Minerva Neurosciences, Inc. Q4 FY2022 Earnings Call

Good day, and thank you for standing by. Welcome to Minerva Neurosciences Full Year 2022 Financial Results and Business Update Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Geoff Race, President of Minerva Neurosciences. Please begin.

Good morning. A press release with the company's fourth quarter and year-end 2022 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 annual report on Form 10-K 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'd 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 the 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 Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission earlier today. Any forward-looking statements made on this call speak only as of today's date, Wednesday, March 8, 2023, 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'd now like to turn the call over to Remy Luthringer.

Thank you, Geoff, and good morning, everyone. Thank you for joining us today for a review of 2022 and our plans for 2023. During the year, we had multiple interactions with the FDA regarding the regulatory path forward for our lead compound, roluperidone, for the treatment of negative symptoms of patients diagnosed with schizophrenia. In March 2022, we attended a Type C meeting in which the FDA advised us on its remaining concerns, which we outlined in our press release in April 2022. Specifically, the FDA was concerned with the applicability of the Phase 2b data conducted in Europe to the U.S. population, and the Phase 3 study did not meet the primary endpoint. In addition, the FDA sought reassurance that Minerva could reliably identify those patients who do not need antipsychotics and how to evaluate the stability of those patients. The FDA also noted that roluperidone may be used by prescribers in a way that differs significantly from the intended monotherapy use and noted that we have not presented data to demonstrate that roluperidone does not interfere with the safety or efficacy of antipsychotic medications. Following the Type C meeting, Minerva provided additional data to address the concerns raised by the FDA. In August 2022, we submitted an NDA for roluperidone for the treatment of negative symptoms in patients with schizophrenia. The submission was supported by results from late-stage, well-controlled studies in patients with moderate to severe negative symptoms and stable positive symptoms of schizophrenia, specifically studies MIN-101C03 Phase 2b and MIN-101C07 Phase 3. Both studies had very similar overall designs, being multicenter, multinational, randomized, double-blind, placebo-controlled pilot group studies in which patients received a placebo, 32-milligram or 64-milligram doses of roluperidone. In both studies, if patients were taking antipsychotic treatments, those were discontinued and a short washout period was implemented before being randomized to one of the three arms. Both studies captured comparative placebo-controlled data throughout the 12-week double-blind period. Both studies also provided long-term exposure data regarding the safety and tolerability of roluperidone and efficacy based on blinded doses of roluperidone, specifically intended to demonstrate the continuation of improvement in negative symptoms, the stability of positive symptoms, and the low relapse rate of positive symptoms following the 24-week study MIN-101C03 and the 40-week study MIN-101C07 open-label periods. As mentioned above, with the exception of the duration of the open-label period, these two studies were nearly identical concerning patient population and assessment tools: positive and negative syndrome scale pans, personal and social performance scale, clinical global impression. As such, the data from these studies were the basis for the decision to submit the NDA, as we believe they provided sufficient evidence to support the long-term safety and efficacy in adults in an area of high unmet medical need and, consequently, merit an in-depth review by the psychiatric division of the FDA. In October 2022, we received a Refuse to File letter from the FDA and continued, as proposed by the psychiatric division, our dialogue in a Type A meeting on November 30. Following that meeting, the FDA confirmed that the RTF remained in effect. We remain committed to developing roluperidone as a potential transformative treatment for those patients with negative symptoms of schizophrenia. We anticipate further discussions with the FDA over the coming months regarding the status of the roluperidone NDA and the development program. I look forward to providing more information as it becomes available. I will now turn it over to Fred to discuss our financial performance.

Thank you, Remy. Earlier this morning, we issued a press release summarizing our operating results for the fourth quarter and year ended December 31, 2022. A more detailed discussion of our results may be found in our annual report on Form 10-K filed with the SEC earlier today. Cash, cash equivalents, and restricted cash as of December 31, 2022, were approximately $36.2 million compared to $60.9 million as of December 31, 2021. In January 2023, we received a refund of our NDA filing fee of $3.1 million from the FDA. This refund was made in accordance with the Federal Food Drug and Cosmetic Act, which allows a fee waiver for a small business submitting its first human drug application. 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 from today, based on our current operating plan. The assumptions upon which this estimate is based are routinely evaluated and may be subject to change. Research and development expense for the fourth quarter of 2022 was $3.2 million, compared to $18.7 million for the same period in 2021, a decrease of $15.5 million. The decrease in R&D expense was primarily due to an impairment charge of $15.2 million in the fourth quarter of 2021 to the carrying value of in-process research and development related to our MIN-301 development program. Our R&D expense for the years ended December 31, 2022, and 2021, was $14.6 million and $32 million, respectively, a decrease of $17.4 million. The decrease in R&D expense was primarily due to the aforementioned impairment charge and lower clinical trial costs during 2022. Noncash stock compensation costs included in R&D expense for the years ended December 31, 2022, and 2021, totaled $2 million and $2.4 million, respectively. General and administrative expense for the fourth quarter of 2022 was $1.9 million, compared to $2.6 million for the same period in 2021, a decrease of $0.7 million. G&A expense for the years ended December 31, 2022, and 2021, was $10.6 million and $13.3 million, respectively, a decrease of $2.7 million. The decrease in G&A expense for both the fourth quarter and year ended December 31, 2022, versus the prior year period was primarily due to lower compensation expense as well as lower legal and insurance fees. Noncash stock compensation costs included in G&A expense for the years ended December 31, 2022, and 2021, were $2.1 million and $2.8 million, respectively. For the fourth quarter of 2022, our net loss was $6.7 million, or a loss per share of $1.26, as compared to a net loss of $21.3 million for the fourth quarter of 2021, or a loss per share of $3.99. For the year ended December 31, 2022, our net loss was $32.1 million, or a loss per share of $6.01, versus a net loss of $49.9 million for the year ended December 31, 2021, or a loss per share of $9.35. Now I'd like to turn the call over to the operator for any questions.

Our first question comes from the line of Andrew Tsai with Jefferies.

Thanks for all the updates. So the first question is, can you possibly remind us of the latest outstanding issues the FDA has following your recent Type A meeting with the NDA? I think last time, you said the FDA did propose a few items in the meeting you'd kind of share with us. But I'm just curious about what those things were that led to the FDA issuing the RTF and then maintaining their stance afterwards?

Yes. Really great question. So clearly, as we mentioned, we already outlined what were the concerns after the Type C meeting we had with the FDA in April of last year. I think we've made a lot of progress, but I think the two main points, as we mentioned, are the fact that they're still struggling with the applicability of the Phase 2b study, the C03 study results. They suggested or confirmed that this study is a positive study. However, the struggle is that this study has no U.S. patients. They want to be sure that U.S. and non-U.S. patients are similar in terms of disease, specifically concerning negative symptoms, and mostly in terms of negative symptoms because, as you know, there is no drug approved for negative symptoms, so they want to be extremely sure about this. The second point is that they are still having concerns about the Phase 3 study due to the fact that we used a Type 1 correction, the Hochberg correction. As you know, for Hochberg correction, we need to have the tool assist in achieving a P-value of 0.05. In our case, only the highest dose achieved a P-value of 0.05. In my opinion, this is very technical and does not indicate whether the drug is working or not. But these are the two main concerns. If you allow me, let me further explain them. Regarding the first point, we continue to engage in dialogue with the FDA and are providing them with data showing that the patients included outside the U.S. are extremely similar in terms of baseline and the effect of our drug on negative symptoms and the overall disease. We even provided information from other studies performed by other sponsors to strengthen our case, and I am confident that we will overcome this. Now concerning the Phase 3 study, indeed, only the 64-milligram dose achieved the 0.05 P-value. But as we disclosed, our NDA is asking for approval of the 64-milligram only; we are not asking for approval for the 32 milligrams. If we look at what we observed in the Phase 3 with the 64 mg, it is very similar to what we observed in the Phase 2b study. Importantly, we had one key secondary endpoint, the PSP, looking at the everyday functioning of the patients, with a highly significant P-value of 0.016. When we look at patient improvement, it is clear that they are improving significantly with a good P-value in both the Phase 2b and Phase 3 studies. So clearly, these are the outstanding issues. I hope that answered your question.

Yes, it's very clear. Thanks. It sounds like you're going to talk to them over the coming months about the NDA and so forth. Any thoughts on the timing of the resolution or an outcome of this? Is it also going to be another Type A meeting? I don't even know how you classify it, but any clarity around the potential timing of that outcome here?

So I think we cannot be clear about the timing. The dialogue is ongoing, and we hope to have a resolution in the shortest time possible. However, this will happen in the next coming months or weeks. Additionally, we want to convey a clear message that we have a substantial amount of information in our NDA. For example, we have a lot of data on the comparability between U.S. and non-U.S. patients, as well as information about functional improvements of the patients because the key primary endpoint we had in Phase 3 was the total score of PSP. There are four sub-scores, and we have analyzed these in detail, confirming that the drug improves functioning in patients. Our key goal is to convey to the FDA that the reasons for their concerns are not enough to reset high but rather should encourage an in-depth review of our NDA and a dialogue with us to analyze all of our data demonstrating that roluperidone is an effective drug for patients suffering from negative symptoms and diagnosed with schizophrenia. This is the ongoing dialogue, and in terms of timing, we cannot provide more details.

That makes sense. And very last question, if you could share who at the FDA has been overseeing the NDA application? I'm just curious if it was Billy Dunn. If so, does this departure change your perspective on anything as it relates to the NDA?

That is a great question as well. When submitting your NDA, the Type C or Type A meetings are mostly with the psychiatric division because the decision for Refuse to File comes from the division. Indeed, Dr. Dunn was involved in overseeing the psychiatric division and other divisions within neuroscience for the past one to two years. He is known to be very open to developments or indications with no approved treatment. Importantly, Dr. Dunn values not only P-values but also the functional improvement we see with roluperidone. So I do not believe this will pose a problem for us following Dr. Dunn's departure. The FDA's remaining personnel understand the importance of functional improvement. The new nominee in place of Dr. Dunn is also knowledgeable and open to innovation. Therefore, I do not see any problems there. We continue working along the lines set by Dr. Dunn.

So just as a follow-up. Obviously, there's still some uncertainty. But when you envision the path forward for roluperidone and your interactions with the agency, do you think that one study would potentially suffice to address their concerns? Or would you need to run both a monotherapy and an adjunct therapy study? Or could that potentially be carried out in one trial?

To be very clear, the FDA has never asked us to conduct an additional study. They have requested that we continue providing them with additional information, which we are currently doing. Regarding your comment on monotherapy versus adjunct therapy, this is a good point. We developed roluperidone as a monotherapy for several reasons. Primarily, we wanted to demonstrate specific improvements in negative symptoms since this can only be shown through monotherapy versus placebo. Adding antipsychotics would obfuscate the results because you cannot accurately measure the specific effects of our drug. Additionally, unblinding the study due to antipsychotic side effects would skew results. Moreover, scientific opinion has shifted: the community increasingly suggests that patients diagnosed with schizophrenia should not continuously receive antipsychotics. There is growing evidence indicating a significant proportion of these patients do not require ongoing treatment with antipsychotics. Our targeted patient population needed a minimum score of negative symptoms on the PANSS, stable for the past six months, along with stable positive symptoms. Our data indicates that patients show improvements in negative symptoms and the PSP while remaining stable regarding positive symptoms at very low levels. Therefore, if patients indeed require antipsychotic treatment, they respond well to it. In summary, the FDA has not requested additional studies at this point; our focus remains on ensuring an in-depth review of our NDA, as we have two well-controlled studies that serve as the basis for our submission.

So Remy, I understand your position. However, would pragmatism not dictate that carrying out another study might be the most efficient way to proceed, considering the agency's reservations? If the Phase 3 results had pivoted to a follow-up study, that study would have likely concluded by now, allowing you to approach the agency with incontrovertible data and reducing questions regarding the data set. At what point do you feel you have exhausted those options?

I hear you clearly, and it is a common suggestion we receive. However, my question for you is what kind of study you would run? You've mentioned monotherapy, but if we are convinced our current package is comprehensive enough, we need complete clarity on what study to undertake. We seek full affirmation from the FDA regarding all aspects of the study. There have been cases where companies ran studies believing they were doing the right thing, only to find that the FDA disagreed with the method. Our aim is to get that clarity before considering any new trials.

Just to clarify, is part of your ongoing discussions with the agency to obtain clarity on what potential additional studies may be needed?

No, we are not discussing the need for an additional study at this time. We have opened the door for post-approval studies but are focused on understanding what the FDA needs from our existing data set. We're also discussing whether the reasons for the Refuse to File, as mentioned earlier in this call, pertain to our filing. We believe we possess the data required, and we will continue these constructive discussions moving forward.

I'm showing no further questions at this time. I'd like to hand the conference back over to Dr. Luthringer for closing remarks.

Yes, thank you so much. And really thanks to Andrew and Doug for these important questions. I hope it clarified that we continue to have a vital dialogue ongoing, and we will soon have clarity regarding the next steps. As I tried to explain, we possess a significant data package that requires an in-depth review by the FDA, and we are confident that this will happen. Once this review commences, it will become clear that roluperidone represents a crucial solution for addressing a significant unmet medical need lacking any approved treatments in the U.S. I look forward to updating you as soon as we have more clarity about the ongoing dialogue with the FDA. Thank you for being with us today.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.