Addex Therapeutics Ltd (ADXN) 2012 Q2 法說會逐字稿

Ladies and gentlemen, good afternoon. Welcome to the Addex Therapeutics conference call. I'm Goren, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. After the presentation there will be a Q&A session.

(Operator Instructions)

At this time it's my pleasure to hand over to Mr. Tim Dyer, CFO of Addex Therapeutics. Please go ahead, sir.

Thanks, operator. Good afternoon, ladies and gentlemen, and good morning to those of you who are connected from the US. My name's Tim Dyer, and for those who do not know me I'm the CFO of Addex. I'm accompanied by Bharatt Chowrira, our President and CEO; Charlotte Keywood, our Chief Medical Officer; and Graham Dixon, our recently appointed Chief Scientific Officer and head of Research.

On today's call Bharatt Chowrira will give the corporate update and view of our pipeline, and I will review our 2012 half year financial results before we open the call for your questions.

So, Bharatt, without further ado the floor is yours.

Thank you, Tim. Hello, everyone, and hope everyone is having a good summer. As you know, the first half of 2012 has seen significant achievements for Addex. We were excited to see 2 of our orally active allosteric modulators make significant progress in clinical development.

Significant achievements were also made within our preclinical and discovery programs for diseases with major unmet medical needs. In addition, excellent progress was made in improving operational efficiency and prioritization of our discovery portfolio.

Today I'd like to discuss some of our achievements in the first half of 2012, which include positive data for Dipraglurant in a Phase IIa PD-LID trial; the initiation of a Phase IIa anxiety trial in major depressive disorder patients by our partner, Janssen Pharmaceuticals; progress in advancing our GABA-B receptor PAM towards the clinic; the expansion of our allosteric modulator discovery technology platform; and, finally, achievement of operational efficiency and pipeline prioritization efforts.

First, let me discuss our lead program, Dipraglurant, for the treatment of Parkinson's disease levodopa-induced dyskinesia. As many of you know, Dipraglurant is a novel, oral, small molecule compound which selectively inhibits the metabotropic glutamate receptor 5, or mGluR5.

Is there a disturbance on the line, right?

Yes. There seems to be a disturbance on the line.

Can everyone hear me okay? Operator?

We can hear perfectly, sir.

Okay. As many of you know, Dipraglurant is a novel, oral, small molecule compound which selectively inhibits the metabotropic receptor 5, or mGluR5. Dipraglurant has a broad potential to be used in combination with levodopa or dopamine agonists for the treatment of Parkinson's disease or PD.

We are very excited by the potential of Dipraglurant, following the positive Phase IIa data in levodopa-induced dyskinesia, or PD-LID, which at the top-line results were reported in March of this year.

In the double-blind placebo-controlled EU and the US trial in PD-LID patients, the data showed that the Dipraglurant met the primary objective of the study by exhibiting a good safety and tolerability profile. Dipraglurant 50 and 100 milligram doses reduced dyskinesia severity and appeared to have an effect on dystonia, as well as chorea components of dyskinesia.

Dipraglurant 50 and 100 milligram increased on time without dyskinesia in all 4 treatment weeks, and appeared to reduce off time in the final week of the treatment. In addition, clinicians rated Dipraglurant as giving greater improvement in dyskinesia than placebo and the anti-parkinsonian effectiveness of levodopa was maintained with co-administration of Dipraglurant.

Based on these exciting results, we are now engaged in partnering discussions with a number of global players that have the vision expertise and capability to fully exploit Dipraglurant's attractive commercial potential. We hope to have a deal completed by the end of this year.

Together with a partner, we hope to study Dipraglurant's potential for treatment of not only PD-LID, but also for treatment of the non-motor symptoms of PD, which includes co-morbid anxiety, depression or impulse control disorders, and effects on underlying motor symptoms of PD, as well as treatment of non-Parkinsonian dystonias.

As you may know, levodopa is the gold standard for Parkinson's disease treatment, but is often used sparingly in the early stages of the disease due to the fear of inducing dyskinesia in patients. There are no approved treatments for PD-LID.

We believe an effective anti-dyskinetic agent like Dipraglurant has the potential to change the way Parkinson's disease is treated because patients, because patients -- excuse me, physicians will be able to use the most effective drug for Parkinson's disease, which is levodopa, earlier and more aggressively by pairing levodopa with Dipraglurant and preventing delaying and/or -- and treating dyskinesia as they appear.

In addition, based on robust preclinical data, potential label expansions for Dipraglurant can include PD motor symptoms and/or non-motor symptoms like co-morbid anxiety, depression, as well as non-Parkinson dystonias. An extended release formulation of the Dipraglurant is also in development. The choice of two formulations offers the flexibility to tailor treatment to individual patients and their particular problems. It also offers the possibility of an extensive product range and comprehensive life cycle management.

While Dipraglurant has broad potential for treating Parkinson's disease, the most direct path to market is treatment of PD-LID. No drug is approved for PD-LID and dyskinesia has been identified by the regulatory authorities, patient advocacy groups such as The Michael J. Fox Foundation for Parkinson's Research, and key opinion leaders as a very important unmet medical need.

We have recently commissioned Datamonitor to conduct primary market research for Dipraglurant in PD-LID. And I would briefly like to share with you some of the key findings and some take-home messages from the study. Firstly, the market research confirmed that levodopa is the most effective treatment of choice and that its use was being delayed as long as possible due to the concerns about dyskinesia, and that there is a substantial unmet medical need for treating dyskinesia within PD.

The off-label usage of drugs such as Amantadine to treat dyskinesia was viewed by respondents in the market research as largely ineffective and accompanied by significant compliance limiting side effects.

The market research confirmed a huge need for a safe and effective anti-dyskinetic treatment. It also noted that while levodopa remains the gold standard for PD treatment, fear of dyskinesia leads to suboptimal levodopa usage and that most patients only -- most patients achieve only suboptimal management of motor symptoms, and efficacy and/or suffer from debilitating dyskinesia.

The market research also concluded that there is a substantial opportunity for adjunctive therapies that have the potential to facilitate the broader and more effective use of levodopa by preventing, delaying or treating dyskinesia. In addition, the market research showed that Dipraglurant has the potential to transform the PD market by allowing the wider usage of levodopa, and therefore reducing the need for suboptimal treatment such as dopamine agonists, MAOB inhibitors and expensive, invasive deep brain stimulation, or DBS.

In summary, the Datamonitor market research showed that there is a significant commercial opportunity for Dipraglurant in PD-LID due to its unique profile, lack of approved treatments for treating PD-LID and a huge unmet medical need. Estimated market potential is well in excess of $1 billion.

In addition, further label expansion outside of Parkinson's disease could substantially add to the peak sales potential for Dipraglurant. As a result, we think that Dipraglurant is a compelling partnering opportunity and look forward to sharing with you more about this program in the coming months.

Now, let me tell you about another very exciting Phase IIa clinical program that is being developed in collaboration with our partner, Janssen Pharmaceuticals. In 2001 our partner, Janssen, initiated a 105-patient Phase IIa study of ADX71149 for the treatment of schizophrenia.

This mGluR2 positive allosteric modulator, or PAM, was discovered and developed in collaboration with Janssen and has the potential to be the first non-dopaminergic drug that may address both the positive and the negative symptoms of schizophrenia, in addition to other indications such as anxiety.

ADX71149 is differentiated from marketed antipsychotics, in that it may show efficacy not only on the positive symptoms, but also on the negative symptoms such as depression, anxiety and cognitive dysfunction, and avoid compliance limiting side effects like weight gain and tardive dyskinesia, which are associated with the use of dopamine antagonists. We hope to share with you top-line data for this program during the fourth quarter of this year.

In addition, a separate Phase IIa trial in major depressive disorder patients suffering from anxiety was initiated in June of this year. We are expecting our partner, Janssen Pharmaceuticals, to dose the first patient in this trial soon.

As you can imagine, we couldn't be more pleased with the progress that Janssen is making on this program and are proud to be their partner. Under this -- under the terms of this partnership Janssen is responsible for all the costs associated with advancing this program through commercialization. We are eligible to receive development milestones totaling up to EUR112 million of which EUR100 million are remaining. And we can expect to receive additionally low double-digit royalties on product sales.

In the first half of 2012 we also made significant progress towards advancing several discovery and preclinical stage programs. In our GABA-B receptor PAM program we advanced a clinical candidate into IND enabling studies. This novel, first-in-class oral small molecule GABA-B receptor PAM has demonstrated excellent preclinical efficacy and tolerability in several rodent models of pain [and] overactive bladder. Having recently selected the GABA-B receptor PAM clinical candidate, we are on track to submit in late 2012 an application for clinical testing.

In addition, in the first half of 2012 we continued to invest in our proprietary allosteric modulator technology platform and applying it to address a number of both GPCR and non-GPCR targets. We continue to be very excited about our early stage discovery pipeline programs, and believe that each will have the potential to generate high value drug candidates with markedly differentiated product profiles.

We plan to nominate at least one clinical candidate by the end of 2012. Underlying our robust pipeline is our industry-leading proprietary allosteric modulator discovery platform. Over the last ten years we have invested significant resources and time in building the infrastructure and developing the expertise for discovering and developing highly selective oral small molecule allosteric modulators. Our platform allows industrial scale, high throughput screening and can be adapted for a broad range of targets, including targets that are considered undruggable using conventional approaches.

In 2012, we continue to enhance our allosteric modulator technology platform capabilities via investments in novel proprietary screening tools, innovative pharmacology assay development, access to biophysical and structural biology technologies and the expansion of our allosteric-based chemical library. In short, we are expanding the realm of druggable targets with our technologies for discovering oral small molecule allosteric modulators.

Finally, in the first half of 2012 we fine tuned our strategy, refocused on our core strengths and took measures to enhance operational efficiency going forward. The reduction in headcount taken together with the pipeline prioritization significantly reduced our cost structure, and provides cash to fund operations through the first half of 2013. This, of course, is without taking into account any new revenues from new or existing partnerships.

As a result, the Company is now on a much stronger footing and well positioned to achieve our near and medium-term objectives. Our operational strategy going forward will be to focus internally on our core competencies and doing what we do best, discovery and development of oral small molecule allosteric modulators for undruggable targets and externalizing all non-core activities.

In the second half of 2012 we look forward to achieving several major R&D milestones including announcing top-line data from the Phase IIa study with ADX71149, filing an application for clinical testing of GABA-B receptor PAM, as well as selecting a clinical candidate in one of our preclinical programs. In addition, we are looking to close at least one partnership deal before the end of the year.

With that, I'd like to turn the call over to Tim Dyer, our CFO, for a discussion of our first half 2012 financial results. Tim?

Thanks, Bharatt. So before going through the details of our 2012 half year financial results let me give you the highlights. We reported cash utilization of CHF15.8 million for the first half of 2012, which puts us ahead of our previous guidance of CHF23 million for the full year. This resulted in us finishing the half year with a cash position of CHF20.2 million.

Total operating expenses for the first half of 2012 decreased by 17% to CHF14.9 million and our income of CHF0.1 million, resulting in a net loss of CHF14.8 million for the half year. As a result of the restructuring that was announced in May 2012, our contractual headcount at the 30th of June was 76 FTEs. And we expect our payroll to be down to 55 FTEs by November of 2012.

Moving on to the balance sheet, the balance sheet is dominated by the cash position of CHF20.2 million. As a result of the restructuring, we are expecting cost savings to feed through in the second half of 2012, consequently expect our cash reserves to take us through quarter two 2013. It is important to note that our current cash runway assumes no milestones from existing partnerships or business development activities.

Moving on to the income statement, the first of 2012 income amounted to CHF0.1 million compared to CHF3.2 million in the first half of 2011, corresponded to grants recognized from The Michael J. Fox Foundation to support our Phase II trial in PD-LID. The comparative figure in the first half of 2011 included a CHF2.6 million milestone received from Janssen under the mGluR2 PAM license agreement.

On the expense side, R&D expenses decreased by 21% to CHF11.6 million in the first half of 2012 compared to CHF14.6 million in the first half of 2011, primarily due to the lower headcount. G&A expenses remained stable at $3.3 million, mainly due to the effects of the reduced headcount being offset by one-off restructuring costs. We expect expenses to continue to decrease through the second half of this year.

Moving on to the cash flow statement, the half year cash utilization of CHF15.8 million corresponds to the cash used in operations, including the opening of an escrow account for CHF1.4 million that is recorded in other noncurrent assets. This amount relates to claims from the French tax authorities that are in dispute and has not been provided in the financial statements as we believe based on external legal and tax advice that the risk of a cash outflow is remote.

Moving on to an analysis of our headcount development, you will note that we have significantly reduced our headcount through the restructuring measures taken in 2011 and 2012, bringing the headcount down by 50% from 111.8 FTEs on the 30th of June, 2011 to an expected level of 55 FTEs by November 2012. The contractual headcount at 30th of June, 2012 was 76, which has contributed to the higher than guided cash utilization in the first half compared to our expectations for the second half of the year.

Moving on to the outlook for the rest of 2012, beyond cash utilization guidance for the full year 2012 has been revised upwards from CHF20 million to CHF23 million to CHF25 million to CHF27 million, mainly due to the CHF1.4 million recorded in other noncurrent assets and additional costs associated with outsourcing our research activities.

We have also revised our cash reach through Q2 2013. As mentioned before, our cash utilization guidance does not include any cash inflows from existing agreements or any potential cash inflows from new partnerships.

And with that, before we open the call for questions, I'd like to hand you back to Bharatt.

Thanks, Tim. As you have heard today, we are committed to building significant value for our shareholders through a combination of pipeline execution, generating non-dilutive funding through partnerships and improving operational efficiency.

We believe 2012 will be a seminal year, indeed a transformational year for Addex. We have a robust pipeline with important near-term milestones, cutting edge science, a strong balance sheet and high caliber investors who support our overall strategy of building a strong and successful company focused on discovery and development of innovative oral small molecule drugs for treatment of diseases and conditions with large unmet medical needs.

Finally, I would like to acknowledge and thank all our employees for their hard work, dedication, loyalty and perseverance through all the recent changes. We look forward to working together to bring innovative therapies to patients and building shareholder value in the process. Also I would like to thank our shareholders for your continued support of the Company over the years.

Operator, please open the call for questions.

We will now begin the question-and-answer session.

(Operator Instructions)

The first question is from Juan Sanchez from Ladenburg. Please go ahead.

Hello? Hi. The first question is on the Dipraglurant. How much work have you guys done on defining the characteristics of the next trial? Do you have any plans of meeting with the FDA and whether or not those discussions -- a partner -- a potential partner needs to be involved in defining the characteristics of the future trial or not?

Thank you, Juan. And so, I'll let Charlotte answer that question. So, Charlotte?

Okay. Yes, thanks. Hello, Juan. Indeed, yes we are -- following the successful results we got in March this year clearly we're very keen to continue the program as promptly as possible. So we are working on the design for the Phase IIb study at the moment and actually are working also with The Michael J. Fox Foundation on the study design and potential of a support for that.

Our plan is to meet the FDA towards the end of this year to put the study proposals towards them and to discuss the outcome measures to be agreed before embarking on Phase IIb. Now clearly we would like a partner to be involved in that, and hopefully it should fit in with the timeline for the partnering discussions.

It is important that a partner who takes this product is involved fully and buys into the design for the Phase IIb trial, but until that happens we are making very good progress with the design of the trial.

And so, when do you think you're going to be in a position to initiate a Phase III, assuming you get a partner?

Yes. Assuming we are going to partner, we would be looking to initiate the Phase IIb in the first half of next year.

Got it. And one question on [149]. In your agreement with Janssen, how much are you going to be able to share with us when the news comes out in Q4? I mean, is it going to be some sort of details (inaudible) or just the data was positive, that data was negative and, et cetera?

Yes. Thanks for the question, Juan. So our partner, Janssen, recognizes the material nature of this agreement for Addex and its shareholders. And so, they are appreciative of the fact that we want to provide reasonably good information in terms of the trial results as they come out. So, I think we'll be able to share some top-line results with you towards the end of this year. And so, we are in discussions with them in terms of the extent and the amount of details we want to disclose as part of that press release.

Perfect. Thank you, guys.

The next question is from Lala Gregorek from Edison Investment Research. Please go ahead.

Good afternoon. I wanted to ask a -- it's basically a two-part question in relation to the changing competitive landscape with mGluRs. First of all, obviously Lilly had their Phase II failure with their schizophrenia program. I was wondering whether you are able to provide any comment on that.

And, secondly, more recently obviously --

Hello?

We lost you.

We lost the second part of the question -- yes.

Okay. And the second part of my question relates to the more recent announcement by Merck Serono that they're spinning their mGluR programs into a new company, Prexton. And, again, I'm just interested in what your thoughts are in relation to that.

Okay. I'll take --

Yes. Go ahead.

I'll talk about the Lilly. The Lilly trial has two essential differences with what J&J are doing. The first relates to the molecule, and the second one really relates to trial design.

The Lilly compound is a nonspecific mGluR23 agonist and not a selective mGluR2 PAM. So, it's quite a different kind of compound to the one that J&J has. And also, it's not particularly active and doesn't penetrate the blood/brain barrier. So, they've actually had to use a pro drug in order to get good CNS penetration. So, it's very distinct from the J&J compound.

The second result -- the second refers to the sort of trial design. Lilly took a very broad sort of all comers let's treat schizophrenia type trial design. And they didn't really refine the design in order to determine the best attributes of the drug, unlike J&J. And so, they were trying to treat general schizophrenia, and symptoms in all comers.

And the skill of J&J and really why we enjoy working with them so much is they've identified the areas where they think this mechanism -- the mGluR2 PAM mechanism -- can really be most effective. So not only does it have some antipsychotic potential, but really [its] strength will be in treating the negative symptoms of schizophrenia.

And this is an area of very great unmet medical need that isn't treated at all in schizophrenia and where this drug could be particularly strong. And so, they've actually designed their trial to select patients who have important residual negative symptoms of schizophrenia, so the anxiety and depression.

And so, by getting that population that's very distinct they have a much better chance of showing efficacy with this drug. So they're really tailoring the outcome measures to the specific attributes of the drug. And by that we think that will mitigate the risk of a negative outcome in this indication which we know is quite challenging. So we're really looking forward actually, and excited to see the results later this year.

Yes. And I think just to add to that to what Charlotte just mentioned, I think Lilly's design was going up [and] monotherapy. And as opposed to the trial design that our partner, Janssen, is pursuing, which is an adjunctive therapy over the background of the standard of care of antipsychotics, and we believe that that would be a fast, and quick and direct path to registration. And once you get that, then you can probably expand that to other means of administering the drug.

So I think there are significant differences, and we remain very bullish on this program. And this could be a potentially major breakthrough that in the treatment of schizophrenia, as well as anxious depression, which is a second indication that J&J is pursuing for this compound.

With respect to your second question, it's -- what Merck Serono has attempted to do in terms of spinning out Prexton Therapeutics is actually a positive development for the field of mGluR targeting with allosteric modulators. It raises the awareness and the importance of allosteric modulator as a mechanism for targeting specifically and selectively certain types of mGluRs involved in different indications.

So the Prexton, I believe, from what I understand on the press release is involved in targeting mGluR4 as an allosteric modulator. And as you know that Addex has the most advanced program of selectively targeting mGluR4 with the allosteric modulator -- positive allosteric modulator.

And we are making rapid progress in advancing that program towards a candidate selection, not only for Parkinson's disease but also a number of other very exciting indications such as MS, and dystonia and other indications. So we feel very confident about our position in the field and leadership position that we have in targeting mGluR4.

I don't know if that answers your question.

It does. It's been very, very helpful so thank you very much.

(Operator Instructions)

Ladies and gentlemen, there are no more questions at this time.

All right. Well, thank you, everyone, for participating in this call over the summertime. And I hope you are having a good summer. We look forward to reporting advances and progress as we make at Addex. And in the coming weeks and months, we'll be able to report more advancements going on at Addex. So thank you again, and enjoy the rest of your summer.

Ladies and gentlemen, the conference is now over. Thank you for choosing the Chorus Call facility, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.