Anavex Life Sciences Corp. Q4 FY2021 Earnings Call

Welcome to the Anavex Life Sciences Fiscal 2021 Fourth Quarter Conference Call. My name is Vage and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Please note this conference call is being recorded. I'll now turn the call over to your host Clint Tomlinson. Sir, you may begin.

Thank you and good afternoon, everyone. We appreciate you joining us today for Anavex Life Sciences fourth quarter conference call to review financial results and discuss the company's business updates. The tape replay of this call will be available after the call. The call will also be available for replay on Anavex's website at www.anavex.com. With us today is Dr. Christopher Missling, President and Chief Executive Officer; and Sandra Boenisch, Principal Financial Officer. Following management's remarks, there will be a question and answer session. Before we begin, please note that during this conference call the company will make some projections and forward-looking statements. These statements are only predictions based on current information and expectations and involve a number of risks and uncertainties. We encourage you to review the company's filings with the SEC, including without limitation the company's Form 10-K and Form 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, risks inherent in the development and/or commercialization of potential products, uncertainty in the results of clinical trials or regulatory approvals, the need and ability to obtain future capital, and maintenance of intellectual property rights. And with that, I'd like to turn the call over to Dr. Missling.

Thank you, Clint. We really appreciate everyone joining us on today's conference call to review our most recent reported financial results and to provide a corporate business update. We concluded an exceptional fiscal year 2021 while continuing our momentum highlighted by the efficient execution of Phase 2/3 AVATAR clinical trials in Rett Syndrome, the ANAVEX 2-73 Phase 2/3 AVATAR Rett Syndrome program as well as ANAVEX 3-71. Starting with our lead drug candidate ANAVEX 2-73, we expect top-line results from the second placebo-controlled study for the treatment of outpatients with Rett Syndrome, which are expected to be announced around calendar year end 2021. This study took place in Australia and the United Kingdom using a higher dose than the U.S.-based Phase 2 study and enrolled 33 patients over a seven-week treatment period, including ANAVEX 2-73-specific precision medicine biomarkers. Top-line results from the placebo-controlled EXCELLENCE Phase 2/3 study for the treatment of pediatric patients with Rett Syndrome are expected in the first half of 2022. This Phase 2/3 study in pediatric patients with Rett Syndrome, ages five to 18, will evaluate the safety and efficacy of ANAVEX 2-73 in approximately 84 patients over a 12-week treatment period, including 2-73-specific precision medicine biomarkers. Regarding our Alzheimer's disease program, top-line results from the placebo-controlled Phase 2b/3 Alzheimer's study for the treatment of Alzheimer's disease are confirmed and are expected in the second half of 2022. The double-blind, placebo-controlled, 509-patient late-stage Phase 2b/3 study in patients with Alzheimer's disease exceeded enrollment targets across North America, Europe and Australia, using ADCS-ADL for activities of daily living and function as primary endpoints. This multicenter, double-blind clinical trial is measuring efficacy, tolerability and safety of two different once-daily oral ANAVEX 2-73 doses or placebo. Last month, the independent Data Safety Monitoring Board for the company's Phase 2b/3 study completed its most recent pre-specified review of the preliminary Phase 2b/3 study data in Alzheimer's patients. As specified in the protocol, the DSMB reviewed the interim safety data for the ANAVEX 2-73 Phase 2b/3 clinical study and its open-label extension ATTENTION study. Upon review of the interim safety data, the DSMB recommended to continue the study without modification. We're very excited also to report that ANAVEX 3-71 received Orphan Drug Designation by the FDA for frontotemporal dementia. A placebo-controlled Phase 1 study evaluating ANAVEX 3-71 in humans is expected around calendar year end 2021. During 2022, we are also moving closer to further expanding the pipeline for ANAVEX 2-73 using gene biomarkers of response, applying precision medicine to another neurological disorder with unmet medical need. This includes a planned initiation of a 2-73 imaging-focused clinical study, a planned initiation of Phase 2/3 clinical trials for the treatment of a new rare disease indication, and lastly a planned initiation of a pivotal Phase 2 specialty study of a new genetic target. I would like to direct the call to Sandra Boenisch, Principal Financial Officer, for a brief financial summary of the recently reported year end.

Thank you, Christopher, and good afternoon to everybody. We continue to maintain a strong balance sheet and fiscal responsibility. Our cash position on September 30, 2021 was $152.1 million, which we believe is sufficient cash runway to fund operations and clinical programs beyond 2025. During fiscal 2021 cash utilization in operations was $30.4 million. We reported a net loss of $37.9 million for the full fiscal year, which is $0.54 per share as compared to $26.3 million or $0.45 per share in the comparable year 2020. Research and development expenses for the year were $33.0 million compared to $25.2 million for the comparable fiscal year. The increase is primarily attributable to the continued advancement of our ongoing clinical trials, most notably the full enrollment of our international Phase 2b/3 Alzheimer's disease trial and the related open-label extension and the continued enrollment and advancement of the Rett Syndrome studies and expansion of these trials internationally. General and administrative expenses were $9.0 million for the year as compared to $5.9 million in the prior year. The increase is mostly significantly associated with an increase in personnel and associated non-cash stock option compensation charges. Thank you. And now I'll return the call back over to you, Christopher.

Thank you, Sandra. As we look to the remainder of 2021 and into 2022, I'm very excited about the company's potential as we continue to advance and expand our precision medicine programs. As we look ahead, we will continue to focus on driving meaningful growth across our broad ANAVEX platform and portfolio to deliver transformational treatments for patients with both degenerative and developmental neurological disorders around the world. So we look forward to providing further updates as we advance and continue. At this point, I would like to also wish everyone a happy Thanksgiving. I would like now to open the call for questions. Operator, please go ahead.

And our first question comes from Charles Duncan from Cantor Fitzgerald. Your line is open.

This is Pete for Charles. Good afternoon Christopher and team and congratulations on the progress and appreciate all the updates. I have a couple of questions regarding Rett Syndrome. When you think about the efficacy measures that were made in the efficacy seen in the U.S. adult study, how do you feel about the sample size or the planned effect size out of AVATAR and also the EXCELLENCE study? And we saw that you upsized the sample size for EXCELLENCE from 69 to 84 subjects — what drove that decision, if you can give us some color on that?

Appreciate it and thank you. So the efficacy effect size was really significant in the first U.S. study, which was using a low dose, as you remember, and the effect size was in the range of 1.1 to 1.3, which is considered very large. And since we expect those responses based on higher doses, we basically incline to believe that the second study, the AVATAR study, might show a similar if not higher effect size, given that we are using a higher dose in the AVATAR study compared to the U.S. study. The extension of patient number in the EXCELLENCE study from originally 69 to 84 was based on a regulatory request to also have an additional sub-analysis of the number of patients in different age groups; for example, from five to 18, to also have an additional analysis of patients from five to 12, and then from 12 or 13 to 18. In order to make sure we have enough power for this additional calculation, we thought it was prudent to just add additional numbers of patients which ended up with the total number of 84 as we communicated.

Thank you. Very helpful. We also saw that you made a few changes to the primary and secondary endpoints in the EXCELLENCE study. Can you help us understand what drove those decisions, was a result of advice or interactions with the FDA or any other regulatory agency?

Right. So we have noted that the RSS (Rett Syndrome Questionnaire) is really the most rigorous endpoint. It goes through 45 very detailed questions, which can be answered very precisely. There's also the ability, which we have demonstrated in our presentation, to do sub-analyses of the sub-scores of the entire RSS score. However, when we look at that we noticed that there was a weaker ability to rely on this because it's really a global assessment and it also has a known and published weaker reliability. We basically include that still, but we didn't want to overemphasize that score. So that was the background for the focus on the RSS adjustments.

All right. Thank you. And my last question regards the Parkinson's disease dementia program, can you provide any updates on that program, have you met with the agency to discuss it and/or do you plan to anytime in the near future?

Yes, we plan to do that. We actually are in the process of now discussing the data with foundations and we are expecting to get valuable feedback and input on the design of pivotal studies for Parkinson's and also pivotal study for Parkinson's dementia. With that input in our package, we then feel more robustly educated and fully informed to go to the agency to discuss a proper pivotal study in the respective indications.

Do you think, by some chance, you're going to wait for the imaging study results or will the meeting occur beforehand?

This will be before the imaging study, but definitely we are still including — we have not yet reported the total gene analysis of the PD study. So that means we've not only looked at the Sigma-1 gene expression changes of the mRNA, but also the gene expression of all participants that are in the active arm as well as in the placebo arm, and we believe that additional intelligence can be drawn out that will make an informed design of a study which increases further the chances of a successful pivotal study down the road.

All right. Thank you. Thank you very much for taking my questions and congratulations again on the progress and happy Thanksgiving.

Thank you.

Next question comes from Raghuram Selvaraju from H.C. Wainwright. Your line is open.

Congrats for the progress and thanks for taking our questions. So firstly, how early in 2022 do you envisage filing an NDA in Rett Syndrome, provided you get positive readouts from the three trials?

It's really, I would let the data first come out and then we can talk about that, but obviously pending positive data as soon as possible.

Excellent. And then with regards to 2-73, what learnings are you transitioning into your Fragile X syndrome development? For example, are you planning on cross-analyzing data from the Rett Syndrome and the Fragile X syndrome trials, given that the two syndromes share overlapping symptoms as well as underlying cellular mechanisms?

That's exactly right. So two pockets here to look at: one is the preclinical pocket, and we see very strong results in the animal model of Fragile X leading to even reversal of the pathology. And then we look also at the clinical study of Rett Syndrome, and we see that the phenotypes are overlapping between these two indications. There are some endpoints which are included in the Rett Syndrome study — for example, ADAMS is one of them — and that has been responding very well with the drug and we believe this could also be used as a key measure for the Fragile X study, since that has been used prior in Fragile X studies as a primary endpoint. The decision is not yet made exactly about how to use that endpoint, but this could be one potential venue.

Okay. Very helpful. And we read with interest your recent published paper in Expert Opinion on Therapeutic Targets where you described 2-73 and 3-71 as hand-in-hand targets for Alzheimer's disease. We were wondering if you've, number one, benchmarked these drugs together pre-clinically, and number two, tested a combination; if not, do you plan to do so?

So the two compounds came from different angles and different labs but they are now moving more into what we call a learning approach. So far we could not find a comparable assay other than a very early preclinical assay of target engagement. There are differences in the affinities for the Sigma-1 receptor and also differences at the muscarinic receptor, which we believe are important. Ultimately we will only be able to see the difference really if we run both drugs in the same indication in the same trial. So we think that each drug has its own merits and it could very well be that 3-71 is particularly good at focusing on frontotemporal dementia, and could also be very good at other indications, but right now we have 2-73 more advanced, so we will eventually find out.

Appreciate the color. And then just finally you've talked about 2-73 using it in a prophylactic manner. We saw a recent Science Advances article which describes a unique kind of brain protein signature in younger cohorts, mean age of 39. Are you currently working on or planning a genetic or protein test in a younger cohort to help guide 2-73 administration in the future?

Yeah, we look into that and it's a very good point because while the disease correlates with age, it's clear that early intervention is most likely the most efficient way to impact the disease. Our preclinical data indicates that potential, which was done very successfully in animals that received the drug before they were exposed to a toxic load; they never developed the symptoms of Alzheimer's disease. So there's real encouragement to also proceed in that direction. We are committed to eventually do that at the appropriate time down the road and to look into the early biomarker approaches you described.

Okay. Excellent. That's it from us. Congrats again, and happy Thanksgiving to you and everyone on the call. Thanks.

Next question comes from Soumit Roy from Jones Trading. Your line is open.

Hello everyone. And thank you for taking the question. Could you give us a little color around the upcoming Rett study? As I understand, there will be different dose cohorts. So could you give us an idea of the size and is there going to be intra-cohort dose escalation? What should we expect?

Yeah. So let me explain that there is not different dose cohorts. The target dose is higher than the U.S. study. So there's only one active dose and one placebo arm, and that one dose will be the target dose. So there will not be multiple doses; technically it's just one higher dose.

Okay. Got it. So, and you are not disclosing if it's going to be 10, 20 or 30?

Right. We will find out when we disclose the data and then we'll be able to share that.

Got it. And any color on the Alzheimer's trial, what are you planning as patients are coming out of the 48-week? Are they going into a maintenance trial or what is the plan there?

Right. So we have an extension study called ATTENTION-AD, which is a two-year open-label follow-up after the 48-week randomized portion, which started after the first patient finished the 48 weeks. Because these patients have actually — some of them finished this phase and had requested to continue to stay on the study drug — we initiated and successfully expanded this ATTENTION-AD open-label extension from two years to three years. So patients who finish the randomized placebo-controlled part of the study enter into the extension study; after finishing two years they will now continue into the third year. That is because of requests by the patients, the caretakers and the physicians. I would like to add that the conversion from the placebo-controlled part of the study to the open-label extension is very high; it's above 94% currently, which is a good sign.

Great. It's really good to hear. And one last question on the Rett program, where are you on the conversation turning whether these are going to be the data ...

It's really a question now of the data and the data has to speak for itself. We also said it's a potential orphan drug study. The data will determine how this is looked at. We have to point out that for adults there is no treatment available, and the adult patient population is harder to enroll in trials because patients are more dispersed and due to disease progression there are fewer available patients. The focus is really on the study for that reason, but there's an unmet need for patients of all ages with Rett Syndrome. We could even start a rolling submission with the adult trial, and that could potentially be approved before any pediatric filing; I would say it cannot be excluded, but I cannot promise it either. That's why I said we would have two independent placebo-controlled studies in Rett Syndrome, which usually is beyond what is required for rare diseases. So this will be a very powerful package if successful.

Got it. Congratulations again on all the progress and happy Thanksgiving.

Happy Thanksgiving. Thank you.

Next question comes from an analyst from BTIG. Your line is open.

Hi. Thanks very much for taking the question. So the first one is on Rett Syndrome and so the definition of a responder, is that on each efficacy endpoint, is that going to be the same in pediatric patients as in adult patients, and also the definition of a responder, is that consistent with how clinicians are viewing a clinically meaningful improvement?

That's correct. It's consistent with the first study and then consistent with the assessment. The responder definition is aligned with how clinicians view clinically meaningful improvement.

Okay. Then I think I didn't see an update on the 3-71 program in 2022 in terms of upcoming milestones. So I just wanted to check if frontotemporal dementia is still going to be the first indication for that program and when do you expect a study potentially to start?

Right. So we have mentioned that we would move ahead with frontotemporal dementia, but we would like to have solid Phase 1 data in hand before we say we commit to the definitive plan. But we definitely will move forward with FTD or any other related dementia indication.

Okay. And then on the pipeline, it's very encouraging to be able to target multiple indications, but just wondering which indications do you think you would like to prioritize going forward? Of course, Rett Syndrome is going to be the lead indication, but which indications do you think might be suited for partnerships?

So we believe that with the rare disease franchise — Rett Syndrome, Fragile X and others — we have the ability to build a commercial entity focused on rare diseases. That seems feasible to do independently. For larger indications like Alzheimer's disease and Parkinson's disease, which require broad commercialization and involvement of general practitioners and specialists, it might be more powerful to partner with a larger pharmaceutical company at the right time to ensure commercial penetration while retaining upside for Anavex's stakeholders. That would be done at the right time and not prematurely.

Okay, great. Thank you very much. And happy Thanksgiving.

And your next question comes from — your line is likewise. That concludes the question and answer portion. And it also concludes the conference call. Thank you for participating. You may now disconnect.