you. And there are no further questions in the queue. I'd like to turn the call back to George Goldsmith for closing remarks.

Speaker 1

Thank you very much to everyone for participating in today's call. We will be participating in the Berenberg and Evercore investor meetings coming. And we'll look forward to seeing some of you there. Thank you very much for your participation today.