Anavex Life Sciences Corp. Q3 FY2022 Earnings Call

Good afternoon. Welcome to the Anavex Life Sciences’ Fiscal 2022 Third Quarter Conference Call. My name is Clint Tomlinson, and I’ll 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 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. 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 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 and results of clinical trials or regulatory approvals, 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 appreciate everyone joining us on today’s conference call to review our most recently reported financial results and to provide a business update. We are pleased with the continued advancement regarding our lead product candidate, ANAVEX 2-73 in Alzheimer’s disease and Rett syndrome. As we maintain our attention on the execution across each of our clinical programs and overall business operations. We achieved a very important milestone at the end of June with the last patient, last visit in the randomized placebo-controlled Phase 2b/3 study of ANAVEX 2-73 for the treatment of early Alzheimer disease. We are now focused on completion of associated end-of-trial activities in order to provide top-line results of the placebo-controlled Phase 2b/3 study of ANAVEX 2-73 for the treatment of early Alzheimer’s disease, which are expected this coming fall. This is an indication, which is a condition of significant unmet need and economic burden, for which there are only limited approved pharmacological treatment options. As a reminder, Alzheimer disease is the most common cause of dementia and the fifth leading cause of death in adults older than 65 years. The estimated total healthcare cost for the treatment of Alzheimer’s disease in 2020 is estimated at $305 billion, with the cost expected to increase to more than $1 trillion as the population ages. Most of the direct costs of care for Alzheimer’s disease are attributed to skilled nursing care, home healthcare, and hospice care. Indirect costs of care, including quality of life and informal caregiving, are likely underestimated and are associated with significant negative societal and personal burden. We also recorded the last patient, last visit in the 48-week open-label extension of the Parkinson disease dementia Phase 2 study occurred this quarter. Data from this study is expected by year-end 2022. In our Rett syndrome program, completion of the randomized placebo-controlled EXCELLENCE Phase 2/3 study for the treatment of pediatric patients with Rett syndrome is expected by the end of 2022. In June, Anavex announced a peer-reviewed publication in the American Journal of Medical Genetics, identifying a blood biomarker for assessing treatment effect of ANAVEX 2-73 in Fragile X syndrome, which provided strong scientific support for the planned clinical trial of ANAVEX 2-73 in Fragile X syndrome. At the end of July, Anavex presented very important data, the first complete clinical human Alzheimer’s disease and Parkinson’s disease gene pathway data from the ANAVEX 2-73-PDD-001 Parkinson’s Disease Dementia study at the Alzheimer’s Association International Conference, AAIC, in San Diego, California. Also at AAIC in early August, Anavex presented long-lasting effect of ANAVEX 3-71, preventing cognitive decline in a transgenic rat model of Alzheimer’s disease. This new data strengthens the importance and applicability of Anavex Precision Medicine SIGMAR1 platform and is consistent with previously reported therapeutic significance and dose-dependent preclinical prevention of a better-induced biomarker correlated with cognitive impairment with ANAVEX 2-73. Further pipeline expansion of the Anavex platform using gene biomarkers of response applying precision medicine for neurological disorders with unmet medical need is expected in 2022, including meeting with the FDA to discuss the ANAVEX 2-73 Parkinson’s disease program, including a pivotal Phase 3 study, planned initiation of ANAVEX 2-73 imaging-focused Parkinson’s disease clinical study sponsored by the Michael J. Fox Foundation, and planned initiation of a potential pivotal Phase 2/3 study in Fragile X syndrome, the most frequent genetic cause of autism spectrum disorder. Lastly, planned initiation of ANAVEX 3-71 Phase 2 clinical trials for schizophrenia, frontotemporal dementia, and Alzheimer disease indications. 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. During our third fiscal quarter, we maintained fiscally responsible cash utilization as we continue to execute on our clinical programs. Our cash position on June 30, 2022, was $153.2 million. To put this in context, at our current cash utilization rate and range, we believe we have sufficient cash runway to fund operations and clinical programs beyond the next four years. Our research and development expenses for the third quarter of fiscal 2022 were $9.3 million as compared to $9 million for the comparable quarter of fiscal 2021. General and administrative expenses were $3.2 million compared to $2.4 million for the comparable quarter of fiscal 2021. Overall, we reported a net loss of $12.4 million for the quarter or $0.16 per share. The overall increased expenses over the comparable period are primarily related to an increase in non-cash compensation charges period-over-period, which is driven by the continued addition of staff to manage and support our clinical studies and development. Thank you. And now I will turn the call back over to you, Christopher.

Thank you, Sandra. We’re looking forward to delivering data readouts as well as initiating biomarker-driven precision medicine clinical studies, as planned. I would like now to turn the call back to Clint for Q&A.

Thank you, Christopher. We’ll now begin the question-and-answer session. If you have a question, please raise your hand or enter it in the Q&A box. The first question today will be coming from Soumit Roy at Jones Research. Go ahead.

Hi, everyone. Congratulations on all the progress. One question on the EXCELLENCE pediatric Rett trial. Could you clarify when you’re mentioning its completion of the trial is expected year-end '22? So, is the data getting pushed back into 2023, or do we expect data still at the end of '22?

We previously updated the completion date for the study on clinicaltrial.gov, indicating it will be finished in December. We will make every effort to release the data as soon as the study concludes. At this point, I can confirm that the study will be completed by the end of the year, and shortly after that, we will provide the top-line data. Additionally, I want to highlight that we have prepared adequate manufacturing products for a potential market entry for Rett syndrome, should the EXCELLENCE study yield positive results.

Got it. Is there any headwind in the enrollment for the pediatric Rett syndrome trial? I'm trying to understand why it seems to be taking longer to complete the enrollment.

We reminded last quarter that we had the situation that the vaccines were approved for the pediatric population. And since the trial requires a three-month consistent medication, a vaccine is a trigger for this three-month duration. So, when a patient or participant in the study has a vaccine taken, the last dose will trigger a three-month period before somebody can join the trial. And we noticed that this would lead to slower enrollment, and we just are made aware of that. And that’s part of this process. So, there’s really not anything else, but that we want to make sure that we follow the guidance of the protocol, which requires this three-month period.

I totally understand. And last question. So, you are still curious whether to file the adults BLA separately from the pediatric BLA, or are you going to wait until the entire pediatric data is available and then file together? Any thoughts on that?

At this point, we are so close to readout of the EXCELLENCE study. And we should remind everyone that Rett syndrome is predominantly a pediatric indication. It predominantly affects girls from an early age onwards, and many patients do not live into adulthood. The life expectancy at 40 years is only 50%. And so, that makes it clear that this is predominantly a pediatric indication. That’s why we also focused on the study size and the study focused on the pediatric study. The adult study is important to get approval for the entire age group. And at this point in time, we also want to ensure that since we have the voucher eligibility, we want to be able to submit a successful pediatric study first in order to receive this voucher, which is quite valuable, as you know. So, again, but the key thing is that we are so far into this EXCELLENCE study that it is just more preferred and prudent, in addition to the fact that it’s predominantly a pediatric indication, to finish the EXCELLENCE study and then file the entire program, which consists of three placebo-controlled studies, the Phase 2, the Phase 3 AVATAR, and the Phase 3 EXCELLENCE study.

Thank you for clarifying all the issues. And congratulations again on all the development.

The next question will come from Yun Zhong at BTIG. Go ahead.

So, the first question is on your discussion with the FDA on the pathway for Parkinson’s disease. What’s the possibility that the FDA might ask you for additional information or clinical data from Parkinson’s disease patients, given that your Phase 2 study was done in PDD, not really the population of PD patients? And if that’s the case, do you think the imaging study will provide you with sufficient information? And I have a follow-up question.

Yes. So, that’s a good question. So, as a reminder, we’re initiating soon the imaging study in Parkinson’s patients funded by the Michael Fox Foundation for their support for this, which is the second grant we've received from Michael Fox after the first one, which covered the Parkinson’s disease, our proof-of-concept indication in animals in a disease-modifying animal model. This PET study would be a good support for a study in Parkinson’s disease only. We have to see though that the Parkinson’s disease dementia study, we believe, is very robust to demonstrate parkinsonism because we noticed and measured in this Parkinson’s dementia study a very strong dose-dependent improvement in the MDS-UPDRS score, which is the standard and gold standard of measuring parkinsonism for Parkinson’s disease patient features, and that was very robust in its outcome. So, we believe that we have enough evidence of moving forward in a pivotal study in Parkinson’s disease because of the data from the Parkinson’s disease dementia Phase 2 study in 132 patients in a placebo-controlled study.

Okay. My second question is that you have reported quite a lot of interesting biomarker data. So, I wonder, have you incorporated that biomarker information in, for example, patient enrollment in the Alzheimer’s study? And also, do you plan to incorporate that information to allow you to maybe identify a specific patient population in future studies so that you will be able to show maybe better clinical data?

The most important takeaway from the genetic analysis of the whole genome of patients receiving ANAVEX 2-73 compared to placebo in the Parkinson’s dementia study was really that the drug shows the ability to resuscitate or to counter down-regulated gene pathways, not only gene pathways but also clusters of gene pathways, which are down-regulated in the respective pathology of Alzheimer’s disease as well as in the respective pathology of Parkinson’s disease. The fact that clusters of gene pathways are down-regulated in these diseases, which is published compared to healthy volunteers in various papers, and we were able to demonstrate that those down-regulated genes were up-regulated again in the ANAVEX 2-73 arm shows really the broad ability to counter these complex pathologies. And I want to remind again, this is evidence that we are talking about extremely complex indications with different features and not one unilateral pathway in Alzheimer’s disease or Parkinson’s disease, but the ability to really address pathways and counter them on a broader range, which includes degeneration in various features like mitochondria, autophagy restoration, tau reduction, and better balance homeostasis restoration. All these pathways have been addressed and confirmed in this whole genome analysis. And we’ve noticed that and learned that in pre-clinical animal studies already that ANAVEX 2-73 is capable of doing that. And what is really important is that this is on top of the very clear biomarker data of SIGMAR1 correlation with the outcome of patients' benefit. So again, patients benefit the most who also had the highest SIGMAR1 activation since we activate SIGMAR1. That makes perfect sense and does not come as a surprise but should give us confidence in the readout of future studies. And that’s why I’m very excited that the whole genome analysis also shows this fundamental strong biomarker correlation with the outcome and not only in one gene, but also broader pathways that are again impaired in these indications.

Next question is from Ram Selvaraju from H.C. Wainwright.

Thank you so much for taking my questions. And congrats on all the progress once again. I just wanted to ask if you could comment on two strategic aspects. One is with respect to the imaging use of 2-73 versus its therapeutic use and how you envision that evolving at a commercial level. Should the molecule ultimately demonstrate its utility on both of those fronts, regardless of the neurodegenerative disease context. And the other is how you are thinking about optimizing the value of blarcamesine in ex-U.S. territories. And in particular, to what extent you expect to be exploring this through partnerships and what the timing of those might be? I also was wondering if in that context you could provide some commentary regarding the IP protection of blarcamesine, in particular, in potentially significant commercial territories like China.

Very good question. May I ask for a clarification on the first question, please? What were you referring to imaging effects of the drug?

That is correct, yes.

Now I understand. Thank you. So, as you might remember, and I want to re-emphasize this. We did notice that in all three studies, so far, clinical studies, Alzheimer’s, Parkinson’s dementia, and Rett syndrome, we noticed that the SIGMAR1 shows up in two different genetic forms. One is more prevalent than the other. We call it wild-type (WT). It’s the most predominant. We talk about 80% to 90% of all participants in studies or in the world have this SIGMAR1 wild-type gene. We noticed that with everything being equal, those patients had a slightly better response than those patients, which are the minority of 10% to 20% with a SIGMAR1 variant and one amino acid, which seems to change the conformation and hence might be not as expedited in its activity in the body, but still doing its job because we noticed that when we dose high enough, there is no real difference between those two genetic forms in a patient. Having said that, if it becomes necessary to focus on patients with the wild-type gene, we are in parallel developing a diagnostic test, which would serve as a companion diagnostic for the therapeutic for ANAVEX 2-73. We would then be able to go into the market with that companion diagnostic to identify patients only with this wild-type SIGMAR1 gene, which, again, is over 80% of the population. This will ensure that these patients benefit most from ANAVEX 2-73. So far, we will see if the Alzheimer’s study and the pediatric Rett study don’t need that kind of additional cohort selection. We might just find out that all patients, irrespective of genetic background, will benefit from ANAVEX 2-73. But again, if it does not be the case, we will have that ability to move into that precision medicine, companion diagnostic-therapeutic approach. Secondly, regarding planning for commercialization outside of the U.S., we stated in Rett syndrome that we would be happy and able to, and are planning to, move forward ourselves in marketing ANAVEX 2-73 in Rett syndrome and possibly also in Fragile X. In the Rest of the World, we are actively in discussions and planning to expand the dialogue with European, Asian, and including Chinese companies for marketing the drug outside of the U.S. There’s also the potential for partnerships globally, ex-U.S. or in regional partnerships, for example, Asia, or a separate Japan and the rest of Asia, and then Europe and South America. We are in discussions on that already in order to maximize also the rollout of the drug worldwide. Did I miss any additional question?

Just as an adjunct to that, I was asking about the IP protection for blarcamesine currently in China.

Thank you for reminding. So, we ensured that when we started the company’s portfolio strategy to include China very aggressively in IP protection. With all the patents we have filed so far, going back to the last 7 years, we included specific patent applications in China. We always make sure that we not only have protection in the largest market but specifically also added China into this group of IP protection.

Okay. And then, just one last question was with respect to when you expect to disclose the identity of the new ultra-rare indication for blarcamesine, for which you expect to initiate Phase 2/3 clinical development as per the guidance from the press release still this year? When do you disclose the identity of that indication?

Right. I want to give a bit of background about this. We would be happy to disclose it. It’s not that we don’t want to disclose it. We just don’t want to convey the message as if we would not be focused and convinced about the existing indications. That’s the only reason we don’t want to distract the market. The reason why we have this in this form or shape mentioned is that we have several indications where we have very robust pre-clinical data with ANAVEX 2-73 in rare diseases and ultra-rare diseases. We want to make sure that we are progressing first with the FDA to discuss those indications to ensure we pick the one which has the highest chance of succeeding in our clinical trial and progressing in the clinical trial success. Then, we will make the disclosure. But really, the predominant reason is that we want to make sure that we don’t create the impression that we are not focused on the existing indications, which we are very excited about as we speak.

Just one very minor financial clarification, if I may. Based on your guidance with respect to the length of the cash runway, can you confirm whether or not that effectively includes whatever budget assumptions you may have to make regarding actual commercialization of blarcamesine? One might say, for example, the highest likelihood is commercial-related expenses associated with the deployment of the drug in Rett syndrome, but possibly also another indication. I just wanted to clarify whether your financial runway guidance actually includes those commercial expenses along with the other operating expenses as well.

This is an excellent question. Let me break it down this way. For the commercialization, we already have, as I mentioned just briefly before, sufficient drug product for the entire commercial rollout of ANAVEX 2-73 in Rett syndrome. The marketing rollout cost, as you know, when you have an approved drug, your ability to access capital and resources for that is broader than the equity capital market. You have access to debt financing and other financial vehicles which are basically not dilutive. We certainly will make use of that. So, the cash available is not limited to equity, which is right now the focus in a stage where the company does not yet have revenue. But this can change very quickly and hopefully very soon, as we're able to expand on the ability to use financial vehicles and resources that are basically non-dilutive to shareholders.

Okay. Thank you. Our next question is going to come from Charles Duncan at Cantor.

Hi. It’s Avian on for Charles. Thank you for taking our questions. And congratulations on the progress. So, I guess a quick question regarding the Alzheimer’s program. I was wondering if you could speak to enrollment rates into the open-label extension.

Say it again, what’s the question, please?

Could you please discuss enrollment rates in the open-label extension from the Phase 2/3 Alzheimer’s study?

Yes. We have very high enrollment in the extension, which is two years after the placebo-controlled study that just finished last June. I think the last number I received was in the range of 94% to 93% enrollment.

Okay, great. Yes. Awesome. Sounds good. And then, I have a couple of questions regarding the Rett syndrome program. So, I guess, first, could we expect a potential press release or an update when the last patient last visit is reached?

From the EXCELLENCE study? Yes, we will provide that.

Okay, wonderful. Thank you. And then, my last question is you had mentioned earlier in the call that should the results be positive, you would try to move forward with an NDA submission. But I was sort of wondering, how are you distinguishing between positive or positive enough to move forward with an NDA versus positive that there’s a signal we should continue to explore further? I was wondering if you could share how you’re thinking about that distinction? And what sort of feedback the FDA has related to you regarding what it would take to get an approval? Thank you.

We have two robust clinical studies, the Phase 2 study and the AVATAR study, both of which are placebo-controlled. We have submitted these studies to the FDA along with the design of the ongoing EXCELLENCE study to ensure the agency is comfortable with our approach and data. Our goal is to receive clear feedback from this submission, which will help maximize our chances for NDA approval. We anticipate this feedback will be communicated to us. This is the best way to avoid any obstacles when the data is released. We want to ensure that before the EXCELLENCE study concludes, we have a clear path to approval.

Okay. Wonderful. Yes. Thank you for taking our questions. And congrats on the quarter.

Thank you.

The next question comes from Caroline Palomeque from Berenberg.

I just have a follow-up on the mechanism work. Do you plan on doing any genomic analysis, gene expression work on 3-71 such as an FDD or some indication like that as well?

That’s correct. So, we have done, now since our first study in Alzheimer's disease, the Phase 2a, where we, for the first time, used genome analysis; we will now include that as well as in the ANAVEX 3-71 program because of the broad applicability and the way we believe we can learn more about the effect of the drug. So, we will clearly also include that in the ANAVEX 3-71 program.

I believe that was the last question, Dr. Missling.

Thank you. Again, we are very much looking forward, and we're very excited about the company’s potential as we build on biomarker-driven precision medicine studies, with significant unmet medical needs and economic burden. We are looking forward to clinical trial readouts in Alzheimer’s disease and pediatric Rett syndrome. Thank you very much.

Thank you, Dr. Missling. Ladies and gentlemen, this concludes today’s conference. We thank you for participating, and you may now disconnect.