Relmada Therapeutics, Inc. Q3 FY2021 Earnings Call

Greetings and welcome to Relmada Therapeutics Inc. Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Tim McCarthy.

Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Sergio Traversa; and Chief Accounting and Compliance Officer, Chuck Ence. This afternoon, Relmada issued a news release providing a business update and announcing financial results for the three and nine months ended September 30, 2021, and filed its quarterly report on Form 10-Q with the SEC. Please note that certain information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Relmada's management team will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Relmada's press release issued today and the company's SEC filings, including in the annual report on Form 10-K for the year ended December 30, 2020 and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, November 11, 2021. Relmada undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Now I would like to turn the call over to Sergio.

Thank you, Tim, and good afternoon to everyone. And we also have on the call today, Maged Shenouda, who is our CFO alongside Chuck Ence. I am pleased to welcome you to Relmada’s third quarter 2021 conference call. On today's call, I will provide an update on the comprehensive development program for our lead product candidate REL-1017 for the adjunctive and monotherapy treatment of major depression disorder (MDD); highlight the substantial market opportunity for this compelling product candidate and review upcoming milestones. Following this, I will turn the call over to Maged Shenouda, Chief Financial Officer for a review of the financials. I will then provide a brief overview of the data that we recently presented at the Neuroscience Education Institute Conference last week. With that, I will begin by highlighting the point that we will have data readouts in each quarter of next year. I will elaborate further on this shortly, but in summary, in the first quarter of next year 2022, we expect top-line results from our second human abuse potential (HAP) study, each one assessing REL-1017 versus intravenous ketamine. Following this, in the second quarter, we anticipate top-line data from RELIANCE III, the ongoing monotherapy registrational Phase 2 trial. In the third and fourth quarters of 2022, we expect top-line results from RELIANCE I and RELIANCE II, respectively. The two ongoing Phase III sister 2 arm, placebo-controlled pivotal studies. With that, I would like now to reiterate the important development on the regulatory update that we provided for REL-1017 last month. To begin with the RELIANCE III, which aims to randomize 364 patients is expected to be completed in the second quarter of 2022, prior to the anticipated conclusion of RELIANCE I and RELIANCE II, the adjunctive MDD studies, which I will discuss momentarily. These MDD monotherapy studies are for individuals who are diagnosed with depression and are not currently taking standard antidepressant therapy. Importantly, conducting RELIANCE III as the Phase 3 study may meaningfully reduce the time for a potential approval of REL-1017 as a MDD monotherapy. In addition, in order to support potential regulatory submission seeking approval for REL-1017 as a monotherapy as well as adjunctive treatment, the FDA confirmed that based on what is known at this time, we will not be required to conduct a two-year carcinogenicity study of REL-1017. This is with the understanding that sufficient pre-clinical safety data has been generated to date. The FDA also confirmed that Relmada does not need to conduct a thorough QT (TQT) cardiac study in humans to support cardiac safety in a potential regulatory submission for REL-1017. The data provided to-date as well as the data to be generated from the Phase 3 program would be adequate to evaluate and confirm the cardiac safety profile of REL-1017. Moving on, I will now provide an update on the ongoing RELIANCE I and RELIANCE II studies, each of which will include 364 participants per study across 55 sites. As a reminder, RELIANCE I and II are designed to evaluate REL-1017 as an adjunctive treatment for MDD and both include two arms, placebo and 25 mg of REL-1017, both of which are in addition to a standard antidepressant for participants who have had inadequate response to one up to three standard antidepressant therapies. The clinical trial protocol remains unchanged, with the primary endpoints being change in MADRS score at day 28, and key secondary endpoints including the change in MADRS score at day 7 and the change in Clinical Global Impression severity score at day 28 (CGIS). Both RELIANCE I and RELIANCE II are progressing with top-line data expected in the second half of next year. The RELIANCE development program also includes the RELIANCE-OLS, a long-term open-label safety study that is enrolling both rollover participants from three pivotal studies as well as de novo participants. RELIANCE-OLS is ongoing and enrolling participants as planned. Data from this long-term open-label safety study will be part of the NDA filing package. As we look ahead to the key RELIANCE clinical program, the catalysts I outlined earlier, it is important to note that we are highly confident that we are sufficiently powered in our studies to demonstrate the desired sites and targeted degrees in MADRS score improvement. Our substantial, while REL-1017 demonstrated data points improving scores versus placebo in the Phase II trial. Moving on, our second HAP study evaluating REL-1017 versus intravenous ketamine, which has an established history as an effective positive control and is ongoing. Based on the current rate of recruitment, we expect top-line results from this study in the first quarter of 2022. As a reminder, in the third quarter we announced positive top-line results from our first HAP study, evaluating REL-1017 versus oxycodone 40 mg as an active control. As we discussed these data in length on our last two investor calls, I won’t go into too much detail here. However, I will reiterate that this study was designed in a manner that followed the FDA 2017 guidelines on the assessment of the abuse potential of drugs. Top-line results for the primary endpoint showed that all three doses of REL-1017 evaluated in recreational opioid users demonstrated a highly statistically significant difference versus the active control drug oxycodone 40 mg. Notably, the highly statistically significant difference was confirmed between the active control and 150 mg of REL-1017, which is the maximum tolerated dose and is six times the proposed therapeutic dose. As for the secondary endpoints, such as the desire to take the drug again, were consistent with those of the primary endpoints that demonstrated no evidence of any meaningful abuse potential. Importantly, these results are consistent with HAP study results that are seen in drugs that affect the CNS and which have been stable at classes four, five, or even on schedule. I also wanted to take a moment to reaffirm the need for a new therapeutic option with a potential clinical profile that REL-1017 presents. Over 17 million individuals suffer from MDD, and the current options are limited in their effectiveness. Current antidepressant standards have significant side effects and can take four to six weeks to show efficacy. Sixty-five percent of patients do not respond to their first antidepressant treatment, and thirty percent do not respond to any of the currently available oral treatments. Furthermore, there are only three FDA-approved adjunctive treatments for major depression disorder, all of which are antipsychotics, which often can cause long-term serious side effects. It is evident that new treatment options are needed, and we believe that REL-1017 has the potential to make a difference for these patients and their care needs as a monotherapy or adjunctive treatment. I will now pass the call over to Maged to review the financials. I will then touch on the recent poster presentation at the recently held Neuroscience Education Institute Conference. Please go ahead, Maged.

Yes, sure. Thank you, Sergio, and good afternoon, everyone. Today, we issued a press release announcing our business and financial results for the three months and nine months ended September 30, 2021, which I will now review. For the third quarter ended September 30, 2021, total research and development expense was approximately $34 million, as compared to $11.2 million for the comparable period of 2020. The increase was primarily related to an increase in costs associated with the execution of a broader clinical program for REL-1017. Total general and administrative expense for the second quarter ended September 30, 2021 was approximately $8.7 million, as compared to $5.9 million for the comparable period of 2020. The increase was primarily due to an increase in personnel cost, stock-based compensation, and consulting services. For the third quarter ended September 30, 2021, we recorded a net loss of approximately $42.6 million, or $2.44 per basic and diluted share, compared to a net loss of $16.9 million, or $1.05 per basic and diluted share in the comparable period of 2020. Turning to the results for the nine months ended September 30, 2021. Total research and development expense was approximately $65.3 million, as compared to $21.1 million for the comparable period of 2020. The increase was primarily related to an increase in costs associated with the execution of a broader clinical program for REL-1017. For the nine months ended September 30, 2021, general and administrative expense was approximately $26.2 million, as compared to $18.8 million for the comparable period of 2020. The increase was primarily due to an increase in personnel cost, stock-based compensation, and consulting services. For the nine months ended September 30, 2021, we recorded a net loss of approximately $91.4 million, or $5.36 per basic and diluted share, compared to a net loss of $38.7 million, or $2.52 per basic and diluted share in the comparable period of 2020. On September 30, 2021, the company had cash and cash equivalents and short-term investments of $88.1 million, which compares to $117.1 million on December 31, 2020. I will now hand the call back over to Sergio for further remarks on our most recent progress.

Thank you, Maged. Earlier this month, we presented a total of eight posters at the NEI Congress including three posters with new data resulting from post-op analysis from our Phase 2 trial. First, the post-op analysis of the dissociative symptom of depression questionnaire, the SDQ, on MSED scale scores from patients treated with REL-1017 showed improvement in such scales of cognition, motivation, anxiety, and the ability of sleep function signaling that the benefits from REL-1017 may extend well beyond just symptom improvement. These data suggest that REL-1017 may have potentially meaningful implications for patients' working and social abilities. The second poster included a post-op analysis of MDD patients experiencing the psychiatric symptoms prior to treatment, showing clinically meaningful improvement in the Abnormal Clinical Administered Dissociative States Scale Scores, which is used to measure the dissociative state after REL-1017 treatment. It suggests that REL-1017 may not only be exempt from generating dissociative symptoms, unlike other NMDA antagonists, but it may also be beneficial for patients affected by such symptoms. Finally, some of the current standard of care antidepressants have shown an increase in lipid metabolism abnormalities among patients with MDD at risk. A post-op analysis showed that REL-1017 did not significantly increase cardiovascular risk. In summary, the REL-1017 development program remains on track, and we expect key data catalysts in each quarter next year. To reiterate, we expect top-line results from a second HAP study, this one assessing REL-1017 versus intravenous ketamine in the first quarter, followed by top-line data from the RELIANCE III monotherapy trial in the second quarter; in the third and fourth quarters of 2022, we expect top-line results from the RELIANCE I and RELIANCE II adjunctive trials, respectively. Importantly, as Maged noted, our robust R&D initiatives are supported by a strong balance sheet. In closing, I remain grateful to the Relmada team for their continued hard work and dedication to executing on our mission. I would also like to extend my sincere thanks to the participants and clinical partners involved in the REL-1017 clinical trials for their efforts in advancing this important therapy to the clinic as expeditiously as possible. I believe, we will now open up the call for questions. And operator, can you please open up?

Our first question is from Andrew Tsai with Jefferies. Please proceed.

Okay. Great. Thanks, guys, for taking my questions. I noticed at the NEI Congress, you shared some additional secondary endpoints for the oxycodone abuse liability study. I couldn't help but notice while your scores increased a little for esmethadone on the secondary endpoints, the score is at the mean state at 50. So, I thought that was interesting. I was wondering if you could talk about that. At the same time, I guess, it’s part of my second question—is did you ever find out who the outliers were that scored high? What exactly were they feeling to make them score higher? And then, can you confirm that they were definitely not feeling any euphoric mood or anything like that, just maybe because of the CNS effects? Thanks.

Well, thank you, Andrew, for the question. Look, on the data that we presented at the NEI last week, the whole dataset is out for publication at some point. That we published shows all the details that will be there. I would just summarize that there was very marginal difference between primary and secondary endpoints. We can say they would be very consistent, confirming that slight difference from placebo that is expected from any CNS product that affects the mood, especially even at the maximum dose of six times the therapeutic dose. But none of these data are inconsistent with the primary endpoints. Regarding your second question, the straight answer is that we did not reach out to the subjects after they completed the study; therefore, we don’t really know who they are. So, it rests in the hands of the site, and we respect the privacy. There are some questions that were asked in a limited questionnaire during the study. We did look at the outliers without knowing who they are or why they were outliers. What we have noticed is that the vast majority is a single-digit number of outliers. So, it was not extensive likeability across the different set of subjects. There were only—I don’t remember the exact number, but it was a single-digit number of patients that, for whatever reason, scored high. We see that as a positive signal, because although we cannot confirm anything, this study was not designed to show any antidepressant effects, but over 90% of the subjects did not feel any likeability, with only a single-digit number of subjects liking the drug significantly. We suspect that there was something in these patients that made them prefer the drug in particular. We could speculate that could have been relief from their anxiety and psychiatric symptoms, and taking a massive dose of a rapid-acting antidepressant may have provided some benefits. So, I hope I answered your questions.

Yes. Very knowledgeable. More than I think.

Right. It is.

Thank you.

Well, look, Phase 3 will answer all these questions. I look forward to the ketamine data.

Right. And speaking of the Phase 3 studies, I had one hypothetical question: the first Phase 3 monotherapy depression data in Q2. So, hypothetically, if it happens to show negative efficacy, which I say it doesn’t hit day 28 or maybe it doesn’t show rapid effects, I guess the question would be, why should that not be a negative read for your Phase 3 adjunct studies?

Well, first we hope that data will confirm what we observed in Phase 2. The only way that it would not is if we know that the drug had a very strong efficacy signal in Phase 2. If that signal is not confirmed or repeated in monotherapy, the only potential reason could be a synergy between existing treatments. I would not read that if that does not work well as a monotherapy, it implies that the adjunctive treatment would not work as well; the dynamics are different when you are taking two drugs versus one as in monotherapy. To be honest, I believe that’s not going to be the case.

Great. Thank you. Very last question, very quickly: just for the monotherapy study, can you remind us of the primary endpoint day 28? What kind of minimum separation versus placebo would you like to see? Are these assumptions then similar to the Phase 3 adjunct MDD studies?

Yes. I can give you a more straightforward answer. The statistical plan is exactly the same for all three Phase 3 trials: the two adjunctive and the monotherapy. It is designed to detect a delta of two points in the MADRS score versus placebo. If we hit two points delta, the study will be statistically significant. We designed it this way across all three studies. The reason it’s two points is because it’s a rule of thumb based on FDA guidance. But the clinical significance of a two-point delta, which is observed from all the approved products, means it should deserve approval for treatment-resistant therapy or depression, especially if we achieve half that efficacy seen in Phase 2; it would still be statistically significant.

Okay. Perfect. Thank you, Sergio.

Thank you, Andrew.

Our next question is from Yatin Suneja with Guggenheim Partners. Please proceed.

Hey guys. Thank you for taking my question. Maged, good to hear your voice. Just a couple for me.

Likewise.

With regard to the RELIANCE III, which has now been upgraded to Phase 3, can you just help us understand what exactly was the conversation with the FDA that led to it being Phase 3, but earlier you thought about it as a Phase 2? And then, how is your filing strategy going to be? Are you going to complete all three studies and then file? Just trying to get a sense of the type of label you are hoping to get?

Okay, well, thank you, Yatin, first for the questions and insights. Regarding the upgrade of the monotherapy study to pivotal, we didn’t have a direct conversation with the FDA about making the leap to Phase 3. We submitted a proposal to upgrade it, and we waited for the traditional 30 plus 30 days, which usually signals that the FDA does not have any objections to moving forward. Until we heard from them at the end of August, we took it as a green light to begin Phase 3. There was really no significant difference between the product; we believed that the feedback from FDA on the carcinogenicity study and the TQT ensured that they were comfortable with the drug's safety and tolerability. Also, the results we observed in the HAP study back in July gave the FDA more confidence to expand the trial to about 350 patients, all outpatients. We compiled all this data, took the risk, and moved to Phase 3 because the FDA was relatively comfortable, and we had data supporting the safety of the program.

Got it. And one question on the ketamine study that you are doing. Can you just help us understand what you are doing differently in this study to ensure a separation between ketamine and the placebo arm, which did not happen in the first study?

No, yes, the first unsuccessful ketamine study failed mainly because the bioavailability of our ketamine was poor, leading half the patients to misunderstand they were taking placebo. So, it didn’t work pivotal. Now we are using intravenous ketamine and following Johnson & Johnson’s route with a standard infusion report. There’s no doubt that the control will work this time. The study has been progressing well, and we look forward to the results and the approval process.

Got it. Maybe one question for Maged. Can you help us with the profit and loss outlook? I notice a steep rise in R&D spending. Just trying to get a sense of how much might be non-cash? And how should we model that going forward in 4Q and into next year?

Yes, so thanks for the question, Yatin. Regarding non-cash components of R&D for the quarter, that was $11.8 million for the R&D line, and $6.4 million for the SG&A line. With regard to just the remainder of the year, I would say, I am pointing you to our 10-Q, which we expect to file tomorrow morning. We’re not issuing forward guidance, but we do believe we have sufficient funding to continue ongoing operations for at least 12 months.

Got it. Thank you so much.

Sure.

Our next question comes from Joon Lee with Truist Securities. Please proceed.

Hi, thanks for the updates and for taking our questions. I wanted to ask about a competitor that just reported data for TRD studies, given your Phase 2 also included TRD patients. Did you see any suicidal ideation in your trial? And I have a follow-up.

Yes, thank you, Joon. I anticipated questions like these. Regarding the data released days ago, our straight answer is that, no, we have not seen any suicidal ideation in any of our studies. NMDA antagonists are supposed to reduce suicidal ideation. A competitor is running a trial focused on reducing suicidality ideation, following the use of their ketamine nasal form. The mechanism of action for NMDA antagonists is to primarily reduce suicidality. The other program that raised concerns is unrelated; it could involve different mechanisms altogether. We cannot establish any correlation. Generally, we advise caution when assessing incidents of suicidality during acute treatment phases, particularly among patients with severe depression. While the focus is on treatment-resistant depression, further speculation on its occurrence is limited as we were closely observing patient interactions.

But your Phase 2 was also a patient-monitored for two weeks, and you saw no suicidality given it being an in-patient study?

Yes. We have no issues with suicidality.

Okay.

We don’t expect.

And then, just a follow-up question: I was intrigued by the posters showing symptom inclusion that used the FDQ scale, which was not statistically significant by day 7, the last day of dosing. However, statistically significant seven days later—what is the significance of FDQ within physician circles versus academic circles, and how is that measured?

To answer your second question first, patients are slower to react in self-administered questionnaires. When you ask clinician-driven questionnaires like MADRS and CGI, they are more responsive and quicker to provide feedback. The patient’s improvements at home, away from treatment, showed a more comprehensive recovery over time. It isn’t unusual for self-assessment scales to reflect slower responses. Consequently, there is a considerable lag, and we expect to see better outcomes for patients further down the line.

How is it used by the physicians at the SDQ? Is it merely an academic metric that they use?

I believe it has been published in academic circles, and while I’m not sure how FDA-approved medications take it into account, it’s often correlated with MADRS. Our understanding with the FDA is that they consider CGI and MADRS relatively similar metrics, so if MADRS is accepted, they likely will view CGI favorably, too.

Thank you very much. Appreciate your answers.

I hope I answered your questions.

Yes, yes. That’s pretty good. Looking forward to other data next quarter. Thank you.

Thank you.

Our next question comes from Andrea Tan with Goldman Sachs. Please proceed.

Thanks for taking the question. Sergio, the first one is just a follow-up on your comments on the plans for the rolling NDA submission. Would results from RELIANCE III support approval for monotherapy use, or would you need to run a second trial to capture that indication?

Good question, Andrea. Based on our current knowledge, if all three studies yield positive results, we believe one positive monotherapy study would suffice under FDA guidelines. If it turns out to be the only positive study, we would likely need to run at least one additional monotherapy trial.

Got it. And just one if you could comment on what you are seeing with enrollment in the RELIANCE I and II trials that’s delaying the timing of those readouts. In particular, are you seeing this in any way reflecting commercial dynamics that could play out if REL-1017 were approved?

Yes. Regarding the slower pace for the adjunctive studies, it's mostly about the quality of the trials. We pay a lot of attention to ensure quality over speed. We want participants to be suitable candidates – we don’t want to enroll patients with personality disorders or any condition that wouldn’t be appropriate for antidepressant treatment, resulting in a 50% failure rate in our screening process. We have stringent criteria which slow the overall enrollment rates, but aim to maintain the integrity of the studies looking at genuine responses in the data.

Got it. Thanks, Sergio.

Thank you, Andrea.

Our next question comes from Jay Olson with Oppenheimer. Please proceed.

Hey, congrats on the progress, and thank you for taking my questions. Maybe just following up on recent competitors’ results in TRD. Do you see any read across from that COMPASS Pathways study for psilocybin in TRD to your own psilocybin program from Arbormentis? Can you give us an update on the current status of that compound?

Yes, thank you, Jay. There’s no correlation between our program and theirs. Our strategy targets different forms and applications of psilocybin, focusing on neurodegenerative diseases, leveraging our expertise leveraging strong neuroplastic effects corresponding to neurodegeneration recovery. We use significantly lower doses compared to typical psychiatric applications. The current status is we are running through manufacturing; the synths we’re creating have some complexities and rely on strong partnerships within pharmaceutical settings. If the FDA agrees, we could potentially consider joining the Phase 2 studies by the second half of next year, but we intend to remain focused on the REL-1017 trial data first before allocating resources to bhyd to expand our focus.

That’s very helpful. Thank you very much. Maybe just one follow-up: can you comment on what particular forms of neurodegeneration that you are thinking about studying when you initiate your Phase 2 trials?

Yes, we’re focusing on conditions that involve nerve damage. If our hypothesis is correct, then the compounded safety profile suggests speeds recovery for acute nerve damage alongside recovering from those injuries. We’ll need FDA endorsement to proceed further, but our focus is well-defined.

Great. Thank you very much for the additional color.

Thank you, Jay.

Thank you. Ladies and gentlemen, there are no further questions at this time, and I’d like to turn the call back to Sergio Traversa for any closing remarks.

Thank you, operator, and thanks to everyone for joining us on the call today. We are pleased to share our recent progress with you, and the REL-1017 clinical development program continues to advance. We are excited about the many important catalysts that lie ahead of us in 2022, and we will keep you updated on clinical readouts and activity in the coming months. Next year will really show whether we have a drug or not, and I strongly believe we do have an effective treatment that can help many individuals. Thank you all again for joining, and enjoy the rest of your day.

This concludes today’s conference. You may now disconnect your lines at this time. Thank you very much for your participation.