Minerva Neurosciences (NASDAQ:NERV) Q2 2020 Earnings Call

0:00 Welcome to the Minerva Neurosciences second quarter 2020 conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session following today's prepared remarks. The call is being webcast live on the investor sections of Minerva's website at ir.minervaneurosciences.com. As a reminder, today's call is being recorded. I would now like to turn the call over to William Boni, Vice President, Investor Relations and Corporate Communications at Minerva. Please proceed. Good morning. A press release with the company's second quarter 2020 financial results and business highlights became available at 7.30 a.m. Eastern Time today and can be found on the Investors section of our website.

0:51 Our quarterly report on Form 10-Q was also filed electronically with the Securities and Exchange Commission this morning and can be found on the SEC's website, at www.sec.gov. Joining me on the call today from Minerva are Dr. Remy Luthringer, Executive Chairman and Chief Executive Officer, and Mr. Jeff Race, Executive Vice President, Chief Financial Officer, and Chief Business Officer. Following our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans, and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

1:46 We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors that are more fully detailed under the caption risk factors in our filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended June 30, 2020, filed with the SEC on August 3, 2020. Any forward-looking statements made on this call speak only as of today's date, Monday, August 3, 2020, and the company disclaims any obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today's call except as required by law.

2:47 I would now like to turn the call over to Remy Luthringer. Thank you, Bill, and good morning, everyone. Thanks for joining us. I hope everyone is doing well. Today I will focus primarily on Minerva's lead product, Voliparadone, which recently completed the double-blind part in a phase 3 trial for the treatment of negative symptoms in patients suffering from schizophrenia. The significant unmet medical need is the main reason why patients with schizophrenia suffer from diminished function, and it places a huge burden on patients, their families, and the Health Care System. Today, there is no approved treatment for negative symptoms in the United States.

3:35 Based on the review of the Phase III data, which builds on the Phase IIb data, as well as additional data we have compiled over the years, we continue to believe that Rolipiridone has the potential to be the first drug to improve negative symptoms directly and specifically. After giving an update on rhodoperidone, I will also discuss the cell direction program and our decision to opt out of the co-development agreement with Janssen Pharmaceutica. Today I would like to begin with an update on the review of data from the recent phase 3 trial of rhodoperidone. The trial evaluated two doses of rhodoperidone, 32 and 64 mg, over 12 weeks.

4:23 The study was carried out in about 60 clinical sites in the U.S., Europe, and Israel. More than 500 patients were included in the trial. Following the 12-week double-blind phase, patients were offered an additional nine-month extension period of treatment with Roliparidone on either 32 or 64 milligrams. I'm pleased to report that over 300 patients entered the extension and more than 100 patients have now completed the overall one-year treatment period. I'm also very pleased to report that only a limited number of patients dropped out of the studies as a result of worsening of positive symptoms. This continues to be observed to date in the nine-month extension.

5:11 So, what have we learned about rhodoperidonex schizophrenia from this trial so far? Statistically significant differences were observed for the primary endpoint, the negative score proposed by Steve Marder, NSFS, negative symptoms factor score extracted from the PAM scale between active doses and placebo at week 4, both doses, and week 8, 64 mg only. Both groups receiving active treatment showed numerically superior improvements in NSFS to placebo at week 12, also the placebo improvement was higher throughout the phase three trial compared to the phase two B trials. We believe this may be why statistical significance was not achieved at week 12.

5:59 Functional improvement as measured by the personal and social performance scale or PSP was statistically significantly superior with the 64 milligram dose at all assessed weeks with nominal p-value of 0.021 at week 12. We continue to explore the drivers behind the improvement of negative symptoms and consequently functional improvement by looking at this core component of negative symptoms, and we suspect it is largely driven by a meaningful improvement in the patient's level of abolition or lack of interest or engagement in goal-directed behavior. So what is next? Once we complete our additional analysis of the Phase III data, we will be requesting a meeting with the FDA to discuss our data package and the path forward for rhodoperidone's development.

6:57 I would now like to address our second clinical stage program, celtorexant, Mn202. On July 1, 2020, we announced that we exercised our right to opt out of our agreement with Janssen for the future development of celtorexant. As a result, Minerva will collect royalty in the mid single digits on worldwide sales of cell direction in all indications with no financial obligations to Janssen moving forward. So the decision to opt out of the agreement at this stage of the program enables us to retain a meaningful financial interest in the future revenue stream of a compound with significant commercial potential in multiple indications. At the same time, It eliminates the company's obligation to make significant financial payments to fund the large Phase III program.

7:51 Our decision to opt out will enable us to align our human and financial resources with our primary focus to seek approval of our lead company, Wally Peridon, and to help those patients for which there is currently no effective treatment. Before handing over to Jeff to give you the financial update, I would like to restate our conviction that Lovoperidone has significant potential to be the first drug approved to treat negative symptoms. This conviction is based on our growing understanding of negative symptoms and the recent Phase III data combined with the data that we have accumulated over the past few years. This encouraging data combined with an innovative mechanism of action and favorable safety profile gives us confidence in the future of body paradigm.

8:44 Body paradigm remains an important program both for the potential benefit of patients and their families and a significant commercial opportunity to effectively treat negative symptoms in schizophrenia and beyond. I will now turn it over to Jeff. Thank you, Remy. Earlier this morning, we issued a press release summarizing our operating results for the second quarter ended June 30th, 2020. A more detailed discussion of our results may be found in our quarterly report on Form 10Q filed with the SEC earlier today. Cash equivalents restricted cash and marketable securities as of June 30th, 2020 were approximately $35.3 million.

9:36 We presently expect that the company's existing cash and cash equivalents will be sufficient to meet its anticipated capital requirements into early 2022 based on our current operating plan. The assumptions upon which this estimate is based are routinely evaluated and may be subject to change. Research and development expenses were $5.8 million in the second quarter of 2020. and Joseph Reilly. primarily reflect lower development expenses for the Phase III clinical trial of rolyperidone and the Phase IIb clinical trial of MIN-117.

10:45 We expect R&D expenses to decrease during 2020 as we have completed the MIN-117 clinical trial and the 12-week double-blind portion of the Phase III clinical trial of rolyperidone. General and administrative expenses were $5.9 million in the second quarter of 2020 compared to $4.6 million in the second quarter of 2019. For the six months ended June 30, 2020, G&A expenses were $10.1 million compared to $9.3 million for the same period in 2019. The increases in G&A expenses during the quarter and six months ended June 30th, 2020 were primarily due to increases in non-cash stock-based compensation expenses and severance benefits.

11:43 Net income was $29.5 million for the second quarter of 2020 or net income per share of 75 cents and 73 cents basic and diluted respectively as compared to a net loss of $12.5 million or a loss per share of 32 cents basic and diluted for the second quarter of 2019. Net income was $17.4 million for the first six months of 2020 or net income per share of 44 cents and 43 cents basic and diluted respectively as compared to a net loss of $28.3 million or a loss per share of 73 cents Basic and Diluted for the first six months of 2019.

12:37 As a result of opting out of the agreement with Janssen, the company recognized $41.2 million in collaborative revenue during the second quarter of 2020, which had previously been included on the balance sheet under deferred revenue. This amount represents the $30 million payment made by Janssen in 2017 and $11.2 million in previously accrued collaborative expenses forgiven by Janssen upon the effective date of the amendment. The company does not have any future performance obligations under the agreement and will recognize any future royalty revenues in the periods of the sale of products related to the agreement.

13:24 Now I'd like to turn the call over to the operator for any questions. Operator? Ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touch-tone telephone. If your question has been answered or you wish to move yourself from the queue, please press the pound key. Our first question comes from Joel Beattie with Citi. Hi, this is Sean Egan calling in for Joel. Thank you for taking my questions. a few from me today maybe a little bit more on your decision to opt out of the Seltzer Rexman program why you think that was the right decision at the time and if you have any color on whether Jensen still plans to devolve this asset going forward and then I have a follow up question on William Peridon as well Thank you for the question, so Remy speaking so clearly I mean I think this molecule is a very interesting molecule, a very important molecule, and obviously we cannot speak for Janssen, but I think this is really a project which is really moving forward, and I really hope that this molecule is going to patients who need this kind of treatment.

14:36 For the first part of the question, maybe Jeff, you can take it, why we opted out. Thanks for the question, Sean. The decision to opt out was really based on a return on investment decision. We were looking at the benefits of this program, the European rights that we had as part of our agreement with Janssen and the royalty rate compared to the size of the investment that we would have to make in the phase three program and Remy Luthringer, and I guess when that data is presented, what are the most important data metrics for investors to be kind of zeroing in?

15:44 So it's obviously a great question and it's a question we are getting quite often. So what I can say about this is that we have really done a lot of additional analysis. I alluded to this in my talk just before or in my update just before. Clearly, I mean, even if we did not hit a P-value at week 12, all the data we have in hand and all the additional analyses are showing that, I mean, this translates into a functional improvement of the patients. As I also hinted to it, it's clear that, like in the phase 2b, the abolition improvement is really the key driver. Remember we had a publication from Gregory Strauss showing that improvement of abolition was really the driver to improve overall negative symptoms and as a consequence PSP and at the end of the day how the patients are functioning.

16:50 So all this is really fitting together and all the analysis we are doing is fitting together. Now to give you a complete update with all the details I don't know when we will do this but I think the most important is that we are really preparing and be ready for the meeting with the FDA so we will submit as a request for meeting in the next coming days because we have no all the data or most of the data together it's not a matter to fine tune all this and I think the best moment to give you the update is to have obviously the outcome or the minutes from the FDA but I think the The bottom line is that we are more and more convinced that this drug is doing what it had to do. It's clear that in the phase three, we had this effect on placebo, which was more important than in the phase two B.

17:43 And it's basically not a surprise, because if you have a highly positive phase two B study, the expectation from the PIs, the sites, and even the patients or the caregiver is higher. So this is obviously one explanation. We obviously went from 30 sites to 60 sites, and this has also an impact. But overall, when you're looking to the drug, again, to the functional consequences and from where the effect is coming, abolition, with an innovative mechanism of action, I'm very confident that we will have a good meeting with the FDA. So this is where we are and what I can tell you as of today. Fantastic. Thank you, Remy and Tim.

18:30 Our next question comes from Byron Amin with Jefferies. Yes, hey, good morning, guys. This is Jeet on for Byron. Thanks for taking our questions. Maybe just two from us, Remy. I guess it looks like you're going to be scheduling this meeting with the FDA in the next couple of days. Any idea of when that meeting might perhaps take place and when you'll come back with the feedback in hand? and second, do you believe the FDA may be willing to accept post hoc analysis data and are there any examples of the FDA accepting such data in the neuropsych space for a regulatory approval? Thank you. So concerning the timing, obviously if we submit the document very soon, which will be the case, usually the time to get a meeting granted is 60 or 75 days depending on the type of meeting you will ask for so definitely we will have the meeting and the feedback during the last quarter of the end of the third quarter and we might get the feedback one month later so third quarter meeting and the feedback one month later so this is a Thank you very much.

20:07 Now, concerning your question, I mean, I think our package is not only based on postdoc analysis. Obviously, we have done a lot of postdoc analysis in order to better understand, for example, the placebo behavior. We have done, obviously, some postdoc analysis in order to better understand Thank you very much. is just confirming some analysis which was scheduled in the statistical analysis plan which has been submitted to the FDA before we did the postdoc analysis and before, obviously, the data came out or the opening of the blind.

21:00 So I think we have in our package quite a lot of analysis which has been done, not postdoc, but a priori, which hopefully will convince the FDA. Okay. I think there are some examples, maybe not in the CNS space, but there are some examples where the FDA was giving the green light to the sponsor to move forward based on not absolutely a p-value on the primary endpoint and some additional color, which was given by postdoc analysis. So again, I think we have... a lot in our data. Again, I'm not saying that we achieved a primary endpoint at week 12, definitely not, but all the rest of the data pointing towards the fact that the molecule is working, that the things are extremely similar to the phase to be.

21:55 Again, remember I showed the combination of the two studies. This will not be something the FDA will consider, but it will help. But again, long story short, I think we have enough a priori analysis, which hopefully will come in ZFTA. Appreciate the caller. Thank you. Our next question comes from Thomas Schroeder with VTIG. Hi. Good morning. This is Julian on for Tom. Thanks for taking our questions. First, just keeping in mind it's still early, can you possibly talk about what an additional Phase III study Peroloperidone would likely look like if that's ultimately in your best interest? Would it likely just be one dose and could we expect a shorter study duration?

22:41 Any other differences you could comment on at this time? So first of all, again, I mean, I as a company and personally, you know, having really moving forward this molecule from from the beginning and try really to address this unmet medical need and I think this is an important word. Here we are dealing with unmet medical need which has no treatment and this is what is really making that these patients are not able to get any decent life and are not functioning in the family life or even not speaking about getting a small job which obviously would be also very important. So again, I really think that this is really what is driving us.

23:36 Sorry, I missed you. Can you repeat your question just so that I can give you the right answer? Yeah, sure. So perhaps after you reconvene with the FDA, if it's clear after that meeting. Can you hear me? Yeah. Yeah. So after that meeting, it's in your best interest to proceed with an additional phase three study. Can you give us a sense for what that would likely look like compared to the most recently concluded one? Would there likely just be one dose? Would there be a short duration, things like that? So what I wanted to say is basically, sorry, what I wanted to say is that, I mean, obviously it's the best study or if we have to do a study, would be to go with one dose, definitely no extension like in this study or in the phase three study we just completed.

24:29 Because as you heard, we will accumulate a lot of data in terms of extension and this will be very important in terms of also having some efficacy measurements. And we already know that things are going very well in the extension. So this definitely will be a study without an extension. So one dose versus placebo, definitely not two doses. But what I wanted to say, and this is the reason why I started with explaining negative symptoms, is that abolition is a driver. We will obviously discuss with the FDA. If we have to do a study, we will discuss what is the best primary endpoint, what is a way to calculate negative symptoms, and how do we extract functioning. I think we did the right things. I think it's clear that negative symptoms is a construct of different...

25:18 Subscores, as you know, I mean, the consensus today is that negative symptoms is this 5A, abolition, anhedonia, all this is part of the negative symptoms construct. And, you know, also that, I mean, it is well accepted that the model negative score can be subdivided into two items or into two dimensions, experience and expression. And remember, Here we had, with experience, we had a highly significant P-value there. So I think there will be a discussion if we have to do a study about what is the best primary and what is the best secondary endpoint. But I think, yes, you're right, it will be a much smaller study, a much more straightforward study. But what would we change? Because you asked me all this question.

26:09 I think what we will change is definitely reduce the number of sites. because I think what happened in the phase three is that we really were able to, in brackets, control the sites or train the sites very well, but maybe one or two sites did not completely do the scoring as they should have done the scoring. so we will reduce the number of sites and we have obviously a lot of insight of how the sites have performed because we have also completed the analysis of the 60 sites who have participated to this study we have also, we went back to the analysis of all the sites the 30 sites who have participated to the phase 2b so this will be the first thing to have really the right sites to really create this analysis Motivation by the sites to really score the patients, not in the context, but really score the symptoms of the patients because this is the essence of having a separation from placebo.

27:18 All this will be a criteria we will implement in order to make sure that we have a successful study and discriminating placebo from treatment. Okay, got it. Thanks. That's very helpful. And then last, on celdorexin, are you aware of any plans at this time for development in the broader insomnia market beyond major depressive disorder with comorbid insomnia? Is that something you have any visibility on? I think we, as you heard, we are out of the program and we took our royalties. Keep in mind that the patient population, the MDD population who will be included in this phase 3 program run by Janssen, these are patients who have a complaint of insomnia. And as you know, insomnia is a big driver in depression.

28:11 But I mean, it's going a little bit beyond this because the insomnia will be characterized in the eligibility criteria of the patients. And in addition, insomnia will also be quantified subjectively and objectively during the trials. So I think the insomnia part is already covered in the trial or in the trials which will be run with the NDD population. Okay, great. Thanks very much. Again, ladies and gentlemen, if you have a question or a comment at this time, please press the star, then the one key on your touchtone telephone. Our next question comes from Jason Butler with JMP Securities. Hi, thanks for taking the question. Just a quick one for me. I'm wondering how you think about partnering priorities for Roloperidone now with this data on hand, either in the U.S. or in other global territories.

29:09 Is it more of a priority? Are there things that you would consider, or have you already started any discussions? Thanks. So Jason, maybe I will give over to Jeff in a minute, but I think as we discussed already in the past, I mean, we have always been open to discuss with inbounds we got from pharma companies. So as you know, I mean, as you can guess, a lot of pharma companies are completely aware about Voliparidone and the development we have done. And we continue, obviously, to give them the updates if updates are are asked for us, but maybe, Jeff, you want to give more color on this. Thanks for the question, Jason. There isn't really much more to add to that.

29:57 We'll have our discussion with the FDA, which should provide additional information to potential partners, and we'll have those discussions at that point in time. Okay, great. Thank you. Our next question comes from Miles Venter with William Blair. Hi guys, thanks for the questions. Just the first one on the potential differences between the placebo response in the Phase 2B and the Phase 3. I've had the data for a little time now. I'm just wondering whether there's anything that's coming up in this additional data analysis that really points to the reasons why you would have seen a difference.

30:44 Is it really just the difference in the quality of the clinical sites that you alluded to Remy that might be describing that or is there something else in the patient demographics that are coming up I only ask because this is obviously something that you're going to be formulating an argument with the FDA about so just wondering any additional colour as to the specific reasons why that differential response may have occurred Yeah so this is obviously a great question and as you can see We worked a lot on this and I think we have a clear understanding of what happened. I was mentioning the quality of scoring of some sites and definitely we know that this has had an influence on the data but I think what I was also mentioning the expectation after a positive study is increasing. Clearly the patients who have been included in the study in terms of Thank you very much.

32:10 an important study in hand which has shown a very clear effect on negative symptoms which has an influence on how the sites are scoring. There is another aspect which is important is that during the study and we have several reports from sites about patients who have dramatically improved and are back to work which obviously we will have in hand when we are going to the FDA. So really the sites could see that there is an improvement of the patients during the course of the 12-week double-blind phase. There was, towards the end of the study or towards the end of the recruitment, this willingness to push the patients to the extension because here, obviously, you know that they are treated with 32 mg or 64 mg.

32:58 So there are a lot of things which are explaining why we had this increase What I call inflation of the placebo arm. But I think the most important of our data, and I think this is something which will be very helpful when we are going to present all this, and what we will put obviously in the briefing book, but all what we will go to present to the FDA is to really show and demonstrate that between the Phase 2B and the Phase 3, The improvement we have seen with 32 and more particularly with 64 mg is the same between the two studies. We will again demonstrate that abolition is an extremely important driver and here the things are very, very clear when you're looking to the data we have today in hand and obviously we will also and more and more go into the details about PSP, which, as you know, is a functional improvement. So all these pieces are fitting extremely well together and are definitely not influenced by the placebo effect or by the placebo inflation as the primary endpoint has been influenced. And, you know, it's not really a surprise because, as I tried to explain before, Negative symptoms is a construct of different aspects and different dimensions. And when you're going more into the details, you see that, I mean,

34:28 the phase three is extremely positive and is discriminating very well, treatment from placebo. So this will be the full package we will present to the FDA. That's helpful. One final one from me. Just in terms of the small amount of patients that have discontinued the open-label extension study due to positive symptom relapse, maybe in a real-world perspective, would these patients just go on adjunctive therapy with dopamine receptor blockers and they do manage there? Or were there something specific in these patients that they must be withdrawn from roloperidone treatment? I think there is nothing specific here. I'm coming to your question about add-on.

35:14 There is nothing specific because keep in mind here that we have included more than 500 patients and we have really a handful of patients who are relapsing in the double-blind phase and there is a handful in the extension. So when you're looking to the trials which have been run with antipsychotics, I mean Thank you very much. to show to the FDA or to the CHMP in Europe that you can have a significant amount of patients with a diagnostic of schizophrenia who do not absolutely need antipsychotics in order to stay stable in terms of positive symptoms.

36:24 about your question about add-on. As you know, and we discussed this in the past, we have a review of 150 psychiatrists in the US and based on the target product profile, you have already a significant amount of these prescribers who are willing to give the drug in monotherapy. Obviously, some of them will still go as add-on because this is clinical practice and it will be Take maybe a little bit time to convince some prescribers that there are patients out there who do not need antipsychotics. But I think the field is evolving quite significantly. And as also we discussed in the past, there are no very, very good publications out showing that you can reduce very dramatically the doses of antipsychotics and the number of relapses will not increase significantly.

37:19 so I think the story is coming together but again the data we have in hand are really showing that a lot of patients do not relapse and remember when you're going with our inclusion exclusion criteria this represents 60-70% of the patients with a diagnostic of schizophrenia so we're not speaking here about a marginal population we're speaking with a very very large part of the patients with a diagnostic of schizophrenia so again Long story short, it will need a little bit of time, it will need a little bit of education, but I think we have here a drug which is really improving negative symptoms and functioning, and I still believe, and this was my hypothesis a long time ago when I started this project, when you're improving negative symptoms and functioning, you probably are also improving positive symptoms or at minimum the number of hospitalizations slash relapses because the patient is more able to cope with his everyday life.

38:26 So it's a paradigm shift. It is obviously going through a molecule which has less side effects, which is less impairing the patients, which is really having a specific effect on negative symptoms and functioning. So it will take a little bit of time to educate as a prescriber, but I think the field is really moving into the right direction here. Fantastic. Thanks for the questions. You're welcome. Our next question comes from Doug with AHC, Wayne Wright. Hi. Good morning. Thanks for taking the questions. Just a couple for me. How are you now... Thank you.

39:56 Is your line muted, Remy? It's still showing Remy's line. Ah, so can you hear me now? Yes, thank you. Sorry. Sorry, Doug. So... So clearly, your first question about, you know, going, for example, to prodromal patients or to subject to have negative symptoms and to might transform into a full-blown psychotic disease, schizophrenia, for example. This is still something we absolutely want to do, yes, because...

40:45 I think that all the data we have are showing that if you can change this, you might maybe avoid patients who are already having the full-blown disease, even if they have some negative symptoms before they have the first episode of positive symptoms. So clearly this is something we are working on, but this will be done post-approval because this is a very specific study and also a study which needs the right subjects in the study. but I mean, yes, I think earlier is better in our case or in schizophrenia. Now concerning the other assets, we have obviously the highest priority here on Voluparidone. We need to have a very good outcome with the FDA and based on a positive outcome, I think the other assets can again start to move according to plan, yes? But I mean, the highest priority is to make sure that we have the best outcome from the FDA.

41:47 And sorry about this technical issue. I was definitely on mute. Oh, no worries. And I'm not showing any further questions at this time. Okay. So thank you all for the questions, and hopefully it was helpful. We are obviously looking forward to update you and very soon about the progress we have made and I think the next major key event will be the update about what the FDA is telling us based on the data we will provide to them. So thank you again and looking forward to give you an update very soon. Thank you all.

42:32 Ladies and gentlemen, this concludes today's presentation. Thank you once again for your participation. You may now disconnect and have a great day.