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Good day, and thank you for standing by. Welcome to the Addex Therapeutics to announce half year 2022 financial results and provides corporate update conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tim Dyer. Please go ahead.
Thank you. Hello, everyone. I'd like to thank you all for joining our Q2 2022 financial results conference call. I'm here with Roger Mills, our Chief Medical Officer; and Robert Lutjens, our Head of Discovery Biology. I draw your attention to the press release and the financial statements issued earlier today, which are available on our website.
I also draw your attention to our disclaimer. We will be making certain forward-looking statements that are based on the knowledge we have today. I will start this conference call by giving a quick overview of our recent achievements before handing over to Roger and Robert, who will review our clinical and pre-clinical pipeline. I will then review our financial results. Followed that, we will open the call for Q&A.
During the second quarter of this year, we had to take the difficult decision to terminate the development of dipraglurant in dyskinesia associated with Parkinson's disease. This was due to the slow patient recruitment, which was attributed to the impact of COVID-19 on the interest of Parkinson's patients to join our clinical study as well as staffing challenges and staff turnover of clinical trial sites.
This decision has significantly delayed the development of dipraglurant for PD-LID and negatively impacted the prospects of a marketing approval for dipraglurant. In addition, the inconclusive results from our blepharospasm clinical study was also a significant disappointment. And as a result, we have terminated the development dipraglurant in dystonia.
We continue to believe in dipraglurant and are currently evaluating its future development in PD-LID and a number of other disease areas, including pain, substance-use disorder, neurodevelopmental disorders and stroke rehabilitation. Despite these setbacks in the development of dipraglurant, we continue to make excellent progress towards achieving our other strategic objectives.
Our partner, Janssen, continues to make significant progress in executing their global Phase II study in epilepsy patients. Due to the disruption caused by the Ukraine, Russia conflict and the impact it has had on the recruitment of patients at sites, which were active in these countries, we have revised our guidance for reporting data from epilepsy study from Q4 to Q1 of 2023.
We are very excited by our preclinical pipeline which has made excellent progress with multiple clinical candidates rapidly advancing towards IND-enabling studies. Earlier this week, we announced the extension of our strategic collaboration on GABAB PAM with Indivior and their commitment of an additional $900,000 of research funding to advance drug candidates through to the start of IND-enabling studies.
In addition, we have agreed with Indivior to expand our reserved indications to include chronic cough. As a reminder, Indivior's primary interest is substance-use disorders, and under the agreement, we have retained the right to select drug candidates for development in certain exclusive reserved indications. Our GABAB PAM funded research effort has progressed to late clinical candidate selection phase with multiple candidates being profiled in secondary disease-relevant models.
We expect Indivior and ourselves to select compounds early in 2023 to advance into IND-enabling studies. We plan to develop our independent program in Charcot-Marie-Tooth 1 in neuropathy chronic cough and pain.
We have made great progress in our mGlu7 negative allosteric modulator program for stress-related disorders and have successfully identified a compound ready to enter IND-enabling studies. We continue to advance a selection of differentiated backup compounds through late clinical candidate selection.
Our mGlu2 negative allosteric modulator program for mild neurocognitive disorders associated with Alzheimer's disease, Parkinson's disease and depression has entered clinical candidate selection phase. And last but not least, our M4 PAM program is advancing rapidly through lead optimization. M4 PAM is a particularly exciting target for schizophrenia, especially following the recent positive Phase III data from Karuna. On the financing side, the CHF 4.6 million of equity financing completed in July has increased our cash reserves to CHF 12 million at the end of July, providing us with a cash runway through Q2 of 2023. And -- so now I'd like to hand over to Roger.
Thank you, Tim. I'd like to talk about our drug, ADX-71149 for epilepsy. This is partnered with Janssen Pharmaceutical J&J company. In the epilepsy market, it's a large market, and it is projected to reach approximately $20 billion by the year 2026. The market leader is Keppra and the branded drug is treating over 2 million patients, recognizing over EUR 800 million per year. Obviously, there is extensive generic treatment with the drug as well, which really extends the market further. The high proportion of refractory patients, 1/4 of new patients are refractory to treatment. And current combination treatments have limited therapeutic effect.
Therefore, there's a large underserved patient population in need of improved treatment options. 71149 is a selective oral mGlu2 PAM positive allosteric modulator with a clear mechanism of action in epilepsy. Preclinical models have showed a 35-fold increase in Keppra efficacy when combined with 149. And therefore, there's a potential to both reduce Keppra dosing, which will improve efficacy and reduce side effects.
In terms of development, 149 has been extensively explored in the clinic with 9 Phase I and 2 Phase II studies in other indications. Janssen have also recently completed our Phase I program in Japan. Currently, there's a proof-of-concept study, which is ongoing with top line data, as Tim mentioned, expected in Q1 2023.
Also, Janssen has recently started a 2-year open label extension study which started this quarter in 2022, and we'll be open to eligible patients who complete the Phase II randomized study. In terms of the partnership, Addex is eligible to receive EUR 109 million in pre-launch milestones and double-digit royalties.
On this slide, you can see the preclinical efficacy using a pharmaco-resistant mouse epilepsy model, which has high translational value and is strongly predictive of clinical utility. On the left side of the slide, you can see that the taking standard dose of Keppra and adding a low dose of 149, you see a 35-fold shift in efficacy. On the right side, you can see a 14-fold increase in efficacy when Keppra is added to 149. Thus, this is a true synergistic effect and we're excited to see how this unfolds in the clinic.
On that point, if we look at this slide, this describes the Phase II study, which is currently ongoing. This is a Phase II double-blind placebo-controlled proof-of-concept study and enrolls patients with partial onset seizures who have a suboptimal response to treatment with Keppra or [ levetiracetam ].
Patients will establish a 28-day seizure count over a 56-day baseline period prior to randomization. They will then be randomized to receive either 149, 50 mgs BID or matching placebo. The primary endpoint of the study is a time taken to return to their monthly baseline seizure count.
The setting have 2 periods, period 1 being the 4-week acute efficacy phase and period 2 being an 8-week maintenance efficacy phase. Period 2 will include patients who did not return to their baseline monthly seizure rate during the first period of the study, and they will continue on their randomized drug or placebo. Data from this study is expected in Q1 2023. The study illustrates a continued commitment of our long-term collaboration partner in Janssen Pharmaceuticals to this program and to pioneering novel ways to help epilepsy patients. As a reminder, Janssen is covering all costs of development, and we have significant prelaunch milestones of EUR 109 million and double-digit royalties on net sales.
On the next slide, I just want to remind people of the -- as Tim has mentioned, the continued opportunity we have with dipraglurant, PD-LID affects 200,000 patients in the U.S. and dipraglurant has orphan drug designation in the U.S.A.
Substance-use disorder 20 million patients in the U.S. and about 2.2% of the adult population worldwide. With pain at a 10% of the adult population diagnosed with chronic pain every year. With stroke rehabilitation, 5.3 million patients with 1 million stroke patients in the U.S. and the 50,000 fragile X patients in the U.S.A.
In terms of clinically validated approach, different dipraglurant reduced PD-LID in Phase II. ADX-compound-10059 reduced pain in patients with episodic migraine and basimglurant, a similar drug is currently in Phase II for trigeminal neuralgia. Mavoglurant another mGlu5 has shown effects in cocaine-use disorder, alcohol-use disorder, fragile X, et cetera. In terms of status to development, there's extensive preclinical and clinical data, 5 Phase Is and Phase IIs proof-of-concept to PD-LID that have been completed.
In terms of intellectual property, competition to matter through June 2025. And strong polymorph patents through 2034 without extensions. Dipraglurant has orphan drug designation in PD-LID in United States. With the potential for additional market protection through formulation and the orphan drugs. I'd like to hand over to Robert.
Thanks, Roger. Good morning and good afternoon to everyone. We've made great progress in advancing our preclinical programs. As a reminder, all of our programs were identified in-house from our proprietary allosteric modulation discovery platform. The success of our platform is driven by the combination of our unique small molecule chemical library and tailor-made proprietary biological screening tools and methods which we deployed to identify the initial hits and support lead optimization. Today, I would like to share with you the progress we have made in 4 of our most advanced preclinical programs, the GABAB positive allosteric modulator program, the mGlu7 negative allosteric modulator program, the mGlu2 negative allosteric modulator program and the muscarinic M4 positive allosteric modulator program. Starting with our GABAB PAM program, which is partnered with Indivior, the aim of this collaboration is to deliver a new generation of treatment for substance-use disorders. Indivior is supporting the research addicts and have recently committed additional funding for us to complete clinical candidate selection [indiscernible].
As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, a GABAB orthosteric agonist and has been FDA approved for treatment of spasticity and is widely used off-label to treat numerous diseases, including alcohol-use disorder, gastroesophageal reflux disease and various conditions of pain.
However, baclofen comes with significant side effect, hampering its wider use and there is a strong need for what we call a better baclofen. We believe this can be achieved with positive allosteric modulator and their differentiated pharmacology having the efficacy of baclofen without its side effects. We are well on our way to meeting this objective with multiple novel drug candidates rapidly advancing through clinical candidate selection phase. We are currently profiling several drug candidates in non-GLP studies with the aim to nominate drug candidates for IND-enabling studies beginning of 2023. As mentioned earlier, we have the right to select drug candidates from the Indivior funded research activities for our own independent GABAB PAM program. I will now speak about the indications we plan to pursue. Firstly, Charcot-Marie-Tooth 1A, a type of inherited neurological disorders that affect the peripheral nerves. People with this disease experience weakness and wasting of the muscles of the lower legs beginning in adolescence. Later, they can also have a hand weakness and sensory loss resulting in a significant reduction in their quality of life. CMT1A is caused by having an extra copy or duplication of the PMP22 gene and is inherited in an autosomal dominant manner. There is currently no approved drug to treat CMT1A. However, baclofen has shown beneficial effects in patients. In addition, we have collected robust preclinical data with our own drug candidates in highly translational models of CMT1A. In these studies, we have demonstrated positive effects on both biomarkers and behavioral measures suggesting a GABAB PAM has the potential to slow or even stop the progression of the disease. We are currently completing preclinical profiling of our proprietary drug candidates in advanced disease relevant models in collaboration with the American Charcot-Marie-Tooth Association.
Secondly, there is a strong rationale for developing GABAB PAM for chronic cough based on studies with baclofen and the role of GABAB-receptors and the neural pathway involved in cough. We believe that GABAB positive allosteric modulators could be an innovative potential new treatment with a highly differentiated side effect profile compared to baclofen and P2X3 inhibitors. We are currently profiling our proprietary compounds in disease-relevant models of chronic cough. Thirdly, there is also a strong rationale for developing GABAB PAM for various types of chronic pain, including pelvic pain [indiscernible] bladder pain, cancer pain and pain associated with trigeminal neuralgia. Current medication is largely based on opioids, gabapentin pregabalin, NSAs for bladder pain or carbamazepine and other antiepileptic drugs for trigeminal neuralgia. These medications are suboptimal as they leave a significant proportion of patients without adequate support or any benefit and carried risk of significant side effects. Again, the GABAB receptor target has been well validated by baclofen, which has shown efficacy in patients with cancer pain and is used off-label in patients with bladder pain or trigeminal neurology.
Now to the status of the program, we have identified multiple novel chemical series with potential for robust novel intellectual property and multiple compounds are in late clinical candidate selection phase, completing non-GLP preparatory studies. We expect to deliver multiple drug candidates for Indivior and in parallel, multi differentiated drug candidates for our independent program for progression into IND-enabling studies in the first half of 2023.
We have been progressing significantly our mGlu7 negative allosteric modulator program for post-traumatic stress disorder or PTSD as we have now identified a clinical candidate drug to enter IND-enabling studies. PTSD is a psychiatric disorder that may occur in people who have experienced or witnessed a traumatic often life-threatening events such as a serious accident, natural disaster or war in total nearly 4% of the world population. Current treatments are mostly relying on behavioral therapy as most pharmacological treatments such as anxiolytics and antidepressants show insufficient benefits. Based on established knowledge around the mGlu7 target, such as the anxiolytic profile of the mGlu7 [indiscernible] animals and of mGlu7 inhibitors and the robust preclinical data in multiple in vivo models of the disease we have generated with our current mGlu7 NAM compounds, we have a very strong rationale to progress this project towards the clinic. We have now identified 1 clinical candidate drug ready to enter IND-enabling studies and in addition, multiple well-differentiated backup compounds.
On to our mGlu2 negative allosteric modulator program for mild neurocognitive disorders, or NCD, and depression. Mild NCD is a stage between expected cognitive decline of normal aging and the more serious decline of dementia. Besides being potentially the early sign of Alzheimer's disease, Mild NCD is also often experienced by patients suffering from depression. Developing mGlu2 NAM offers the exciting opportunity to treat cognitive impairment while also addressing symptoms of depression. Both pro-cognitive and antidepressant effects have been demonstrated in relevant preclinical models with our mGlu2 NAM candidate compounds. We believe that [indiscernible] has initiated a Phase II proof-of-concept clinical trial in treatment-resistant depression with mGlu2 NAM compound, and they are currently running a drug-drug interaction study with denopezil suggesting they prepare a study in mild neurocognitive -- mild NCD patients with a combination between their compound and [indiscernible]. We aim to be a fast follower to them in our approach with our well-differentiated compounds. We are completing lead optimization and have begun a clinical candidate selection phase with multiple compounds with the aim to start IND-enabling studies in the second half of 2023.
And finally, a few words about our muscarinic M4 positive allosteric modulator program for treatment of schizophrenia and other types of psychosis. As you probably know, psychosis has been treated with the same mechanism of action for the last 50 years with limited efficacy and significant tolerability issues, often leading to treatment discontinuation and relapse. The big news in the field came from Karuna Therapeutics who published the positive results of their Phase III study of their CAR XT compound and schizophrenia patients. CAR XT is a combination of xanomeline, a muscarinic M4 receptor agonist and trospium, a peripherally restricted muscarnic antagonist. This combination allows to selectively activate muscarnic receptors in the brain while blocking the off-target effect xanomeline has because of its poor selectivity. This is a perfect validation of the M4 receptor target and of our positive allosteric modulation approach as we are aiming at identifying highly selective and brain penetrant molecules. In summary, our drug discovery engine has achieved great progress with multiple drug candidates advancing towards IND-enabling studies. The renewed commitment of our partner Indivior the delivery of a candidate ready to start IND-enabling studies in the mGlu7 program are further validation of the quality and productivity of our allosteric modulation platform.
This concludes my prepared remarks, and I'll hand it back to Tim now.
Thanks, Robert. I'll now switch to an overview of the financials. Starting with the income statement. We recognized $200,000 in revenue and income in Q2 2022 compared to $1 million in Q2 of 2021. The primary source of revenue is research funding from our collaboration with Indivior, which we expect to reduce in 2022 as drug candidates move to late-stage clinical candidate selection and our partner takes over more of the operational execution of the development. In terms of expenses, R&D expenses of $5.7 million are primarily related to research and development activities on our dipraglurant program and, to a lesser extent, our GABAB PAM, and mGlu2 NAM and M4 PAM programs. R&D expenses have increased by $2 million compared to second quarter in 2021 primarily due to the increased activities in dipraglurant clinical development activities related to PD-LID and blepharospasm. G&A expenses were $1.5 million in the second quarter compared to $1.8 million in the second quarter of 2021. The decrease of $300,000 is due to the reduced professional fees, which were abnormally high due to one-off expenses of setting up our U.S. shelf registration and at the market, American depository share equity sale program, which we incurred in second quarter 2021. Finance loss of $100,000 in the second quarter of this year related primarily to exchange rate losses on U.S. dollar cash deposits due to the strengthening of the Swiss franc. Now on to the balance sheet. Our assets are primarily held in cash, and we completed the second quarter of this year with CHF 8.8 million of cash held in Swiss francs and U.S. dollars. Other current assets, $2.1 million relate primarily to prepaid insurance and retirement benefits. Current liabilities of $4 million are consistent with prior years and relate primarily to R&D payables and accruals, non-current liabilities of $200,000 related to retirement element obligation calculated under IFRS. The decrease compared to prior period is driven by an increase in the discount rate applied in the calculation. So in summary, Addex has made notable progress in the second quarter. We have a number of programs marching towards the IND-enabling studies. We have an experienced team. We have a pioneering technology platform, which has delivered a pipeline. We have a significant IP estate. We have a strong foundation with partnerships with the industry strong U.S. investors, the dual listed on the Swiss Stock Exchange and the U.S. NASDAQ, and we have an exciting news flow coming forward for the rest of the year and into 2023. This concludes the presentation, and I will now open the call for questions.
[Operator Instructions] Dear speakers we have several questions on the audio, would you be happy to take them?
Yes.
Now we're going to take our first question -- please stand by. And the first question comes from the line of Raghuram Selvaraju from H.C. Wainwright & Co.
I have 2 principal ones. With respect to the 71149 clinical data readout, I was wondering if you could frame for us what you think would be a slam dunk as it were results coming from this clinical trial and how we should think about the way that might be quantified from an efficacy perspective and how that might be framed in the context of the current competitive landscape within the target indication?
Yes. Thanks very much for the question. Roger, would you like to handle this one?
Yes. Thanks, Tim. So we've not -- the drug is being developed by Janssen. And in terms of the reduction in seizures that's expected, we've not described that yet. But I think what we are looking at are patients who are -- the design of the study actually, it's really related to much more clinical practice than perhaps traditional endpoints in studies. So we are really looking at patients who have quite extensive seizures and reducing the frequency of seizures over time. And I think we -- I think it's an exciting program. I think we will see a fairly marked improvement in the active arm. As I say, the reporting -- will be down to -- actually to Janssen.
And then the second question was with respect to dipraglurant. Assuming that you identify an appropriate partner to take forward this asset, what would be some of the core attributes of such a partner, particularly with respect to the way in which they advance the asset and the extent to which they explore its clinical utility?
Okay -- yes, an interesting question. And we are discussing with a number of parties across the spectrum of larger to smaller entities. There is a body of clinical data out there using other mGlu5 negative allosteric modulators, in particular, mavoglurant. And it will really depend on -- at the moment, it will depend on the appetite of the partner and their primary interest.
I mean, we believe in dipraglurant for PD-LID. We also believe in the substance-use disorder, data that's been generated by mavoglurant. We think that's pretty robust. And we're also pretty excited by the rationale in stroke rehabilitation. Neurodevelopmental disorders, we are -- while there's some rationale there, I think there's a lot to be done around the selection of patients and the selection of the endpoint you would measure. But I think at the moment, it's -- the discussions are a very early stage to really give you much more clarity on what a partner would concretely look like.
Okay. That's very helpful. If I could just sneak one other one in, if I may. You had commented in your prepared remarks about potential interest in the neurology space, if I recall, if I heard correctly. And I was just wondering whether you had thoughts around how specifically to stratify that patient population as well as potentially design development programs, even if you might not necessarily be the ones conducting those programs directly in order to specifically deal with the issue that historically has risen multiple times in such clinical trials in these indications, namely high and unpredictable magnitude of placebo response.
Yes. I mean back in 2007, Addex ran an acute migraine study and generated positive data with ADX159, which was a predecessor mGlu5 negative allosteric modulator. So we do have some experience in the migraine field. And again, we do believe in this disease area. Now we -- as we've said, we are currently evaluating. And again, this is the decision to terminate dipraglurant development PD-LID is pretty recent. So we are very much at an early stage of evaluating the different disease areas we could go into because as you know, it's a lot more than just the scientific rationale. It's also the complexity of development, the competitive landscape and then in parallel, the discussions with potential partners in order to secure a backer to help finance the -- and the operational execution of the development going forward. I can't really concretely answer your question to what a trial would look like in trigeminal neuralgia. Now there is a -- dipraglurant is currently in a trigeminal neuralgia study. So I think there is quite a lot of information available on clinicaltrial.gov about what their trial looks like.
[Operator Instructions] And the next question comes from the line of Bob Pooler from ValuationLAB AG.
A few questions from me. First, starting with dipraglurant. Also there were a low amount of patients treated, did you see any signals in those patients?
We are really looking at the data, and we're not ready to disclose anything at the moment. But we will do it in June [indiscernible].
Okay. And then on the potential monetizing and partnering of dipraglurant, do you prefer a front-ended deal or a back-ended deal?
We prefer a front-ended deal.
Okay. And 149 on positive results in the first quarter of next year, would that trigger a milestone?
No.
Okay. And then on the Indivior products, there too, I think you're having several products probably also potentially going to the clinic with Indivior. Would you also see some milestone payments coming from that part too? In other words, a little about your cash reach going forward?
Yes. So we've talked about having EUR 330 million of milestone payments. We have also mentioned that there are sales milestones included in there. And we've also said that it's a pretty balanced conventional structure of a deal. However, we have not given any guidance on the timing of milestones. We are expecting to deliver molecules, clinical catalog, development candidates for Indivior by March next year.
We announced the extension of the agreement. And in addition to the additional funding, we disclosed that the agreement had been funded -- had been extended until the 31st of March. So I think you can read into that, that we are at very advanced stages of clinical candidate selection and that Indivior is expecting to be able to select its development candidates by the 31st of March. And they will then take over the operational execution of that program and advance it into IND-enabling studies and then into Phase I in 2024.
[Operator Instructions] Dear speakers, there are no further questions. Please continue.
Thank you very much. Maybe just a few closing remarks. I mean, we -- as you can see, we've made excellent progress in the preclinical portfolio despite the disappointment in the dipraglurant development. And we're certainly very excited about seeing the readout from the ADX71149 epilepsy program, which is being operationally executed by Janssen. And as I said, we've revised slightly guidance into Q1 of 2023. I would just like to remind you that we are -- one of our strategic priorities is to execute partnerships across the portfolio. As you can see with the progress that's been made in the preclinical portfolio with a number of programs now delivering clinical candidates. I think this is a very reasonable objective to achieve. And so we're very confident in getting this executed by the end of the year. So thank you very much for attending our call. And I wish you all a very nice day.
That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.