Addex Therapeutics Ltd

SIX:ADXN

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Addex Therapeutics Third Quarter 2023 Financial Results and 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 speaker today, Tim Dyer. Please go ahead.

[Timothy Dyer, executive]

Thank you. Hello, everyone. I would like to thank you all for attending our Q3 2023 financial results conference call. I'm here with Robert Lutjens, our Head of Discovery Biology; and Mikhail Kalinichev, our Head of Translational Science. 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 Robert and Mikhail, who will review our clinical and preclinical pipeline. I will then review our Q3 2023 financial results. Following that, we will open the call for Q&A.

So starting with the highlights. Our partner, Janssen, completed recruitment of the ADX71149 Phase II epilepsy study earlier this month, and we reaffirmed that data is expected in Q2 2024. I'd like to remind you that an independent interim review committee established by Janssen to review the unblinded data from Part 1 of Cohort 1 made its recommendation to continue the study. This recommendation and the decision of Janssen to continue the study is very encouraging and suggest that 149 is safe and well tolerated and may be having a positive impact on this patient population.

We have made substantial progress in our collaboration with our partner, Indivior in advancing several novel GABAB PAM compounds into candidate selection. As a reminder, Indivior primary interest is in substance use disorder. And under the agreement, we have retained the right to select drug candidates for development in certain exclusive reserved indications. We are focusing our independent program on cough.

During Q3, we have continued to advance compounds through clinical candidate selection. Multiple compounds showing excellent efficacy in multiple preclinical model cough. In Q3, we announced the extension of our collaboration through June 2024 with CHF 2.7 million of additional research funding committed by Indivior. We expect Indivior and ourselves to select compounds to advance into IND-enabling studies in 2024.

We lead a consortium -- or we led a consortium which has secured EUR 4 million grant to advance our mGlu2 negative modulator cognition program through lead optimization to clinical candidate selection phase. We also continue to believe there is value in dipraglurant, our Phase II ready compound and have substantially completed our evaluation of the future development as post-stroke recovery is an interesting area for future development and are currently [ profiling ] preclinical models of post-stroke recovery.

Furthermore, preclinical data was recently published in the journal Brain, which strongly supports the rationale for the inhibition of dipraglurant as being post-stroke recovery and the development of dipraglurant in this important unmet medical need. We are in the parallel pursuing discussions with potential partners to advance future development of dipraglurant. And last but not least, our M4 PAM program for schizophrenia, which is now a priority program for us, continues to make rapid progress through clinical candidate selection based and is on track to start IND-enabling studies in the second half of next year.

From a financial perspective, we continue to pursue discussions with potential partners across the portfolio and highly controlled costs. As of today, we estimate that our cash reserve provides us with a runway through Q1 2024. Now I will hand over to Robert, who will give you some more details about our existing pipeline.

[Robert Lutjens, executive]

Thanks, Tim. Hello, everyone. I will start by speaking about our Phase II epilepsy study with ADX71149, which is being executed by Janssen. Janssen is making excellent progress and has recently completed recruitment of 110 patients across 2 cohorts. Epilepsy is a large multibillion-dollar market opportunity where despite several available attritions, many patients are still in need of improved therapies to treat the diseases.

As a reminder, ADX71149 is a metabotropic glutamate receptor subtype 2 or mGlu2 positive allosteric modulator discovered in partnership with Janssen using Addex's proprietary allosteric modulator platform. ADX71149 has demonstrated both stand-alone efficacy and a strong synergistic effect in combination with inhibitors of SV2A such as Keppra and Briviact.

149 has also been thoroughly profiled in preclinical and clinical studies by Janssen demonstrating its good safety and tolerability profile in health volunteers and patients. Janssen is responsible for development and are currently operationally executing both the Phase II study and an open-label extension study in epilepsy patients. We have significant economics in our Janssen with prelaunch milestones of EUR 109 million, low double-digit royalties on net sales and Janssen is responsible for all development costs.

To illustrate the synergistic effect seen with the combination of 149 and levetiracetam the active molecule in Keppra, here is the data obtained in the 6 Hertz psychomotor seizure model widely recognized as having high translational value to characterize the efficacy of antiepileptic drugs. As a reminder, ADX71149 given alone in this model produces a robust protection against 6-Hertz indices with an ED50 determined to be approximately 20 milligrams per kilo.

In combination studies with varying doses of levetiracetam, a fixed dose of 149 increase the potency of levetiracetam leading to an approximate 35-fold shift in ED50. Conversely, using a fixed dose of levetiracetam with varying doses of ADX71149, levetiracetam increased the potency of 149 leading to an approximate 14-fold shift in its ED50, suggesting a positive pharmacodynamic relationship or strong synergistic effects for the 2 molecules when given in combination.

This extraordinary effect of the combination of an mGlu2 PAM with an SV2A antagonist has been patented offering a strong protection for this program until 2035 without additional extensions. This is the Phase II study design. The study is a double-blind, placebo-controlled, proof-of-concept study enrolling patients with focal onset seizures who have suboptimal response to treatment with Keppra or Briviact. As mentioned, the study has completed recruitment of 110 patients across 2 cohorts evaluating 2 doses.

In this Phase II study design, patients established a 28-day seizure count over a 56-day baseline period prior to being randomized to receive either 149 or matching placebo. The primary endpoint is the time taken to return to their monthly baseline seizure count. The study has 2 parts. Part 1 being the 4-week acute efficacy phase and the Part 2 being an 8-week maintenance of efficacy phase.

Part 2 includes patients who did not reach their baseline seizure count during Part 1 of study and continue on their randomized drug or placebo. An open-label extension study is ongoing in parallel, offering all patients the opportunity to get treated with 71149 in combination with levetiracetam or brivaracetam. As previously announced in May, an independent interim review committee convened by our collaboration partner to continue the study following review of unblinded data from Part 1 patient Cohort 1.

This was encouraging news suggesting 149 is safe and well tolerated and potentially offering benefits to epilepsy patients. We look forward to sharing the top line release date of Cohorts 1 and 2 in Q2 of 2024.

I'll now pass it over to Mikhail, who will update you on the dipraglurant and GABAB PAM programs.

[Mikhail Kalinichev, executive]

Thank you, Robert. Following termination of the development of dipraglurant in PD-LID, we embarked on the detailed evaluation of a number of potential indications of interest for huge development, including substance use disorder, migraine and other forms of pain. We have completed this exercise and have identified post stroke recovery as an interesting indication for the future development of the dipraglurant.

We believe the differentiated profile of the dipraglurant makes it particularly suitable for post-stroke recovery. There is a large unmet medical need in post-stroke recovery and rehabilitation. Stroke is among leading causes of chronic often lifelong disability as it leading to motor sensory cognitive impairments and multiple comorbidities. There are over 100 million stroke survivors worldwide, and the number is growing at the annual rate of 12 million.

A variety of rehabilitation therapies are used with post-stroke patients, but the recovery is slow and all inadequate. There is an urgent need for pharmacological agents that can facilitate the recovery stimulated by rehabilitation service. mGluR5 receptor is a suitable target to address post-stroke recovery as it is densely expressed in the brain, involved in neuroplasticity and modulates excitatory inhibitor equilibrium.

In fact, activation of mGluR5 receptor has been observed in a range of neurological disorders, including stroke, where it plays a role in maladaptive rewiring of the brain following stroke. Inhibition of mGluR5, on the other hand, can facilitate adaptive rewiring of the brain promoting neuroplasticity and creating of new functional pathways moving the neural network towards a pre-lesion state.

Exciting new evidence recently published in the journal Brain suggests that negative allosteric modulator of mGluR5 receptor, MTEP,administered daily in rats following stroke results in a sustained and growing improvement in sensory motor function in comparison to [ vocal ] treatment.

Similar improvement in sensory motor function was observed in animals treated with our mGluR5 NAM dipraglurant. MRI imaging of the resting state functional connectivity in post-stroke rodents shows that daily administration of MTEP also stimulates intra and interhemispheric connectivity in the brain disrupted by stroke. It is important to note that the improvement in brain connectivity after stroke is known to correlate with functional recovery and is observed across [ PCs ].

Dipraglurant is ideally suited to be used in tandem with rehabilitation therapies in post-stroke patients and as it has a fast onset of action and short half-life. It has shown good tolerability in healthy subjects and in Parkinsonian patients showing only mild to moderate CNS-related adverse effects.

We have drug product ready and a patent position and believe dipraglurant can become a first-in-class drug to facilitate post-stroke recovery. Let me now switch to our preclinical programs, starting with our GABAB positive allosteric modulator program, which is partnered with Indivior.

The aim of this collaboration is to deliver a new treatment for substance abuse disorders. Indivior is supporting the research at Addex and had recently committed an additional CHF 2.7 million funding for us to complete clinical candidate selection activities, in addition to CHF 13.8 total funding so far. As a reminder, GABAB receptor activation has been clinically validated in a number of disease areas using baclofen, a GABAB orthosteric agonist.

Baclofen is an FDA-approved drug for treatment of spasticity and is widely used off-label to treat numerous diseases, including substance abuse disorder. However, baclofen has a short half-life and comes with significant side effects hampering its wider use. Thus, there is a strong need for a better baclofen. We believe this can be achieved with positive modulator approach and their differentiated pharmacology having the efficacy of baclofen but longer half-life and improved side effect profile.

We are well on our way to meeting this objective with multiple novel drug candidates rapidly advancing through clinical candidate selection phase with the aim to nominate drug candidates ready to enter IND-enabling studies in 2024. As part of our agreement with Indivior, we have the right to select drug candidates from the funded research activities for our own independent GABAB PAM program. We have selected to focus our independent program on cough. Therefore, I will present this exciting opportunity.

There is a strong rationale for developing GABAB PAM for chronic cough. Chronic cough is a persistent cough that last for more than 8 weeks and can be caused by a variety of factors, including respiratory infections, asthma, allergies and acidic reflux, but also possibly by an overactive cough effect. There is a large unmet medical need in novel antitussive drugs as current standards of care are ineffective in 30% of patients and only moderately effective in up to 60% of patients.

In addition, the current treatments carry risks of serious side effects. Support for using GABAB PAMs in treatment of chronic cough comes from the clinical evidence of GABAB agonist is used off-label in cough patients and from the anatomical evidence that GABAB receptors are strongly expressed in airways and in the neural pathway regulated cough. Therefore, we believe that GABAB PAMs could offer superior efficacy in cough patients.

On the next slide, which shows that GABAB PAMs are likely to have a superior tolerability profile in comparison to the current standards of care and show no taste related side effects as seen with the newly approved P2X3 inhibitor, Gefapixant. Therefore, we believe that couple GABAB PAMs could be an innovative new treatment of chronic cough administered once daily via oral dosing and offering improved efficacy and tolerability with fewer nonresponder patients suitable for chronic dosing therefore, significantly improving patients' quality of life.

We are working with multiple compounds progressing in late clinical candidate selection phase, and we expect to move into IND-enabling studies in 2024 in parallel to delivering compounds to our partner, Indivior.

I will now pass it back to Robert for an update on our other preclinical programs.

[Robert Lutjens, executive]

Thanks, Mikhail. Let me start with an update on our M4 PAM program as a potential novel treatment of schizophrenia and other psychosis. Schizophrenia affects approximately 1% of the world population and patients have 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. This space is seeing a major breakthrough with the advent of a completely novel approach based on activation of muscarinic M4 acetylcholine receptors. The recent filing of an NDA and accepted by -- acceptance by FDA [indiscernible], a combination of xanomeline, a nonselective M1 M4 agonist and a peripherally restricted PAM muscarinic antagonist strongly validates the M4 receptor activation approach.

In addition, a Phase Ib testing of Emraclidine, an M4 positive allosteric modulator developed by Cerevel in schizophrenia patients showed an antipsychotic effect, paving the way for our M4 positive allosteric modulator program.

Without going into too much detail, the mechanism of M4 acetylcholine receptors allow us to reduce striatal dopamine tone without directly blocking the dopamine receptors, the strategy used by current antipsychotic agents. This allows to retain a therapeutic effect without the side effects of typical and atypical antipsychotics. Standard of care antipsychotics as well as nonselective muscarinic agents suffer from significant side effects, leading to high treatment discontinuation rate.

KarXT represents a significant step in providing a new treatment of schizophrenia patients with poor selectivity treatments, but still result in suboptimal tolerability. Our allosteric modulation approach is providing many advantages over an agonist approach, in particular with absolute receptor subtype selectivity and without the potential side effects linked to constant receptor activation, such as receptor desensitization and reduced efficacy due to tolerance. The aim of our M4 positive modulation program is to identify highly selective and brain penetrant molecules offering potential best-in-class efficacy and tolerability.

We are currently working on highly differentiated and novel chemical series identified from our proprietary chemical library of small molecules with our specific allosteric modulation biological assays. We have made great progress in optimizing compounds, identifying highly M4 selective compounds, demonstrating an effect in preclinical models of schizophrenia for several lead compounds and have now entered into clinical candidate selection phase, aiming to identify drug candidates ready to enter IND-enabling studies in 2024.

On to our mGlu2 negative allosteric modulator program for mild neurocognitive disorders associated with Alzheimer's disease, Parkinson's disease and depression. The program has been awarded a EUR 4 million grant to allow identification of one or more drug candidates to advance into IND-enabling studies. Mild neurocognitive disorder, or mNCD is a stage between expected cognitive decline of normal aging and the more serious decline of dementia.

Besides being potentially the early signs of Alzheimer's disease, mNCD is also often experienced by patients suffering from depression [indiscernible] is approximately 15% and augments significantly with age, affecting up to 25% of people aged 80 or more. Interestingly, mNCD is currently viewed as an intervention window for delaying the onset of dementia. There is currently no permanent drug to treat mild neurocognitive disorders. Some drugs such acetylcholinesterase inhibitors are being prescribed but showed limited efficacy and come with significant side effects.

It is, therefore, a strong unmet medical need for better treatment options [indiscernible] details by inhibiting presynaptic mGlu2 receptors or negative allosteric modulators will counteract the synaptic deficits observed in mNCD by increasing the excitability of neuro circuits involved in cognition. This objective was also followed with positive allosteric modulators of AMPA or Ampakines, which pharmaceutical companies try to develop without success. Ampakines seem to induce class-related side effects, and we strongly believe our MGlu2 NAM approach will successfully address mNCD without having these side effects.

Besides being potentially the early sign of Alzheimer's disease, mNCD is also often experience by patients suffering from depression. The 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 compound.

Our project has been awarded a EUR 4 million grant in 1 or more drug candidates to enter IND-enabling studies. Eurostars funds highly innovative projects to address unmet needs therefore, we see this as a significant validation of our project, while providing us with funds for 3 years. [indiscernible] will lead a consortium of highly experienced teams with complementary expertise for fully optimization of different series clinical candidate selection phase before identifying clinical drug candidates to enter IND-enabling studies by end of 2025.

In summary, our drug discovery engine has made great progress with multiple drug candidates advancing towards IND-enabling studies. The renewed commitment of our partner, Indivior, and the recent award of EUR 4 million grant, a further validation of the quality and profitability of our steric modulation platform.

This concludes our prepared remarks on the progress of our R&D programs and now hand it back to Tim.

[Timothy Dyer, executive]

Thanks, Robert. I'll now switch to an overview of the financials. Starting with the income statement. We recognized CHF 0.3 million of income in Q3 compared to CHF 0.4 million in Q3 of '22. The primary source of revenue is research funding from our collaboration with Indivior. In terms of expenses, R&D expense is CHF 1.8 million in Q3 2023 compared to CHF 2.8 million in Q3 2022. The decrease of CHF 1 million is primarily due to the termination of dipraglurant development in PD-LID in June of 2022. G&A expenses were CHF 1.2 million in Q3 compared to CHF 1.8 million in the same period 2022.

The decrease of CHF 0.6 million is primarily due to reduced share-based service costs and decreased D&O insurance. The finance result is primarily related to foreign exchange gains on U.S. dollar cash deposits and to a lesser extent to interest income. Now to the balance sheet. Our assets are primarily held in cash, and we completed Q3 with CHF 4.8 million of cash held in Swiss francs and U.S. dollars. Other current assets amount to CHF 1 million and primarily relate to prepaid D&O insurance and retirement benefits as well as other trade receivable related to our agreement with Indivior.

Current liabilities of CHF 1.9 million, decreased by CHF 1.4 million compared to December 31, 2022, primarily related to our R&D, payables and accruals. Noncurrent liabilities of CHF 0.3 million, increased [indiscernible] million compared to December 31, 2022, and primarily related to retirement benefit obligations.

Now to summarize. So ADX71149 Phase II epilepsy clinical study completed recruitment of patients and top line results are expected in Q2 of next year. We believe the recommendation of the independent review committee to continue the study is very encouraging and suggest that 149 could be having a positive impact on patients. We continue to believe in the value of dipraglurant and are completing preclinical profiling in post-stroke recovery.

In parallel, we are pursuing collaborative arrangements to advance development and look forward to showing more information in the future. Our preclinical programs continue to make solid progress towards delivering drug candidates for future clinical development and important therapeutic areas and stress-related disorders, chronic cough, cognition and schizophrenia.

As a reminder, our portfolio was discovered in-house from our pioneering allosteric modulator drug discovery platform. Currently, we have significant intellectual property on all programs. We have a track record of securing partnerships at the preclinical stage and supportive top-tier investors. We've recognized the 2023 stock performance, and current market capitalization is very disappointing. However, we are having multiple business discussions across our portfolio and strongly believe that if we are successful in executing our near-term partnering strategy, then our stock price should move to recognize the value of our portfolio.

This concludes the presentation, and we will now open the call for questions.

[Operator]

[Operator Instructions] Now we're going to take our first question over the phone. And it comes from the line of Leonildo Delgado from Baader-Helvea.

[Leonildo Delgado, analyst]

The question is, what can we expect if the epilepsy readout in 2Q '24 is positive? So the question is basically, what is the immediate implication for Addex in 2024?

[Timothy Dyer, executive]

Yes. So thanks for the question. And well, the immediate implications for Addex, well, as you know, Janssen is operationally executive and they're responsible for financing the study. And so Addex has very little -- well, no control over the future development. And we have very limited visibility. However, we believe that the data that's been generated because they've looked at 2 doses. So should the study be positive and then we would expect the program to be moved forward into a pivotal study.

But again, we don't have visibility on exactly what the plans of Janssen are with respect to future development.

[Operator]

[Operator Instructions] At this moment, there are no further questions over lines, and we will proceed to any written questions.

And the first question comes from the line of Peter Alec. And the question is, EUR 4 million Eurostars grant, when will the money be paid?

[Timothy Dyer, executive]

Yes. So yes, some of that money comes to Addex and some of that money goes to consortium partners. And we are [indiscernible] that money to be or a significant part of the money that's allocated to Addex to be received by Addex quite soon. But we are not providing the details of how that money is split at the current time.

[Operator]

The next question comes from the line of [indiscernible]. In the IRB review of unblinded data from 149, were efficacy measures unblinded? Also, what any changes in dosage made between Cohort 1 and Cohort 2?

[Timothy Dyer, executive]

Yes. So thanks for the question. Yes, so the independent interim review committee had some very clear guidance from Janssen. And they had -- they were given clear guidance that they should recommend to stop the study if they [ did see ] a certain level of split between active dose and placebo. And the fact that they -- and also, of course, if they saw any safety -- significant safety issues, then they had to recommend to stop.

Now the recommendation to continue means that they must have seen at least a signal of efficacy and no safety -- significant safety concerns. Now -- and that was Cohort 1. Now what we know is that Cohort 2 is a higher dose than Cohort 1. And this is why we are very encouraged by the combination of the recommendation [indiscernible] to continue and the fact that Cohort 2 is a higher dose. And now that they have completely recruitment, we are guaranteed of data. I hope that answers your question.

[Operator]

[Operator Instructions] Thank you, ladies and gentlemen. This brings the main part of our conference for close. And I would now like to hand it back to Tim Dyer for any closing remarks.

[Timothy Dyer, executive]

Well, thank you, everyone, for attending the Q3 conference call and the corporate update. We look forward to speaking to you again soon. And just wish you a nice end of your day. Thank you. Bye-bye.

[Operator]

That does conclude our comments for today. Thank you for participating. You may now all disconnect. Have a nice day.