Earnings Call Transcript - RLMD Q1 2021

Operator, Operator

Good afternoon, ladies and gentlemen. And thank you for standing by. Welcome to the Relmada Therapeutics Incorporated First Quarter 2021 Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host Tim McCarthy with LifeSci Advisors.

Tim McCarthy, LifeSci Advisors

Thank you, operator. And thank you all for joining us this afternoon. With me on today’s call are Chief Executive Officer, Dr. 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 first quarter ended March 31, 2021. Please note that certain information discussed on the call today is covered under the Safe Harbor provision 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 the 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 the Annual Report on Form 10-K and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, May 12, 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’d like to turn the call over to Sergio. Sergio?

Sergio Traversa, CEO

And good afternoon to everyone. I am pleased to welcome you to Relmada’s first quarter 2021 conference call. I will provide an update on the comprehensive development program for the treatment of depression, the REL-1017, and the upcoming milestones. I will provide an overview of the recent data that we've presented at three recent scientific conferences. With that, I’ll begin with an update on RELIANCE, which is the ongoing clinical program for REL-1017 and is enrolling both rollover participants from previous studies as well as new global participants. This study is designed to evaluate REL-1017 as an adjunctive treatment for major depressive disorder (MDD) and includes a placebo-controlled arm featuring doses of 25 milligrams. We have already successfully enrolled a minimum of one up to three antidepressant therapies. The primary endpoint is changing the MADRS score by day 20. Key secondary endpoints include change in MADRS score by day 7, and change in CGI-S severity score by day 28. The first phase 3 trial RELIANCE I continues to enroll as expected, and additional sites are onboarding nicely. We have also recently begun enrolling participants into the second phase 3 trial RELIANCE II, which mirrors RELIANCE I. Topline data from these two trials are expected in the first half of next year. The RELIANCE long-term open-label safety study is underway and currently enrolling participants. This includes both rollover participants from prior studies as well as new participants. The data from this long-term safety study will be part of the NDA filing package. We remain on track to initiate the study evaluating the use of our REL-1017 as a monotherapy for MDD during the current quarter. The most significant difference between these trials and the ongoing clinical studies is the patient population. The patient population planned for the MDD monotherapy study will consist of individuals diagnosed with depression who are not currently taking standard antidepressant therapy. We anticipate completion of this study by year-end 2021. Moving on, I would now like to provide an update on the human abuse potential (HAP) studies. As we discussed previously, we discontinued study 120, which was assessing REL-1017 versus oral ketamine as an active control. A pre-planned and blinded analysis of the initial study completers showed that a significant number of participants did not respond to the active control ketamine, likely due to the poor bioavailability of oral ketamine, resulting in inconclusive findings. Therefore, we decided to stop it. We are now working towards initiating a new ketamine control study, which we'll call study 126, that will utilize intravenous (IV) ketamine as an established effective positive control. We plan to complete this study by the end of the year. The second HAP study, study 124, is comparing REL-1017 to oxycodone. This is progressing as planned, and we continue to expect to complete the study by the end of the current quarter. These HAP studies are standard components of the NDA submission for many CNS drugs and will inform the assessment of REL-1017 for this indication. The results will also represent an important opportunity to reinforce the strong differentiation of REL-1017 from racemic methadone and any potential perceived association with opioid effects or dissociative symptoms. I am also happy to share that Relmada recently completed presentations of a total of nine posters across three different scientific conferences. I will provide an overview of the data for REL-1017 that we presented. First at the American Society for Pharmacology and Experimental Therapeutics, we presented preclinical data confirming a lack of any neurotoxic features that could be associated with lesions. This was not a surprise, but it's important because these findings have impacted the safety and development of other NMDA blockers like MK-801. The findings continue to support the consistent safety profile across preclinical and clinical studies. Next, at the Society of Biological Psychiatry, we shared six posters outlining new work to understand the underlying mechanisms of REL-1017. Our findings were very interesting and included additional support for a role in neural plasticity, as well as insights regarding its binding to NMDA receptor subunits, particularly the 2D subunit, which appear to explain both the lack of dissociative side effects and the rapid and sustained antidepressant response. Finally, at the American Psychiatric Association, we presented data from the Phase 2 study showing that REL-1017 demonstrated statistically significant rapid and sustained efficacy with a large effect size, in addition to a favorable safety and tolerability profile in the absence of any signs of withdrawal after ending treatment. In summary, the REL-1017 development program remains very active, and we anticipate multiple key data results over the next 12 months. Importantly, as Chuck noted, we have a strong balance sheet to support these robust R&D efforts.

Chuck Ence, CFO

Thank you. And good afternoon, everyone. Today we issued a press release announcing our business and financial results for the first quarter ended March 31, 2021, which I will now review. For the first quarter, total research and development expense was approximately $14 million compared to $4.5 million for the comparable period in 2020. The increase was primarily related to costs associated with the execution of a broader clinical program for REL-1017. Total general and administrative expenses for the quarter were approximately $8.4 million, compared to $5.5 million for the same period in 2020. The increase was primarily due to the rise in stock-based compensation. For the first quarter, we recorded a net loss of approximately $22.2 million, or $1.34 for basic and diluted share, compared to a net loss of $10.7 million, or $0.72 per basic and diluted share in the same period last year. As of March 31, 2021, the company had cash, cash equivalents and short-term investments of approximately $102.7 million, compared to $117.1 million on December 31, 2020. We continue to expect that this strong cash position will support us through at least the multiple data readouts we anticipate through the first half of 2022.

Sergio Traversa, CEO

Thank you, Chuck. As I mentioned, I'm happy to outline the recent data we presented in nine posters across three different medical meetings. The data at the American Society for Pharmacology and Experimental Therapeutics confirmed the neurotoxic findings previously discussed, which is important for the continued safety profile of REL-1017. We believe our findings will lead to significant developments in patient treatment. At the Society of Biological Psychiatry, the insights into underlying mechanisms have opened new avenues for research and understanding, particularly with regards to the role of neural plasticity. We anticipate this will lead to further clinical advancements and refinements in our treatment protocols. Additionally, data we presented at the APA showed promising results regarding the efficacy and tolerability of REL-1017 without withdrawal symptoms, speaking volumes about its potential as a treatment for MDD. Importantly, as Chuck noted, we have a strong financial standing that will facilitate our R&D efforts moving forward. I’m also grateful to the Relmada team for their dedication and to all study participants and clinical partners for their involvement in advancing this significant therapy.

Operator, Operator

Thank you. Our first question is from Andrew Tsai with Jefferies.

Andrew Tsai, Analyst

Thanks, good afternoon and congrats on all the progress, Sergio and team. My first question is on the oxycodone study with data reading out soon. Can you describe just how similar S-methadone should be to oxycodone on the likability score? Because sometimes I think of a scenario where what happens if S-methadone shows 60 to 65, for example, just outside of the typical placebo range. How would we interpret that result?

Sergio Traversa, CEO

Thank you, Andrew. Good afternoon, and thanks for the question. Oxycodone, at 40 milligrams, is not a very high dose but is enough that it is clearly liked by participants who might consider using it as a recreational drug. It is a CNS drug, so you can expect some response. If this response is pleasant or not is difficult to ascertain. However, data so far shows minimal likes for oxycodone in previous studies. We have over 100 patients enrolled, and they reported no likability. In Phase One, some patients taking higher doses experienced negative effects like pain and nausea. So, to answer your question, we expect the key focus should be on differentiating all three doses of S-methadone from oxycodone, while we also recognize that we do not expect there to be a considerable similarity to placebo.

Andrew Tsai, Analyst

Thank you, that's very insightful. If the data comes out positively, would it be fair for investors to assume that the results for the second abuse potential study versus ketamine are also strong since we would have seen data on dissociation from the oxycodone study?

Sergio Traversa, CEO

Yes, that's a good perspective. As a pharmacist, I can say that drugs tend not to change in their mechanisms of action over time. Therefore, while we cannot guarantee it’s not 100%, we believe it is unlikely that we would observe significant dissociative or hallucinogenic effects in the ketamine studies, given how well our S-methadone has performed thus far. So, yes, if the oxycodone study presents strong results, it would lead us to feel more confident about the ketamine study’s outcomes.

Operator, Operator

Our next question is from Joon Lee with Truist.

Joon Lee, Analyst

Hi, thanks for taking our questions. I believe that DEA has claimed that S-methadone has a low addiction liability. What is the basis for that claim? Is it based on a specific study? If so, what doses were used? And are you aware of the DEA making similar claims about esketamine versus ketamine?

Sergio Traversa, CEO

Yes, Joon. We raised the same question with the DEA regarding the data they base their statement on S-methadone having low abuse risk and no respiratory depression. They did not rely on any specific study because they did not conduct proprietary research. Instead, they reviewed existing literature including our phase one studies. It’s mainly based on what's publicly available. Regarding ketamine, it’s been on the market in several European countries for quite some time as an anesthetic. While esketamine is a lower dose of racemic ketamine, they are pharmacologically quite similar, so I would expect that the DEA would ultimately schedule them similarly. Both of them are scheduled three drugs which is markedly different from schedule two because what the FDA concerns is not just abuse potential but also safety.

Joon Lee, Analyst

Was there anything out of the ordinary in the blinded study using oxycodone, considering the study with ketamine was prematurely terminated? Did oxycodone behave as expected?

Sergio Traversa, CEO

Yes, that's a great question. The oxycodone study is progressing quicker than the ketamine study because there are many more subjects who like to abuse opioids than those interested in ketamine. The blinded results will be available closer to the end of the study, which should wrap up by the end of June. We probably will be able to analyze the data shortly thereafter. It’s difficult to predict, but we don’t expect to see results like we did when we had to prematurely terminate the ketamine study. Because overall, preparation and participant qualification have shown high interest in the oxycodone control, we feel confident that it will go smoothly.

Joon Lee, Analyst

Looking forward to the data and thanks for taking our questions.

Sergio Traversa, CEO

Likewise, thank you, Joon.

Yatin Suneja, Analyst

Hey, guys, thank you for taking my question. Just a couple on the HAP side or Human Abuse Liability Study. Could you help us understand how each of these studies inform us from a scheduling perspective? If you show a statistical difference between oxy and ketamine, do we know you're not going to get the same level of scheduling? What would your expectations be on scheduling for REL-1017? Would you anticipate any form of scheduling?

Sergio Traversa, CEO

The scheduling process is determined through a thorough evaluation involving the CSS - the Control Substance Staff, which advises the FDA, who then gives recommendations to the DEA. The DEA has 90 days post-approval to establish scheduling, influenced by several factors including pharmacological impact and safety profile among other data points. A strong statistical differentiation from oxycodone in anticipated results would likely lead us to not being classified at the same schedule as Schedule II. While it could lead to a higher schedule, we cannot assure any specific guarantee. Following these results, I'm optimistic about obtaining a scheduling level that allows for greater distribution and commercial viability. Ideally, I would be satisfied with a Schedule III or IV status.

Yatin Suneja, Analyst

That's very helpful. On the monotherapy study, can you elaborate on any specific feedback from the FDA, and if there are any standard medications allowed? Do you mean the data will be available this year? Or just provide clarity on that?

Sergio Traversa, CEO

The monotherapy protocol is quite similar to the RELIANCE trials. The key difference is that the monotherapy study will enroll patients who are not currently taking treatment, while the add-on trials will involve patients on antidepressants. We do not expect any significant issues regarding feedback from the FDA on the monotherapy protocol, as it follows the same standards observed in previous studies. Our current estimate is to have this study completed by year-end 2021, with a cautious approach to scheduling the data analysis since it could coincide with the holiday season, making it impractical to release information like that during the holidays. But we aim to facilitate thorough analysis and informative output.

Sonia, Analyst

Thanks for taking our questions. At APA, you presented data regarding REL-1017, where the effect linked to life years since the onset of MDD was discussed. Just wondering if those findings will affect the design of your trial?

Sergio Traversa, CEO

Thank you, Sonia. The short answer is no. The fundamental aim is to create a trial that reflects the overall standard population. We prefer to refrain from pre-selecting or stratifying patients based on how long they’ve been experiencing depression. We intend to recruit patients ranging from a few months to many years in terms of duration. Therefore, there will be no significant impact regarding these data points. However, our interpretation indicates that NMDA antagonists possess unique features affecting brain functionality. This development underscores how SSRI treatments miss addressing underlying brain dysfunction traits, especially in long-term depression cases.

Jay Olson, Analyst

Thank you for taking the questions. Can you discuss the differentiating features between NMDA antagonists and allosteric modulators, especially from a patient perspective? Why do you think patients would prefer S-methadone over others?

Sergio Traversa, CEO

The mechanisms and actions of NMDA antagonists like S-methadone differ significantly from allosteric modulators such as those developed by SAGE and Praxis. This differentiation influences clinical activity profiles, as NMDA antagonists develop longer efficacy duration, which benefits patients experiencing prolonged depressive episodes. While there’s a recognized market for fast-acting agents like SAGE, we’re positioning our therapy to be effective for a broader patient segment. Thus, it’s essential that these differing mechanisms reflect a feasible option for patient preference and treatment strategy. Feedback from physicians and KOLs has been largely positive regarding our data presentations. They recognize the potential for S-methadone’s differentiation from traditional opioids and NMDA antagonists. There’s an ongoing interest in understanding how S-methadone functions differently, especially in terms of avoiding dissociative effects at high doses. Insights from our studies underscore exciting potential implications for both therapeutic development and patient quality of life.

Julian, Analyst

Just for clarity, are you still targeting the enrollment of 55 sites for each RELIANCE study? And how do you foresee COVID-19 impacting clinical trial conduct during this period?

Sergio Traversa, CEO

Our enrollment rates have not significantly been impacted by COVID-19, especially in light of the recent vaccination rollout. The demand for clinical trials has increased due to the psychological aftermath of the pandemic. Thus far, we see no challenges related to recruitment or enrollment despite the circumstances. Enrolling for the two RELIANCE trials has been growing expediently, and we are comfortably anticipating meeting our enrollment goals without major issues.

Julian, Analyst

Thank you for that clarification. Regarding SG&A, there seems to have been an uptick in stock-based compensation in Q1. Should we expect similar trends for the rest of the year, or is it temporary?

Chuck Ence, CFO

Yes. We’ve observed fluctuations in stock-based compensation related to various factor events within the company. The stock compensation expense that you saw in Q1 reflects a reasonable benchmark for the upcoming quarters, barring any other extraordinary events.

Operator, Operator

We have a follow-up question from Joon Lee with Truist Securities.

Joon Lee, Analyst

Based on FDA guidelines, the HAP study must involve experienced recreational users. For the HAP study using oxycodone as a comparator, is it fair to assume that participants are experienced with oxycodone? Or are they not necessarily required to have past usage of methadone?

Sergio Traversa, CEO

Yes, that’s a fair assumption. While methadone is frequently used in maintenance therapy, it does not carry the same appeal as more immediate opioids due to its long half-life and less intense euphoria. The perception and acceptability for recreational use greatly influence our participant pool, and it's vital that we capture accurate feedback through qualified users in the study. Thank you operator. I appreciate everyone's participation in today's call. We are thrilled to share recent advancements regarding the REL-1017 development program. We anticipate additional key catalysts to remain active and we will provide further updates on our clinical research and activities throughout the remainder of 2021. Thank you for joining today and enjoy your day.

Operator, Operator

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.