Minerva Neurosciences, Inc. Q3 FY2022 Earnings Call

Thank you for your patience. Welcome to the Minerva Neurosciences Third Quarter 2022 Conference Call. All participants are currently in listen-only mode. After the presentations, there will be a question-and-answer session. Please note that today's program is being recorded. Now, I would like to introduce your host for today's program, Geoff Race, who is the Executive Vice President, Chief Financial Officer, and Chief Business Officer. Please proceed, sir.

Good morning. A press release with the company's third quarter 2022 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. 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. 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, 2022, filed with the SEC earlier today. Any forward-looking statements made on this call speak only as of today's date, Wednesday, November 9, 2022, 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. Thank you for joining us today. As we previously reported on August 17, 2022, we submitted our NDA for roluperidone to treat negative symptoms in schizophrenia to the FDA. The submission included the data from two clinical trials of our Phase 2b and Phase 3 studies, in patients diagnosed with schizophrenia with negative symptoms. We believe that these trials are adequate and well controlled for the purposes of submitting an NDA. The overall data set included results from two doses 32 milligram and 64 milligram administered in both studies each of 12-week duration, double-blind and placebo controlled. Also included was the data from the six months open-label extension to the Phase 2b study and data from the nine months open-label extension to the Phase 3 study. We also provided additional supporting data requested by the FDA. Following the receipt of the refusal to file letter from the FDA in October, we have requested a Type A meeting to discuss the FDA's reasons for not accepting our NDA for substantive review. We expect the Type A meeting to occur before the end of this year and the minutes are normally available 30 days after the meeting. I would like to make a few comments regarding our NDA for roluperidone. First, it is important to note that there are no approved drugs in the U.S. to treat the negative symptoms of schizophrenia, which represents a huge unmet medical need. Furthermore, to my knowledge, there are no drugs currently being developed or in clinical studies that have a specific and direct benefit on negative symptoms of schizophrenia. It is true that other drugs in development bring down negative symptoms as a function of improving positive symptoms and side effects of antipsychotics, but none have been shown to be effective directly and specifically on disease-related negative symptoms. Furthermore, our two studies have demonstrated that by reducing the severity of negative symptoms, roluperidone improves the overall functioning of the patients. Again, to my knowledge, roluperidone is the only drug that has shown this effect in patients. Last but not least, it is well documented in the related scientific literature that antipsychotic drugs that block dopaminergic pathways in the brain may cause drug-related worsening of negative symptoms over and above those negative symptoms that are disease-related. We believe that there is a large subset of patients diagnosed with schizophrenia who do not need continuous treatment with antipsychotics for positive symptoms yet still suffer negative symptoms that make it difficult to lead some semblance of a normal life. Considering all of these factors from the start, we developed roluperidone as a monotherapy for this patient subpopulation. Having worked in clinical practice, I know there is a significant number of these patients in the community, whom we have recruited and studied in our clinical trials. We have discussed with the FDA the need for a treatment for this specific subpopulation of U.S. patients and the FDA has previously acknowledged that negative symptoms represent a significant unmet medical need. We look forward to discussing the FDA's reasons for not accepting our NDA at the Type A meeting and we'll provide an update following that meeting. I will now turn it over to Fred for the financial update.

Thank you, Remy. Earlier this morning, we issued a press release summarizing our operating results for the third quarter ended September 30, 2022. 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, 2022 were approximately $40.3 million compared to $60.9 million as of December 31, 2021. In September 2022, we filed the shelf registration statement on Form S-3 to register up to $200 million in new shares of common stock. We also entered into an open market sale agreement with Jefferies LLC pursuant to which we may offer and sell shares of our common stock from time-to-time through Jefferies by any method permitted by law deemed to be and at-the-market offering. During the nine months ended September 30, 2022, no shares of our common stock were issued or sold under the agreement. As of September 30, 2022, an aggregate of $22.6 million was eligible for sale under our effective registration statement on Form S-3. We expect that 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. For the three months ended September 30, 2022 and 2021, research and development expense was $2.4 million and $4.5 million respectively, a decrease of approximately $2.1 million. For the three months ended September 30, 2022 and 2021, non-cash stock compensation expense included in R&D was $0.5 million in both periods. For the nine months ended September 30, 2022 and 2021, R&D expense was $11.5 million and $13.3 million respectively, a decrease of approximately $1.8 million. For the nine months ended September 30, 2022 and 2021, non-cash stock compensation expense included in R&D was $1.5 million and $1.8 million respectively. The decrease in R&D expense for both the three and nine month periods ended September 30, 2022 versus the comparable prior year periods was primarily due to lower costs for the Phase 3 clinical trial of roluperidone due to the completion of the 40-week open label extension in 2021, partially offset by higher consulting fees in support of the NDA submission in August 2022. For the three months ended September 30, 2022 and 2021, general and administrative expense was $2.8 million and $3 million respectively, a decrease of approximately $0.2 million. For the three months ended September 30, 2022 and 2021, non-cash stock compensation expense included in G&A was $0.5 million and $0.6 million respectively. For the nine months ended September 30, 2022 and 2021, G&A expense was $8.7 million and $10.7 million respectively, a decrease of approximately $2 million. For the nine months ended September 30, 2022 and 2021, non-cash stock compensation expense included in G&A was $1.6 million and $2.2 million respectively. The decrease in G&A expense for both the three and nine month periods ended September 30, 2022 versus the comparable prior year period was primarily due to lower legal and insurance costs. For the three months ended September 30, 2022 and 2021, non-cash interest expense for the sale of future royalties was $1.9 million and $1.7 million respectively, an increase of approximately $0.2 million. For the nine months ended September 30, 2022 and 2021, non-cash interest expense for the sale of future royalties was $5.5 million and $4.6 million respectively, an increase of approximately $0.9 million. The increase in non-cash interest expense for both the three and nine month periods ended September 30, 2022 versus the prior year period was primarily due to interest accruing with effect from January 19, 2021, the date at which the company entered into an agreement to sell our royalty interest in seltorexant to Royalty Pharma, as well as an increase in the underlying balance of the liability, which totaled $71.8 million at September 30, 2022. The effective interest rate is based upon estimates, which contain significant assumptions regarding the timing and amount of expected royalty and milestone payments to be recognized over the royalty period. Net loss was $6.9 million for the third quarter of 2022 or net loss per share of $1.29 basic and diluted, as compared to net loss of $9.2 million or net loss per share of $1.72 basic and diluted for the third quarter of 2021. Net loss was $25.4 million for the nine months ended September 30, 2022, and or net loss per share of $4.75 basic and diluted as compared to net loss of $28.6 million or net loss per share of $5.36 basic and diluted for the nine months ended September 30, 2021. Now, I would like to turn the call over to the operator for any questions.

And our first question comes from Andrew Tsai from Jefferies. Please go ahead with your question.

Hi. Thanks and good morning. Thanks for sharing the updates and having me. So despite the RTF that you received, which is unfortunate. Can we infer at this juncture whether the FDA now does feel comfortable about any of the issues they previously outlined in your prior Type C meeting. So the formulations the U.S. versus ex-U.S. mITT, the endpoint or even roluperidone as a monotherapy? And then I have a follow-up. Thank you.

Yes. Hello, sir. Obviously, great question. Yes. So I think, I mean, obviously, each time you have a meeting with the FDA, you have discussions and you achieve something, yes. So this said, I think because the FDA has really proposed to have this type meeting after something else that we choose to file. And so because we have an open dialogue, I think I would like to comment more on what has been achieved and what has not been achieved. But so like, we will see what happened during this meeting. Again, the FDA has proposed to have this meeting to discuss the few items they have in mind, and we will report after we had hopefully a very good discussion with the FDA.

Thanks. At this point, it doesn't seem like you would consider a new study after the Type if there isn't a change in the FDA's stance. Would that be when you would think about another study? If not, my question is when would you consider conducting another study? What factors would need to occur first? Thank you.

I think the answer to your question is that we need to have the meeting. Again, the meeting hopefully will help to clarify the content of the NDA and hopefully we'll be able to, how to say, in the FDA is – I mean we have two well adequate and controlled studies and this is enough to have the start of the review of our NDA. So again, I mean, let us have the meeting and we will give you more clarity after the meeting.

Got you. Thank you.

You’re welcome.

Thank you. One moment for our next question. And our next question comes from the line of Tom Shrader from BTIG. Your question please.

Good morning. This is [indiscernible] filling in for Tom. Thank you for taking my question. As a follow-up, if additional data are needed before roluperidone can be approved, would a partnership make more sense now? Also, do you have any thoughts on what the trial might look like and how similar or different it may be? Thank you.

I think for the first part of the question, I will hand over to Geoff, yes, I mean, to give you his views. But concerning the trial, again, we will discuss the topics that the FDA raised in the letter we received for the refusal to file. And obviously based on this, I mean, we will see what is next and will have additional data we can provide. So again, keep with us and hopefully, we will have a good meeting with the FDA and have complete clarity. Geoff, can you take the first part, please?

Yeah. Nothing really much to add to that, Tom. I think, in terms of what the path forward looks like, we'll have a whole clearer idea, a much clearer idea following the Type A meeting. And then from a strategy point of view, we can address that kind of question whether it's necessary to do another study, whether it’s best to do that study on our own or whether it's best to do it with a partner. I think those are decisions that we'll need to take following the Type A meeting.

Great. Thank you for the color.

Thank you. Our next question comes from Douglas Tsao from H.C. Wainwright. Please go ahead with your question.

Hi. Good morning. Thanks for taking the questions. Just in getting the refuse to file a letter from FDA, did they cite anything specific or was it merely just sort of notifying of the decision and indicating a willingness to have a Type A meeting?

Great question, Doug. So normally, they have always to give a reason why, yes, I mean, and these are the topics we will go to discuss. So definitely, they gave a few reasons why. So this is what we will discuss in the Type definitely.

Okay. Can you tell us if the issues raised were similar to those in previous interactions with the agency?

So I think, as I said before, I think it's not really wise to go into the details here. I mean, because we have an open dialogue and then obviously the next step is this Type A meeting. So I really would not like to comment on this. As I said before, I mean, we are making progress each time we speak, so I'm really hoping that in the Type A meeting, we will be able to clarify a few items still open.

Okay, great. Thank you.

Welcome, Doug.

One moment for our next question. And our next question comes from the line of Myles Minter from William Blair. Your question please.

Hi. Just a clarification question. Did the FDA truly propose this Type A meeting as a recommendation? Because my understanding is that that is a non-RTF thing to put in a letter or did they just sort of have commentary in there, saying this is a potential path forward like it is for all RTFs? That's the first question.

Yeah. No, they proposed as a Type A meeting.

Okay. And then something that is in your control, I believe when you requested the Type A meeting, you have to submit a list of questions that you'd like addressed in that meeting. Can you give us at least a flavor of what those list of questions were because they came from you and that's not interpreting how the FDA is going to respond to them? Thank you.

No. So the list of questions we have is obviously extremely limited and is completely focused on what was in the letter, as from the FDA. So it's not new questions or whatever else it's really focusing on the few points that they raised in the letter. This is a principle of the Type A meeting.

Okay. Thanks for the questions.

You're welcome.

Thank you. One moment for our next question. And our next question is a follow-up from the line of Andrew Tsai from Jefferies. Your question please.

Thanks. Just one more follow-up. I appreciate you taking the questions. Are you working on other assets in the pipeline? Are there next steps that we can look forward to perhaps next year? I just wanted to kind of gauge your thoughts on “contingencies” or contingency planning? Thank you.

Yes. So great question as well. So clearly, obviously, the complete focus is on the roluperidone because this is really the most important asset because it's a very late stage asset and it is a value driver. But it is true that we have an early stage pipeline and obviously, we are moving this pipeline – not as fast as we would like to have this pipeline moving. But we are moving. So yes, indeed, I mean, if I mean, these things are going well with roluperidone, which I think it will go very well, the rest of the pipeline will move definitely. And we can report probably during the course of next year what we have achieved on this early stage pipeline, absolutely.

Okay. Yes, perfect. Well, fingers crossed on the Type A. Good luck. Thanks.

Thank you so much. Thank you so much.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Remy Luthringer for any further remarks.

Thank you very much. This concludes our earnings call, and I look forward to providing you with an update after the Type A meeting. As we mentioned in our press release, this meeting will occur before the end of the year, and we have requested the meeting. We typically receive the minutes 30 days later, and as soon as we have clarity, we will share all the insights we gained and what we achieved with the FDA to advance roluperidone, which is an extremely important drug with no approved treatment in the United States. Thank you again for your time, and I look forward to our next update.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.