Anavex Life Sciences Corp. Q1 FY2022 Earnings Call

Good afternoon. Welcome to the Anavex Life Sciences Fiscal 2022 First Quarter Conference Call. My name is Clint Tomlinson, and I will be your host for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. The call will 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, our Principal Financial Officer. 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. This includes, without limitation, the company's Forms 10-K and 10-Q, which identify the specific factors that may cause actual results or even 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, need and ability to obtain future capital and maintain intellectual property rights. And with that, I would like to turn the call over to Dr. Missling.

Thank you, Clint, and we appreciate everyone joining us on today's conference call to review our most recently reported financial results and to provide a business update. The first quarter marked significant progress across our portfolio, highlighted by the positive top line results of the randomized placebo-controlled AVATAR Phase 3 study for the treatment of adult patients with Rett syndrome and the positive top line results from the placebo-controlled Phase 1 study of ANAVEX 3-71, which is in development for the treatment of neurodegenerative diseases, including frontotemporal dementia and a clinical data-driven evidence of efficacy and safety of our broad SIGMAR1 platform portfolio, which allows us to plan and to expand further into the rare disease space, including implementing expanded access for adult patients with Rett syndrome, an underserved population. At the same time, we are advancing both ANAVEX 2-73 and ANAVEX 3-71 in the planned studies with a goal to driving meaningful growth across our broad SIGMAR1 platform portfolio to deliver transformational treatments for patients with both degenerative and developmental neurological disorders around the world. Starting with our lead drug candidate, 2-73. We reported positive top line results from the second randomized placebo-controlled AVATAR Phase 3 study for the treatment of adult patients with Rett syndrome. The study met its primary and secondary efficacy and safety endpoints with consistent and clinically meaningful improvements in all efficacy measures of Rett syndrome symptoms. Convenient once-daily oral liquid doses of up to 30 milligrams of ANAVEX 2-73 were also well-tolerated with good medication compliance. Based on the results of the AVATAR Phase 3 study and the prior successful US Phase 2 study in adult patients with Rett syndrome, Anavex is now planning to meet with the FDA to discuss the approval pathway. 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 second half of 2022. The extension of this expected duration of enrollment is based on recent country and local government requirements for children to have full COVID-19 vaccination prior to joining a clinical trial, which includes our pediatric EXCELLENCE trial. This Phase 2/3 study in pediatric patients with Rett syndrome aged five to 17 will evaluate the safety and efficacy of 2-73 in approximately 84 patients over a 12-week treatment period, including ANAVEX®2-73 specific precision medicine biomarkers. Regarding our Alzheimer's disease program, top line results from the randomized placebo-controlled Phase 2b/3 ANAVEX®2-73-AD-004 study for the treatment of Alzheimer's disease are also expected in the second half of 2022. The 509 patients, late-stage Phase 2b study in patients with Alzheimer's disease is taking place at 52 sites across North America, Europe, and Australia, using ADAS-Cog for cognition and ADCS-ADL for activities of daily living and function as primary endpoints. This clinical trial is measuring efficacy, tolerability, and safety of two different once-daily oral 2-73 doses or placebo. The current data allows us to expand in parallel our ANAVEX platform pipeline using gene biomarkers of response and applying precision medicine for neurological disorders with unmet medical needs, which are expected in 2022. That includes the planned initiation of ANAVEX®2-73 imaging-focused Parkinson disease clinical study, a planned initiation of a potential pivotal Phase 2/3 study in Fragile X syndrome, the most frequent genetic cause of autism spectrum disorder; and a planned initiation of a Phase 2/3 clinical trial for the treatment of a new rare disease indication. As well, last month, Anavex reported positive top line results from the placebo-controlled Phase 1 ANAVEX®3-71 clinical trial in development for the treatment of neurodegenerative diseases, including frontotemporal dementia, for which ANAVEX®3-71 has been granted orphan drug designation by the FDA. The study reached primary and secondary endpoints of safety with no serious adverse events or dose-limiting toxicity observed. ANAVEX®3-71 was well tolerated in all cohorts receiving ANAVEX®3-71 in single doses ranging from 5-milligram to 200-milligram daily with no serious adverse events and no significant lab abnormalities in any subject. Based on these results in ANAVEX®3-71's preclinical profile, we intend to advance 3-71 into a biomarker-driven clinical development dementia program for the treatment of frontotemporal dementia, schizophrenia, and Alzheimer's disease, evaluating the longitudinal effect of treatment with ANAVEX®3-71. We believe that the results of these studies could serve as the basis for advancing into respective registration studies in the US. And now I would like to direct the call to Sandra Boenisch, Principal Financial Officer of Anavex, for a brief financial summary of the recently reported quarter.

Thank you, Christopher, and good afternoon to everyone on the call. Our cash position at December 31, 2021, was $151.1 million, which we believe is sufficient cash runway to fund operations and clinical programs beyond 2025. For the first quarter, cash utilized in operations was $3.5 million. We reported a net loss of $10.9 million for the quarter or $0.14 per share, inclusive of non-cash compensation charges of $3.9 million, compared to a net loss of $7.9 million or $0.12 per share, inclusive of non-cash compensation of $0.9 million for the comparable quarter of fiscal 2021. Our research and development expenses for the first quarter of fiscal 2022 were $8.7 million as compared to $7.9 million for the first quarter of fiscal 2021. General and administrative expenses were $3.1 million, compared to $1.5 million for the comparable quarter of fiscal 2021. In both cases, the increases are primarily related to an increase in non-cash compensation charges of $1.7 million for research and development and $1.3 million for general and administrative expenses period-over-period. These increases in non-cash compensation are mainly driven by the addition of staff to manage and support our clinical studies and development. Thank you, and I'll turn it back over to Christopher.

Thank you, Sandra. Again, we look forward into 2022. We are very excited about the company's potential as we build on the successful completion of two important studies that allow us to confidently expand further into the rare disease space and plan for extended access for adult patients with Rett syndrome, while we are looking forward to further pivotal clinical trial readouts in pediatric Rett syndrome and Alzheimer's disease, as well as pipeline updates this year. I would like now to turn the call back to Clint for Q&A.

Thank you. We will now begin the question-and-answer session. And our first question is coming from Charles Duncan with Cantor Fitzgerald. Please go ahead, Charles.

Let's see. Can you hear me?

We can hear you.

Okay. Super. Thanks, Clint. Hi, Christopher and team. Thanks for hosting the call. I had a couple of questions on the recent AVATAR readout, one on EXCELLENCE, and then I wanted to ask Sandra a little bit about the cash runway. So regarding AVATAR, we were quite intrigued with the recent results. But I guess I'm wondering if you had assessed just simply the change from baseline in RSBQ and CGI and if you intend to present that data here in the near term. And then regarding the expanded access, is that part of an open-label extension study or open-label extension to the AVATAR study?

To address your last question first, expanded access is intended to provide the drug for free to patients currently participating in trials so they can continue their treatment, as well as to those who are not part of the trials. This defines our concept of expanded access and is what we are working toward. Regarding the first question, I’d like to reiterate the background of the response analysis. The animal studies for Rett syndrome and other neurodegenerative diseases suggest that ANAVEX 2-73 has both symptomatic and disease-modifying impacts. Consequently, our analysis of ANAVEX 2-73 data aims to capture these effects, which we present as response analysis using the RSBQ AUC. Additionally, we noted in the research, which was referenced in our February 1 presentation, that the RSBQ has significant limitations, including a 200 percent variation and lack of baseline calibration, making it unreliable for sole use. Nonetheless, we reference the CGI requirement for a 1-point scale improvement, which signifies a minimal clinically important improvement represented by an average reduction of 12.5 on the RSBQ scale. Now, with over 72% of responders scoring above 3, some have also scored a 2 as observed in this study. Therefore, the average RSBQ must exceed a 12.5 change. I hope this clarifies things further.

It does, Christopher. I appreciate that and definitely appreciate linking RSBQ to clinical benefit. Let me turn to EXCELLENCE. I guess I'm wondering if you'll use the same evaluation as was used in AVATAR, because I think clin trials has it a little bit different, and you might correct that. And then the second thing about EXCELLENCE is that, in terms of the patient enrollment to date, can you give us some color on the number of patients enrolled? And when during the second half of 2022 you would anticipate that study to read out?

Yes, the enrollment is progressing well. However, we have learned that, due to the COVID vaccines being approved globally, all participants are now required to get vaccinated. The protocol states that participants need to be on a specific medication for several weeks, approximately six to eight weeks, prior to joining a trial. This means they must receive both the first and second doses of the vaccine and allow some time for the new medication, which in this case is the vaccine, to stabilize. As a result, this will extend the timeline for completing the last patient enrollments in the trial. Charles, what was your other question? I just...

Yes. I was just wondering if you can provide some color on the number of patients enrolled thus far.

We are doing well from our perspective. I'd like to just mention that, right now, we are very comfortable with the time frame during the second half of 2022 that gives us ample time to complete the study with this additional required vaccination regimen. So this is sufficient for us at this point to share.

Okay. And you may narrow the time frame from, say, second half to a little bit more granularity in the future as your enrollment progresses?

Exactly right. Yes. In relation to ClinicalTrials.gov, I want to clarify that it should not be considered our main form of company communication. It will be updated in due course, so it's important for you to recognize that. Our official communication takes precedence over ClinicalTrials.gov, and updates will come once we finalize the study outcomes. Currently, the information may not be entirely current, and I want to ensure that everyone is aware of this.

Okay. Last quick question for Sandra. I think you mentioned $151 million go through 2025. I assume that's considering only the current spend and that you are not contemplating an NDA filing or commercial prep for that runway and that the runway may change if you end up being involved in an NDA filing and/or commercialization?

Yes. If I can maybe start first. We have over $150 million in cash, which is really an incredibly large sum of money. And when you calculate our average cash utilization in the past, it was very consistent in the range of $2 million per month to $2.5 million. And now in the last quarter, we averaged $2.3 million, I think. So that is the cash utilization. If we do have additional plans, which are marketing the drug, of course, there will be a difference in that regard. So in this regard to the cash utilization is right now continuing what we have planned, which is several studies, which we mentioned we are planning to do and executing the studies which are ongoing. So that is the assumption of the calculation.

Okay. Thank you.

Thank you.

Hi, everyone. Thanks for taking the question and congrats on this quarter and the data. One question, Chris, I wanted to understand or get your take on how do you think the FDA would look at two drugs being filed so close to each other with two different endpoints? Curious if you would make any comment if you think they would ask Acadia to file it with RSBQ AUC?

It's a great question. I want to talk about our data. We believe that each drug should be evaluated individually, and the analysis should consider the drug's effects. That's exactly what we've done. Additionally, there's research on the RSBQ that highlights significant variability and inconsistency in baseline measurements. This isn't just my opinion; it's documented in a paper from 2020, released around the same time we completed our initial study in the US. We learned from that to adjust our approach. The FDA guidelines are clear about how to handle situations with unreliable endpoints. If the endpoint lacks complete reliability, the recommendation is to utilize an anchoring and user response analysis. However, it's crucial that this endpoint correlates with CGI. If there’s no correlation, the anchoring method cannot be applied, leaving you with a less favorable outcome. Fortunately, we have verified this correlation; the RSBQ is rated by parents, while the CGI is rated by physicians. These measures assess different aspects but should reflect a positive change independently. This correlation exists in our studies, which is reassuring. Once the correlation is established, the FDA guidance suggests adopting the anchor-based method to ensure clinical significance rather than just statistical significance. This approach elevates our standards for the drug and clarifies the effect of the drug. We’ve made it easier for the FDA to understand that all responders will exhibit clinically meaningful improvement. The goal is to avoid situations where there is statistical significance without real-world benefits, as neither the physician, patient, nor parents can verify the effectiveness. By employing the CGI anchored RSBQ, we have been able to raise the evaluation standard and simplify interpretation. It's similar to assessing skin diseases, where a minimum percentage of improvement is required for the drug to be considered effective. This provides a fairer and more accurate assessment of the drug’s impact.

Thank you, Chris, that really helps. Thank you for getting into the details. One last question is, if you can remind us if there is any formulation difference between the adult Rett trial and the pediatric one? And if you could talk about if the liquid versus pills you see any advantage you have versus your peers?

Yeah. So we have for the Rett trials, a consistent liquid formulation across all trials, all three trials in the program. So the US study, the AVATAR and the EXCELLENCE have exactly the same formulation. It's a liquid formulation taken once daily orally, they take the amount of drug they need. And so there's no difference. What maybe you are referring to is the formulation for the Parkinson's disease, dementia study and the Alzheimer's disease study. In those cases, we have a once-daily solid capsule formulation or pill. And that is, obviously, also at different doses, and that is taken in solid form. The reason why we formulated or developed a liquid formulation of the drug was that we learned very early on that patients with Rett syndrome sometimes either cannot swallow capsules or pills, or they have not even the ability to take food or liquid in a normal way. They have a pouch, where they basically get that injected. So you need to have a formulation which allows to do that, and a liquid formulation is exactly suitable for that.

Thank you, Chris, really appreciate it. And congratulations again on the robust data.

Thank you.

The next call is coming from Tom Bishop of BI Research. Go ahead, Tom.

Yes, hi. Can you hear me?

Yes.

Okay. If I remember correctly, on a previous call, you estimated that the total Rett market could be between $2 billion and $5 billion. I was wondering if my memory is accurate and whether that figure refers to the U.S. or the global market. Additionally, could you provide some insights on the adult Rett population compared to the pediatric population?

The estimate we mentioned is based on a rough calculation. On average, there are about 11,000 patients in the U.S., so let’s round that down to 10,000. For rare disease pricing per patient per year, it could range from $200,000 to $500,000. If we multiply that by 10,000 patients, the total revenue per year could be between $2 billion and $5 billion. This estimate only considers the U.S. market at this time. When looking specifically at adult patients with Rett, we estimate that they make up around 50% of the total patient population, suggesting that the adult Rett population would be roughly half of that total.

Okay. And then there’s the whole world to boot.

We have obviously large markets. For example, we estimate that the market sizes for Fragile X are approximately 13,000 in Europe, 37,000 in Asia, and 350,000 globally.

Was that Fragile X or Rett?

Yes, this is Rett syndrome only. In Europe, there are 11,000 to 13,000 cases. These numbers are based on information from natural foundations and other sources. In Asia, there are 37,000 Rett syndrome patients, and globally, there are 350,000 patients with Rett syndrome. Fragile X is larger, estimated to be around six to seven times the size of Rett syndrome.

Okay. I note that the quarterly commentary again skips over Parkinson's disease, dementia and the physical aspect as well. And I'm wondering why that is. And what's the status?

No. We want to update when we have the updates. So the PDD study was really successful, and it allowed us to move into now two directions. And we stated that. One is to plan a potentially pivotal study in Parkinson's alone, given the strong UPDRS signal as well as in UPDRS in Parkinson's dementia, given that the strong cognitive improvement. We are now discussing with the respective experts the designs of such studies. And then we go with these designs to the FDA, to the agency, and ask for their input on how to execute those studies. And that's right now taking place. So once we have feedback, we will come back and revert back on this.

Good. Okay. And when do you estimate the last patient will complete the last observation in the 48-week Alzheimer's trial? I understand that's fully enrolled at 509 patients already, right?

Yes, 509 patients. So we expect the last patient to be finished around probably summertime. And so I think then we have to clean data and do data lock, and then we have the data. So that's right now the expected timelines.

Could you describe the various steps involved after the trial is completed, including the cleaning process, blinding the trial, and analyzing the data? How long do these steps typically take? I believe this information would be helpful for everyone.

The primary focus is on data cleanup after a clinical trial. Once the data is locked, no changes can be made, not even minor adjustments. It is essential to thoroughly check every entry to ensure completeness and clarity, with no missing information. This verification process often takes several months. After data cleanup, the time from data lock to un-blind data release is typically about two weeks. During this period, quality control checks are performed to confirm the accuracy of the outcomes and calculations before the data is provided to us. This is a general overview of the process.

Okay. That's helpful. And there have been a lot of estimates of how big the revenue opportunity would be for a drug that works on Alzheimer's disease, and I must confess to certain myself in the US and the world. And for the US, I think it sounds to me like many think that could be around $10 billion annually. But I'm more interested in what your thoughts are on that market potential, size.

Yes, it's definitely within reach and not unreasonable. I recall when the approval from Biogen was announced, the stock value surged to 30 billion. If that's the expected net present value of a successful trial with a potential drug on the market, then that's what we should consider. It's essentially about the price multiplied by the number of eligible patients, and then you can calculate from there. Clearly, this represents the largest unmet need, and that's undeniable.

I noticed that same $20 billion increase in the market cap of Biogen temporarily anyway. Okay. That’s it for me. Thank you.

Thank you. We have another question if there are no other questions. I was wondering if you could comment on a couple of items. Will you consider initiating further trials in Angelman syndrome, perhaps a basket trial with multiple gene-related disorders? The answer to that question is we are already planning to bring the Rett franchise home first, and we are very close to that. After that, we want to address these other indications for which we have pre-clinical data that support moving into clinical trials, including Angelman syndrome. Additionally, as I mentioned in the last call, we are planning to use a quasi-basket trial for Fragile X since it is a heterogeneous population. We want to ensure we are addressing the right population for the cohort. Each cohort will be addressed and will be homogeneous. We will assess how well they respond to our drug. We are essentially utilizing this basket-like trial design for our next trial. Clint, are there any more questions you see?

Okay. Can you hear me?

Please go ahead, yes.

Okay. Thank you for taking our question. This is . Congratulations on the quarter's progress. And I just want to take one step back about the Rett syndrome of clinical manifestation because Rett syndrome is pretty wide range of clinical manifestation. So do you consider Rett syndrome primarily central nervous related or both central and peripheral, because a lot of multiple clinical trials have been using RSBQ and CGI as primary endpoint. But some experts believe RSBQ focuses too much on behavior changes, but motor functions for Rett syndrome patients are also important. So are you marrying any motor function-related endpoints in the trial?

Excellent question. And that's another reason why the RSBQ is basically not a bad endpoint, but just needs to be put in the right perspective. And as a standalone, it is not sufficiently validated to represent the full features of Rett pathology. So the answer to that is two-fold. Yes, we did see a signal also in movement features. We noticed that in the quality of life assessment that there were some activities noticed in that regard. And the quality of life also captures movement. And also, for example, family cohesion. So is the family more happy to deal with things? And can the patient do things by themselves? And we also heard from some investigators that there were the ability of moving the legs again, which were not able to move before. And to come to the question about the periphery versus central nervous system, I think this is a complex disease. And as we learn more about it, we also have to appreciate that the fact that we have seen in the periphery by measuring blood biomarkers of pathology like the GABA and the LAAA, which responded nicely and were in line with the outcome of the patient benefit. So these are also CNS-related features, but they were measured in the periphery. So we cannot exclude that the periphery effect is also involved. But ultimately, we know that the key feature of the drug is really on CNS. And we have seen that confirmed with the target engagement study we did prior with the PET scan sigma-1 ligand. So we definitely know that the key target point is in the brain. But again, I would not exclude that there is also potential periphery effect, but the key target is definitely the CNS.

Thank you. It's helpful. So regarding your interaction with the regulators, have you already scheduled a meeting with the FDA, or when should we expect to see?

Yes. So the way it works, we have to send to the FDA clinical channel reports, and they're required to be put together. So it's not just the slides which we have. So in that right now is on high pressure is taking place. So once we have those slides, those documents done together, which are clinical study reports, the formal report, then we will submit them and then request the meeting.

Okay. So do you expect the feedback to be before the readout of the EXCELLENCE study?

This is very likely because we said second half of 2022. So we expect that to be the case, yes.

Thank you for your question. Regarding the basket study for 3-71, which involves three different indications, I can provide more details on those indications, including our patient recruitment plans and how we intend to measure efficacy. Since these indications have distinct endpoints and clinical durations—schizophrenia, for example, can show changes relatively quickly—do you have a prioritization in mind, or can you share more insights on that?

Right. So I think it was a bit of like maybe explained too quickly. We refer to Fragile X where we will include Fragile X patients. These are all Fragile X patients, but they have different features which are not identical. So they have to harmonize them to make them more consistent in their feature. We group them in distinct groups of Fragile X. And it could be certain behavior prevalence, certain cognitive impairment prevalences and so forth. So that's what I was referring to do across the basket trial. So we will measure the same endpoint, which is Fragile X related endpoints. When it comes to ANAVEX 3-71, which we are planning in Alzheimer's in front of dementia and also schizophrenia, this will be not a basket trial. It will be in a program, we call it. There will be trials which will be done separately because our schizophrenia, for example, requires a relatively short study duration, around six weeks, for example. In the FTD and Alzheimer study, longer studies are required, at least six months. So you see already from that angle that they cannot be put in one trial together.

Okay. Thank you. That’s helpful.

That's all the questions, Dr. Missling.

So then we'd like to thank everybody. And again, as we look forward into 2022, we're very excited about the company's potential as we build on a successful completion of two important studies that allow us to confidently expand further into the rare disease space and plan expanded access for adult patients with Rett syndrome. And while we're looking forward to further pivotal clinical trial readouts in pediatric Rett syndrome and in Alzheimer's disease, as well as pipeline updates this year. So with that, thank you very much.

Thank you, ladies and gentlemen, and that concludes today's conference call. We appreciate you participating. You can now disconnect.