Relmada Therapeutics, Inc. Q4 FY2023 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to the Relmada Therapeutics Inc. Fourth Quarter and Full Year 2023 Results Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. This call is being recorded on Tuesday, March 19, 2024. I would now like to turn the conference over to Mr. Tim McCarthy. Thank you. Please go ahead.

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 Financial Officer, Maged Shenouda. This afternoon, Relmada issued a press release, providing a business update and announcing financial results for the three and 12 months ended December 31, 2023. 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 31, 2023, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, March 19, 2024. 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'd like to turn the call over to Sergio. Sergio?

Thank you, Tim, as always. Good afternoon to everyone, and welcome to the Relmada fourth quarter and full year 2023 conference call. We are continuing to make solid progress in advancing the ongoing Phase 3 program for REL-1017 in major depressive disorder, MDD, as well as in the promising preclinical novel psilocybin program, all of which I will briefly cover today. Following this, Maged will review our fourth quarter and full year 2023 financial results, and then we will take your questions. Let's begin with an update on the Phase 3 program for REL-1017. As you know, Relmada is focused on developing REL-1017 as an adjunctive treatment for MDD. As previously communicated, we have made critical changes to RELIANCE II, the ongoing Study 302, a Phase 3 two-arm placebo-controlled pivotal study, evaluating REL-1017 25 milligrams for adjunctive MDD, aimed at controlling placebo response and improving the enrollment quality. The amendment Study 302 protocol has been implemented across all our clinical sites. Enrollment continues to steadily progress, and our ability to leverage our close relationship with the study sites is paying dividends. Moreover, the ongoing initiative we put in place to drive trial awareness with prospective patients is also bearing fruit. Importantly, we are evaluating the productivity of sites on a real-time basis and making changes where needed. As a reminder, we plan to enroll approximately 300 patients into RELIANCE II. Based on our current projection, we expect the enrollment in RELIANCE II to be completed in mid-2024. In our second Phase 3 trial for REL-1017, named RELIGHT, or Study 304, we began those in patients during the third quarter of last year. RELIGHT also has a planned enrollment of approximately 300 patients that is planned to be completed by year-end 2024. To reiterate what we have said previously, like RELIANCE II, RELIGHT is a randomized, double-blind, placebo-controlled four-week trial evaluating the efficacy and safety of REL-1017 as an adjunctive treatment for MDD in patients experiencing inadequate response to ongoing background antidepressant treatment. The primary endpoint of both studies is the change in the MADRS total score from baseline to day 28, as compared to placebo. I should highlight that we made significant changes to our screening and enrollment processes to ensure that we have patients that meet all the quality criteria. More specifically, we have instituted a comprehensive adjudication process through which we now require medical records for all patients enrolled in RELIANCE II and RELIGHT. Given this, our screen failure rate in these studies is now approximately 80% versus 50% previously in RELIANCE I and RELIANCE III, our previously completed Phase 3 trials for REL-1017. We strongly believe that these changes will significantly enhance the probability of success of our current studies. Of note, we have completed all the necessary preclinical, manufacturing, and Phase 1 studies required for a potential REL-1017 NDA filing, and are now focused on execution of various pre-commercial readiness activities. Moving now to our promising preclinical novel modified release psilocybin program. You may recall that at last November's AASLD meeting, the Liver Conference, compelling preclinical data were presented in a poster presentation. These data demonstrated the beneficial effect of low chronic dose psilocybin on multiple metabolic parameters in a rodent model of metabolic dysfunction associated with steatotic liver disease, or MASLD. These initial promising preclinical results support the therapeutic potential of low chronic doses of psilocybin. Based on these data, low dose psilocybin could improve lipids and glucose, with potentially fewer side effects over other investigative treatment approaches such as GLP-1, glucagon, and GIP. We intend to initiate a single ascending dose Phase 1 trial in obese patients in the first half of 2024 to define the pharmacokinetic, safety, and tolerability profile for our modified release psilocybin formulation in this population. This will be followed by a Phase 2a trial to establish clinical proof-of-concept. Data from the Phase 2a study is anticipated in the first half of next year. Just to summarize a multiple upcoming key milestones over the next 12 to 18 months, we anticipate completing enrollment in the ongoing RELIANCE II study mid-2024, with top-line data in the second half. In addition, we plan to complete enrollment in the RELIGHT study by the end of this year. Finally, we intend to initiate a Phase 1 clinical trial for the modified release formulation of psilocybin in the first half of this year. Moving on, while Maged will provide a detailed review of our financials, I would like to emphasize that with current cash on hand to take us into 2025, Relmada remains sufficiently funded to fully execute our plans to reach data readouts from both REL-1017 Phase 3 trials, RELIANCE II and RELIGHT, as well as conduct the planned Phase 1 for our modified release psilocybin formulation. I will now turn the call over to Maged to review our fourth quarter and full year financial results. Maged?

Thank you, Sergio. Today we issued a press release announcing our business and financial results for the three and 12 months ended December 31, 2023, which I will now review. For the fourth quarter ended December 31, 2023, total research and development expense was approximately $14.8 million, as compared to $26.9 million for the comparable period of 2022, a decrease of approximately $12.1 million. The decrease was primarily associated with the completion of two Phase 3 trials and the long-term open label safety trial, Study 310. The research and development non-cash charge related to stock-based compensation totaled $1.8 million in the most recently completed fourth quarter. Total general and administrative expense for the fourth quarter ended December 31, 2023, was approximately $12.1 million, as compared to $11.8 million for the comparable period of 2022, an increase of approximately $243,000. The increase was primarily driven by an increase in compensation expense due to higher employee-related costs. The general and administrative non-cash charge related to stock-based compensation totaled $8.1 million in the most recently completed fourth quarter. For the fourth quarter ended December 31, 2023, the net loss was $25.2 million, or $0.84 per basic and diluted share, compared with a net loss of $37.9 million, or $1.28 per basic and diluted share in the comparable period of 2022. Turning to the results for the full year ended December 31, 2023, total research and development expense was approximately $54.8 million, as compared to $113.3 million for the year ended December 31, 2022, representing a decrease of $58.5 million. Again, the decrease was primarily driven by a reduction in study costs associated with the completion of two Phase 3 trials and the long-term open label safety trial Study 310. For the year ended December 31, 2023, total general and administrative expense was approximately $48.9 million, as compared to $47.9 million for the year ended December 31, 2022. This increase was primarily driven by an increase in compensation expense due to higher employee-related costs. For the year ended December 31, 2023, the net loss was approximately $98.8 million, or $3.28 per basic and diluted share, compared with a net loss of $157 million, or $5.30 per basic and diluted share for the year ended December 31, 2022. As of December 31, 2023, we had cash, cash equivalents and short-term investments of approximately $96.3 million, compared to approximately $148.3 million as of December 31, 2022. Cash used in operations for the full year 2023 was $51.7 million. Based on our current clinical development plan, our current cash position provides us with ample runway into 2025. Notably, this time period includes data readouts from both Phase 3 trials, RELIANCE II, Study 302, and RELIGHT Study 304, as well as the initiation of our planned Phase 1 trial of our modified release psilocybin formulation. I will now ask the operator to please open the call for questions. Operator?

Thank you. Your first question comes from the line of Marc Goodman from Leerink Partners. Please go ahead.

Hi, good afternoon. This is Basma on for Marc. For RELIANCE II, could you please remind us again how many patients were enrolled before the protocol amendments? And do you expect that, due to the inclusion of these patients prior to the amendments, that there will be any source of noise or variation to the trial? Or were you able to go back and check the inclusion criteria? Thank you.

Yes. Thank you. Sergio here. That's a great question. Previously to the amendment, we enrolled about 80 or 90 patients. And as of now, they will be included in the final analysis. We have noticed, if I can expand for a bit, we have noticed that there was a significant difference in patient enrollment when the COVID restrictions were in place and after the COVID restrictions were lifted. So of these 80 or 90 patients, about half were enrolled after the COVID restrictions were lifted. The data are blinded, so we don't really know how the data will look like. But we don't have any reason to believe that this patient group would carry any particular baggage. Also, the sites where issues with data were generated in the previous trials have never been included in RELIANCE II. So, the bottom line is that yes, these patients will be included in the final analysis, but we don't have any particular reasons to believe that they would carry any particular burden on the final review. And we do have, on the call, Dr. Andrew Cutler, our Special Advisor for Clinical Development. Andrew, if you are online, you may want to expand a little bit on the question, regarding whether these patients enrolled prior to the protocol amendment will carry any weight on the final results?

Well, thank you very much. I'm here. Excuse me. I think it's a very reasonable question, but I'm pretty confident — I would say I'm very confident that we should be successful. The previous study was very close to being positive; it just missed. You don't have to be perfect here. We just have to be better. The changes that have been made, particularly with respect to analyzing the quality of the sites, and the protocol amendment will significantly enhance the quality of the second cohort. The majority of the patients, I think, will carry through. So, I'm very confident that despite having some patients enrolled previously, I still think we're going to be successful overall.

Thank you. I hope that answers your question.

Yes, thank you.

Thank you. And your next question comes from the line of Uy Ear from Mizuho. Please go ahead.

Thanks for taking my questions. So I have a couple. Just following up on the previous question, at these sites that enrolled patients previously, could you maybe elaborate on, or remind us just like were most of these patients referred by physicians? Were there large volumes of patients, or just a few patients at these sites? Yes, so that's the first question. And I'll ask a second question after that. Thanks.

Yes, sure. Thank you. There were two sites that together enrolled about 20% of Study 301, the adjunctive treatment study. They have never been present in Study 302. There were a couple of issues there. We don't really know why the data from these two sites were the opposite, or completely different from the other 41 sites in the trial, but that was the reality. But they've never been in Study 302. We are limiting the number of patients enrolled for each site, so we won't have any site that will make a major impact on the final number. So we feel confident that with these measures, what happened in the Study 301 will not occur again.

Okay.

Yes, if I could add one other quick thing. Another modification we made was requiring medical records to ensure that these were legitimate patients who actually were taking an antidepressant. That was not done in the Study 301, so that's another improvement we've made.

All right, thanks. And maybe more presently, could you provide some color on maybe the proportion of patients who have been so far enrolled in RELIANCE II? And maybe RELIGHT as well? After that, maybe, just briefly, Maged, help us think about how to model the gains of spending. Is it sort of relatively flat, or would it sort of go down towards the end of the year? Thanks.

Yes, I'll take the first one. We may not want to go into real details about the number of patients, but we passed half of the trial at the end of last year. It's progressing steadily with some variability, maybe week-to-week, but it's on track. We are confident that we will have top-line data in the second half of this year. As we get closer, we will be a little more precise, but we will stay with this broad guidance about the second half of this year. The reason being that we are screening quite a bit of patients. The number of screened patients is very large. What we have noticed with the improvement on the protocol is that the screening failure rate has significantly increased. We were around 50% in the previous trial, but we are now approaching 80%. The selectivity in enrolling patients is much higher. We looked at the reasons some patients were not enrolled and they generated legitimate reasons. These are the patients that caused issues in the previous trials, and we definitely don't want them again in the new trials. The screening process is going very well, and the screening failure for legitimate reasons is much higher. We believe the quality is excellent in this trial. I don't know, Andrew, if you want to add something.

No, I think you've said it well. It's in line with what I said earlier. We're really trying to make sure we have the right patients, legitimately with the illness, and not patients with mild depression or who are not legitimate patients. So, we're being very careful about selecting the right patients.

Maged, I think the second part is for you.

Sure. Yes. So hi, Uy. Thanks for the question. G&A expenses should follow the pattern we've had in 2023 on a quarterly basis. A lot depends on enrollment patterns, but our current expectation is that R&D should pick up a little bit in the first quarter and then again increase in the second quarter. It should then stay at that level through the third and fourth quarter as you can sort of see enrollment picking up in 302, and then picking up in 304 as well. So I hope that helps.

Very helpful. Thank you.

Sure. My pleasure.

Thank you. And your next question comes from the line of Andrew Tsai from Jefferies. Please go ahead.

Hi, good afternoon. Thanks for taking my question. So in your prepared remarks, you mentioned how you're monitoring sites in real time and making changes accordingly. What exactly are you monitoring for, and what kinds of changes are you making on a day-to-day basis? Secondly, are there any learnings or thoughts that you might have on Sage's recent rejection for their MDD study? Are there any read-throughs or lessons learned that you think you could apply to REL-1017? Thanks.

Thank you, Andrew, and thanks for the call. I will ask you to repeat the second question, because I didn't catch it 100%. But the first question is I think Andrew can go into much more detail since he has run his site for 30 years and has done many CNS clinical trials. There is no magic; you monitor in general every three or four or four to five patients enrolled by the site, how the blinded data look. Of course, they're blinded, so you don't know if they are good. But you can definitely have a good understanding if there is something wrong. When you have data that shows variability week-over-week of the first four weeks, that's usually not the behavior that placebo and the drug will have. There is a trend, so that's one signal. The overall quality of the site is important too. You monitor how the quality is documented in data and how they enter the data into the database. There isn’t one single factor; it’s a combination that can give you a sense of whether the site is providing the service that we would like to have. Andrew, you have done this for a long time. Do you want to add anything?

Yes. There are various quality indicators you look for, and I think we're watching closely here. You look for things like whether the rating scales are consistent and moving in the same direction. You look for adherence to the protocol and what we call protocol violations, which indicate sloppiness. This time, we are careful not to let, as Sergio said, any sites get off to the races and recruit too many patients too quickly. There are a variety of quality indicators and consistency factors we look for. If there's a site that has issues, we're stopping their enrollment, trying to figure out what's going on, and deciding if we want to continue working with them or not.

Hope that answers your question, Andrew. If you don't mind repeating your second question, because I didn't catch it.

No problem. Sage recently had their NDA rejected for MDD. I'm curious if the reasons behind that rejection have any bearing or read-through to your program?

Yes. Sergio, maybe I could help here. Because I was very involved with that. It's really apples and oranges. Their paradigm was very different. It was a two-week treatment paradigm with a very different mechanism. The issue was that they didn't have a good story for how two weeks of treatment would hold a charge. In their Phase 2 study, there was a suggestion that the efficacy continued beyond the two weeks; however, it was not well replicated in Phase 3. So the FDA had concerns about that. It's a very different paradigm, very different medicine. I don't see it as a competition or an issue that would influence what we're doing.

Makes sense. Okay. Thank you very much.

Thank you, both.

Thank you, and your next question comes from the line of Andrea Tan from Goldman Sachs. Please go ahead.

Good afternoon. Thanks for taking our questions. Sergio or Andrew, just curious if you're able to share what RELIANCE II and the RELIGHT studies are powered to detect and remind us what you're assuming here for placebo response?

Yes, that's a great question. We haven't filed with the FDA the final statistical plan yet; you usually do that at the very end, as there is no advantage to doing it before. But as a fair assumption, usually what you want to detect is a clinically meaningful effect that, according to the experts in adjunctive treatment, is around 2.5 points. So the trial is designed to detect that kind of change from placebo. That would be the minimum; we hope we can do better than that, based on the Phase 2 data, but that's a fair assumption. With 300 patients enrolled, it is feasible and realistic.

And then maybe just one quick question on REL-P11 here. I just wanted to confirm which indication you're looking to study this in?

Yes, we actually did not discuss the indication. The reason being that we don't really know exactly which indication we will pursue. We have to conduct Phase 1 and obtain pharmacokinetic data, as well as all the parameters for the new formulations, the new concept regarding low-dose chronic treatment. What we can see is the effect it had on the rodent model, which, according to experts, is somewhat relevant for what should happen in humans. We have observed a material decrease in body weight without changing the diet, despite continuing the high fat, high glucose diet. So the rodent lost weight, not as much as GLP-1, but enough to consider it as a valuable drug for treating obesity. At the same time, we observed a significant decrease in glucose levels, likely a bit higher than metformin, along with a notable effect on the liver fat. These results indicate it could work across a span of metabolic syndrome issues, including weight, glucose, and liver fat. The fair assumption is that the indication will fall within the metabolic realm. We haven't made a final decision yet, as that will be determined after Phase 2. There are a wide range of possibilities, all in the metabolic area that are viable. We aim to choose a suitable route to get the drug approved in a relatively short timeframe, but I do not have a straightforward answer at this point.

Got it. Maybe just one follow-up there. Have you seen evidence to-date preclinically that you are avoiding loss of muscle when you've tracked the weight loss in these rodents?

In the preclinical studies, no, we haven't looked at that, because we haven't examined it yet. It is a fair assumption that since there is no change in diet, the rodents are not losing weight as a result of reduced food intake, which can happen with GLP-1. Psilocybin acts as a 5-HT2A agonist and functions at the metabolic level, thereby increasing the metabolism of fat. Mechanistically, it is not really expected to cause muscle loss, unlike GLP-1.

Okay. Thanks, everyone.

Thank you, Andrea.

Thank you. And your last question comes from the line of Velma Furiati from Guggenheim. Please go ahead.

Good afternoon. Thank you for taking my question. This is Velma Furiati. Following up on the previous questions, can you clarify if you already performed the real-time site checking in the previous RELIANCE studies, or is it something that you've implemented new only now? I also wanted to ask about the statistical plan; is that run by a third-party or internally within the company? Thank you.

Thank you for the question. If I understood correctly, the first question is about whether we implemented monitoring of the sites in previous studies. The short answer is no. COVID made it complicated to do so, and we didn't implement it. But that's just one of the operational changes we've made in the new protocol. The required medical records is probably the biggest change. The main goal is to enroll patients affected by biological depression who have a history; this is an adjunctive trial. The patients must come in already on some antidepressant and have access to medical and pharmacy records, which is a good proxy to ensure that they are legitimate patients. Regarding the second question, the statistical plan is designed through collaboration. We have help from a large independent statistical company that advises us on the statistics.

Got it. Thank you.

Thank you.

Thank you. There are no further questions at this time. Mr. Traversa, please go ahead.

Well, thank you, and in summary, we remain confident that we do have an approvable drug in REL-1017 and are excited about the potential of our novel psilocybin and derivative program. We look forward to reporting on progress with our pipeline in the months ahead. To close, I'm 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 patients and clinical partners involved in the REL-1017 trials for their participation in the advancement of this promising investigational medicine through development. Thank you very much to everyone.

Thank you. That concludes our conference today. Thank you for participating. You may all disconnect.