AtaiBeckley Inc. Q2 FY2021 Earnings Call

Thank you and good morning. Welcome to our second quarter 2021 ATAI Life Sciences financial results and corporate update conference call. The press release reporting our financial results is available in the investors and media section of our website at www.atai.life and our quarterly report on Form-10Q ended June 30th 2021 will file today with the SEC. Joining me today are Florian Brand, our co-founder and CEO. Dr. Srinivas Rao, our Co-Founder and Chief Scientific Officer; and Christian Angermayer, Founder and Chairman. During today's call, we'll be making certain forward-looking statements that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. While these statements represent management's current expectations of projections about future results and performance as of today, the actual results are subject to many risks and uncertainties that could cause actual results to differ materially from those expectations. In addition to any risks highlighted during the call, these statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our final prospectus filed with the SEC on June 21 of 2021. I caution you not to place undue reliance on these forward-looking statements which speak only as of today, August 16 2021 and except as may be required by applicable law, ATAI disclaims any obligation to update such statements, even if management's views change. And now I'd like to turn the call over to ATAI's CEO Florian Brand.

Good morning, everyone. Thank you all for joining our first earnings call following our successfully completed IPO on NASDAQ in June, where we raised $259 million. We are thrilled by the enthusiastic response to our mission from the investor community. We intend to use these proceeds to continue advancing our decentralized drug development platform in two ways. First, by executing on our existing pipeline, and second, by continuing to incubate, acquire, and invest in new programs and enabling technologies. With our unique approach, we aim to become the leading drug development company focused on mental health. We will do so by transforming and advancing the treatments of patients with the ultimate objective to heal mental health disorders so that everyone, everywhere can live a more fulfilled life. And now, it gives me great pleasure to introduce you to my visionary co-founder and our Board Chairman, Christian Angermayer.

Thank you everyone. With my Co-Founders and the entire ATAI team, I share the common aim of transforming the treatment of mental health disorders and exploring solutions offered by unconventional approaches, including psychedelic compounds. I want to take a few moments to discuss ATAI's origin and my commitment to ATAI. In this context, it is important to emphasize that I'm not only part of the founding team, but also made a significant investment in ATAI myself. Everything started with my own first psychedelic experience, which was in short, the single most meaningful experience in my entire life. In addition, my friend and our Co-Founder, Las Welder, who suffered greatly from treatment with systemic depression, sound healing, and succeeding therapy. Those experiences form the basis for my desire to invest heavily in rigorously researching the therapeutic potential of psychedelics for mental health disorders. I hope you leave this call with a real appreciation for both ATAI's progress to date and what I hope will be an even brighter future to come. While I leave it to Florian and Srinivas to elaborate on the details of our chief milestones, I want to emphasize what makes me most proud. ATAI is aiming to help solve one of the biggest problems in healthcare, mental health disorders. More than 1 billion people globally suffer from depression, addiction, PTSD, anxiety, and other intractable mental health diseases. That is just the official number. The unofficial one is most likely significantly higher, as mental health issues are unfortunately still a stigmatized topic. We have built a well-funded company in the young psychedelics industry, and have more than $400 million to continue advancing our 11 programs. We have a rich business development pipeline, and we're aiming to add more programs over time. All of our drugs, both the psychedelic ones and the non-psychedelic ones, have prior evidence in humans, which helps strengthen the indication for the outcome of our trials. Because of our portfolio approach and our extensive pipeline, we expect continuous news flow with 18 R&D catalysts over the next 18 months. Our partnership with Otsuka illustrates big pharma interest in psychedelics, while we strive to keep control of our assets through phase three. Moreover, we are, as you know, well-funded to achieve that goal. I am very convinced that we have the highest potential to become the leading mental health company globally while building value for our shareholders and other stakeholders. Let me now hand it back to our CEO, Florian, who together with our CSO, Srinivas and CFO, Greg will provide additional updates on our business.

Thank you, Christian. Allow me now to provide a few introductory comments. Then Srinivas will review highlights from our drug development pipeline, and Greg will provide the quarterly financial reports followed by the Q&A. For people not yet familiar with our company, let me briefly give you an overview of ATAI Life Sciences. We founded ATAI three years ago as a response to the significant unmet need that we witnessed firsthand ourselves with friends and family members suffering from mental health disorders. As you know, we operate our business in a decentralized model and utilize enabling technologies, such as digital therapeutics. This allows us to support and accelerate the development of compounds in our companies. These are all companies we have either acquired, control, or have significant interest in or incubated de novo. We have a disciplined program selection process that is focused on differentiated mental health opportunities and aimed at increasing the clinical probability of success. At an asset level, we are focused on developing compounds with prior evidence in humans. Combined with our unique portfolio approach, which is designed to avoid binary risk, the ATAI pipeline can be both innovative and diversified. Our process also incorporates a milestone-based approach to capital allocation. We have already demonstrated our ability to capture value this year by partnering with other world-class organizations focused on mental health. One example of this is perception of licensing deal with Otsuka, an industry leader in innovative mental health therapies. This deal represents the first major partnership between a biopharmaceutical company developing psychedelics and large pharma. In only three years, we have aggressively built a pipeline of 11 developments, programs, and six enabling technologies. We believe that several of our target indications have a potential market opportunity of at least $1 billion in annual sales each once approved. Outside of our current focus indications, we see significant untapped business opportunities around indication expansion, with an additional estimated market potential of $18 billion by 2026. We intend to invest in these indications for our most promising compounds to optimize our portfolio and maximize shareholder value. Looking forward, it is important to highlight the density of our news flow. We have 18 R&D catalysts over the next 18 months as a result of our portfolio approach and our extensive pipeline. The two most imminent upcoming milestones are first, Compass Pathways that is expected to provide top-line results on their phase 2B study in Q4 of this year, and second, Recognify Life Sciences that has initiated a phase 2 trial and expects to have data by the end of the year. In addition, we plan to initiate perceptions phase two trial for TRD and DemeRx phase 1/2 OUD trial still in this quarter. Additionally, we plan to initiate three phase 2 trials and four phase 1 trials next year. With a very strong cash position, we are well equipped to maintain our leadership in developing treatments for mental health disorders. I will now turn the call over to Srinivas for a more detailed update on the entire pipeline.

Thanks, Florian. As highlighted, we have a broad array of exciting assets that are nearing the clinic. On this call, I will focus on the programs with the most near-term visibility and highlight upcoming milestones starting with Perception Neuroscience. Our lead compound for Perception is PCN-101, a formulation of our ketamine. Our ketamine's glutamatergic modulators are being developed as a rapid-acting antidepressant with non-dissociative properties and the potential for at-home use. This is in contrast to ketamine marketed as provato, which must be administered only in the clinic. In preclinical models, our ketamine has demonstrated higher potency, greater durability, and lower abuse potential compared to ketamine. The recently published results of an open-label seven subject trial in patients with treatment-resistant depression or TRD using IV ketamine supported the hypothesis that our ketamine may be efficacious at sub-dissociative doses, in contrast to ketamine. As we've mentioned before, we're excited about these potential aspects of differentiation, particularly from the perspective of scalability and commercial potential for a product delivered at home. In February 2021, Perception announced positive phase 1 results demonstrating the safety and tolerability of PCN-101 in 58 subjects treated at doses of up to 150 milligrams IV. The compound was well tolerated, and there were no serious adverse effects reported. Additionally, the pharmacokinetics of PCN-101 in plasma were found to be approximately dose-proportional. Notably, the study demonstrated that PCN-101 required substantially higher doses to induce perceptual changes compared to ketamine. Importantly, we anticipate initiating our phase 2a trial of PCN-101 in Q3 2021. This randomized double-blind placebo-controlled trial testing an IV formulation of our ketamine will be conducted across 13 sites in Europe and aims to enroll 93 patients diagnosed with TRD. We anticipate the study running through late 2022. In parallel, we intend to conclude the phase 1 bioequivalence study to bridge from the IV formulation to a subcutaneous formulation of PCN-101 that we believe will support at-home use. Next, Recognify Life Sciences is developing RL-007, an orally available cholinergic, glutamatergic, and GABA-B receptor modulator. In aggregate, RL-007's complex pharmacology is designed to alter the excitatory/inhibitory balance in the brain to produce pro-cognitive effects. We're developing this compound for the treatment of cognitive impairments associated with schizophrenia or CIAS, which is a challenging indication with significant unmet need, as though drug therapies are presently approved for this condition. In April 2021, Recognify initiated a 32 patient phase 2A proof of mechanism study for RL-007 after receiving IND clearance from the FDA to commence U.S. clinical development for the treatment of CIAS. The exploratory study is designed to evaluate the effects of RL-007 on safety, tolerability, and quantitative electroencephalogram or QEEG based measures that are viewed as biomarkers for cognition. More specifically, the objective of the trial is to extend the results of a previous study involving a scopolamine challenge in healthy volunteers. In addition to observed improvements in verbal memory, RL-007 administration resulted in a spectral shift on to QEEG from a lower frequency theta band to higher frequency alpha and beta band oscillations. Further, we're investigating the effects of RL-007 on several evoked potential measures, including mismatch negativity and P300, the latter in response to an auditory oddball task. Ultimately, we're looking for comprehensive data consistent with pro-cognitive effects when all cohorts in the phase 2A trials are analyzed. Such top-line data, which are anticipated by the end of the year, will allow us to progress confidently into the proof of concept study. The latter will be a double-blind placebo-controlled trial focused on more traditional cognitive endpoints, including subsets of the matrix battery. Next, GABA therapeutics' primary program is GRX-917, an oral formulation of a deuterated version of etifoxine, a compound that has a long history of prescription use in France and other countries for treating anxiety disorders. Mechanistically, etifoxine and GRX-917 have been found to increase the production of neurosteroids, including our pregnenolone, an IV formulation of which was approved in the United States in 2019 for the treatment of postpartum depression. This mechanism of action is thought to underlie etifoxine's rapid onset of anxiolytic activity that is similar to that observed with benzodiazepines, but without the sedation, cognitive impairment, or abuse independence risks associated with this class of compounds. Furthermore, etifoxine has extensive safety data, which we believe will greatly benefit the future development of GRX-917. Like etifoxine, we hypothesized that GRX-917 will provide rapid anxiolytic activity with improved tolerability compared to current treatments for anxiety. The deuteration is intended to enable less frequent dosing and lower doses with GRX-917 than etifoxine. In June 2021, we initiated a randomized double-blind placebo-controlled phase 1 trial in Australia, which will ultimately enroll approximately 76 healthy adults. The study is a single ascending dose and multiple ascending dose design, looking at safety and tolerability, pharmacokinetics, as well as pharmacodynamics using qEEG. Based upon the mechanism of action of GRX-917, we're using qEEG as a target engagement biomarker looking for increased relative spectral power in the beta band. Such changes have been demonstrated with IV pregnenolone and related compounds. We also noted in a 2019 phase one trial of etifoxine that we conducted. Top-line data for the GRX-917 phase 1 trial are expected early in 2022. Moving to DemeRx, we are developing DMX-1002 as an oral formulation of ibogaine, a naturally occurring psychedelic product as a potential disease-modifying treatment for opioid use disorder. We anticipate initiating the phase one component of an exploratory phase 1/2A of DMX-1002 in recreational drug users and healthy volunteers in the UK in the third quarter of 2021. To that end, we recently received approval from the UK medicines and healthcare products regulatory agency or MHRA to commence subject enrollment. The phase 1/2A trial is designed to assess safety, tolerability, pharmacokinetics, and efficacy, and the results will inform future studies in patients with opioid use disorder. We expect to obtain safety data from the phase 1 element of this trial in early 2022. We have an extensive early-stage pipeline that will be entering the clinic in 2022 and will provide a deeper update on these programs and associated milestones as we approach next year. Further, it should be noted that the digital therapeutics being developed at Introspect are currently undergoing user acceptability testing at Academy Clinic in San Diego. We anticipate rolling out the Introspect technology in our phase 2 trials starting next year. Finally, a brief mention of COMPASS Pathways and its compound COMP360, which is a proprietary formulation of synthetic psilocybin, a 5-HT2A-R agonist being developed as an oral, rapid-acting antidepressant is in order. In June 2021 COMPASS announced completion of dosing in the phase 2b clinical trial for COMP360 in a total of 233 patients diagnosed with TRD. This randomized double-blind dose-ranging study investigating the safety and efficacy of psilocybin is the largest industry-funded clinical trial of psilocybin conducted to date. Getting to this stage in this trial is a major achievement, and the COMPASS team should be commended for their incredible work. We look forward to the top-line data of this trial later this year. I will now turn over the call to Greg for an overview of our financial highlights.

Thank you Srinivas and hello everyone. As Florian mentioned in June, we completed our upsized IPO of 17.25 million shares, raising gross proceeds of $259 million including the full green shoe exercise. Cash and equivalents total $453.6 million as of June 30, compared to $97.2 million as of December 31, 2020. The six months increase of $356.4 million is attributable to the IPO net proceeds of $231.6 million plus $168.6 million from series C and series D common stock issuances. $20 million of licensed revenue proceeds and $4 million proceeds from the sale of investments in the conversion of convertible notes, offsetting cash payments of $32 million for investments in platform companies and $35.8 million in net operating expenses in the first half of 2021. Our operating use of cash for the six months ended June 30, 2021, was $14.6 million which includes the positive effect of the $20 million in license revenue proceeds received from perceptions licensing collaboration agreement with Otsuka Pharmaceuticals. Operating costs and expenses in the first half of '21 were as follows: research and development expenses of $16 million and $21.6 million for the three and six months ending June 30, 2021, as compared to $2.9 million and $5 million for the same prior year periods. The increase of $13.1 million and $16.6 million respectively were attributable to personnel costs, including stock-based compensation expense, and increased CRO expenses related to advancements in our R&D programs. We also recorded an acquisition of in-process R&D expense of $8 million and $9 million for the three and six months ended June 30, relating to our investments in Neuronasal and InnarisBio. Moving to G&A expenses for the three and six months ended June 30, 2021 were $37.3 million and $46.6 million as compared to $2.9 million and $4.4 million in the same prior year periods. The increases of $34.4 million and $42.2 million respectively were attributable to personnel costs, including stock-based compensation expense, professional fees, and other costs related to support our platform growth and public company requirements. Total stock-based compensation expense for the three and six months ended June 30 was $37.5 million and $37.7 million respectively, as compared to $41,000 and $82,000 for the comparable prior year periods. This reflects a recognition of expense related to the achievement of the IPO performance-based partial vesting conditions. The year-to-date R&D portion was $9 million, and G&A portion was $28.7 million for your modeling.

I'd like to draw your attention to two one-time items in our first half results: First, with COMPASS Pathways. In the second quarter, we booked a gain of $16.9 million relating to our investment in COMPASS and may follow-on equity round. ATAI participated and purchased 140,000 shares for $5 million and we now own 19.4% of COMPASS. The licensing revenue of $19.9 million was recorded from perceptions licensing collaboration agreement with Otsuka Pharmaceuticals. I compliment the management team at Perception and everyone involved at ATAI on this deal. I also want to point out that the strategic intent is to drive additional non-dilutive licensing transactions in the future.

Thank you, Greg and Srinivas. I would like to thank the entire ATAI team as well as our supportive investors for their contributions to all we've achieved this year. Looking ahead, we are energized to drive towards an important and catalyst-rich 2021 and 2022 with additional clinical readouts, trial initiations, and business development. This is an incredibly exciting time for ATAI, and we will continue to provide updates on our programs as they advance. Before we take questions, I would like to highlight the following five key takeaways regarding our progress to date and roadmap forward: Number one, with our strong balance sheet and broad portfolio, we have solidified our leadership position as an innovative drug developer within mental health. Number two, by design, our company is structured to maximize the probability of success in drug development through a combination of three elements: the unique portfolio approach, the focus on developing compounds with prior evidence in humans, and the milestone-based approach to capital allocation. Number three, our differentiated model has been validated by our attraction to date, where we are the only biopharma company developing psychedelics that has entered into a drug development collaboration with large pharma. Number four, ATAI has accelerating momentum with 18 near-term catalysts, including phase 2 data readouts by year-end from Recognify and Compass pathways. Number five, we continue to drive our business development activities by incubating, acquiring, and investing in complementary compounds and enabling technologies. With that, we are happy to take questions.

Our first question comes from Charles Duncan with Cantor Fitzgerald. Please go ahead with your question.

Yes, good morning, Florian and team. First of all, thanks for taking the question. And thanks for all the details outlining the 12 and 18. Call it week and month plan. So I had a quick question on RL-007 phase 2a and CIAS. I am wondering if you could provide a little bit more detail on the enrollment criteria regarding symptom presentation, as well as concomitant medications and perhaps frame a useful result to inform the next steps out of that study with regard to dosing and duration.

Absolutely, Charles, and thanks for the question. Generally speaking, of course, they have to meet the criteria of schizophrenia with cognitive impairment. That is, I believe, one sigma below normal. In terms of concomitant medications, they are allowed to have that we are limiting it to our peprazol and one other related compound. That's about it to keep the population as homogeneous as possible. In terms of a meaningful outcome, what we're trying to do here is extend the results of the previous Phase 1 study, which is a scopolamine challenge study. In that trial, they found two things: improvements in verbal memory and concomitant changes on quantitative qEEG, specifically, they found alterations in the spectral profile, pre and post-drug, shifting from lower frequencies to higher frequencies. Higher frequencies are associated with improved cognition. Folks with schizophrenia, particularly those with prominent cognitive impairments, do have some degree of suppression of higher frequencies and tend to run at lower frequencies. So the very first thing that we're looking at is a replication of the quantitative qEEG spectral shift. That will be the first thing, and then we'd like to extend from there to some of the evoked potential measures that we're looking at: mismatch negativity and P300. A win would be around some of the spectral shift; that's the key here. Obviously, concomitant improvements and evoked potentials would be great. We are conducting cognitive assessments as well. This is a very small study, so we aren't expecting much, but if we find some proportionality of concordance with the qEEG shifts, that would be a significant one.

Okay, thank you. One additional pipeline question, then a quick follow up for Greg. Regarding the COMP360 results that could come towards the end of this year, clearly we've spoken to COMPASS management about this, but we'd like to hear your perspective on what you'd like to see out of the trial in terms of three-week effect sizes and response rates, as well as longer-term durability, given that this is the largest controlled trial of psilocybin to date and it represents a new paradigm relative to the current standard of care.

Okay, Charles. I think you meant Greg, but I'm willing to take that. Of course, Greg, if you want to chime in, please do so. With respect to the psilocybin study, one thing we're looking at is their primary endpoint at three weeks showing a rapidity of onset, as well as some degree of durability. Part of the promise is the extent of the efficacy duration in driving someone into remission. We're certainly going to be watching the data from there on out; this trial goes out to 12 weeks so we'll be looking at that. It's powered certainly for the primary endpoint at three weeks, and of course, these data will inform subsequent studies. Clearly, responder remission data over the subsequent weeks will be key for understanding and interpreting the results from this trial. Does that answer your question?

Yes, yes, it does. And it was for you. My follow-up for Greg was relative to OpEx, over the course of, say, the next six to 12 months. I'm not looking really for guidance, but just a range. How do you see the income statement over the course of the next year?

So thanks, Charles. Greg here. Good question. Inside the first half numbers, you've got some in-process R&D and some spikes in non-cash. But if you strip it out, the OpEx in the first half was running about 18% per quarter. I think we're going to see personnel costs growing as we continue to support the platform companies and build out the capabilities internally. As the pipeline moves to more clinical stage, we'll have additional R&D spend likely to grow there to support that activity as well. As a range, we expect it to be above where we are now—maybe in the 25% to 30% range per quarter as we go forward—would be directionally okay.

Our next question comes from the line of Ritu Baral with Cowen. Please proceed with your question.

Good morning, guys. Thanks for taking the question. My first questions is on Perception and RL-007. Can you preview for us the dose and the dosing paradigm and treatment duration that you're using in the upcoming phase 2a that you plan to start in Q3? When we do get the data in 2022, what are the most important scales that we should be looking to for depression efficacy, as well as the degree of dissociation versus S-ketamine?

No problem. I'll start with that one. In terms of dosing, we haven't really guided on that at this point. What I can say is that based on the phase 1, we have some latitude on dosing, and we are certainly going with doses that are sub-dissociative, based on the phase 1 results. In terms of endpoints, the MADRS is going to be kind of key here. You also talked about dosing frequency. So this trial is a single dose of a single IV administration of a compound, and clearly the results will follow from there. The depressive symptomatology has 14 days of primaries at 24 hours, consistent with other ketamine studies. The results will give us some indication of the dosing or re-dosing frequency, which we do anticipate will be required here. Not unlike S-ketamine or ketamine proper. There is preclinical data suggesting greater durability of effect. That's driving the hypothesis that we might be able to dose less frequently than S-ketamine, which is twice a week for four weeks. So that’s the summary in terms of dosing and endpoints. The CADSS is included, but it might not be the best suited for this. We're also using the 5-DSC here, which will provide granularity on the sort of psychedelic-type effects that we see with the compound.

Got it. And then my next question is on the DemeRx Phase 1/2 study that you're planning to start in Q3. You mentioned safety and PK. Are you doing any special cardiovascular monitoring around the IV study? Given this is a recreational drug user population, what sort of efficacy data could you glean from it, and when?

In terms of cardiovascular safety, of course, there's a signal depending on the publication for QT prolongation in this population. I think there are some compounds with existing data, and there were certainly multiple dosing experiments done. The concentration of ibogaine wasn't necessarily clear, so we're looking at that closely. We are doing repeated ECG endpoints in a standard fashion here. We'd like to see if there's a dose range that can be reached that is devoid of QT prolongation and that’s our focus. In terms of efficacy and the phase 1 element, the efficacy endpoints are really focused on the phase 2 piece in those individuals undergoing medically-assisted detox, assessing withdrawal, and looking at long-term remission.

Our next question comes from the line of Brian Abrahams with RBC Capital Markets. Please proceed with your question.

Hey, guys, thank you so much for taking my questions. Congrats on all the progress. Starting with PCN-101, I would like to know the status of the subcutaneous formulation. You mentioned that would be moving into a bridging study in your opening comments. Just wondering what, if any, gating factors there are to starting that study and what your target volume would be for that administration?

A lot of the details here are not public. The long and short of it is that the formulation is under development. Of course, there's the formulation and compatibility with the device for the subcutaneous injector. All that work is ongoing. The bioequivalence study, as you’re familiar, is straightforward and very quick, basically comparing IV versus subcutaneous. As we mentioned in the opening remarks, we're looking to get that data contemporaneously with the phase 2 results, so that's ongoing currently. The standard volume for subcutaneous is keeping it under two milliliters, and we would like to keep it significantly under that standard.

Great, thanks. You also recently announced Vivexia's launch to develop digital therapeutics. I'm curious on the digital therapeutic element there, which you talked about a little bit in your opening remarks, and your vision for integrating that to help assist with dosing therapy and monitoring how that may provide an administration advantage. Secondly, you pointed out that it doesn't interact with 5-HT2A, which could enable additivity to SSRIs. Can you speak to how you envision the future program in terms of combination potential, both with SSRIs and other TRD programs in your pipeline?

That's the key point with Salvinorin. The compound is psychedelic; it has many properties and overlaps with classical psychedelics and some aspects of ketamine. Very interesting compounds; there’s more anecdotal data around antidepressant efficacy, really an interesting compound because of its Kappa agonist properties. Many such Kappa agonists, though they tend to be more partial agonists, can be dysphoric, but this compound is quite interesting. The opioid receptor pharmacology suggests it can be used concurrently with SSRIs and SNRIs. That’s really the value here, something we're very keen to pursue. More broadly speaking, depression is multifactorial; different patient populations may have different underlying pathophysiology, including aspects related to opioid dysfunction. So we are certainly interested in this compound. In terms of digital therapeutics, we've mentioned that the readout frequency isn’t clear and will vary by patient. Regardless of the compound, there will be subsets that don’t respond, and some will have long-term remission. We envision the digital therapeutics supporting the patient both pre and post-psychedelic, with prep work for expectation setting and then post-providing psychosocial therapy. This provides a baseline level and standardized therapy, which can be beneficial. We didn't get into our work with cyber, which is hardware-based that provides feedback in guiding the patient through the appropriate mindset during the psychedelic effect.

Our next question comes from the line of Judah Frommer with Credit Suisse. Please proceed with your question.

Yes, hi, thanks for taking the question. I wanted a little bit more high-level on this space as it evolves. There are a couple of narratives developing here. Some companies in this space are assuming that we'll need a change in treatment landscape and kind of location change in terms of how patients are dosed with psychedelics. It seems like your team is looking more to leverage the existing infrastructure in the mental health industry. Can you talk about your thought process on doing that as you move compounds through the clinic, and if there's any need to effectively reinvent the treatment landscape?

I'll let Florian take that.

Thanks. Happy to address that. We are certainly R&D focused; that's our DNA. It's about executing the trials and how we think. You correctly summarized that we intend to leverage the existing infrastructure that existed pre-J&J's approvals to administer treatments. We observe and get involved in the ecosystem, focusing on the development and execution of our drug development pipelines. Key for us is optimizing therapist time through the digital therapeutics that Srini mentioned, as well as optimizing treatment duration to slot into existing infrastructure. We want to reach as many patients as possible in a thoughtful way. Srini, you may have points on this or how therapies fit in.

The main point is scalability. It's been mentioned that there are limits to how many therapists can be trained, particularly for compounds requiring them. Both the Salvinorin and DMT programs aim to create a psychedelic effect profile mimicking that of S-ketamine. The target duration being 30 to 45 minutes allows us to tap into S-ketamine’s infrastructure, as J&J has over 3000 clinics. The shorter duration means we may not need the heavy lift of a traditional sitter. But for those who have access to one, that’s ideal. Yet the digital therapeutic will provide a standardized level of support, potentially improving safety and efficacy.

That’s helpful; thank you. A quick follow-up on something Greg mentioned about Otsuka collaboration regarding pursuing additional non-dilutive financing. Is that a general comment, or is it specific to PCN-101? Is it tied to psychedelics and Big Pharma validating their approach?

The partnership indicates validation from our perspective of our ability to capture value. We’ve been executing for a while but as of March, it showed we can capture that value we generated. It's one potential avenue, and something we want to build on, as Greg mentioned. We aim to continue discussions and potentially enter agreements with strong strategic partners. That’s one avenue, while optimizing our success means getting our compounds approved, especially with the enabling technologies we have.

Our next question comes from the line of Esther Hong with Berenberg. Please proceed with your question.

Hi, good morning, and congratulations on all the progress. I wanted to ask about PCN-101 or ketamine for TRD regarding the dissociative effects or lack thereof. Is there any difference in patients who may be more susceptible to dissociative effects? Or does it depend on dose strength, particularly at high doses?

It's a really interesting question. The short answer is we don't know in terms of patient subsets. It's something we're looking into, including the digital aspects and some metabolomic aspects. Right now, we're focused on dose.

Got it. I also wanted to ask about GRX-917 deuterated etifoxine for generalized anxiety disorder. Can you speak more about the non-deuterated etifoxine's use in France, specifically the safety profile, where it's used in the treatment paradigm, and any additional details from its history in France?

Yes, absolutely. This was approved in 1979 in France, with reciprocal approvals in other small territories, but nothing in major territories. When it came out, it was viewed as a benzodiazepine, but it was pretty obvious that its profile was quite different. At that time in the late 70s and early 80s, benzodiazepines were the heyday, and people attributed the 'drunk' feeling associated with benzodiazepines with efficacy. There was a bias against the compound right off the bat. Nonetheless, it has sold significant amounts and been used in vulnerable patient populations, the elderly, etc. There was publication a couple years ago from a safety database in France, with about 13 million exposures, looking at safety. It has been generally well-tolerated with limited reported adverse effects compared to other compounds. Compared to benzodiazepines, it was quite clean even compared to SSRIs; its profile was favorable, and there’s no data suggesting addictive properties or dependence issues.

Our next question comes from the line of Nathan Weinstein with Aegis Capital. Please proceed with your question.

Good morning, everyone, and thanks for taking my question. Just a quick one on the pipeline for KUR-101. When you consider a broader indication set beyond OUD, just given the range of traditional uses that the compound has had?

That's a good question. I view opioid use disorder as kind of a spectrum. In many situations, particularly with iatrogenic opioid use disorder, it starts with the treatment of acute pain. There was a large cross-sectional study suggesting 6% of patients receiving a prescription for an acute opioid maintained opioid use one year later. That’s terrifying. Of course, there’s been significant clampdowns over subsequent years, but there’s a need for a compound with a better tolerability profile than traditional opioids. That’s something we’re looking at; there’s spectrum from treating pain, both acute and chronic, to opioid use disorder. That's where cradam is used, as the boards and publications show. It’s treatment for pain when non-scheduled compounds can’t be tolerated.

Great, thanks. Just one follow-up, obviously, one of the appealing aspects of your multiple programs and different APIs is procurement of drugs or substances. Have there been any logistical challenges, or do you foresee such challenges in the future?

There have been no specific logistical challenges. Certainly, a lot of synthetic; there are three that are semi-synthetic or purified extracts—ibogaine and deuterated methrozenine. We have good supply agreements for those products, so it hasn't really been an issue, and we don’t anticipate it being. We generally like to minimize what's coming from plants for a range of reasons, including environmental concerns, so we are looking at alternative routes to producing drug substances, but that’s a future discussion.

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

Great, thank you everyone for dialing in today and for all the questions that you have for us. Thanks also to everyone and the entire team and all our investors that brought us here to where we are today, looking forward to the future, which is very exciting. Thank you all, and we wish you a very successful week.

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.