Minerva Neurosciences, Inc. Q3 FY2021 Earnings Call

Welcome to the Minerva Neurosciences Third Quarter 2021 Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session following today's prepared remarks. This call is being webcast live on the Investors section of Minerva's website. As a reminder, today's call is being recorded. I would now like to turn the call over to Geoff Race, President of Minerva. Please proceed.

Good morning. A press release with the company's third quarter 2021 financial results and business highlights became available at 7:30 AM 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. Joining me on the call today from Minerva are Dr. Remy Luthringer, Executive Chairman and Chief Executive Officer, and Mr. Fred Ahlholm, Chief Financial 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. Those 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 June 30, 2021, filed with the SEC earlier today. Any forward-looking statements made on this call speak only as of today's date, Monday, November 8, 2021, 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 Remy Luthringer.

Thank you, Geoff. And good morning, everyone. Thanks for joining us today. I would like to focus this morning's update on our late program roluperidone. On September 30, 2021, we announced the results from a pivotal bioequivalence study where the results met key pharmacokinetic objectives and demonstrated value equivalence across the various formulations. Because the objective of the study was to compare the formulations employed in the Phase IIb and Phase III trials, as well as the planned commercial formulation designed in conjunction with our commercial supplier to facilitate large-scale manufacturing. This type of study in the area under the curve to last detectable concentration, AUClast, the area under the curve extrapolated to infinity, AUCinf, and the maximum plasma concentration, Cmax are the most commonly used plasma pharmacokinetic parameters to evaluate bioequivalence between various formulations. For roluperidone, our earlier work has shown that efficacy in patients with negative symptoms of schizophrenia is mostly driven by plasma exposure of the drug, i.e., AUCs, whereas safety margins improved by reducing Cmax of the drug. Furthermore, as roluperidone is intended for chronic use and the assessed formulations are controlled release, AUCinf is the most relevant of the AUC measurements when single-dose data are collected and used for determining bioequivalents. In this study, the two most important objectives were to establish, firstly, the comparability under fasted conditions of the 64 milligram tablet of the Phase III formulation of roluperidone compared to the 64 milligram dose based on the administration of two 32 milligram tablets of roluperidone used in the Phase IIb study. And secondly, the comparability under fasted conditions of the 64 milligram tablet of the planned commercial formulation of roluperidone compared with a 64 milligram dose based on the administration of two 32 milligram tablets of roluperidone used in the Phase IIb study. The data showed that both objectives were met. The AUCinf were bioequivalent and the Cmax of the reformulated Phase III and planned commercial formulations had been reduced substantially compared to the Phase IIb formulation. In this study, we also demonstrated bioequivalence in terms of AUCs and Cmax between the 64 milligram formulation of the planned commercial tablets under fasted conditions compared to the formulation used in the Phase III. And bioequivalence, both in terms of AUCinf and Cmax of the 64 milligram dose of the planned commercial formulation under fasted condition. In summary, I believe the bioequivalence study results represent important progress along Minerva's critical path towards submission of an NDA for roluperidone. Moving on to our recent correspondence with the FDA. Last week, we announced that the FDA had denied the company's request for a pre-NDA meeting for roluperidone and proposed that the Type C guidance meeting would be more appropriate. Therefore, the company plans to request a Type C meeting. And so, to conclude my update this morning, the successful completion of the bioequivalence study represents an important component of the NDA package. Subject to the timing of and feedback from the FDA, we continue to work towards the submission of a New Drug Application in the first half of 2022. Finally, I would like to take this opportunity to welcome Dr. Ramana Kuchibhatla as our new head of R&D at Minerva. Thank you, Remy. Earlier this morning, we issued a press release summarizing our operating results for the third quarter ended September 30th, 2021. A more detailed discussion of our results can be found in our quarterly report on Form 10-Q filed with the SEC earlier today. Cash, cash equivalents, restricted cash and marketable securities as of September 30, 2021 were approximately $65.7 million compared to $25.5 million as of December 31, 2020. Our cash position was strengthened significantly in January 2021, with the receipt of a $60 million upfront cash payment from Royalty Pharma in connection with Royalty Pharma's acquisition of the company's royalty interest in seltorexant. Under this agreement, Minerva has the potential to receive up to a further $95 million in additional payments, contingent upon the achievement of certain clinical, regulatory and commercialization milestones by Janssen. As a result of the sale of Minerva's interest in the seltorexant royalty stream to Royalty Pharma, Minerva will recognize non-cash interest expense related to the amortization of this future revenue stream as compared to the cash payments ultimately received from Janssen. Accordingly, for the three and nine months ended September 30, 2021, Minerva recognized $1.7 million and $4.6 million, respectively, in non-cash interest expense related to this agreement. The $60 million payment received from Royalty Pharma has been included on our balance sheet under liability related to the sale of future royalties. As we recognize interest expense, the liability related to the sale of future royalties will increase until such time that we begin to receive the related royalty payments which will thereafter reduce the liability on our balance sheet. While the upfront payment and future milestone payments will continue to be included on our balance sheet as a liability, as they described earlier, in accordance with the terms of our agreement with Royalty Pharma, in the event that Janssen were to discontinue the seltorexant program for any reason, Minerva has no obligation to repay any amounts received from Royalty Pharma. We expect the company's existing cash and cash equivalents will be sufficient to meet its anticipated capital requirements for at least the next 12 months based on our current operating plan. The assumptions upon which this estimate is based are routinely evaluated and may be subject to change. For the three months ended September 30, 2021 and 2020, research and development expense was $4.5 million and $4.6 million, respectively, a decrease of approximately $0.1 million. For the three months ended September 30, 2021 and 2020, non-cash stock compensation expense included within R&D was $0.5 million and $0.8 million respectively. For the nine months ended September 30, 2021 and 2020, R&D expense was $13.3 million and $18.5 million, respectively, a decrease of approximately $5.2 million. For the nine months ended September 30, 2021 and 2020, non-cash stock compensation expense included within R&D was $1.8 million and $2.2 million, respectively. The decrease in R&D expense for both the three and nine-month periods ended September 30, 2021 versus the same periods in 2020 was primarily due to lower costs for the Phase III clinical trial of roluperidone, for which the three-month core study portion of the trial was completed in May 2020. For the three months ended September 30, 2021 and 2020, general and administrative expense was $3 million and $3.5 million, respectively, a decrease of approximately $0.5 million. For the three months ended September 30, 2021 and 2020, non-cash stock compensation expense included within G&A was $0.6 million and $1.2 million respectively. For the nine months ended September 30, 2021 and 2020, G&A expense was $10.7 million and $13.5 million, respectively, a decrease of approximately $2.8 million. For the nine months ended September 30, 2021 and September 30, 2020, non-cash stock compensation expense included within G&A was $2.2 million and $5.6 million, respectively. The decrease in G&A expense for both the three and nine-month periods ended September 30, 2021 was primarily due to non-cash stock compensation charges, resulting from certain stock option awards approved in June 2020, as well as some additional stock compensation expense incurred under severance agreements during 2020. Net loss was $9.2 million for the third quarter of 2021 or net loss per share of $0.22 basic and diluted as compared to a net loss of $8.1 million or net loss per share of $0.19 basic and diluted for the third quarter of 2020. Net loss was $28.6 million for the nine months ended September 30, 2021 or net loss per share of $0.67 basic and diluted as compared to net income of $9.3 million or net income per share of $0.23 basic and diluted for the nine months ended September 30, 2020. The decreases in net income for both the three and nine-month periods ended September 30, 2021 were primarily due to the company's opting out of its joint development agreement with Janssen Pharmaceutica for seltorexant during the second quarter of 2020. As a result of opting out of the agreement, the company immediately recognized $41.2 million in collaborative revenue, which had previously been included on the balance sheet under deferred revenue. Now, I would like to turn the call over to the operator for any questions.

Our first question comes from Andrew Tsai with Jefferies.

First one is just on the timelines of the Type C meeting. Congratulations, by the way, on completing the bioequivalence study. My understanding is the FDA generally takes at most 75 days to schedule a Type C. Last year, it sounds like you received minutes within 20 days of your Type C meeting and you came back to the Street a day afterwards, I believe. So, can we expect that Type C meeting outcome to happen, say, within two to three months? Can you give a more granular timeline you think? That's my first question.

As you know, the timelines for a Type C meeting are based on a process of 75 days. But it is also true that last year, when we had our Type C meeting, things came back much quicker from the agency. So, I think today, we have to stick to this, as I say, some deferred guidance basically. And obviously, we have immediately reacted, and your estimate is probably adequate. So, it is a 75-day process indeed.

Another question is just more about the FDA, why they think a Type C meeting would be more appropriate than a pre-NDA? Should we be inferring maybe the FDA is still very unsure of whether the topics that you guys discussed in the last Type C meeting may not have been fully addressed? I guess the root of the question is, what prompted the FDA to do this instead?

Obviously, I'm not at the pleasure of the FDA. Yes. But I think to ask about specifics about monotherapy is a completely fair question. As you know, we have done our development in monotherapy for very obvious reasons. The first one being the fact that if you want to claim for specific effects on negative symptoms, this is, in my opinion, and it has been recently published by a group of experts, this is probably the only way to conduct a study, monotherapy versus placebo, in order to really pick up the specific effect on negative symptoms. So, I think it is a very important debate here, a question. Keep also in mind that common practice is mostly focused on positive symptoms. The common practice is to try to keep someone who has a diagnosis of schizophrenia treated with antipsychotics. So, when you're putting these two pieces together, you might have a discussion around why monotherapy? And I think we have a really good set of data. Some months ago, we disclosed the results of the open-label extension where, definitely, you can see an improvement in negative symptoms, but this is in parallel with some improvement in terms of positive symptoms or, at minimum, stability of positive symptoms, staying at a very low level after monotherapy with roluperidone. Also, remember, we had an extremely low relapse rate. So, when you put all this together, I think we have a very good discussion about monotherapy based on our data. I'm really hopeful that we have the right input and the right output at the end of the day in order to move forward.

Our next question comes from Tom Shrader with BTIG.

Let me add my congratulations for the bridging study. That's a nice result. Very related to the previous question, is this the first time the FDA will have heard you present the open-label extension? And how much of the data that they see in your request for a pre-IND meeting? And then, a kind of a follow-up is, do you expect to have to go to this meeting with the next trial sort of flushed out? Or would that be a subsequent discussion?

Clearly, the FDA has not seen a lot. To be very clear, nothing about the extension data part of the press release we put out about these results. As you know, when you're doing a meeting request, you're not going into the details, you're mostly going through some of the questions you might need to put in your briefing book and want to discuss during the pre-NDA meeting. So, the short answer is that they have no specific insight into this data. If I read into your question, I think it was an important piece of information to be able to demonstrate what we have demonstrated. Now, concerning an additional trial, I know very well that people think we should do a trial or we should have started the trial. People think that we have enough. I think when you're looking at the guidance of November 2019, I said we are ticking the boxes as we deal with an unmet medical need with two well-controlled studies. So, I said we have a lot yet to share and discuss with the agency. And we'll see what comes out of this meeting. Based on the outcome, we will decide. But if you're thinking one second study, you need to know which kind of study, and this will not be the topic of the discussion. We really focus on monotherapy. But afterwards, we can always discuss what we'll be studying. But again, I am very clear. I said we have what you need to have the right discussion, and this clarification on monotherapy makes a lot of sense to me. Hopefully, the agency will choose a data package we have, like a package which can be submitted for an NDA.

Our next question comes from Jason Butler with JMP Securities.

Remy, just another one on the Type C meeting. Has the FDA at all indicated whether it now accepts the bioequivalence data as bridging the Phase II formulation or the Phase IIb formulation to the Phase III and commercial formulations? Or is that still not a discussion you've had? And then, if you have the Type C meeting and decide to continue to submit an NDA, would you still think you need a pre-IND meeting on top of or in addition to the Type C meeting?

For the first question about bioequivalence, the answer is no, the FDA has not seen this data. The only things they have seen are what we have publicly released. Obviously, when you're doing the meeting request, as I explained before, you're going through different points of topics you'd like to discuss. So, clearly, they do not have the complete granularity of this data. This said, as you know, this was a pivotal bioequivalence study, which basically follows guidance. And clearly, either you're bioequivalent or you're not. In our case, we are bioequivalent for the key parameters, as I explained in my talk just before. So, I don't think there will be any surprises there. Now, concerning your second question, I think this focused discussion about monotherapy and the totality of evidence is the right discussion, and this was definitely something we wanted to have during the pre-NDA meeting as well. Depending on the outcome of this meeting, we will see. But we are still trying to stick to our guidance based on the outcome and feedback from the FDA. We are still sticking to the submission of our NDA in the first half of next year. This is what I think I can say about this, but I'm very hopeful that this will help us to stay with the timelines we have given.

Just one more. Just to clarify, so obviously, there's the monotherapy topic, but in addition to that, are the topics that you plan to propose discussing with the FDA at the Type C meeting essentially overlapping with what you would have talked about at the pre-NDA meeting?

Part of the monotherapy, which was a part of it because, obviously, we have developed the drug through monotherapy for the reasons I was explaining before. Yes, some of the topics overlap. The only difference, if you want to find a difference, is that in the pre-NDA meeting, we're also going through the different modules of your NDA, like CMC, like preclinical and so on, and not only focusing on the clinical aspects. So, this is the difference. This said, for example, for CMC, you can have some specific meetings to check or to tick the boxes, as we have done, by the way, also in the past. So, I think there are ways to tick all the boxes before we submit. I think this is the difference. Less focus on ticking the box for non-clinical aspects and more focus on the clinical aspects.

Our next question comes from Douglas Tsao with H.C. Wainwright.

I'm just curious. Remy, when you think about your discussion with the agency, the focus – or how important do you think it is because there's been – with investors, there's obviously been a conversation whether the best sort of use of roluperidone is as adjunct versus monotherapy. When you think about going to the agency and your discussion, has it been primarily focused or exclusively focused as a monotherapy? Beyond the open-label extension data, what do you think are your best points of evidence just to utilize to support that setting?

This is, obviously, an important question. I could give a very long answer, but I think the best answer to your question is to first of all recognize that the scientific community is really acknowledging that many patients with a diagnosis of schizophrenia do not take the treatment if they have the possibility to stop the treatment. I'm speaking here about the commercially available treatments. They do not take that treatment if there was a possibility to stop. So, there is a need for an alternative treatment. The second aspect is that it’s clear as well that existing treatments are definitely not improving negative symptoms. Multiple meta-analyses point to the fact that you see a worsening of negative symptoms due to the treatment on top of the negative symptoms of the disease. Additionally, a lot of work has been done over the last few years to see if you can reduce the dosage of antipsychotics and how that impacts the number of relapses. This is very active research to better understand the phenotype of patients at different stages of the disease. It is becoming more evident that a significant number of patients with schizophrenia are really bothered by negative symptoms and are not functioning. They do not need continuous treatment with antipsychotics. This was one of our hypotheses when we started, in addition to demonstrating the specific effect. Our data shows this is possible because, in the two studies, we took patients who were stabilized on positive symptoms with antipsychotics. They had to have a minimum score of negative symptoms. We switched them to our treatment in monotherapy. When you see that these patients are stable on the positive symptoms at a very low level and have an extremely low relapse rate over one year of treatment, we have additional information here confirming that some patients can be without antipsychotics continuously onboard. So, all this has to be reexplained and rediscussed to show the full power of the data we have generated and the patient population who might benefit from monotherapy. Obviously, I'm not saying antipsychotics are not important. I’m saying that roluperidone will not treat an acute episode of positive symptoms, with agitation, hallucinations, or delusions. We are just trying to fill a gap where there is no existing treatment.

Remy, one follow-up to that is do you think that you have enough data to support or would you seek a specific labeling recommendation for roluperidone to be monotherapy? Do you think it would be appropriate for the label to be agnostic, whether it be used as an adjunct or monotherapy?

I obviously don’t know the final answer on this. The reason I don't is the meeting. What I think is that you can give a drug in adjunct. We never have promoted this more than that. We only conducted the safety aspects of studies needed to give our treatment in adjunct to antipsychotics. Again, I think this is the best opportunity for patients to improve in terms of negative symptoms. Ultimately, in terms of functioning, there is a significant number of patients who can benefit from monotherapy with our drug without having antipsychotics onboard continuously. I think this is what we have demonstrated. Fortunately, the FDA will understand this. This is where we are, this is what I'm thinking. It can be given adjunct, but probably the best outcome in most cases is not to have antipsychotics continuously onboard.

I'm showing no further questions. At this time, I'd like to turn the call back to management for any closing remarks.

Yes. Thank you, everybody, for today's call and for all the questions and for listening to our earnings call. I'm really looking forward to updating you soon about the progress we will make over the next coming few weeks and months. Thank you again. Have a nice day. Bye-bye.

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