Earnings Call Transcript - RLMD Q4 2022

Operator, Operator

Greetings and welcome to Relmada Therapeutics Fourth Quarter and Full Year 2022 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Tim McCarthy. Thank you, you may begin.

Tim McCarthy, Host

Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Sergio Traversa; Chief Medical Officer, Dr. Cedric O'Gorman, and Chief Financial Officer, Maged Shenouda. This afternoon, Relmada issued a news release providing a business update announcing financial results for the three and 12 months ended December 31, 2022. 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 in the company's SEC filings, including the annual report on Form 10-K for the year ended December 31, 2021, and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, March 23, 2023. 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. Sergio?

Sergio Traversa, CEO

Thank you, Tim, as always, and good afternoon to everyone. I'm pleased to welcome you to the Relmada fourth quarter and full year 2022 conference call. We are coming off a challenging 2022, but we have learned a great deal from our completed studies and believe that these learnings better enable us to realize the potential of REL-1017 for the treatment of major depressive disorder (MDD). Following the availability of topline results for REL-1017 in RELIANCE I, or Study 301 in December 2022, we have spent the last three months analyzing these data and considering the appropriate next steps. As a reminder, RELIANCE I or Study 301 and RELIANCE II or Study 302 are two Phase 3 sister two-arm, placebo-controlled, pivotal studies evaluating REL-1017 at 25 milligrams as an adjunctive treatment for MDD. Study 302 is ongoing. We are confident that we have identified the key issues that led to the Phase 3 data in Study 301 differing from the positive results seen in Phase 2. As such, we intend to focus on REL-1017 as an adjunctive treatment based on the data generated to date and market potential, and will initiate one new trial, Study 304, while implementing critical changes to the ongoing Study 302. Our Study 302 protocol amendment has been finalized and is ready to be implemented immediately, and our new Study 304's protocol has been drafted and will be ready to initiate by mid-2023. I would like to emphasize that broadly, we have learned that the two most important drivers for a successful depression trial are recruiting the appropriate patients with MDD and controlling the placebo response. It is proposed that REL-1017, unlike conventional oral antidepressants, exerts its antidepressant effect by inhibiting and correcting the consequences of hyperactive glutamatergic pathways. It does not affect mood by altering neurotransmitter levels, and it is thought not to have a therapeutic effect in the absence of underlying MDD pathophysiology, namely glutamatergic dysfunction. This suggests that the drug would therefore have no effect in this situation for the depressed or for those without a true diagnosis of major depressive disorder. The efficacy signal of REL-1017 in a clinical trial would therefore be expected to be reduced directly proportional to the percentage of inappropriate subjects enrolled in the trial. You will see from the data we are going to share with you today the impact that clinical trial subject quality has on drug outcomes. During today's call, Cedric, our new Chief Medical Officer, will provide the key details for our analysis of Study 301 that generated many valuable insights influencing our future plans for the REL-1017 clinical program. He will then review the changes we are making to Study 302 and will also be implementing in our new Study 304. Following Cedric's comments, Maged Shenouda, our Chief Financial Officer, will review our financial results and balance sheet. But I will say that we are sufficiently funded to fully execute our plan to reach data readouts for both Phase 3 trials. We will then take your questions. And I will now turn the call over to Cedric. Cedric, the stage is all yours.

Cedric O'Gorman, Chief Medical Officer

Thank you, Sergio, and first slide, please. To begin, you will recall that in Study 301, REL-1017 did not meet statistical significance on the primary endpoint. Treatment with REL-1017 did result in a 15.1 points change from baseline on the MADRS total score, but placebo-treated patients experienced an improvement of 12.9 points, representing a high placebo response. It is widely accepted by experts that if the placebo change on the MADRS total score exceeds about 10 points, you have failed to adequately control placebo response. Despite this high placebo response, the placebo-adjusted delta favored REL-1017, which was 2.3 points, a clinically meaningful difference. Meta-analysis shows that the average drug-placebo difference that has resulted in the approval of oral antidepressants over the past decades has been approximately 2 points. Next slide, please. We did see in Study 301 a statistically significant greater proportion of patients treated with REL-1017 experienced therapeutic response defined as a 50% or more improvement in the MADRS total score from baseline at day 28, with 40% of REL-1017 treatment versus 27% for placebo, with a p-value of 0.044. Next slide, please. Now let's take a look at the per protocol analysis of Study 301. It is important to note that this was a pre-specified analysis; per protocol refers to the population of patients who were treated to day 28 and who did not have any major protocol deviations. This pre-specified analysis only resulted in the exclusion of 29 patients and demonstrated a 3.1 placebo-adjusted difference in favor of REL-1017 at day 28, with a p-value of 0.051, approaching statistical significance. The total N in this pre-specified analysis was a robust 198 patients versus the 227 patients in the intent-to-treat primary analysis. From the primary and pre-specified analysis, including response rates and per protocol set, we believe the signal for efficacy with REL-1017 is clear and robust and that the continued development of REL-1017 for the treatment of major depressive disorder is warranted and justified. After obtaining the full dataset and final study report for Study 301, we further analyzed the results in a post-hoc manner to see what insights we could leverage as we continue to develop REL-1017. Next slide, please. As previously communicated, two of our highest enrolling sites were particularly impacted by paradoxical data and placebo response. When we exclude the data from these two sites, the population was reduced by only approximately 40 subjects, and we saw a 4.1 points placebo-adjusted difference at day 28 on the MADRS total score favoring REL-1017, with a p-value of 0.019. Next slide, please. We also found striking results when evaluating data from subjects coming into this study from different sources of referral, which for the purposes of this analysis, we divided into verifiable versus unverifiable sources of recruitment. Verifiably sourced patients were defined as patients who were known to the site, such as current patients, patients found within the site's database, and referrals coming directly from healthcare professionals. Non-verifiably sourced subjects were those engaged through radio and TV ads, social media, Internet searches, and recruitment companies. The prior studies relied on self-reported medical history from the subjects regardless of the source of recruitment being verified or unverified. As a result, we believe that subjects recruited through unverifiable sources were not adequately vetted via the use of medical or pharmacy records to confirm the accuracy of their MDD diagnosis. Moving forward for our trials, medical and pharmacy records are mandated regardless of source of recruitment. Next slide, please. Here we present the change from baseline on the MADRS total score when assessing patients from verifiable sources versus non-verifiable sources. We observed that verifiably sourced patients had a change from baseline of 17.2 points on the MADRS total score at day 28 versus 11.8 points for placebo. This amounts to a 5.5 point difference versus placebo with a p-value of 0.106. Again, this is a post-hoc analysis, but from these data, it is clear to us that in clinically depressed patients from verifiable sources of recruitment, REL-1017 has a strong signal of efficacy. Next slide, please. It is also clear to us that the COVID-19 pandemic had a negative impact on trial results. This has been seen by other researchers in the MDD space. We believe that during the pandemic, many patients have situational depression, most likely related to isolation and other pandemic-related issues. When we cut the data using April 1, 2022, when COVID's restrictions were largely lifted, as the demarcation point, we saw a placebo-adjusted difference of 4.1 points favoring REL-1017 on the day 28 MADRS score for the post-pandemic subgroup. Next slide, please. Finally, we consulted with various internal and external stakeholders for additional perspective. These experts concluded that the site visits in Study 301 were too long in duration with too many assessments, driving up the placebo response. The stakeholders also agreed that the highest enrolling sites with high placebo response were overrepresented in the final dataset. Additionally, there were elements of the screening eligibility oversight that could have been improved to be more centralized rather than outsourced. Next slide, please. Based on these critical learnings and analyses, we intend to implement changes to our clinical programs going forward with a protocol amendment for the ongoing study and study conduct changes. These changes will allow us to more accurately identify and enroll patients with a verified diagnosis of MDD and will allow us to screen out subjects with transient or situational depressive symptoms. We will only enroll patients from verifiable sources. More specifically, we will require medical and pharmacy records from prospective subjects to verify depression diagnosis and antidepressant treatment history. As previously mentioned in the past, we have relied solely on patients' self-report in these regards. In addition, we will be making site selection improvements. We now have a wealth of data on site performance from our recent trials and input from our thought leaders that will be drawn upon to select better quality sites going forward. Moreover, we intend to limit the number of patients per site so that no single site can have a disproportionate effect on study outcomes. We plan to make changes to the protocol to reduce the duration of site visits and assessments. Previously, there were too many assessments and procedures that resulted in lengthy and burdensome site visits. Between extensive safety evaluations and secondary assessments, the study visits were very long. While this is great in the sense that we now have an abundance of safety evaluations, which look very good for REL-1017 in comparison to placebo, this hindered subject and site recruitment and hurt signal detection. We will also be dramatically simplifying our protocols going forward with the goal of reducing expectation bias, placebo response, and enhancing signal detection. We also know that a simplified study design improves patient recruitment. Again, just to reiterate, the positive completed studies provide us with very important controlled safety data, which looks very good with REL-1017 exposure. This is not insignificant data when it comes to filing our NDA. In the ongoing Study 302, we are planning to enroll approximately 300 patients and currently expect that trials will complete in the first half of 2024. Currently, we have enrolled one third or approximately 100 patients into this study. We also intend to initiate the new Study 304 in mid-2023, also with a planned enrollment of approximately 300 patients, with completion anticipated in the second half of 2024. Our open-label one-year safety study is on schedule for completion and data release in May 2023. With that, I will now turn the call over to Maged for a review of the financials.

Maged Shenouda, CFO

Thank you, Cedric. Today, we issued a press release announcing our business and financial results for the three and 12 months ended December 31, 2022, which I will now review. For the fourth quarter ended December 31, 2022, total research and development expense was approximately $26.9 million as compared to $25.3 million for the comparable period of 2021. The increase was primarily related to an increase in stock-based compensation. This non-cash charge totaled $2.2 million in the most recently completed fourth quarter. Total general and administrative expense for the fourth quarter ended December 31, 2022, was approximately $11.8 million as compared to $8.9 million for the comparable period of 2021, an increase of approximately $2.9 million. The increase was primarily driven by an increase in stock-based compensation. This non-cash charge totaled $9.4 million in the most recently completed fourth quarter. For the fourth quarter ended December 31, 2022, the net loss was $37.9 million or $1.28 per basic and diluted share, compared with a net loss of $34.4 million or $1.80 per basic and diluted share in the comparable period of 2021. Turning to the results for the full year December 31, 2022, total research and development expense was approximately $113.3 million as compared to $90.6 million for the comparable period in 2021. The increase was primarily related to an increase in costs associated with the execution of a broader clinical program for REL-1017. For the year ended December 31, 2022, total general and administrative expense was approximately $47.9 million as compared to $35.1 million for the comparable period of 2021. The increase was primarily driven by an increase in stock-based compensation. For the year ended December 31, 2022, the net loss was approximately $157 million or $5.30 per basic and diluted share, compared with a net loss of $125.8 million or $7.16 per basic and diluted share in the comparable period of 2021. As of December 31, 2022, we had cash, cash equivalents, and short-term investments of approximately $148.3 million, compared to $211.9 million as of December 31, 2021. Based on the updated clinical development plan that Sergio and Cedric shared earlier, our current cash position provides us with ample runway of approximately two years of cash. I'll now turn the call back to Sergio.

Sergio Traversa, CEO

Thank you, Maged, and thank you, Cedric. So, in summary, we are confident that we have an approvable drug and need to focus on clinical trial execution. Based on the results of Study 301, we now know how to identify the most reliable sites, the most suitable patients, and greatly improve our study protocols. Also importantly, all other preclinical, clinical, and CMC pieces are in place for a successful NDA filing for REL-1017. Additionally, as stated earlier, we are sufficiently funded to fully execute on our plans for REL-1017 development as we ended 2022 with approximately $148 million in cash, cash equivalents, and short-term investments. We look forward to reporting on progress with Studies 302 and 304 through the year. And now, we will ask the operator to please open up the call for questions.

Operator, Operator

Our first question comes from Uy Ear with Mizuho Health. Please proceed with your question.

Uy Ear, Analyst

Hi, guys. Thanks for taking my questions. So, I guess my first question is, I think you indicated that for 302 the protocol is pretty much finalized and you have already started immediately. So, have you started re-enrolling and re-dosing patients in 302? And Secondly, for 304, do you need the FDA blessing before you can start the trial? And, I guess my third question is, on the open-label study, what data do you think it would be helpful for investors to look at and to gain greater confidence in your molecule? Thanks.

Sergio Traversa, CEO

Thank you, Uy. I believe Cedric, this question is for you.

Cedric O'Gorman, Chief Medical Officer

Absolutely. Thank you for the question, and I will address them in the order they were asked. Yes, Study 302 is open for recruitment. It has been progressing a bit slowly over the past quarter as we worked on streamlining the existing protocol and making necessary amendments for efficiency. We will also add sites to accelerate the study. It was never closed or paused; it has always been open for recruitment, and now we will reinvigorate our efforts with the amended protocol. Regarding the new study and the requirement for FDA approval, all our study designs are submitted to the FDA, giving them the chance to share their feedback or recommendations. However, we have already had extensive discussions with the FDA and have a clear understanding of what these trials need to entail, so we do not expect any significant deviations from their expectations for a trial like this; it’s fairly straightforward. As for the data from the open-label study that would interest the community, conducting a 12-month open-label study provides the necessary safety exposures vital for the NDA filing. In this setting, we will analyze adverse event rates to help contextualize what patients might experience with this treatment in the future, as well as discontinuation rates, which are always important. From an efficacy standpoint, we will look at real-world efficacy results. The long-term nature of this open-label study will allow us to gather valuable insights on sustained response and treatment over approximately 12 months.

Uy Ear, Analyst

Okay. Thank you.

Operator, Operator

Our next question is from Marc Goodman with SVB Securities. Please proceed with your question.

Guofang Li, Analyst

Thanks for taking my question. This is Rudy on the line for Marc. I have a question regarding Study 302; you mentioned that Study is enrolling around 100 patients. So how should we think about the impact of the new enrollment criteria, especially in those patients who are enrolled? And also, could you talk about the powering for both studies with your new product?

Sergio Traversa, CEO

Thank you. Cedric, you are in great demand today, so it's for you too.

Cedric O'Gorman, Chief Medical Officer

Thanks, Rudy. If I understood your question correctly, you were inquiring about what we could learn from the first 100 patients in that study and how one should think about the next 200. What I will say is that the most important outcomes for this study revolve around the primary efficacy analysis. There are no changes in that regard. So basically, the amendments were aimed at reducing the amount of assessments and the amount of time that the patients were spending at the site in order to control those issues that we saw, particularly regarding placebo response. Therefore, the primary outcome of interest, the efficacy measurement, remains unchanged, and the approach to dosing and evaluating the patients for that purpose is very much the same. With regards to gaining insights from the first 100 patients, we feel confident having discussed it internally and with clinical trialists that we can design a more efficient subsequent phase of this ongoing study to bring us to a positive outcome and that is what we have set out to do by amending this protocol. As for powering a statistical analysis, we are not ready at this moment to delve into those specifics.

Guofang Li, Analyst

Got it. Thanks.

Operator, Operator

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

Andrea Tan, Analyst

Hi, everyone. Thanks for taking my question. Maybe another one for Cedric, if you don't mind. Just curious given the receptivity for MDD so far, I'm wondering if you could speak on updated thoughts on how you see REL-1017 existing in the treatment landscape there. Are there any learnings that you can take from the early launches so far?

Sergio Traversa, CEO

Hi, Andrea, thank you for the question. Cedric, that's definitely for you.

Cedric O'Gorman, Chief Medical Officer

I just think it’s tremendous to see new drugs being approved with new mechanisms of action. The MDD patient population continues to be underserved, and so I think it’s terrific that the more opportunities we have for approvals, the better. Obviously, there are some similarities between REL-1017 being NMDA receptor antagonist, and I think it’s very exciting that in that particular realm of mechanisms, there’s greater access and people are willing to develop these drugs. I don’t think I have any learnings or insights based on early launch activity or anything like that; I focus on the clinical trial design here.

Sergio Traversa, CEO

Andrea, if I may add, yes, the position in the marketplace that you mentioned—if REL-1017 is approved, it will be quite a bit different. REL-1017 is intended to be adjunctive, meaning it will be one single tablet that can be added to any other antidepressant use. Currently, no antidepressant is approved for that indication, right? Other drugs are already combinations, so it's unlikely that they would be widely used as an adjunctive to another existing treatment. I hope this answers your question.

Andrea Tan, Analyst

Thanks, Sergio.

Operator, Operator

Our next question is from Andrew Tsai with Jefferies. Please proceed with your question.

Andrew Tsai, Analyst

Hi, thanks. Good afternoon. Thanks for taking my question. I appreciate you walking us through these analyses that you did. First question is, what would the very first Study 303 monotherapy look like if you were to do a similar post-hoc analysis? Would you get a similar type of signal or a favorable signal for REL-1017? And then secondly, as we think about RELIANCE II, is there a way to know if the first 100 patients indeed are not tainted? There's no issues basically? Or said another way, why should we feel confident the first 30% of patients who have been enrolled in RELIANCE II won’t hurt the study outcome because technically some of them could have come from unverifiable sources, correct?

Sergio Traversa, CEO

Cedric?

Cedric O'Gorman, Chief Medical Officer

Okay, thanks, Andrew. So the first question about monotherapy: yes, we did apply the same analysis to the monotherapy study. In that study, had a much higher mean change from baseline for placebo of about 14 points, and the drug outperformed placebo by approximately 1 point. So it had a higher placebo problem, but the delta was also a little less than what we saw in the adjunctive study. But you’re right. When we looked at verifiable, unverifiable, pre-pandemic, and post-pandemic splits of the data and sites, we definitely saw the same issues. So we don’t feel that the issues were unique to the adjunctive Study 302 but rather broadly across the RELIANCE program. The decision to pursue the adjunctive path was a strategic decision based on the fact that 302 was ongoing with, as you pointed out, one-third of patients enrolled. By improving that design and starting with a new streamlined adjunctive study, that will be the clearest and quickest path to filing for the indication of adjunctive treatment of MDD with the agency. Now, as for whether we can know anything from the first 100 subjects, well, you can’t really because it’s blinded. What you can work on is how your studies did over time. We spent a bit of time pointing out pre-pandemic impacts versus those after restrictions were lifted, and the impact and how the delta improved. We think that the later part of the 301 study is more reflective of the early part of the first 100 patients in 302. And statistical modeling conversations and consultations with sites gave us confidence, suggesting that if we had an original target of about 300 patients, the opportunity for the drug to separate from the placebo exists despite those challenges. To answer your question directly, we feel pretty confident that with the amended protocol and the considerations around target sample size, this study could indeed be positive.

Sergio Traversa, CEO

Andrew, also consider that if you look at the data from the top down, the major impact on Study 301 was localized to two sites that enrolled about 40 patients together. These two sites were not present in Study 302.

Andrew Tsai, Analyst

Right, right. Okay. And then one more is just on the 304 study, RELIANCE IV. Are there any differences in the study design relative to RELIANCE II, the ongoing one? And does it make sense to start RELIANCE V, actually?

Cedric O'Gorman, Chief Medical Officer

Well, let me start with RELIANCE IV before we talk about RELIANCE V. But with the 304 new study, it will be significantly different regarding the various scales and assessments that we will ask the raters and the PIs to administer with the patients. Now, there are a couple of standard things that you don’t change like your primary efficacy outcome measure. However, it’s much easier to start with a blank slate than to amend the protocol and remove elements. It will be very similar in terms of being a two-arm study, four weeks in duration, with the primary efficacy outcome being the same, and there will be fewer exploratory secondary endpoints just so that we can really focus on efficacy.

Andrew Tsai, Analyst

Very helpful. Thank you, guys.

Operator, Operator

Our next question is from Jay Olson with Oppenheimer. Please proceed with your question.

Jay Olson, Analyst

Hi, guys, thanks for the update. And thanks for the question. First question is for Cedric. Could you please talk about any due diligence that you did prior to making your decision to join Relmada? What did you learn from your peers or key opinion leaders that you may have spoken to about REL-1017? And what do you consider to be the most important capabilities for the Chief Medical Officer to optimize the probability of success for MDD clinical trials? And then I have a follow-on, if I could, please.

Cedric O'Gorman, Chief Medical Officer

Thank you for that question, and I'm delighted to be part of the Relmada team. They are a very thoughtful, professional group of people. I’ve only been here since January 6, but I already feel part of the family. When Sergio first reached out to me and asked if I would be interested in taking the role, I wanted to look at the data under a confidentiality agreement to understand what went wrong in the study, and if I still believed that the drug had efficacy potential. If it did, I wanted to know what reasonable changes I could suggest to optimize the signal. It was very clear to me that key opinion leaders acknowledged that the uncontrolled placebo response made it very hard to draw any conclusions unless the placebo response was kept to around 10 points. Additionally, I wanted to look at the protocols as they were run and see if I had ideas that could help. I believe that by everything we're trying to do right now, streamlining the protocols, all of which is achievable. Was there a second part to your question?

Jay Olson, Analyst

No, I think that's everything. That's super helpful. I did have one follow-up question on RELIANCE II when you see the results. How do you plan to evaluate patients who enrolled pre versus post-protocol? And is the study powered for a subgroup analysis of pre versus post-protocol amendment? What influence do you expect to see on the results from the protocol amendment? Thank you.

Sergio Traversa, CEO

What is the review? Do you want to answer that?

Cedric O'Gorman, Chief Medical Officer

The second part first: I'm hoping to control for placebo response because I won't feel that I succeeded in my job unless I can bring that placebo response down, and that will widen the delta, the drug-placebo difference. One thing that REL-1017 has had in common across all the trials is the same magnitude and trajectory of improvement. If we can keep the placebo response down, I would expect to see a nice separation. As for the first part of the question related to evaluating patients pre versus post-protocol, we are definitely looking at that and intend to do that as part of the analysis plan, but I wouldn’t be ready to get into the specifics of it just yet with you. It's a great and important demarcation in terms of data announcement.

Sergio Traversa, CEO

Jay, we did—Sergio here—make a conservative assumption on the first third of the patients. We assume that the data will be similar to what we have seen in 301. We also made conservative assumptions about what the next two-thirds of trial patients should be to ensure that the study is successful and reaches the conclusion that it's definitely worth moving forward and completing the trial.

Jay Olson, Analyst

Okay, great. Thank you. That's super helpful. Appreciate that, Sergio. And thank you both.

Sergio Traversa, CEO

Thank you.

Operator, Operator

We've reached the end of the question-and-answer session. I would now like to turn the call back to Sergio Traversa for closing comments.

Sergio Traversa, CEO

Thank you very much. In closing, I remain grateful to the Relmada team for their continued hard work and dedication to executing our mission. I would also like to extend my sincere thanks to the participants and clinical partners involved in the REL-1017 trials for their effort in advancing this important product candidate through the clinic. With that said, thank you very much to everyone, and I wish you all a good end of the day. Thank you.

Operator, Operator

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.