Earnings Call Transcript - AVXL Q3 2021

Operator, Operator

Good afternoon. My name is Adrian and I'll be your conference call operator today. Welcome to the Anavex Life Sciences Fiscal 2021 Third Quarter Conference Call. As a reminder, this conference call is being recorded. And I'd like to call over your host for today's conference, Clint Tomlinson, please go ahead.

Clint Tomlinson, Host, Investor Relations

Thank you. And good afternoon, everyone. We appreciate you joining us today for Anavex Life Sciences' third 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. This includes, without limitation, the company's Form 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 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.

Dr. Christopher Missling, President & Chief Executive Officer

Thank you, Clint. And we appreciate everyone joining us on today's conference call to review our financial results and describe the company's overall strategy. Let me start by stating that we can proceed into the remainder of 2021 with the background of a strong balance sheet of over $157 million in cash and no debt. Starting with our lead candidate ANAVEX 2-73, we expect to announce top-line results from the confirmatory double-blind, placebo-controlled late-stage Phase 2b/3 trial in Alzheimer's disease in the second half of 2022. The double-blind, placebo-controlled 509-patient late-stage Phase 2b/3 ANAVEX 2-73 trial in patients with Alzheimer's disease exceeded enrollment beyond 450 patients at 52 sites across North America, Europe and Australia, using ADCS-ADL (Alzheimer's Disease Cooperative Study—Activities of Daily Living) 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. ANAVEX 2-73 is a small-molecule activator of the sigma-1 receptor. Data suggest that activation of sigma-1 results in restoration of cellular housekeeping function within the body that is pivotal to restoring neuronal homeostasis and promoting neuroplasticity. The study includes a pre-specified precision-medicine biomarker, sigma-1 gene expression, which demonstrated correlation with direct measures of clinical benefit—cognition and activities of daily living—in a previous Phase 2 Alzheimer's study. Preclinical and prior clinical data previously confirmed dose-dependent target engagement of sigma-1 with ANAVEX 2-73. As a reminder, our clinical strategy is clearly differentiated from other biopharma companies in CNS. ANAVEX is continuing to pioneer the approach of big data in clinical trials to leverage the relevance of phenotypic and genotypic precision-medicine analysis of whole-exome sequencing and gene expression data in drug development, and in particular the potential to identify patient variants and gene expression changes that may predict increased chances of success in Alzheimer's disease, Parkinson's disease and Rett Syndrome treatments. Additionally, we can announce that we exceeded the enrollment targets for the precision-medicine ANAVEX 2-73 Phase 2/3 AVATAR clinical trial in patients with Rett Syndrome. Currently top-line results from this study are expected in the second half of 2021. Further clinical milestones are provided in Anavex Life Sciences' latest corporate presentation, available at www.anavex.com. 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.

Sandra Boenisch, Principal Financial Officer

Thank you, Christopher, and good afternoon to everyone. We can report a significant increase in cash runway. Our cash position on June 30, 2021 was $157.6 million, which we believe is sufficient cash runway to fund operations and clinical programs beyond 2025. We reported a net loss of $10.2 million for the current quarter, or $0.14 per share, as compared to $6.5 million or $0.11 per share in the comparable quarter last year. Research and development expenses for the quarter were $9 million compared to $6.7 million for the comparable quarter of fiscal 2020; this 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 continued enrollment and advancement of the international Rett Syndrome program. General and administrative expenses were $2.4 million for the quarter, as compared to $1.4 million for the prior year period. The increase is associated with the growth of our team and non-recurring costs associated with our Annual General Meeting. Thank you. And now I will turn the call back to you, Christopher.

Dr. Christopher Missling, President & Chief Executive Officer

Thank you, Sandra. We are extremely excited and we believe that Anavex has never been in a stronger position than it is today, with our recent double-blind, placebo-controlled study results correlating with predictive biomarker outcomes, the strongest balance sheet to date, and further strengthening of the Anavex team. In summary, we believe we are positioned for further growth and expect catalytic events over the upcoming 12 months. So we look forward to providing further updates as advancement continues. I would like to now open the call for questions. Operator, please go ahead.

Operator, Operator

Thank you. At this time, we'll be conducting a question-and-answer session. And our first question comes to Charles Duncan from Cantor. Your line is open.

Pete Sabrobuza, Analyst, Cantor for Charles Duncan

How are you doing? This is Pete Sabrobuza for Charles. Good afternoon, Christopher and team. Congratulations on the progress and certainly appreciate all the updates. I have one question regarding the Rett program. When you think about the accuracy measures that were made, and 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?

Dr. Christopher Missling, President & Chief Executive Officer

So, we observed in the U.S. Rett study, a single-dose escalation study of 5 milligrams daily orally, that the effect size in the RSPQ was 1.1 Cohen's D, which is considered very large. And for the ADAMS score, it was even larger at 1.3; so these are very large effect sizes. In the AVATAR study, we have an even larger population in the placebo-controlled study, and the doses are higher than 5 milligrams; so we expect, if there is a positive dose-response curve—which we right now assume is the case—that this effect size will be sufficient for a positive readout in the AVATAR study as well.

Pete Sabrobuza, Analyst, Cantor for Charles Duncan

Thank you for all that color. Another question I have regarding the Rett program is that on ClinicalTrials.gov the pediatric EXCELLENCE study states that the estimated completion date is about November 2021. Are you still on track to complete the study by that time? The reason I'm asking is I believe a large part of it is being conducted in Australia, and now unfortunately they're going back into lockdown in some parts because of COVID.

Dr. Christopher Missling, President & Chief Executive Officer

This study is right now still enrolling and we're able to continue the trial. We cannot know for certainty how much enrollment will be impacted by the current situation in Australia, but as of today we still believe the timelines are accurate to complete the trial in the stated timeframe. If this changes, we will update accordingly.

Pete Sabrobuza, Analyst, Cantor for Charles Duncan

All right, thank you. And just one last question on the Alzheimer's program. Can you provide some color on the rollover rates for the Phase 2b/3 study into the open-label extension?

Dr. Christopher Missling, President & Chief Executive Officer

We were really very impressed with the very high rollover rate into the open-label study, which was over 95%, which is extremely high. We have also been informed that the patients who are now reaching the end of this open-label extension have requested—and their respective caregivers have requested—to stay on study drug. We have now been able to extend the open-label study by another period of time to allow continued access to study drug. I want to point out that this does not affect the timeline of the placebo-controlled study; it runs in parallel. This extension simply allows patients who finished the placebo-controlled study to stay on study drug without interruption.

Pete Sabrobuza, Analyst, Cantor for Charles Duncan

That's good—it's probably perceived as a benefit and probably reflects a lack of tolerability issues. So thank you very much for taking my questions. Congratulations again.

Dr. Christopher Missling, President & Chief Executive Officer

Thank you.

Operator, Operator

And the next question comes from Soumit Roy from Jones Trading. Your line is open.

Soumit Roy, Analyst, Jones Trading

Hi, thank you for taking my questions. First question on the adult AVATAR Rett study. Do we have an idea if and when you're having FDA conversations? And if the trial size needs to be modified to turn into a pivotal trial, can you give us any color on that? Also some color on the dosing for both the AVATAR and EXCELLENCE studies—what kind of dose cohorts should we expect?

Dr. Christopher Missling, President & Chief Executive Officer

Right. We are in dialogue right now with the agency. We have Fast Track designation and Orphan Drug designation, as well as voucher eligibility for Rett Syndrome with ANAVEX 2-73. We are in dialogue with the agency and I would like to provide an update as soon as we have that—discussing it publicly before it's appropriate would not be ideal. Regarding doses, we are using higher doses than 5 milligrams. We have used doses up to 50 milligrams in the Rett Syndrome, in the Parkinson's dementia study, and in the Alzheimer study. The reason we are keeping dosing specifics blinded right now is because the study is in a population which is very new to this trial, and we are concerned that revealing dosing details could lead to inadvertent unblinding through family interactions or online discussions. That could allow people to speculate about effects by back-of-the-envelope calculations based on dose. That's why we keep dosing blinded until the data are available. But it is higher than the 5 milligram dose.

Soumit Roy, Analyst, Jones Trading

I see, very interesting. One last question on the Alzheimer's trial. Could you give us any color on the baseline MMSE of these patients? It seems like a wide range, 20 to 28. Should we expect more early-stage or mild-to-moderate patients enrolling in your Phase 2b/3 trial?

Dr. Christopher Missling, President & Chief Executive Officer

Right. The rationale for that range was we saw in the prior Phase 2a a very positive response across the entire baseline MMSE range, which started from 16 to 28. But we noticed that patients with baseline MMSE above 20 had the ability to improve from baseline with a net positive reversal of disease symptoms—the cognition improved and not only showed a delay in cognitive decline—while patients below 20 MMSE were able to stay on a stable score. Another reason we included 20 and higher is that these patients are better able to comply with the trial regimen. When you have more advanced cognitive impairment, often compliance is more challenging. The expectation is a broad average MMSE between 20 and 28, which corresponds to what's often called early Alzheimer's disease, and is the population with the highest unmet need today.

Soumit Roy, Analyst, Jones Trading

I see. So you'd present the data for the entire 20 to 28 group?

Dr. Christopher Missling, President & Chief Executive Officer

Right. Because we saw that there was no difference in improvement whether the baseline was 28 or 20. In both cases, with the appropriate dose, we saw improvement in the score.

Soumit Roy, Analyst, Jones Trading

Got it. Thank you so much for taking the questions. I'll hop back on the queue, and congrats again on the progress.

Dr. Christopher Missling, President & Chief Executive Officer

Thank you.

Operator, Operator

And the next question comes from Ram Selvu from H.C. Wainwright. Your line is open.

Raghuram Selvaraju, Analyst, H.C. Wainwright

Thanks very much for taking my questions. First of all, alluding to the potential role of blarcamesine in Alzheimer's disease, can you comment on some of the preclinical information that's been presented recently and whether this would potentially point to a protective role for blarcamesine? Specifically, can you speculate in which population the use of blarcamesine as a protective treatment might be most relevant from a clinical perspective—for example, in people exhibiting signs of prodromal Alzheimer's disease or mild cognitive impairment? I understand that's an early stage at which to be thinking about that, but I'd like your thoughts.

Dr. Christopher Missling, President & Chief Executive Officer

I appreciate the question. We have learned in a preclinical animal model experiment that giving healthy mice the drug every day for seven days as a pretreatment, then stopping the treatment, and then injecting the pathological stimulus into the brain (a known animal model of pathology), usually those animals develop cognitive impairment measured in water-maze behavior and other tasks. We noticed that the arm which had received the seven-day pretreatment never developed the expected symptoms of cognitive impairment after the injection; they behaved like wild-type controls. Those who had not received the pretreatment developed the expected cognitive impairment. This observation led to the potential that sigma-1 activation with ANAVEX 2-73, which acts very upstream, could prevent the cellular stress that contributes to pathology. Given these preclinical data, there's a possibility it could be used as prevention. The Alzheimer's clinical studies also seem to give some credibility in that direction, since we noticed the ability to improve cognition in earlier-stage participants. As I mentioned earlier, patients with lower baseline MMSE tended to stabilize whereas earlier treatment showed improvements. So we might be able to change the trajectory and prevent cognitive impairment from occurring if the drug is given earlier—potentially in mildly cognitively impaired subjects or even before symptoms are present. I'm not saying this is confirmed in humans yet, but that is a hypothesis and a plan to be explored in future studies—comparable in concept to how some people take aspirin prophylactically for cardiovascular risk. Eventually, if confirmed, this could be a prevention strategy, but it remains to be validated in clinical trials.

Raghuram Selvaraju, Analyst, H.C. Wainwright

Great, thanks. I also wanted to ask about takeaways from the Rett Syndrome experience and their applicability to potential clinical development of the compound in Fragile X syndrome. Can you also give us a sense of when you anticipate the Fragile X program to initiate patient enrollment?

Dr. Christopher Missling, President & Chief Executive Officer

We included in our Rett Syndrome clinical trial a measure called the ADAMS score, which is interesting because ADAMS is often used as a primary endpoint in Fragile X studies. That ADAMS score was extremely positive in Rett, showing behavioral improvement across general mood, anxiety and compulsive behavior—very significant and broad. We believe that the preclinical data in Fragile X with ANAVEX 2-73, which we have submitted to a peer-reviewed paper expected to be forthcoming, could provide a good basis for progressing Fragile X as an indication for ANAVEX 2-73. Fragile X is part of the autism-spectrum disorders family and represents a significant unmet need. We expect to initiate a trial once we are able to showcase the relevant data in a peer-reviewed publication.

Raghuram Selvaraju, Analyst, H.C. Wainwright

Thank you very much.

Operator, Operator

And our next question comes from Tom Bishop from BI Research. Your line is open.

Tom Bishop, Analyst, BI Research

Hi, Christopher. You said that you were expecting to include a Phase 3 prevention study or to initiate one for the prevention indication, and I was wondering what the status of that was and how soon we could expect that?

Dr. Christopher Missling, President & Chief Executive Officer

So this is something we would like to discuss with the agency because it's a very important study and we want to get it right. We will have that discussion before providing more details publicly. I would point out the potential of that approach given the broad upstream effect of sigma-1 activation, which is an endogenous defense mechanism against cellular stress implicated in diseases like Alzheimer's and Parkinson's and other cognitive impairments. That potential makes this prevention approach the 'long shot' and the big prize—one day this could be used as a prevention treatment for degenerative diseases, not only for treatment. But we will discuss the design with regulators first before providing detailed timelines.

Tom Bishop, Analyst, BI Research

That's a very exciting possibility. What is the status of the meeting to proceed to Phase 3 in Parkinson's? Sometimes it seems like a lot of time is lost between trials. I know you've presented the final data. I'm just wondering what the timeline is here. Have you scheduled the meeting with the FDA or have you had an advisory discussion?

Dr. Christopher Missling, President & Chief Executive Officer

Good question. The Parkinson's dementia trial itself has finished, but analysis is not limited to the endpoints we reported; there is more work-up ongoing. This is unique for ANAVEX and differentiates us from other companies, because we included whole-genome exome analysis—both DNA and RNA—in our trials. We reported RNA changes of the sigma-1 gene, but we have not yet completed the analysis of RNA changes across other genes in the whole transcriptome. There will be much more intelligence from this PDD study that we are currently putting together. Once we have that, we will have the ability to design a much more robust Phase 3 pivotal study in Parkinson's dementia, as well as in Parkinson's disease more broadly. That requires dialogue with the agency, but first we need the entire dataset at hand.

Tom Bishop, Analyst, BI Research

Well, okay. And the status of the Michael J. Fox imaging study—Michael J. Fox Foundation—are they doing the imaging independently of you? You're supplying the drug but they're doing the imaging? How's that going?

Dr. Christopher Missling, President & Chief Executive Officer

No, it's basically a grant. We are executing the study and the Michael J. Fox Foundation fully funded it with a grant. We are in the process of starting this year. It's a study which will capture imaging and the profile of ANAVEX 3-71 in the human brain using PET imaging similar to what we have done in animals. This will be a confirmatory study of that effect in human brains, fully funded by the Michael J. Fox Foundation via a grant.

Tom Bishop, Analyst, BI Research

Oh, I see. You indicated a 'mystery' indication earlier this year, and also there's a 3-71 trial—is there not a Phase 1 ongoing? Could you comment on those two—are they the same?

Dr. Christopher Missling, President & Chief Executive Officer

Right—it's not a 'mystery' indication. We have said we have not yet disclosed the indication. We have several animal models where ANAVEX 2-73 has been positive and achieves confirmatory effects in some very rare or ultra-rare diseases. We want to ensure that before we move forward we pick the right one for clinical trials because we have a choice of several indications. We're doing that assessment now and will disclose the indication and start the trial as soon as we complete that assessment. Regarding ANAVEX 3-71, that's another molecule with its own intellectual property and it's in Phase 1. We expect data in the second half of this year. It is progressing well and we are excited because it validates the mechanism of action of our platform focusing on sigma-1 modulation. It has received an Orphan Drug designation for frontotemporal dementia, which is an unmet need. We are preparing the next stage after Phase 1, which could study cognitive impairment indications, potentially frontotemporal dementia or another indication with unmet need.

Tom Bishop, Analyst, BI Research

But the Phase 1 study—is it done?

Dr. Christopher Missling, President & Chief Executive Officer

It is about to wrap up, and we will be able to report the data in the second half of this year. That's correct.

Tom Bishop, Analyst, BI Research

Will it include any efficacy data or just safety—literally just Phase 1?

Dr. Christopher Missling, President & Chief Executive Officer

It's predominantly a safety trial, but we will share the data once we have it and that will give us better visibility on what's included in the outcome measures beyond Phase 1 safety data.

Tom Bishop, Analyst, BI Research

Okay. Well, I've been very encouraged by the breadth of positive readouts you're getting across a variety of indications. I think that helps support the idea that ANAVEX 2-73 really does something in the brain. It's good to see so many different positive readouts coming. Thank you.

Dr. Christopher Missling, President & Chief Executive Officer

If I might add, it's important to highlight that in all clinical trials we've performed so far, ANAVEX 2-73 was not only efficacious at the right doses, but also demonstrated a dose-response curve, which is always a very clear indication of effect. Thirdly, we've noticed that all the trials so far performed had a very strong biomarker of response or predictive biomarker response, borne out by the level of mRNA expression of the target of our drug. There's really no better way of showing and confirming efficacy than with these strong biomarker outcomes, which correlated with the primary and secondary endpoints across the trials.

Tom Bishop, Analyst, BI Research

Like I said, it's very encouraging. All right, thank you.

Operator, Operator

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.