Axsome Therapeutics, Inc. Q1 FY2021 Earnings Call

Good morning. And welcome to the Axsome Therapeutics Conference Call. Currently, all participants are in a listen-only mode. Later there will be a question-and-answer session and instructions will follow at that time. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mark Jacobson, Chief Operating Officer at Axsome Therapeutics. Please go ahead.

Thank you, operator. Good morning and thank you all for joining us on today's conference call. Our earnings press release providing a corporate update and details of the company's financial results for the first quarter of 2021 crossed the wire a short time ago and is available on our website at axsome.com. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our investigational agents, our clinical and non-clinical plans, our plans to present or report additional data, the anticipated conduct and the scope of future clinical trials, regulatory plans, future research and development plans, commercial plans and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today's date and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; Lori Englebert, Senior Vice President of Commercial and Business Development; Dr. Amanda Jones, Senior Vice President of Clinical Development; and Dr. Cedric O'Gorman, Senior Vice President of Medical Affairs. Herriot will first provide an overview of the company and then review recent developments and upcoming milestones. Following Herriot, Lori will provide a commercial update and then Nick will review our financial results. We will then open the line for questions. Questions will be taken in the order they're received. And with that I will turn the call over to Herriot.

Thank you, Mark. Good morning, everyone. And thank you all for joining Axsome Therapeutics' First Quarter 2021 Financial Results and Business Update Conference Call. The timing of this call coincides with Mental Health Month. Axsome is proud to observe May as Mental Health Month by partnering with advocacy groups and helping to raise awareness and support for people living with depression and other mental health conditions. In the first quarter, we continued to make significant strides toward becoming a premier CNS biopharmaceutical company focused on delivering potentially life-changing medicines to people living with serious CNS conditions. The dedicated work of the Axsome team resulted in submission of our NDA for AXS-05 for the treatment of major depressive disorder, or MDD. The NDA was granted priority review by the FDA. The FDA has set a PDUFA target action date for the NDA of August 22, 2021. The NDA for our second lead product candidate, AXS-07, for the acute treatment of migraine is on track for submission to the FDA this quarter, and we expect to announce the FDA's decision regarding its acceptance of the filing in the third quarter. With two NDA filings and a PDUFA target action date for AXS-05 in late August, Axsome is quickly approaching the commercialization stage. Lori will provide some details on our pre-commercial activities to ensure launch readiness assuming a successful NDA review. For the rest of our differentiated late-stage pipeline, development continues to advance. AXS-05 is also being developed for the treatment of Alzheimer's disease agitation and enrollment in the Phase III core trial is progressing. Our AXS-12 product candidate for narcolepsy is progressing toward initiation of the planned Phase III trial early in the third quarter. For our AXS-14 product candidate for the treatment of fibromyalgia, we recently met with the FDA to discuss its further clinical development plan and we are awaiting written feedback from the meeting. Our portfolio comprises four late-stage product candidates under development for six distinct indications representing unmet medical needs that affect a large percentage of Americans. We are energized by their potential to deliver significant benefit to patients and by our planned commercialization approach. I will now turn the call over to Lori who will provide a commercial update.

Thank you, Herriot, and good morning everyone. This is an exciting time at Axsome as we continue to prepare for a successful launch of AXS-05 in major depressive disorder. Today, I will give you an update on our commercial activities as they relate to launch readiness. The prevalence of depressive symptoms in U.S. adults has been steadily on the rise for many years. Recent studies have shown that in 2020 almost one third of U.S. adults experienced depressive symptoms, which is greater than a fourfold increase versus 2019. As a result of the rapid increase in mental health conditions and the associated personal and economic burden, there is an undeniable urgent need to bring awareness and support to those affected. If approved, AXS-05 would be an important new treatment option for the many Americans living with depression. We are committed to bringing this meaningful innovation to patients by commercializing the product in a timely manner, with an expected PDUFA date of August 22. We anticipate launch in the fourth quarter of this year. Consistent with Axsome's culture, our commercial launch strategy is innovative and purposeful. I've spoken previously about the plan for our digital-centric commercialization, or DCC, platform to be used as a means to optimize engagement across all customer types. Our commitment to and belief in a digital focus has only amplified over the past year, as research continues to indicate a strong preference for and trend in this direction with our core customers. Our foundational technology infrastructure is now fully implemented, and we continue to build out our digital capabilities. Using sophisticated data and analytics, streamlined systems and digital enablement tools, our DCC platform will allow for more effective, efficient and meaningful engagement with physicians and consumers. Along with building out our DCC platform, over the past year we've constructed a commercial team that combines breadth and depth of commercial experience with a desire to innovate. I am extremely proud of our commercial team, and I am impressed with their thought leadership and passion for helping those affected by CNS conditions. Functional senior leadership across marketing, market access, commercial operations and sales are all in place. Launch activities are focused on a potential Q4 launch of AXS-05 if approved. The preparations also include launch readiness for a potential AXS-07 launch. Our marketing team is focused on disease education and post-PDUFA launch promotional planning. The market access team continues to engage in ongoing permitted discussions with payers, ensuring awareness of Axsome and of the AXS-05 product profile, along with actively setting up comprehensive patient support services. The commercial operations team is working to implement and execute our DCC vision. And lastly, our sales team has determined the optimum size, structure and design of our sales force and is now concentrating on sales force preparedness as hiring at both the field leadership and rep levels has commenced. Outside of commercial, the medical affairs group is focused on data presentations at upcoming congresses and continuing MSL engagement with KOLs. I will now turn it over to Nick, who will review our financials.

Thank you, Lori. Good morning, everyone. Today we'll discuss our first quarter of 2021 results and provide some financial guidance. We ended the first quarter with approximately $165 million in cash, compared to roughly $184 million in cash at the end of the fourth quarter, a net decrease of approximately $19 million. R&D expenses were $16.6 million for the quarter ending March 31, 2021, versus $27.5 million for the comparable period in 2020. The decrease in R&D expense was driven by a one-time charge in the prior period of $10.2 million related to the Pfizer license agreement, along with several clinical trials that were ongoing in the comparable period that have subsequently been completed. The current quarter included a $2.9 million charge related to the PDUFA application fee for the NDA submission for AXS-05. Subsequent to the end of the quarter, we have received confirmation from the FDA that our small business waiver request has been accepted and we will be refunded this PDUFA application fee. G&A expenses were $11.2 million for the quarter ending March 31, 2021, versus $5 million for the comparable period in 2020. The change was primarily due to the increase in pre-commercial activities and stock compensation expense. Net loss was $29.3 million or $0.78 loss per share for the quarter ended March 31, 2021, compared to a net loss of $32.5 million or $0.88 loss per share for the comparable period in 2020. As a reminder, we currently have a $225 million term loan facility, of which $175 million in funding remains available. This committed non-dilutive capital gives us additional financial flexibility through both anticipated potential commercial launches of AXS-05 and for AXS-07. We believe our current cash position of $165 million, along with the remaining committed capital from our $225 million term loan facility, is sufficient to fund our anticipated operations based on our current operating plan into at least 2024. That concludes our first quarter 2021 financial review. I will now turn the call back to Mark to lead the Q&A discussion.

Thank you, Nick. Operator, may we please have our first question.

Operator instructions were provided. Your first question comes from the line of Charles Duncan from Cantor Fitzgerald. Please go ahead. Your line is now open.

Fabulous. Good morning Herriot and team, congrats on really good progress in the quarter. I had a quick question regarding the PDUFA—the upcoming PDUFA date for AXS-05 for MDD. Would you anticipate an Advisory Committee in advance of that? Has the FDA communicated anything? Or even if they haven't, are you prepared to conduct an Advisory Committee?

Thanks, Charles, for the question. We have not gotten any communication from the FDA indicating that there will be an Advisory Committee. Now that can change, and if that changes we would let you know as soon as possible. With regards to preparations for an Advisory Committee, as you know, when filing the NDA there's a lot of preparation that goes into that very significant filing and based upon that work, we think that we would be prepared for whatever happens during the review cycle. Advisory Committees are a potential expected part of any review cycle, but for the time being we have not gotten any indication that there would be one.

Okay, that's helpful. Let me ask a quick question for Lori and then I'll hop back in the queue. Regarding the commercial readiness, when you think about AXS-05 versus AXS-07, can you highlight some of the synergies in the preparations you're doing? Also, how would you address differences in the prescriber base and how that impacts optimal sizing of the field force? And I imagine you haven't talked about those numbers, but can you provide any color on that?

Hey, Charles, thank you. Can you hear me okay? I'm a bit under the weather so I just want to make sure everyone can hear clearly. It's a great question. Rest assured as we've been planning for commercialization, we've always planned for AXS-07 to potentially follow very closely behind AXS-05 and that includes everything from how we set up our DCC platform, in terms of enabling quick execution from both an AXS-05 and AXS-07 standpoint, as well as how we're structuring our sales force. Our sales force will obviously be originally constructed to call on high-prescribing physicians for depression. There is quite a bit of overlap between physicians who treat migraine and depression, and so we do anticipate being able to quickly pivot when AXS-07 is ready to launch. The DCC platform and our sales force structure were designed with that potential overlap and rapid follow-on launch in mind.

Okay, last question for Nick, just housekeeping. Nick, congrats on getting that money back from the agency. But I know we're dealing with the U.S. government here, when would you actually anticipate them sending the reimbursement and could we assume that it might hit the balance sheet perhaps in this second quarter?

Yeah, hi Charles. That's a good question. They have accepted the waiver as you heard in the opening remarks. So now we are just waiting for reimbursement. The process has been started to receive the $2.9 million back and we should be receiving it back shortly. I can't give a specific time on when we would be receiving that back.

Okay, sounds good. Thanks for taking my questions. Congrats on the progress.

Your next question comes from the line of Joon Lee from Truist Securities. Please go ahead. Your line is now open.

Hi, thanks for taking our questions and congrats on the progress. My first question: the prevalence of depressive symptoms being more than fourfold pre-pandemic is corroborated by many sources. But does that necessarily imply that there are that many diagnosable MDD patients? I'm curious if people reporting depressive symptoms represent a pool of patients who could be medically diagnosed and prescribed AXS-05. I have a follow-up. Thank you.

Thanks, Joon, for the question. If you look at the CDC data which we referenced, the percentage of U.S. adults with depressive symptoms they measured was about 6.9% or roughly 7% in 2019. That actually corresponds to the prevalence of MDD or major depressive disorder. So those CDC numbers did correlate pretty well with the prevalence of MDD. In 2020 those numbers went up to roughly 30% for adults with depressive symptoms. We don't know whether all these individuals would be diagnosed with MDD, but the original starting point did correlate fairly well with the prevalence of MDD. I'll turn it over to Lori to see if she has anything more to add.

Thank you. It's something we are actively watching in terms of diagnosis and drug treatment. What we do know through data is that in 2020 the overall prescription market grew about 6% to 7%, which indicates more patients are coming into care and being treated.

Okay, great, looking forward to the numbers and progress there. Second question: getting priority review is great, but that can compress the timing for inspections of clinical sites and manufacturing sites. Can you tell us a bit about your CMO? Can you disclose who they are? If you can't, describe their capabilities, experience level and whether they've been inspected recently?

Our CMO is a blue-chip contract manufacturing organization with significant experience. They are regularly inspected by regulatory authorities, typically at least once a year.

Your next question comes from the line of Marc Goodman from SVB Leerink. Please go ahead. Your line is now open.

Hi, this is Roanna on the line for Marc, thanks for taking the question. I was curious for a little more detail about the launch plan for AXS-05. Could you let us know the cadence of your payer engagement activities and the scope of educational programs you're doing ahead of the AXS-05 launch? Also, how many target accounts do you plan to detail at the initial launch of AXS-05?

Hi, Roanna, thank you for the question. From a payer engagement standpoint, we have been and continue to engage in permitted discussions with payers about Axsome overall as well as educating them on the AXS-05 clinical profile. Payers are extremely interested given the mental health crisis and the personal and economic burden it causes. They want to understand products that may help alleviate that burden. Regarding educational programs, depending on upcoming medical conferences there are opportunities for sponsored educational programs that raise awareness of the unmet needs in MDD. We recently had a significant presence at the American Psychiatric Association where we hosted a sponsored product theatre focused on unmet needs within MDD, limitations of current treatments and future directions in clinical development. By the metrics we received from the APA, the product theatre was among the best attended at that conference. As for the number of target accounts to detail at launch, at this time what I can tell you is that the size and structure of our sales force has long been set — it was part of the impetus for our DCC platform. The DCC platform was developed to help maximize our sales force's efficiency. Rest assured we will not sacrifice either quality or reach with our targeting.

Got it, thanks.

Your next question comes from the line of Vamil Divan from Mizuho Securities. Please go ahead. Your line is now open.

Great, thanks for taking the questions. Two questions: on the AXS-05 filing that got accepted and priority review, have you had further discussions with the FDA around the ASCEND trial? Given recent regulatory surprises, some have questioned whether that trial is large enough or robust enough to be considered pivotal. Any update on communications would be helpful. Second, on AXS-07, can you update us? I think the filing was planned for this quarter; what are the gating factors for getting that submission in? Thanks.

Thanks Vamil. Regarding the AXS-05 NDA, the filing was accepted and granted priority review, so the FDA clearly has what it needs to conduct a substantive review. We can't comment on specific communications with the FDA beyond that. With respect to the ASCEND trial, I would remind you that this program has been rigorously designed. We previously disclosed that after our breakthrough meeting the ASCEND trial was designated a pivotal trial. With regard to AXS-07, we are on track to file the NDA this quarter as previously stated. The team is working diligently to ensure a timely and quality filing.

Okay, all right. Thank you.

Your next question comes from the line of Yatin Suneja from Guggenheim Partners. Please go ahead. Your line is now open.

Hey, thanks for taking my question. Can you help us understand the enrollment timeframe for the narcolepsy Phase III program? It seems like it got pushed a bit; any gating factors to initiating that study? Secondly, can you comment a bit on pricing for AXS-05? Are there price points where you see sensitivity in market research? Will you keep the price below specialty tiers and what might you do with regard to copay assistance? Also, can you talk about the partnership with Veeva Systems — how you will leverage it and what edge it gives you? Are there examples of other companies using Veeva successfully for launches?

Thanks Yatin. On the narcolepsy program, we are on track to start the Phase III trial early in the third quarter. Initially our guidance was second quarter, and this has slipped slightly into the first month of the third quarter, which is within normal variability for planning a complex Phase III study.

Hi Yatin, thanks for the question. It's premature to disclose specific pricing details; we'll provide that information closer to launch. What I can tell you is we are working to ensure fair and timely patient access while adequately capturing the product's value, and we are engaging and educating payers on the clinical profile of AXS-05. We're continuing to present additional data at upcoming congresses to support payer discussions. Regarding patient support and copay assistance, we are preparing support services to make sure patients can access the product easily. On Veeva, while Veeva is a critical foundational component of our DCC platform, it's not the only component. Companies around the world use Veeva and we are pleased with the partnership. We are also integrating complementary systems and digital capabilities to enable real-time data flow and sophisticated analytics to inform sales reps and make promotional calls more efficient and effective.

Got it. Thank you.

Your next question comes from the line of Ram Selvaraju from H.C. Wainwright. Please go ahead. Your line is now open. Caller may be muted.

So why don't we move on to the next question and we'll get back to Ram.

Your next question here comes from Joe Thome from Cowen and Company. Please go ahead. Your line is now open.

Hi there, good morning and thank you for taking my questions. First, I know you touched on the difference between the increase in depressive symptoms and formal MDD diagnosis. Do you expect that impacted enrollment of the MERIT trial, and how are you thinking about that? Second, on AXS-14, can you remind us of base case expectations — will another Phase III be expected based on the current package? In your conversations with the FDA, was there a particular symptom they were most focused on — pain, fatigue — what do you think will drive benefit enough? Thank you.

Sure. Regarding MERIT enrollment: just to remind folks, MERIT is a Phase II trial in treatment-resistant depression. It uses a randomized withdrawal design and is substantially enrolled. We are currently waiting for relapses to occur in that trial, and those events determine the timing of the readout. Regarding AXS-14 for fibromyalgia, we met with the FDA in the second quarter as planned and we are currently awaiting the final written meeting minutes. We'll have more to say once we receive the written feedback. Generally, fibromyalgia incorporates pain but also other symptoms such as fatigue, sleep disturbance, cognitive symptoms and overall function. Current regulatory endpoints for fibromyalgia studies do incorporate pain and functional endpoints that capture many symptoms of fibromyalgia.

Right, thank you.

Your next question comes from the line of Chris Howerton from Jefferies. Please go ahead. Your line is now open.

Thanks so much for taking the questions. As you move toward commercialization, do you have plans to give more color and solid information around how you've devised the commercial infrastructure and team—what will be the key metrics moving forward? When might we learn more about commercial efforts and structure? Second, regarding the MERIT trial readout, we're expecting the PDUFA for AXS-05 in August. If approved, how might MERIT information alter commercial activities?

Hi Chris, thanks for the question. In terms of when we'll disclose sales force size and structure, you can expect that information around launch; that's typically when we'd be prepared to reveal it. I can tell you we've recently, within the past three weeks, started hiring for field leadership and rep-level roles. The response has been overwhelming in both quantity and quality of applicants, which gives us confidence we'll meet our timelines and have the right people given our unique approach and vision. In terms of metrics for success at launch, we will start defining and sharing those closer to launch.

Regarding the MERIT trial: MERIT is a Phase II randomized withdrawal study designed to generate data across a wide spectrum of patients with MDD and TRD. Once it reads out, it will allow us to publish and provide additional data to clinicians on how AXS-05 performs in various types of patients with MDD, which can be supportive during and after launch.

Okay, that's wonderful. Thank you very much for taking questions.

Your next question comes from the line of Matt Kaplan from Ladenburg Thalmann. Please go ahead. Your line is now open.

Hi, good morning. Wanted to follow up on your interaction with payers. Lori, can you give a sense of how to think about the rollout of coverage over time, initially and then the first six to 12 months for AXS-05? Also, given AXS-07 may follow closely, what are your thoughts and interactions with payers on AXS-07?

Hey Matt, thanks. In terms of coverage, it's premature to disclose specifics as our discussions are ongoing. We are thinking through patient support service offerings to make sure patients are covered. We do anticipate the product will be covered and have high confidence payers are extremely interested in the product profile. For AXS-07, we've conducted market research but have not had substantive discussions with payers specifically on AXS-07 beyond an overall Axsome portfolio introduction.

Very good. And Herriot, in terms of next indications for AXS-05, can you talk about how the AD agitation Phase III program is progressing and next steps for the smoking cessation program as well?

Hi. Regarding the Alzheimer's disease agitation program, it is progressing nicely. It's a bit early to give formal guidance on overall status due to the randomized withdrawal design which involves patients responding and then being randomized and monitored for relapse. For smoking cessation, we are planning to meet with the FDA in the third quarter and will provide an update on that program after our interactions with the agency.

To add to Amanda: while it's still early, internal metrics correlate with our prior guidance of a data readout in the second half of 2022 for the Alzheimer's agitation program.

Your next question comes from the line of Myles Minter from William Blair. Please go ahead. Your line is now open.

Thanks for taking the questions. On the payer landscape for AXS-05, it seems reasonable payers are going to place AXS-05 probably fourth or fifth through a few therapies. By the time a clinician tries to prescribe this product it would be to an MDD population. I'm wondering if you've gotten any pushback from clinicians about prescribing without head-to-head controlled comparisons in all subsets. What's your current messaging to clinicians to encourage prescribing upon potential launch?

Hey Myles, I can answer some of that but will turn to Cedric for medical perspective.

Happy to. The nature of MDD clinical trials is that patients who enroll are often those who have some treatment resistance already. We haven't seen substantial pushback because clinicians understand that new treatments often follow prior lines of therapy. The data we've generated in MDD, including evidence of rapid onset of effect and early improvements in quality of life and functioning, presents a differentiated clinical profile. Overall, the clinical differentiation of AXS-05 has been compelling based on what we're hearing in the field.

If I may add: from KOLs and MSLs in the field, recent COMET sub-study presentations, including data in TRD, have shown a compelling profile in patients who have failed multiple lines of treatment as well as those treated front-line. Importantly, we have now had essentially four Phase III trials that were positive. For example, in STRIDE-1, significance was achieved at week one and week two in a TRD population, and improvements in quality of life and disability were notable. That provides a strong narrative for clinicians and payers.

I'll just add that what Cedric and Herriot stated is consistent with what we're hearing from payers. They are taking the overall patient population in the studies into account.

Yeah, that's consistent with what I've heard as well. One more quick one: in the cash guidance you provided today, does that include provisions for a potential additional clinical trial for AXS-14?

Our cash guidance does include spend for AXS-14. As you know, AXS-14 is a new chemical entity and we are making sure supplies and API are ready since that would be necessary for registration. That spend is included as necessary for any potential next steps. With regard to specifics of a clinical development plan, we will await written feedback from the agency before making further pronouncements.

Your next question comes from the line of David Hoang from SMBC. Please go ahead. Your line is now open.

Hi, thanks for the update and taking my questions. A lot has been asked already. First, on AXS-05 for MDD, how much of the target prescriber population would you say is primary care physicians versus psychiatrists, and do you expect a lot of prescribing from the primary care side? Second, are there plans to commercialize these products outside the U.S., either on your own or with a partner?

Hi David, thanks. We tend not to segment strictly by site versus PCP. We look at high-prescribing physicians across settings and target those with the highest propensity to prescribe. Many primary care practices are mental health focused and prescribe at levels similar to specialty sites, so our targeting will encompass high prescribers and relevant sites. Regarding ex-U.S. commercialization, we have publicly disclosed that we are looking for partners outside the U.S. and those discussions are ongoing.

Your next question comes from the line of Robert Hazlett from BTIG. Please go ahead. Your line is now open.

Hi, this is Terry on the line for Bert, thanks for taking the question. Brief question on the AXS-05 Alzheimer's disease agitation trial: should we expect an interim analysis at some point and if so, what might that entail in terms of efficacy data and timing? Second, for AXS-12, could you talk about potential endpoints including timing?

There is not currently a plan for a formal interim analysis of the Alzheimer's agitation trial. However, the study is designed so that based upon event rates a prospective interim could be incorporated if necessary. Randomized withdrawal studies are driven by the number of events and that typically determines powering and timing. Right now it's too early to know the cadence of relapses; no one has done a study exactly like this before in Alzheimer's disease agitation. For AXS-12, the primary endpoint of the planned Phase III study will be the change in the frequency of cataplexy attacks, which is consistent with prior narcolepsy trials.

Okay, perfect. Thanks for taking the questions and congratulations on the progress.

And your last question here comes from the line of Ram Selvaraju from H.C. Wainwright. Please go ahead. Your line is now open. Once again, Ram Selvaraju from H.C. Wainwright. Please go ahead with your question. Okay and there are no further questions in the queue. I will turn the call back over to management for closing comments.

Well, thank you all again for joining our call this morning. We are excited as we move potentially toward commercialization and as we advance the rest of our pipeline for the benefit of the many people living with serious CNS conditions. We look forward to keeping you updated on our progress in the months ahead.

And this concludes today's conference call. Thank you for participating. You may now disconnect.