Earnings Call Transcript - AVXL Q2 2020

Operator, Operator

Good afternoon. My name is Adriane, and I will be your conference call operator today. Welcome to the Anavex Life Sciences Fiscal 2020 Second Quarter Financial Results Conference Call. As a reminder, this conference call is being recorded. I’d now like to turn the call over to your host for today's conference, Clint Tomlinson. Please go ahead.

Clint Tomlinson, Host

Thank you and good afternoon, everyone. We appreciate you joining us today for Anavex Life Sciences' conference call and webcast. Our agenda is to review the company's financial results for its second quarter of fiscal 2020 and provide a clinical study update. A taped replay of this call will be available approximately two hours after the call's conclusion and will remain available for one month. 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. Dr. Missling and Ms. Boenisch will make prepared remarks, and then we will take questions from equity analysts. Before we begin, please note that during this conference call, the company will make some projections and forward-looking statements regarding future events. 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 those 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 maintenance of intellectual property rights. And with that, I'd like to turn the call over to Dr. Missling.

Christopher Missling, CEO

Thank you. Thank you everyone for joining us on today's conference call to review our second quarter financial results and share with you some clinical updates for ANAVEX 2-73 or blarcamesine. Much has changed around all of us since our last quarterly conference call. As the world navigates COVID-19, Anavex's paramount obligation has always been to ensure the safety of all participants in its clinical programs and the integrity of the studies in which they participate. We are responding to regulatory, institutional, and government guidance and policies related to COVID-19. We remain focused on our clinical development plans and are working closely with all stakeholders to try to mitigate the effect of COVID-19 on the company’s ongoing clinical trials for Rett Syndrome, Parkinson's disease dementia, and Alzheimer's disease. Clinical sites continue to operate and see patients where possible in accordance with local regulations and site policies, regulatory, institutional, and government guidance related to COVID-19. Clinical sites continue to screen and enroll patients into the active trials and the respective open-label extensions for the two Phase 2 Rett Syndrome trials and the Phase 2b/3 Alzheimer's disease trial while the Parkinson's disease dementia Phase 2 trial has completed enrollment and we expect to announce top-line results from this study by mid-2020. Anavex proactively continues to bring on sites in new countries across programs depending on the situation in each country of operations. While Rett Syndrome protocols have always by default allowed at-home visits, the U.S. FDA, European EMA, and Australian TGA recommended contingency plans are actively in place for the Alzheimer’s disease Phase 2b/3 study and the Parkinson’s disease dementia Phase 2 study to ensure remote or virtual assessments for active patients and all respective extension studies. Because ANAVEX 2-73 is an oral formulation, study participants are able to receive shipments of their study medication in a controlled and compliant fashion, and direct-to-patient delivery is occurring in multiple countries. We understand that some activities will be temporarily slower because of COVID-19. However, our risk mitigation actions were implemented for every project. The Anavex primary focus is on the safety of all involved and the continued conduct of our clinical programs as we navigate the pandemic together. Our sites understand why the patients participate in research and are committed to the importance of clinical trials for those patients and communities currently without effective treatments. 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, CFO

Thank you, Christopher, and good afternoon everyone. We reported a net loss of $7.2 million, or $0.12 per share during the quarter as compared to $7.2 million or $0.15 per share in the comparable quarter of fiscal 2019. Research and development expenses have remained consistent at $6.1 million for the three months ended March 31, 2020. General and administrative expenses have decreased by $0.4 million when compared to the second quarter of 2019 to $1.7 million for the three months ended March 31, 2020. The reduction is primarily related to a decrease in stock option compensation charges. Our cash position at March 31, 2020, was $26.6 million compared to $22.2 million at September 30, 2019, the fiscal year end. Thank you. And now, I will turn the call back over to Christopher.

Christopher Missling, CEO

Thank you, Sandra. In summary, despite this challenging time, we continue to make steady progress towards reaching several important milestones and we are poised for an exciting time ahead with multiple data readouts. We look forward to providing further updates as advancements continue. I would like now to open the call for questions. Operator, please go ahead.

Operator, Operator

At this time, we'll be conducting a question-and-answer session for your equity analysts. Our first question comes from Raghuram Selvaraju from H.C. Wainwright. Your line is open.

Blair Cohn, Analyst

Hi, this is Blair Cohn on for Ram. A few questions for you. First, are you concerned in any way about possible data compromise in any of your ongoing trials that are being modified due to COVID-19?

Christopher Missling, CEO

The advantage of our trial is that there are two assessments made by the physician directed towards the patient and also questions towards the caregiver. These questions are very similar whether you ask them in person, over audio/video, or telephone. In the case of Parkinson's disease dementia, the assessment is done using an objective computer-based assessment, which is also not dependent on the interaction with the patient. So I would say that while a virtual assessment can yield different nuances compared to an in-person assessment, the performance of these questionnaires and assessments does not fundamentally change whether in-person or through video/telephone.

Blair Cohn, Analyst

Okay. Thank you. And what are your thoughts on the recently reported Sarizotan failure and Rett syndrome in the STARS trial? And what implications does this have for your program? And would it clear the competitive landscape?

Christopher Missling, CEO

We are obviously aware of this program and it's unfortunate for the patient population. However, we also understand that this program had a narrower focus on the outcome measures. It was focused on respiration function and did not consider the broader phenotype of Rett syndrome, which includes the entire behavioral spectrum like hand movements, physical agility as well as seizures and sleep patterns and other behavioral interactions. Therefore, we believe our program is not directly affected by this and it highlights the existing unmet need. We continue to progress our program to provide an improvement for this population.

Blair Cohn, Analyst

Perfect. Thank you. What would you consider a slam dunk result from the Phase 2 trial in Parkinson's dementia? And would you plan to hold an end of Phase 2 meeting with the FDA on the basis of this data assuming success?

Christopher Missling, CEO

The answer to the last question is that we would obviously hold a meeting depending on the outcomes. Regarding the first question, I prefer to allow the data to speak for itself, as we don't have any preconceived outcome expectations. This is the first study in Parkinson's disease dementia with our drugs, so formulating precise scenarios is challenging.

Blair Cohn, Analyst

Okay. Perfect. That's it for me. Thank you.

Christopher Missling, CEO

Thank you.

Operator, Operator

And our next question is from Tom Bishop from BI Research.

Tom Bishop, Analyst

Hi, Chris.

Christopher Missling, CEO

Hello.

Tom Bishop, Analyst

At last report, the company indicated that it hopes to add a number of sites like going from 15 to 45 and I was just wondering how that was going in this environment. I heard you mention Europe at one point.

Christopher Missling, CEO

Yes, that's right, Europe and North America, and that is the plan. We are ramping up. We're in the process of executing and adding sites. We are aware that these countries have been affected by COVID in respective ways. Nevertheless, the regulatory process of approving a study seems to be unaffected by that. We currently do not have any delays, but we will find out in the upcoming months or quarters when we receive approval in the respective countries how the situation evolves regarding clinical visits because we will continue to learn from the situation. We have included in this protocol submissions the ability to conduct both virtual and home visits for patients. This will enable us to progress despite potential stay-at-home mandates in Europe or North America. We believe we have taken all necessary steps to mitigate this situation, but obviously, no one can predict the future regarding COVID.

Tom Bishop, Analyst

Okay. So I take it that you haven't actually opened any additional sites yet, but you're working full steam on it.

Christopher Missling, CEO

That's exactly right. Yes.

Tom Bishop, Analyst

Meanwhile, has enrollment – I know the last time you mentioned getting to 50%, and you indicated this time you're still around 50% plus. Does that mean there haven't been a whole lot of enrollments during this pandemic, or are you holding at 50% until you reach 100%, 50% plus?

Christopher Missling, CEO

Yes, to clarify, we announced 50% enrollment for the Alzheimer's study for the Phase 2b/3. Today, we are beyond that significantly. We have also surpassed 50% on the two Rett syndrome studies. It is important to note that there are three different studies here, and they should not be mixed.

Tom Bishop, Analyst

Is there also a third Rett trial that has not yet begun?

Christopher Missling, CEO

That's correct regarding the Rett syndrome study, RS-003, where we are awaiting approval to start. We have made some additional amendments, and for that reason, the first patient has not yet been initiated, but this is forthcoming as we speak.

Tom Bishop, Analyst

Okay. From time to time I get a subscriber that says they are concerned that there hasn't been any insider buying. I have told them that you often know too much and maybe it wouldn't be a good idea to buy now, or you're in a quiet period anyway, and there are not many insiders. But could you comment on that because I get that question fairly often.

Christopher Missling, CEO

I have personally shown activity in buying in the open market in the past. I would not interpret the lack of buying as a signal one way or the other. As you mentioned, it is also not always possible to discuss these matters publicly, and there may be instances when buying is not feasible due to knowledge of certain information. So, I would leave it as is. We remain very excited about all our programs. The Alzheimer's study is moving forward positively, the Parkinson's disease study is close to data announcement soon, and we have two ongoing Rett studies, plus the third Rett study that will start shortly. We are enthusiastic about all our programs, including the announced movement into Phase 1 for the ANAVEX 3-71 study as well.

Tom Bishop, Analyst

Okay. One last question on the financial side. I saw something about your agreement with Lincoln Park and kind of ATM, and then there's Cantor Fitzgerald and now I see Leerink. I'm a bit confused if those are two different programs or if they are basically all programs that you’re using to stay funded?

Christopher Missling, CEO

The major contribution for funding in the past came from Lincoln Park, where we have a purchase agreement allowing us, from time to time, to sell shares depending on stock price levels and our burn rate. The ATM was with Cantor Fitzgerald. We're excited that we added Leerink under this agreement. It is essentially an amendment of the existing program with Cantor to include Leerink. It's not a separate program; rather, it expands the capability to access capital. That’s responsible fiscal management for a biotech company without revenues. Flexibility is necessary to maintain operational stability as you won't have revenues or operating profits to absorb costs, so you must have various options available.

Tom Bishop, Analyst

Now regarding Lincoln Park, that isn't an ATM at the market.

Christopher Missling, CEO

It's called a purchase agreement. It has a different name, but the principle is the same. We sell shares to Lincoln Park, and they provide us with cash in return.

Tom Bishop, Analyst

Right. But it's practically the same as Cantor Fitzgerald and Leerink; you just have various options ongoing simultaneously.

Christopher Missling, CEO

That's exactly right. It enhances our ability to access capital, which is fiscally responsible as we need to remain flexible given our operating context as a biotech company without revenues.

Tom Bishop, Analyst

What was the burn rate? You mentioned it, but I didn't catch it.

Christopher Missling, CEO

Yes, in the past, it has typically been in the range of $1 million to $1.5 million. Recently, we have seen it slightly higher in the last two quarters, around $1.5 million to $1.7 million, or $1.8 million a month.

Tom Bishop, Analyst

Per month.

Christopher Missling, CEO

Per month, yes.

Tom Bishop, Analyst

Okay. Alright. Well, thank you very much.

Christopher Missling, CEO

Thank you.

Tom Bishop, Analyst

And by the way, I'm excited about these programs too.

Christopher Missling, CEO

Thank you very much.

Operator, Operator

And our next question comes from Jason Kolbert from Dawson James. Your line is open.

Unidentified Analyst, Analyst

Hi, this is Alex for Jason. I think you did a good job talking about how you guys are dealing with COVID-19 and how that's affecting you. But I think it would be great if you can go into more detail about the catalysts in the upcoming quarters for you.

Christopher Missling, CEO

In the upcoming quarter, we will be announcing top-line data from the Phase 2 Parkinson’s disease dementia study. That is a significant milestone for us and something to mark on everyone's calendar because we have enrolled the last patient, and now we need to wait for the 14 weeks duration of this study plus the time needed for the independent review to interpret the results. We will provide an update as soon as the data is available, which we expect to announce around mid-2020. We will also update on the other studies, including the Rett syndrome studies, and it will be easier to predict the timeline for top-line data based on the known duration of each trial.

Unidentified Analyst, Analyst

Well, that's all I had for you. Thank you.

Christopher Missling, CEO

Thank you.

Operator, Operator

And that concludes today's question-and-answer session. I'll turn the call back over to Christopher.

Christopher Missling, CEO

Thank you all for participating in today's conference call. Should you need additional information or have any other questions, please visit our website at www.anavex.com or call or email us. This concludes our remarks for today. Operator?

Operator, Operator

Thank you, ladies and gentlemen. This concludes your call today. You may now disconnect.