Earnings Call Transcript - VTGN Q1 2022

Operator, Operator

Greetings, and welcome to the VistaGen Therapeutics First Quarter 2022 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded today, Thursday, August 12, 2021. I would now like to turn the conference over to Mr. Mark Flather, Vice President of Investor Relations. Please go ahead, sir.

Mark Flather, Vice President of Investor Relations

Thank you, Daenerys. Hello, and welcome to VistaGen’s conference call covering its fiscal year 2022 first quarter financial results and corporate update. I am Mark Flather, Vice President of Investor Relations at VistaGen. Thank you for joining us today for this business update and welcome to our shareholders, analysts, and anyone taking an interest in VistaGen. Joining me today are Shawn Singh, our Chief Executive Officer; Jerry Dotson, our Chief Financial Officer; and Dr. Mark Smith, our Chief Medical Officer. The format for this call consists of prepared remarks from management, followed by an opportunity for questions. This call is being webcast and will be available for replay. The link can be found in the Investors IR Calendar section of our website. On today’s call, we will make forward-looking statements regarding our business based on our current expectations and current information. The forward-looking statements speak only as of today and except as required by law, we do not assume any duty to update in the future any forward-looking statement made today. Of course, forward-looking statements involve risks and uncertainties and our actual results could differ materially from those anticipated by any forward-looking statements that we make today. Additional information concerning risks and factors that could affect our business and financial results is included in our most recent quarterly report on Form 10-Q filed earlier today with the Securities and Exchange Commission and in the future filings that we make with the SEC from time to time, all of which are at or will be available on the SEC’s website. Now, with the formalities out of the way, I’d like to turn the call over to our Chief Executive Officer, Shawn Singh.

Shawn Singh, CEO

Thank you, Mark. Good afternoon, everyone. On behalf of our entire team here at VistaGen, I thank you for joining our call today. With the recent surge in the pandemic from the Delta variant, we certainly hope you and yours are healthy and doing very well. As I've mentioned many times before, at our core, we're change-makers, a team at VistaGen that's committed to improving the mental health of individuals around the world, with new medicines that go beyond the inadequate current standard of care for anxiety and depression disorders. During the first quarter of fiscal 2022, we maintained that steadfast commitment to our core mission and continued the strong momentum that we generated throughout fiscal 2021 across all aspects of our business. Even before the pandemic, anxiety and depression disorders represented a large and growing unmet medical need in the US and across the globe. Unfortunately, while the prevalence of these conditions has grown substantially during the pandemic, meaningful expansion of differentiated FDA-approved treatment alternatives has not yet occurred. Now, arguably more than ever before, those suffering from anxiety and depression disorders need new and differentiated treatment alternatives. Against the backdrop of the substantial progress we made throughout fiscal 2021, and now through the first quarter of this fiscal year, we are confident and excited about the potential of our CNS pipeline to make meaningful changes in the lives of those impacted by mental illness related to anxiety and depression. Our most significant milestone during the quarter was the initiation of our PALISADE Phase 3 Program led by PALISADE-1, our US Phase 3 multicenter, randomized, double-blind, placebo-controlled clinical study to evaluate the efficacy, safety, and tolerability of PH94B for the acute treatment of anxiety in adults with social anxiety disorder or SAD. According to the US National Institute of Health, SAD is the third most common psychiatric condition after depression and substance abuse. The Phase 3 trial is a key step in our efforts to confirm the positive efficacy and safety results that we've seen in Phase 2 development of PH94B as a differentiated rapid onset, acute treatment in SAD. PH94B is designed to be an acute as-needed treatment of anxiety for adults with SAD, treating their anxiety in the context of a triggering or anxiety-provoking situation or event, similar to how a rescue inhaler is used to prevent the onset of an asthma attack. At a time when we are seeing a continuing increase in the number of Americans suffering from SAD, now over 23 million Americans, and a current drug treatment paradigm that falls short of delivering necessary relief without worrisome consequences, innovative, differentiated, fast-acting, acute treatment alternatives are imperative. If successfully developed, PH94B has the potential to be the first fast-acting non-systemic, non-sedating acute treatment of anxiety for the millions of Americans and others around the world who suffer from the debilitating effects of SAD and several other anxiety disorders. During the quarter, we advanced significantly on our plan to initiate by calendar year-end several additional clinical studies in our PALISADE Phase 3 Program to enable the eventual submission of a PH94B new drug application to the FDA, should the program be successful. Notably, PALISADE-2, which will be a replicate of PALISADE-1, is expected to be initiated before the end of this year. We also made significant progress with the FDA to enable the initiation of our exploratory Phase 2a clinical program for PH94B, a program that will include activity in at least four additional anxiety indications, the first of which will be adjustment disorder with anxiety. With the study may proceed notice from the FDA now in hand, we are on track to start the Phase 2a study in adjustment disorder with anxiety as planned before the end of calendar 2021. We also completed certain additional non-clinical studies of PH10, our depression candidate that we believe are necessary to advance our Phase 2b development plan for PH10 as a potential standalone rapid onset, non-systemic treatment of major depressive disorder. Finally, we advanced in our plan for clinical development of AV-101 in combination with probenecid. We are on track with our plans to initiate the Phase 1b drug-drug interaction study of that combination by calendar year-end. We believe our current cash position is sufficient to advance our CNS pipeline through a very exciting stream of potential clinical and regulatory milestones, which have the potential to be value-adding catalysts for the company. Another important milestone for VistaGen during the quarter was our recent inclusion in the Russell 2000 Index, which, as many of you know, is one of the most cited performance benchmarks for small-cap companies. This milestone is notable as a clear example of how far we've advanced as a company, especially during the past 15 months since our consensus-building meeting with the FDA in mid-2020. We believe we are only in the beginning stages of what has the exciting potential to be a remarkable growth curve for all of our stakeholders. Inclusion in the Russell 2000 Index has already increased awareness of our company within the investment community, and we expect this trend to continue in the years ahead. We certainly welcome the larger audience and will continue to execute on additional noteworthy milestones during the second half of this year and well beyond. VistaGen is dedicated to creating change in the mental health landscape, and to help accomplish this, we continue to strengthen our team with individuals who not only possess the knowledge and experience but also share our passion for social change and align with our company values. We believe that in our search to create medicines for a diverse global population with unmet needs, we must seek out and listen to the opinions of diverse individuals. Recently, VistaGen announced the appointment of two new female members to our board of directors, Mary Rotunno and Margaret FitzPatrick, to combine with prior appointments of Ann Cunningham and Dr. Joanne Curley, bringing VistaGen's board to a female-led majority—a significant advancement and worthy distinction in board representation within the public biopharma space and beyond. Ms. Rotunno brings extensive healthcare expertise to VistaGen's board as both a leader and a strategist. She began her career serving patients as a registered nurse and transitioned to serving clients in healthcare law, allowing her to pursue both her commitment to helping others and advancing the future of mental health and wellness. Ms. FitzPatrick has a strong background in developing and executing multiple high-impact customer-focused marketing communications initiatives for some of the world's largest and most successful companies, including Johnson & Johnson and Cigna. Both of these announcements highlight the importance of bringing broader perspectives and experiences to our boardroom, and we hope to enact meaningful change to help set the stage for more public and private companies across all sectors to continue to diversify board membership.

Jerry Dotson, CFO

Thank you, Shawn. As Shawn mentioned, I'll highlight a few items from the first quarter of our fiscal year 2022 financial results. I would also encourage everyone to review our quarterly report on Form 10-Q, which was filed with the SEC earlier this afternoon for additional details and disclosures. VistaGen recognized $0.4 million in sublicense revenue pursuant to its PH94B development and commercialization agreement with EverInsight Therapeutics, which is now AffaMed Therapeutics, during the first quarter of fiscal year 2022, which ended on June 30, 2021, compared to none in the first quarter of fiscal year 2021, ending on June 30, 2020. Our research and development expenses increased from $1.7 million to $5.6 million for the quarters ended June 30, 2020, and 2021, respectively. This increase is primarily due to expenses related to the commencement of our PH94B PALISADE Phase 3 program, notably the initiation of the PALISADE-1 phase three clinical trial, but also including expenses for the preparation for and execution of other clinical and non-clinical development, outsourced manufacturing, and regulatory activities for both PH94B and PH10, which in aggregate accounted for increased expenses of approximately $2.7 million during the fiscal 2022 first quarter. Salaries and benefits expense for the quarter ended June 30, 2021, increased by approximately $1 million versus the comparable prior year quarter, primarily due to the hiring of additional senior management and other personnel focused on clinical operations, outsourced manufacturing activities, and regulatory affairs. General and administrative expenses increased to approximately $2.5 million from approximately $1.4 million in the first quarter ended June 30, 2021, and 2020, respectively. The increase was primarily due to the hiring of additional senior management and other administrative personnel. Our net loss for the first quarter of fiscal 2022, ended on June 30, 2021, was approximately $7.7 million versus a net loss of $3.1 million for the comparable period of fiscal year 2021. At June 30, 2021, the company had cash and cash equivalents of approximately $97.8 million. I would also note that from July 1, 2021, through today, the company has received approximately $900,000 in cash proceeds from the exercise of outstanding warrants. Again, please refer to our quarterly report on Form 10-Q filed earlier today with the SEC for additional details and disclosures. I'll now turn the call back to Shawn.

Shawn Singh, CEO

Thanks, Jerry. Our patient-focus and investor-focus priorities have guided us through these challenging times and have led our company to what we believe is the strongest position in our history. Our journey to this point would not have been possible nor will our future success be possible without the commitment and patient endurance of the entire VistaGen team, our collaborators, and our stockholders. With relentless effort to focus on creating life-changing value for patients and our shareholders, all of us at VistaGen are grateful for the privilege and opportunity to make a difference in improving the lives of those battling mental health challenges all over the planet.

Mark Flather, Vice President of Investor Relations

Thank you, Shawn. This concludes our prepared remarks. Nadesh, we would like to now open up the call for questions.

Operator, Operator

Our first question is from Andrew Tsai with Jefferies. Please go ahead.

Andrew Tsai, Analyst

Okay, great. Thanks. And good afternoon. I appreciate you taking my questions. First one is on the PALISADE. Glad to hear it's on track and so forth. For that study, are you by chance taking a look at the overall safety efficacy data, as well as discontinuation rates for example, on a blinded basis? And if so, would it be fair to assume that no news is good news, at least on the safety front? Because if you had seen an SAE, for example, in one of your patients, you would have shared it with the street?

Shawn Singh, CEO

Most importantly, we share that with the FDA, same with Andrew. Mark, anything else you want to add on that?

Mark Smith, Chief Medical Officer

Yeah, I think it's safe to say yes, and I agree, no news is good news. Yeah, we're on track. We're following it closely. But yeah, so far, so good.

Andrew Tsai, Analyst

Fantastic. Thank you for confirming. And then, separately for the adjustment disorder study that's starting up by year-end. Can you just give us a little bit more framework or context? Maybe what common drugs or treatments are used for adjustment disorder, if at all? And if there are any existing treatments, what are their limitations? And then maybe a corollary to that is how are you thinking about the study design? How long in duration? Are you using the same doses as you are in the SAD trial? How many arms? What are the geographies so far? Thank you.

Mark Smith, Chief Medical Officer

Yes, sure. Let me address that. Happy to address that. So, we're kind of paving new ground here. In the US, especially, there really haven't been any placebo-controlled trials, to speak of against known agents, because nothing has been approved for this disorder. So what do people take? They often take benzodiazepines, which, for adjustment disorder, should be somewhat self-limited. And yet, as you know, people start on benzodiazepines and they're on for years because of the dependence issues. So, nothing's been approved, and very little has been studied. Now, we thought our drug would be ideal for this. Because of its risk-benefit ratio, it has a very good safety margin, we believe it would be appropriate for this disease, which you can kind of conceive of as PTSD light. As far as the study design, it's a one month duration, placebo versus our drug, PH94B at 3.2 micrograms. But different from what we're doing in social anxiety disorder, we're giving our drug four times a day. That's as much as we feel comfortable prescribing it to people, because that's what we did in the preclinical toxic studies. So people will take it four times a day. And this study will do a number of things. One, it's our first exploration into a disorder beyond social anxiety disorder. Two, we're giving it on a fixed regimen, four times a day versus as-needed basis in SAD. We don't know if it will treat this disorder or not, but because we believe the mechanism of action should be relevant to many anxiety disorders, we'll at least get a first read on whether it's possible to go beyond PRN treatment in social anxiety disorder. This is really an exploratory trial. I think it could reveal quite a bit of information for us to go into a larger study that encompasses adjustment disorder and beyond social anxiety disorder.

Andrew Tsai, Analyst

Thanks. That's right.

Shawn Singh, CEO

The primary endpoint in the study is the change from baseline in anxiety measured by the end of four weeks of treatment.

Andrew Tsai, Analyst

Okay, great. And it’s basically the idea is exploratory trial, just looking for a signal; you find a signal and that’s good, a green light. Okay. And then, my last question is on—you mentioned a, I think, preclinical studies, toxic studies, but actually I had—my last question is just on the peripheral studies. You're running on Carbon 14 fMRI imaging studies. Can we expect to share those results with the street over the coming months? I'm assuming those will be completed later this year. But I could be totally wrong. What are those timelines and so forth? Thanks.

Mark Smith, Chief Medical Officer

The Carbon 14 study will be completed this fall, and we will definitely share those results. I believe you will find them interesting. The fMRI study will likely begin this fall, but the results won't be available until the second half of next year as it will take some time to conduct that study. We will be sure to share the results once we have them.

Andrew Tsai, Analyst

Thanks. Very good. Very helpful.

Shawn Singh, CEO

Thanks, Andrew.

Operator, Operator

Our next question is from Tim Lugo with William Blair. Please go ahead.

Unidentified Analyst, Analyst

Hi guys, this is John on for Tim. Thanks so much for taking our questions. So just to start, just wondering your thoughts about how enrollment in PALISADE may be impacted with this latest COVID-19 wave? So, typically around the study being a laboratory study requiring in-person visits?

Jerry Dotson, CFO

Sure. We're keeping an eye on the situation, but so far, it hasn't been a problem for us. We've been operating across the country this summer, and enrollment is progressing well. As anticipated, I haven't heard of any patients refusing to come in due to concerns about visiting the clinic. Our sites are operational and adhering to their specific protocols. We haven't scaled back due to this issue, and unless circumstances worsen significantly, I believe we're still on the right path.

Unidentified Analyst, Analyst

All right. Great to hear. And maybe as a follow-up, how are you thinking about and managing any impact on PALISADE, due to just overall rising anxiety, given the pretty anxious time that we all stand in right now?

Jerry Dotson, CFO

Is that addressed to me, or to Shawn or…

Shawn Singh, CEO

John, can you restate it? I'm not fully clear on what you're asking.

Unidentified Analyst, Analyst

Sure. So just given that overall anxiety is rising right now in the US, maybe another COVID-19 wave, how are you thinking about that, how that might impact the study?

Shawn Singh, CEO

Okay. Well, you know, all of us in the industry are facing similar concerns. Fortunately, we've got 18 months or so of activity at the various sites across all different sectors that have got SOPs in place to protect the staff and to protect subjects. So fortunately, implementing those as Mark said, it seem to do what needs to be done. Of course, the needs continue to rise, as you said, and I think that's all the more reason why we hope we can continue with the execution efficiency that we've seen so far.

Jerry Dotson, CFO

Yeah, I would echo that. Obviously, things—there is a lot more anxiety. And it—unfortunately it’s continuing to rise. From what I'm hearing, the clinical sites are busier than ever. I think that probably because people recognize that we deal in medicines in both suppression and anxiety. So, yes, busy times because we need these new medicines.

Unidentified Analyst, Analyst

Great, thanks so much for the updates and congrats on the progress.

Shawn Singh, CEO

Thank you.

Operator, Operator

And we have a follow-up question from Andrew Tsai with Jefferies. Please go ahead.

Andrew Tsai, Analyst

Hey, thank you. I wanted to ask on page 10, as well, I mean, it sounds like you've finished non-clinical studies; I guess what did the data look like, what were they? And then because it sounds like you're initiating the Phase 2 in mid-2022. Can you remind us what the gating steps are until you can initiate the study? Thanks.

Shawn Singh, CEO

Yeah, we haven't announced the results of those studies yet, Andrew. The goal for us is to get all the regulatory package together submitted before the year-end, if not at the year-end, right around the corner into 2022. We aim to initiate the Phase 2B study in the first half of 2022. So as early as we can, but fortunately we have—like with PH94B, it's a very safe drug. Everything we've seen so far to date, so we just have to make sure we get the US regulatory package in order to be able to put us in a position to launch. But we expect to be about 150 subjects in the Phase 2B study with PH10 weighted as a potential standalone treatment for major depressive disorder. We are very excited about it. It's similar in many respects to that of PH94B, at least in terms of acting on the peripheral neurons and then through the olfactory bulb neuron, as we've talked about, and we're excited to get early reads to see whether we have what we expect, which is rapid onset activity for a drug that has a remarkably different safety profile than we’ve seen so far with other antidepressants. We'll keep you posted on the progress, but so far, it's all moving in the right direction to be able to green light the effort in the first part of 2022.

Andrew Tsai, Analyst

Got it. Thanks again.

Mark Flather, Vice President of Investor Relations

That's all the time we have for questions today. If you have any additional questions, please contact us at IR@vistagen.com or call any of the phone numbers listed on the bottom of our press release today. Thank you for tuning in, and we appreciate everyone's attention and support. We look forward to keeping you current on our continuing progress. This concludes our call. You may all disconnect now and have a great day.