Minerva Neurosciences, Inc. Q3 FY2020 Earnings Call

Welcome to the Minerva Neurosciences Third Quarter 2020 Conference Call. This call is being webcast live on the Investors section of Minerva's website at ir.minervaneurosciences.com. This call is being recorded.

Good morning. A press release with the company's third quarter 2020 financial results and business highlights became available at 7:30 a.m. Eastern Time today and can be found on the Investors section of our website. Our quarterly report on Form 10-Q was also filed electronically with the Securities and Exchange Commission this morning and can be found on the SEC's website at www.sec.gov. Joining me on the call today from Minerva are Dr. Rémy Luthringer, Executive Chairman and Chief Executive Officer; and Mr. Geoff Race, Executive Vice President, Chief Financial Officer and Chief Business Officer. Following our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors that are more fully detailed under the caption Risk Factors in our filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 2, 2020. Any forward-looking statements made on this call speak only as of today's date, Monday, November 2, 2020, and the company disclaims any obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today's call, except as required by law. I would now like to turn the call over to Rémy Luthringer.

Thank you, Bill, and good morning, everyone. Thanks for joining us. I hope everyone is doing well. As we approach our meeting with the FDA on November 10, we remain enthusiastic about the potential of our lead product, roluperidone, and believe it will have a significant impact on the lives of patients with schizophrenia. Our confidence is based on our experience and the clinical database compiled to date with this compound. We are motivated to bring roluperidone to patients as quickly as possible as there is currently no approved treatment for negative symptoms, which remains the leading unmet need of patients with this disease, their families, and their treating physicians. We announced the top-line results of the 12-week double-blind part of our Phase III study in May. Although the study did not achieve its primary objective, the results obtained with a 64-milligram dose demonstrated the early onset of beneficial effects on negative symptoms that translated into functional improvements. Roluperidone was also generally well tolerated in this trial with a safety profile comparable to placebo. Following that announcement, we have completed extensive analysis of data from this trial and others, including an integrated analysis of data from our Phase IIb and Phase III trials that shows a highly significant separation between the two doses of roluperidone and placebo. In addition, we now have a large amount of data from the 40-week open-label phase of this trial, which is on schedule to complete in the first quarter of 2021. In late September, we provided these findings to the FDA in preparation for the Type C meeting scheduled for November 10. During the forthcoming meeting, our findings will be discussed with the FDA, and we expect to receive the agency's feedback about the next steps in the development and potential regulatory approval of roluperidone. We will provide a further update after our meeting once the minutes have been finalized by the FDA, which is expected in December. In summary, the recent Phase III data combined with all of the data accumulated over the last few years continues to support our belief that roluperidone can become an important treatment for schizophrenia patients. I will now turn it over to Geoff for the financial update.

Thank you, Rémy. Earlier this morning, we issued a press release summarizing our operating results for the third quarter ended September 30, 2020. A more detailed discussion of our results may be found in our quarterly report on Form 10-Q filed with the SEC earlier today. Cash, cash equivalents, and restricted cash as of September 30, 2020, were approximately $32.6 million. During the nine months ended September 30, we raised $12.1 million net of fees from the public offering of stock, and therefore, we presently expect that the company's existing cash and cash equivalents will be sufficient to meet its anticipated capital requirements into early 2022 based on our current operating plan. The assumptions upon which this estimate is based are routinely evaluated and may be subject to change. R&D expenses for the three and nine months ended September 30, 2020, were $4.6 million and $18.5 million, respectively, compared to $9.7 million and $29.6 million for the same period in 2019. The decreases in R&D expenses in 2020 primarily reflect lower development expenses for the Phase III clinical trial of roluperidone and the completion of the Phase IIb clinical trial of MIN-117 in December 2019. We expect R&D expenses to decrease during 2020 compared to 2019 as we have completed the MIN-117 clinical trial and the 12-week double-blind portion of the Phase III clinical trial of roluperidone. G&A expenses for the three and nine months ended September 30, 2020, were $3.5 million and $13.5 million, respectively, compared to $4.6 million and $13.9 million for the same period in 2019. The decrease in G&A expenses in the three-month period was primarily due to a decrease in non-cash stock-based compensation expenses and lower commercial expenses. And the decrease in G&A expenses in the nine-month period was primarily due to lower commercial expenses. Net loss for the three months ended September 30, 2020, was $8.1 million or a loss per share of $0.19 basic and diluted compared to a net loss of $14 million or a loss per share of $0.36 basic and diluted for the three months ended September 30, 2019. For the nine months ended September 30, 2020, net income was $9.3 million or $0.23 basic and diluted compared to a net loss of $42.3 million or a net loss per share of $1.08 basic and diluted for the nine months ended September 30, 2019. Collaborative revenue was $41.2 million for the nine months ended September 30, 2020, compared to $0 for the same period in 2019, an increase of $41.2 million. The increase in collaborative revenue was a result of the company's opting out of its co-development and license agreement with Janssen for seltorexant. That revenue was recognized during the second quarter of 2020 as there are no future performance obligations under the agreement. Now I'd like to turn the call over to the operator for any questions.

Our first question comes from Jason Butler with JMP Securities.

It's Roy filling in for Jason. Since you've submitted the material for the Type C meeting to the agency, have you received any feedback on it? Also, I noticed you sold about $7 million worth of shares for the ATM in the quarter. Have you utilized the ATM in the current quarter, and how much is left under that facility?

Thank you for the question. So Rémy speaking. I will take the first part and the second part, I will give it over to Geoff here. So as you know, when you're submitting your briefing book to the FDA and you have a date fixed for the meeting, you get feedback from the FDA a few days before the meeting happens. So as of today, we did not get any feedback from the FDA. So just recognized receipt of the briefing book, but I think their thoughts and comments on the different questions we asked will come later this week or early next week. Geoff, can you take the other one?

Yes, of course. Thanks for the question. We sold around $5 million worth of stock in the second quarter, we sold $7 million in the third quarter. We haven't sold any stock in the fourth quarter. We had an ATM facility of $50 million in place. We've sold $12 million, that leaves $38 million remaining under the ATM.

Your next question comes from Tom Shrader with BTIG.

This is Julian on for Tom. Keeping in mind, it's a lot is still to be determined from your meeting with the FDA next week. I was wondering if you could talk about what preparations you've been making ahead of that meeting for the range of possible outcomes here. And how fast you can move forward from there, whether it be additional analysis following an NDA or an additional trial?

Important question and, obviously, the success is in anticipation, yes. As you can guess, we are anticipating the different outcomes. With all the data we have generated, which we put in the briefing book, we are extremely confident that the FDA will understand that we have very compelling data, as you already have seen, when you combine the two studies, Phase IIb and Phase III. The two doses are showing an effect on the primary endpoint, which is the PANSS negative score according to Marder. We have a functional improvement. We know that evolution is a driver of the effect we are seeing, and this is really a key driver. But indeed, we are anticipating any outcome, and we are also working on what would be the next steps if the FDA is requesting us to do another study. Again, we don't expect this, or we are doing all we can to ensure that this will not happen, and we have already anticipated the analysis of the extension phase, which will end in the first quarter of next year. So all this is ongoing and in preparation. When we receive the final feedback from the FDA during December, we will be able to react extremely fast. We have anticipated all these different types of scenarios.

Our next question comes from Joel Beatty with Citi.

If another Phase III trial needs to be done, could you discuss the potential trial design there? And any differences that could help enhance the probability of success?

Yes. So obviously, the final study design will be based on the feedback or the discussion with the FDA. Clearly, there are some parts which are completely clear that we will not run them. For example, we will not have an extension in this study, so the nine-month extension is here because this is really to fix the box of 100 patients exposed to the drug for one year. As of today, we already have a lot of patients who have completed the extension. Concerning the study, I guess it will come out from the PANSS scale as we did for the Phase IIb and the Phase III. There will be discussion on which kind of endpoint, but I think we will continue to discuss the negative symptom score coming from PANSS as well as potential modifications to secondary endpoints. We have already strong hints on functional improvement with PSP total scores in these patients. So this is quite clear that we will aim to enhance the probability of success based on these analyses.

Next question comes from Douglas Tsao with H.C. Wainright.

Rémy, a lot of the key subjects have already been touched upon, but I'm just curious about the ongoing open-label extension. Are there any specific endpoints being measured that you think are relevant and can enrich the dataset? And as you think about potentially needing to conduct other studies or just running additional studies to support commercialization, are there things longer term that you would like to look at beyond the typical 12- to 16-week interval?

Doug, this is a very important question. Clearly, we are taking into account the long-term safety aspect here, one-year safety, but we are also measuring efficacy as well. We continue to monitor the PANSS, and we continue to measure PSP. So we will have data for a significant number of patients at the end of the day for efficacy. This is very important. It will be crucial to demonstrate that after the double-blind phase of 12 weeks, patients continue to improve regarding negative symptoms and functioning. Another key aspect is monitoring patient retention in the study and understanding dropout reasons. Importantly, we want to see how many patients are dropping out due to relapses of positive symptoms, as we have a monotherapy and have not had all antipsychotics onboard. If we can demonstrate that over a period of one year, these patients are stable or even slightly improving on positive symptoms without relapses, it would be significant.

Great. Rémy, can you remind us when we would expect to see data for the investment community from the open-label extension?

We will have the last patient last visit during the first quarter of next year. I don't anticipate anything that would delay this. Therefore, you should see something as soon as we have the chance to analyze this data, probably towards the end of the first quarter or beginning of the second quarter.

Our next question comes from Myles Minter with William Blair.

Just wondering, probably for Rémy, the differences between the significant results you saw on the PSP, and unfortunately, the endpoint that slightly missed on the Marder NSFS, have you done further analysis to fully understand what the Marder scale may be capturing or not capturing that isn't reflected in the PSP or vice versa? I'm trying to understand what components crossover and what don't, so that you and also the regulators can get a better sense of what efficacy components are important for this drug?

This is a nice question, Myles. The way to analyze the data is a bit different from what you've suggested. The Marder negative score from the PANSS can be split into two dimensions: expression and experience. Experience is highly correlated with functional improvement, which has been well documented in the literature. As we showed in our data during the top-line results, we had a significant effect in terms of experience even at week 12. If you go with a sub-score of the Marder negative score, you would see a functional improvement, which correlates with the functional improvement we mentioned in the PSP total score. This is not a surprise. So we're observing clear links between the total PANSS scale and what appears in functional improvement. If we can demonstrate that avolition is a significant driver in the Phase IIb, we can show that. Ultimately, I think we can demonstrate a strong connection between what we're measuring and the observed effects of our drug.

That's helpful. And then maybe one for Geoff. As you think about best-case scenarios coming out of this meeting, how do you think about the differential near-term capital needs for the company and getting that over the line? Also, is there any cause to opt back into the seltorexant program after opting out?

Thanks, Myles. I'll take your second question first. There is no opt back in and that's the final position. We have a mid-single-digit royalty on worldwide sales of seltorexant from Janssen, which will be realized at some point in the future once the Phase III is complete. Coming back to your first question, our priority is to continue with the extension of the study. There are several steps we need to take to file the NDA. Depending on the FDA’s feedback, we may need to raise capital in the future. However, it's too early to speculate on what that capital raise will look like. We will discuss it with investors and analysts once we have clarity on what our needs will be after our discussions with the FDA.

Our next question comes from Biren Amin with Jefferies.

This is Jeet Mukherjee on for Biren. Maybe two quick questions from me. First, if another confirmatory study is required, how quickly could you get that up and running? And the second question is perhaps for Rémy. Your data showed that on the PANSS classic 7-item negative score, the 64-mg dose was statistically significant. Is there any analysis on your part regarding which items from the Marder scale didn't perform so well? Do you plan to use the classic scale as maybe a primary or co-primary endpoint for any subsequent Phase III that might be required?

The first part I addressed in previous questions. We are fully prepared to initiate another study. We have already anticipated the infrastructure in terms of CRO and are ready to go once we know what we have to do when we receive the minutes. Regarding your second part, we have closely analyzed item by item our results from the PANSS negative score according to Marder. It's clear that items related to avolition show significant activity compared to placebo. We can also see that the items associated with functional improvement are significant. While there are a few items that do not demonstrate the same statistical significance, I believe it demonstrates that we have strong links between our drug's activity and the functional improvements being measured.

Thank you. I'm currently showing no further questions at this time. I'll turn the call back over to Rémy Luthringer for any closing remarks.

Thank you so much. I appreciate everyone for listening and for all your questions. I think they were all very important. As you can guess, the entire company is focused on the meeting we will have on November 10. As soon as we finalize the minutes with the FDA, we will share the data with you. Thank you again, and take care.

Ladies and gentlemen, this concludes today's presentation. Thank you once again for your participation. You may now disconnect. Have a great day.