Addex Therapeutics Ltd

Good day and thank you for standing by. Welcome to the ADEX Therapeutics First Quarter 2024 Financial Results and Corporate Update Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw a question, please press star 11 again. Alternatively, you can submit your questions via the webcasts. Please be advised that today's conference has been recorded. I would now like to hand the conference over to your first speaker today, Tim Dyer. Please go ahead.

Hello, everyone. I'd like to thank you all for attending our Q1 2024 Financial Results Conference Call. I am here with Misha Kalinichev, our Head of Translational Science, who will provide an update on our R&D programs. 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 disclaimers. 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 activities and achievements before reviewing our pipeline. I will then hand over to Misha, who will review in more detail some of our clinical and preclinical programs. I will then speak about the recent launch of NeuroSterics before reviewing the Q1 2024 full-year financial results. Following that, we will open the call for Q&A. We've made great progress in our GABA B positive allosteric modulator program, which is funded by our partner, Indivior, and are on track for Indivior to select a drug candidate for advancing into IND-enabling studies at the end of this month. As a reminder, under the agreement with Indivior, we have the right to select our own drug candidate after they have selected their candidate and to develop it in eight reserved disease areas where Indivior is precluded from developing their candidate. We have selected chronic cough and expect to complete preclinical characterization in the second half of 2024. We launched Neurosterix with a Series A financing round of 63 million led by perceptive advisors This is an innovative financing transaction that provides us with the resources needed to advance our preclinical portfolio without diluting our shareholders' interest in our clinical stage assets and partner programs. As part of the transaction, we received 5 million Swiss francs and a 20% equity interest in NeuroSterix, securing the balance sheet and retaining significant upside in the programs for our shareholders. I will speak more about this innovative financing transaction later in the presentation. Our partner, Janssen, completed the phase two epilepsy study evaluating adjunctive ADX71149 administration in patients with focal onset seizures with suboptimal response to levotiracetam or grivotiracetam. We reported top line data in May and unfortunately the study did not achieve statistical significance for the primary endpoint of time for patients to reach baseline seizure count when ADX71149 was added to standard of care We expect the full data set from the study in the second half of this year, and we'll work with our partners to determine next steps for the program. Now, for a quick review of our pipeline, as mentioned, 71149 has reported top-line data, and we are expecting full data set in the second half of this year. We continue to believe in Dipaklarant, and it's executing our plans to commence development in both dyskinesia, so you were Parkinson's disease, as well as preparing for a phase two group concept study in post-stroke recovery. As mentioned, our GABA-B-PAM collaboration is coming to the end of the discovery phase with drug candidates on track to start IND enabling studies later this year. And DVO is executing the substance use disorder program. And we are preparing our candidate for development in chronic cough. Now I will hand over to Misha, who will give you some more details about our exciting portfolio.

Thanks, Tim. Hello, everyone. I will start by speaking about Depravilurant and our plans for development in brain injury recovery. Following termination of the development of Depravilurant in PD-LEAD, we embarked on a detailed evaluation of a number of potential indications of interest for future development, including substance use disorder, migraine, and other forms of pain. We have completed this exercise and have identified brain injury recovery as an interesting indication for the future development of Depragnolab. We believe the differentiated profile of Depragnolab makes it particularly suitable for enhancing the impact of rehabilitation in traumatic brain injury and stroke patients. 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 leads to motor, sensory, cognitive impairment, 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 often inadequate. there is an urgent need for pharmacological agents that can facilitate the recovery simulated by rehabilitation therapies. AMGUL5 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 MGOR5 has been observed in a range of neurological disorders, including stroke, where it plays a role in so-called maladaptive rewiring of the brain following stroke. Inhibition of MGOR5, on the other hand, can facilitate adaptive rewiring of the brain, promoting neuroplasticity and creating of new functional pathways, moving the neural network towards the pre-lesion state. Exciting new evidence recently published in the journal Brain suggests that the negative allosteric modulator of mGluR5, mTEP, administered daily in rats following stroke, results in a sustained and growing improvement in sensory motor function in comparison to vehicle treatment. Similar improvement in sensory motor function was observed in animals treated daily with our mGluR5 numb depregnation. MRI imaging of the resting state functional connectivity in post-stroke rodents shows that daily administration of M-TAP also stimulates intra- and inter-hemispheric connectivity in the brain disrupted by stroke. It's important to note that improvement in brain connectivity after stroke is known to correlate with functional recovery and is observed across species. The Progleron is ideally suited to be used in tandem with rehabilitation therapies in post-stroke patients, 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 a drug product ready and a strong patent position and believe dipragluron can become a first-in-class drug to facilitate post-stroke recovery. We can also speculate that dipragluron-mediated adaptive rewiring and facilitation of recovery following brain damage can also be seen in traumatic brain injury patients. Let me now switch to GABA-B positive ulcering modulator preclinical program, which is partners with Indivior. The aim of this collaboration is to deliver a new treatment for substance use disorders. Indivior is supporting the research at ADEX and have recently committed an additional 2.7 million Swiss francs funding for us to complete clinical candidate selection activities. In addition to 13.8 million Swiss francs, total funding so far. As a reminder, GABA-B receptor activation has been clinically validated in a number of disease areas, including using Buclofen, a GABA-B orthosteric agonist. Buclofen is FDA-approved for treatment of spasticity and is widely used off-label to treat numerous diseases, including substance use disorders. 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 allosteric modulators 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 candidate selection phase, with the aim to nominate drug candidates ready to enter IND enabling studies in H2 2024. As part of our agreement with Indivio, we have the right to select drug candidates from the funded research activities for our own independent GABA-B PAM program. we have selected to focus our independent program on cough, and therefore, I will present this exciting opportunity. There is a strong rationale for developing GABA-B PAMs for chronic cough. Chronic cough is a persistent cough that lasts for more than eight weeks and can be caused by a variety of factors, including respiratory infections, asthma, allergies, and acid reflux, but also possibly by an overactive cough reflex. There is a large unmet medical need in novel anti-juice drugs as current standards of care are ineffective in 30% of patients or only moderately effective in up to 60% of patients. In addition, the current treatments carry risks of serious side effects. On the next slide, we showed that GABA-B PAMs are likely to have a superior tolerability profile in comparison to the current standard of care and show no taste-related side effects, as seen with a newly approved P2X3 inhibitor, Gihapixant. Support for using GABA-B PAMs in treatment of chronic cough comes from the clinical evidence that Baclofen, a GABA-B agonist, is used off-label in cough patients And from anatomical evidence, the GABA-B receptors are strongly expressed in airways and in the neuronal pathway regulating calls. Therefore, we believe that GABA-B PAMs could offer superior efficacy in call patients. Thus, we believe that GABA-B PAMS could be an innovative new treatment of chronic cough administered once daily via oral dosing and offering improved efficacy and tolerability with fewer non-responder 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 H22024 in parallel to delivering compounds for our partner in Divio. This concludes our prepared remarks on the progress of our R&D programs. Now I hand it back to Tim.

Thanks, Misha. Now, before I move on to the financials, I would like to spend a few moments to speak about the new Asterix transaction. Due to the excellent progress made by our R&D team in advancing our unpartnered preclinical portfolio, our M4-PAM, our mGloR7-NAM, and mGloR2-NAM programs reached a stage of development where they now need significant amounts of financing to progress into the clinic. Unfortunately, given the low market capitalization of addicts, raising the amount of capital needed would have been extremely challenging and highly diluted to our shareholders, so we decided spin out these programs and our platform into a new private company and raise the necessary capital directly into the new private company. We believe this is an excellent transaction for ADEX shareholders as it has secured $5 million for ADEX and removed the financing overhang on the ADEX stock. We have retained 20% interest in Neurosterix so we can benefit from the upside from advancing the programs into the clinic, which is now secured by the $63 million investment. capital from a high-quality investor syndicate led by perceptive advisors. As part of the transaction, we have divested our Allosteric modulator technology platform, including the majority of our staff. However, we have retained... However, we have entered into a service agreement with NeuroSterics to ensure that we can access the skills needed to execute on our business strategy. Now for the review of Q1 2024 financials. Following Nearest EREX transaction, we were required under the IFRS standards to identify continuing operations related to the retained programs and discontinued operations related to the operations and programs that were sold to Nearest EREX. All income and expense items related to discontinuing operations have been reclassed under a specific line of the comprehensive loss called net loss from discontinued operations. Starting with the income statement, which relates to continuing operations. We recognise 0.2 million of income in Q1 2024 compared to 0.5 million in Q1 2023. The primary source of revenue is research funding from our collaboration with Indivio, which is recognised as the associated research costs are incurred. Continuing R&D expenses primarily relate to our GABA B-PAM programme and remain stable. at 0.3 million in Q1 compared to Q1 2023. Continuing operations in G&A expenses were 0.8 million compared to 0.6 million in Q1 2023. The increase of 0.2 is primarily due to legal fees related to the NeuroCerex transaction. The finance results in Q1 2024 is primarily related to foreign exchange gains on cash held in US dollars and to a lesser extent interest income of the U.S. dollar cash deposit. Now to the balance sheet. Our assets are primarily held in cash, and we completed Q1 with 1.6 million Swiss francs of cash held in Swiss francs and U.S. dollars. Gross proceeds of 5 million from the nearest ERIX transaction have been received in April 2024, so are not included in this figure. Other current assets amount of 0.8 million primarily related to prepaid retirement benefits annually paid at the beginning of the year. Due to the NeuroSterics transaction, we expect 0.6 million of this amount to be reimbursed in Q2 of this year. Current liabilities of 3.3 million as of March 31st, 2024 increased by 0.4 million. compared to a like period, a like date at the previous year, and primarily relate to CRO-related accruals and payables. Non-current liabilities of 0.1 million decreased by 0.5 million compared to December 31, 2023, primarily due to the staff transfer to New Asterix. Now, to summarize, I hope you have understood how transformative the New Asterix deal is for ADEX. We've strengthened the balance sheet and secured the financing to execute on the development of our preclinical portfolio, including the M4 PAM program for schizophrenia into the clinic. And our partnership with Indivia is on track to deliver clinical candidates ready for IND enabling studies by the end of June of this year. Diproclon is ready to restart clinical development and the subject of a number of partnering discussions. Our independent GABA-B COF program is also on track to start IND enabling studies. We're validating partnerships with industries, supportive investors, and strong balance sheet, which puts us on a solid position to deliver on our strategic objectives. This concludes the presentation, and we will now open the call for questions.

Thank you. Dear participants, as a reminder, if you wish to ask a question over the phone, please press star 1-1 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star 1-1 again. Alternatively, you can submit your questions via the webcast. This will take a few moments.

And now we're going to take our first question.

And it comes from the line of Leonel Delgado from .

Your line is open. Please ask your question.

Hi, good afternoon. Thanks for taking my questions. A couple of questions on my slides. In addition to the $5 million upfront payment, should we expect more upside for ADEX when it comes to neurosterics? And so when would ADEX be able to capitalize on 20% equity interest? And so how big would the opportunity be?

Okay, thanks for the question. Yes, so the $5 million, yes, is being received in Q2. And Addix has retained this 20% interest in Nearest Derricks. Nearest Derricks has got $60 million on its balance sheet and the post-money valuation of Nearest Derricks is basically just south of 100. So the value at the date of the transaction of the 20% is about $20 million. Now, regarding upside, there was a sale of the carved-out entity. There are no milestones and royalties on any of the products that were divested into NeuroSterix. So the upside for ADEX is in its equity interest in NeuroSterix. And, I mean, there's a number of... recent deals around the Muscarinic M4. For example, AbbVie bought Ceravel for 8.7 billion. BMS bought Karuna at the end of last year for 14 billion. I think the most relevant comparator is that Ceravel had an M4 PAM. The M4 PAM had just started phase two. And what's interesting is for NeuroSterics is the cash that's on the NeuroSterics balance sheet finances the M4PAM all the way through to a stage very close to where Cerevel was with their M4PAM program. I wouldn't want to speculate about the value upside, but I think you can make your own conclusions that there is significant upside for ADEX in that 20% of NeuroAsterix because NeuroAsterix is well funded and financed to meet some very significant value inflection points. Being the advancing of one or two programs into the clinic and through phase one. I hope that answers your question.

It answers a lot. Maybe one final question on the epilepsy program. When do you think Janssen will communicate plans for the ADX 71149?

Yeah, so as mentioned, we've seen the top line results. Unfortunately, the primary endpoint was not met. We are now doing a full analysis, or Janssen are doing a full analysis of the full data set, and we are expecting to receive the full data set and the full analysis and have discussions with them about it. I mean, we're talking about H2. We're very hopeful that it will come earlier in H2. Given the timelines to do this, it should come in Q3, we would have thought. And then we will work with Janssen to work out how best to move the program forward Now clearly one option which is reasonably possible is that the collaboration gets terminated and ADDx receives back the molecule and all the backup molecules as well. So this is one of the, I would say, reasonably probable outcomes once the full data set has been reviewed. But again, until we see the full data set, we can't really fully understand whether there is a way forward in epilepsy or not.

Okay, thank you.

Thank you.

Dear participants, as a reminder, if you wish to ask a question over the phone, please press star 11 on your telephone keypad.

Alternatively, you can submit your questions via the webcast. Once again, if you wish to ask a question, please press star 11. Thank you, ladies and gentlemen.

This brings the main part of our conference to a close, and I would now like to hand back to Tim Dyer for closing remarks.

Well, thank you very much, everyone, for attending the Q1 2024 conference call. We look forward to speaking to you again soon. Have a very nice day.

That does conclude our conference for today. Thank you for your participation. You may now all disconnect. Have a nice day.