Better Therapeutics, Inc.

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Good morning and welcome to the Better Therapeutics Second Quarter 2022 Financial Results and Business Update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. I would now like to turn the call over to Mark Heinen, Chief Financial Officer. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to the Better Therapeutics conference call to discuss our second quarter 2022 financial results and business update. Our press release was issued this morning and can be found in the investor section of our corporate website, bettertx.com. Joining me on the call this morning is Frank Carva, our President and Chief Executive Officer, Dr. Mark Berman, our Chief Medical Officer, and Dr. D.P. Jaggi, our Chief Strategy and Commercial Officer. During today's call, the team will provide a business and financial overview of the second quarter of 2022 and provide our outlook for the third quarter of 2022 and beyond. A Q&A session will follow our prepared remarks. Before we begin, and as a reminder, today's discussion will include forward-looking statements related to Better Therapeutics' current plans and expectations, which are subject to certain risks and uncertainties. Actual results may differ materially due to various important factors, including those described in the risk factor section of our most recent SEC filing. These forward-looking statements represent our views as of this call and should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to publicly update these statements. With that, I'll pass the call over to Frank Harbaugh. Frank?

Thank you, Mark. Two weeks ago, we announced the successful completion of the BT-001 pivotal trial. evaluating this first-in-class investigational prescription digital therapy, or PDT, for the treatment of type 2 diabetes. We were thrilled with the results, which in some cases, in fact, exceeded our expectations. The key takeaways from our presentation were that our digitally delivered nutritional cognitive behavioral therapy, or NCBT, has the potential to meaningfully impact behavior, and that such behavior changes have the potential to be powerful medicine the exploratory endpoint data specifically highlighted that behavior change that addresses the root cause of a disease has a potential to significantly improve a specific symptom such as blood sugar but that a whole array of additional health measures can also be positively impacted potentially putting patients on a different long-term health trajectory and thereby potentially changing the course of the disease The trial also highlighted some of the unique and differentiated aspects of PDTs relative to more traditional pharmaceutical drugs, such as the potential to provide broad access, other unique insights based on the data they use generates, and the possibility for continuous improvement of the therapy itself. Since we provided a comprehensive update only two weeks ago on these results, we will keep today's call short. Before I provide a brief summary of our previously announced accomplishments in the second quarter, I want to first highlight some exciting news that have emerged over the last two weeks. First, we completed enrollment in the LiftVita liver study this week and expect to announce top-line results in the fourth quarter of this year. This study evaluates the feasibility of our NCBT to reduce liver fat and improve liver disease biomarkers as a potential treatment for fatty liver disease. Insights from this study, along with results from our recently completed pivotal trial in type 2 diabetes, served to inform the potential initiation of new pivotal trials, and as such, an important stepping stone to expand our pipeline. Non-alcoholic fatty liver disease, or NAFLD, and non-alcoholic steatohepatitis, or NASH, have been steadily on the rise, and affect over 64 million adults in the US, resulting in over 100 billion in direct healthcare costs annually. NAFLD is often a precursor to more debilitating and potentially life-threatening diseases, such as NASH, and there's a significant unmet medical need since there are currently no FDA-approved therapeutics available to treat this condition. Second, we mentioned in our last call that one of the unique aspects of digital therapeutics is the fact that they are subject to continuous improvement based on the data their use generates. As we continue to evaluate the data from our recently completed pivotal trial, we're gaining valuable insights beyond just the clinical efficacy and safety endpoints. We are, for example, analyzing use patterns for our product and how these may impact clinical outcomes. The objective of this work is to feed these insights back into future product enhancements to drive better patient engagement and ultimately better clinical outcomes. We're currently evaluating how to incorporate some of the learnings from the pivotal trial into our ongoing real-world evidence program. This randomized controlled multi-site program which is expected to enroll approximately 1,000 patients is designed to generate real-world evidence to provide additional support in our payer coverage and reimbursement discussions. We expect to release initial data in 2023 when about 500 patients have completed a treatment period of at least six months. I will move on to a brief recap of our accomplishments this quarter. Overall, Better Therapeutics gained strong momentum in the second quarter, which we expect to be the beginning of a transformational period in our evolution to a commercial company. In early June, the US Patent and Trademark Office granted us our first patent, providing 20 years of coverage for several key features core to our digital therapeutics platform. The mechanisms covered in the patent relate to the way in which our platform uses machine learning and artificial intelligence to personalize treatment for each patient, which may optimize adherence and outcomes. The exclusivity will extend until at least September of 2039. In early July, we announced the publication of the Clinical Cardiology Medical Journal, highlighting the rigor of the study design and methodology as well as the diversity of patients enrolled in our pivotal clinical trial of Bt001 in adults with type 2 diabetes. And shortly thereafter, also in July, we completed the pivotal trial of Bt001 and provided a detailed update on the results. As announced two weeks ago, the trial met both its primary and secondary endpoints, showing statistically and clinically significant and durable decreases in A1c in the Bt001 group. The study generated compelling results across a range of additional exploratory endpoints, in some cases exceeding our expectations. We remain on track to submit our de novo classification request with the FDA this quarter. If BT001 receives FDA authorization, it could become the first prescription digital therapeutic authorized for the treatment of type 2 diabetes, potentially giving physicians for the first time the ability to prescribe a product that targets the root cause of the disease. Throughout the quarter and beyond, we've continued to make good progress in advancing our plans for a potential commercial launch, including expanding our team to add critical capabilities. As we discussed a couple of weeks ago, our goal is to efficiently reach sufficient providers and patients to quickly gain meaningful traction with a modestly sized market access and sales organization. To accomplish that, we intend to initially focus on innovative large health systems and the regional payers that cover them. Initial discussions with payers and providers, as well as insights from market research, are encouraging, and we look forward to providing further updates on our commercial readiness in the coming months. Dr. Mark Berman, our chief medical officer, will now provide a brief summary of the recently released positive results from the pivotal trial of BT-001 and an update on our clinical progress in general. After that, Mark Heinen, our chief financial officer, will review our financial results for the second quarter. Then I'll be back to provide some concluding remarks before we're opening up the call for questions. With that, I'll turn the call over to Mark.

Thank you, Frank. We made excellent progress advancing clinical development of our digital therapeutics platform in the second quarter. Just two weeks ago, we shared the positive results from our completion of the pivotal trial of BT-001 for the treatment of type 2 diabetes. I'll take a few minutes to recap those results. This pivotal trial set a very high bar for success by recruiting a very difficult to treat population, comparing BT-001 to a control group that could receive additional gold standard medical care beyond their usual treatment, and allowing patients to have medications adjusted the entire duration of the trial. Despite this high bar, the pivotal trial met both its primary efficacy endpoint at day 90 and its secondary efficacy endpoint at day 180. As previously reported, the population of 668 adult patients recruited for the BT-001 pivotal trial was diverse and nationally representative including representation from minority groups that have poorer access to care. Patients had advanced disease, as evidenced by a mean duration of diabetes of 11 years and multiple comorbidities, as well as by poorly controlled blood sugar despite taking, on average, just over two blood sugar-lowering medications. BT001 demonstrated sustained and improved response at 180 days relative to day 90. with absolute A1C reduction advancing from 0.3% to 0.4%, highlighting the potential for long-term improvements in blood sugar control. Compared with the standard of care control group, the 180-day A1C reduction was 0.3% greater, a difference that was statistically significant with a p-value of 0.01. We believe this was particularly remarkable given that meaningfully more diabetes medications were added to the standard of care group than to the BT-001 group. After 180 days of treatment, half of the BT-001 patients had clinically meaningful improvements, with these patients having an absolute mean A1C reduction of 1.3%. The use of BT-001 was not associated with any serious device-related events, And a significantly lower risk of both adverse events and serious adverse events was observed after 180 days in the BT-001 group as compared to the standard of care group. And these differences were highly statistically significant. Additionally, on exploratory endpoint measures, use of BT-001 was associated with additional cardiometabolic benefits, improved patient-reported quality of life and mood scores, high patient reported satisfaction and engagement, lower medication utilization, as well as lower rates of hospitalizations and emergency room visits. We believe the positive results from this pivotal trial support the potential benefits that could be afforded to patients, providers, and payers by BT-001. Based on the positive BT-001 primary endpoint results that we reported in March of this year, we initiated the Levita Liver Health Study in the second quarter. This study is evaluating the feasibility of our investigational NCBT to reduce liver fat and improve liver disease markers in NAFLD and NASH. The Single Arm Interventional Cohort Study has now completed enrollment of 22 adult patients from two specialized liver treatment clinics based in Arizona. These patients had a specialized baseline magnetic resonance imaging and ultrasound, along with blood work to evaluate markers of liver health. These measures will be repeated after an NCBT study treatment period of 90 days. The primary endpoint for this study is a change in liver fat as measured by a specialized form of magnetic resonance imaging called proton density fat fraction, or MRI-PDFF. We selected that endpoint because MRI-PDFS is a validated non-invasive proxy measurement for liver biopsy. Liver biopsy is the FDA-approvable endpoint for new drug therapies for NAFLD and NASH. We anticipate learning the degree to which changes in liver fat correlate with the engagement with our NCBT platform. This will help us optimize the platform as a potential investigational treatment for fatty liver diseases. And pending positive results should give us valuable data to design a pivotal trial in one or more of these diseases. We are excited about the rapid enrollment of our Levitas study, not just because of the potential for NCBT to address another massively prevalent and serious cardiometabolic disease, but also because this represents the first example of how we intend to use our research platform to rapidly test NCBT in new potential indications. In parallel with our LAVITA study and our real-world evidence program, as Frank pointed out, we continue to learn from the rich dataset generated through our BT.001 pivotal trial. We have commenced a data analytics study using machine learning techniques to better understand patterns of BT.001 use and develop predictive models for how use patterns may impact clinical outcomes. The ability to use granular engagement data to develop predictive models offers many unique advantages. First, we can leverage this data to target improvements to our NCBT platform, an effort that is already underway. Second, it gives us potential for near real-time use of patient-generated data to support a novel approach to patient services, which could target added behavioral support for those patients who may benefit from it most. And third, as these models grow in predictive power with progressively larger datasets, they could evolve into proprietary digital biomarkers that could also be used in fee-for-meaningful-use or fee-for-performance reimbursement structures. We believe this speaks to the immense potential we see in digital therapeutics to generate safe, evidence-based behavioral interventions that, unlike drugs, may have the potential to progressively improve outcomes for patients, providers, and payers over time. With that, I will turn the call over to Mark.

Thank you, Mark. I will begin by discussing our operating expenses for the second quarter of 2022. Research and development expenses for the second quarter were $4.2 million. This compares to $5 million for the same period last year. The decrease was primarily related to lower pivotal trial costs as the company approached completion and wind down of its pivotal trial for BT-001. This was offset by an increase in personnel and consulting costs related to preparing for the de novo submission of BT-001, as well as expanding our clinical research and software development capabilities. Sales and marketing expenses for the second quarter were $1.7 million, compared to $0.6 million the same period last year. The increase primarily reflects personnel, marketing, and consulting expenses associated with commercial readiness activities to support the potential launch of BT-001. General and administrative expenses were $3.7 million for the second quarter of 2022 and $0.9 million for the same period in 2021. The increase was primarily related to the additional cost of being a publicly traded company. Approximately $1.1 million of this increase is related to an increase in our DNO insurance. The remainder is related to an increase in headcount, legal, and other professional fees, as well as a charge related to the change in our CEO. Better Therapeutics generated a net loss of $9.9 million in the second quarter of 2022, compared to $8.7 million in the same period last year. On a per share basis, net loss was 42 cents for the second quarter of 2022 compared to 84 cents for the same period last year the decline in loss per share is primarily related to an increase in weighted average shares outstanding as a result of the spac transaction in the fourth quarter of last year now looking ahead we expect operating expenses to increase modestly over the next couple of quarters mainly driven by continued investment in our preparation for the potential commercial launch of BT-001 that's authorized for marketing by the FDA. We expect to make additional investments in commercial readiness as we have better insight into the FDA review timelines. Turning to our balance sheet, we ended the second quarter with $29.7 million in cash and cash equivalents compared to $31.7 million last quarter and $40.6 million as of December 31st. During the second quarter, our cash flow used in operating activities was $6.7 million, which was offset by a $5 million borrowing under our Hercules debt agreement. With that, I'll turn the call back over to Frank for some closing comments.

Thank you, Mark. It is truly an exciting time for us, largely because of the extraordinary opportunity to develop products that can positively impact millions of patients. and substantially reduce the cost of care for many of the most common chronic diseases. We believe the BT-001 pivotal trial has generated strong evidence about the potential of this first-in-class investigational therapy to benefit patients, providers, and payers in the treatment and management of type 2 diabetes. We look forward to updating you on our progress as we advance through the regulatory review process and our preparations for commercial launch. Before we move to Q&A, I will summarize our key priorities and milestones in the second half of 2022 and beyond. As previously mentioned, we are on track to submit a de novo classification request to the FDA for BT-001 in the third quarter of 2022. We expect to complete our health economic models for BT-001, and we'll begin to engage payers in coverage discussions also in the third quarter of this year. We expect to report top-line results from the VITA liver study in the fourth quarter of 2022. And we're advancing our preparations for the potential commercial launch of BT.001, if authorized by the FDA. And we look forward to sharing more details on our approach over the next few months. Pending sufficient capital and continued positive data, we envision to commence additional pivotal studies in 2023. And lastly, We initiated a broad assessment of potential financing options, and we expect to address our financing needs within the next six months to ensure we have the financial resources to continue to prepare for potential commercial launch and expansion into our other cardiometabolic diseases. Our entire team is energized by the positive BT001 pivotal trial results and our continued momentum in the second quarter. It is the evidence generation from this and other studies in the prescription digital therapeutic space that we believe has the potential to eventually result in PDTs becoming a major component of how healthcare is practiced and delivered. We're excited to be a leader in advancing digital therapeutics for cardiometabolic diseases, beginning with type 2 diabetes, and help shape this emerging sector of healthcare by developing potentially life-changing prescription digital therapeutics for the providers and patients who need them most.

With that, we're now ready to take your questions. Thank you. Certainly. Ladies and gentlemen, once again, if you have a question at this time, please press star 1 1 on your telephone. One moment for our first question. And our first question comes from the line of Thomas from Lake Street Capital. Your question, please.

Thank you, and I appreciate you guys taking the questions. What assumption are you guys using internally for FDA review timing?

Hey, good morning, Thomas. Thanks for your question. Yeah, so if you look at the FDA self-imposed mandate for the review of these types of submissions, it's 150 days. That, however, does not include any time that is required for responses to comments or questions from the FDA. So if you look at the few precedents that are there. Our expectation right now is that the review time may take in total around about nine months.

Great. And then just keying off with something that Mark Berman mentioned around continuous improvement and machine learning and taking data on board, what flexibility do you have to change the customer-facing app within the confines of whatever approval you get. Because, I mean, this would kind of be akin to a formulation change in a drug, right? But not. I'm just curious how FDA and you guys think about maintaining your approval while also changing the underlying app that is customer-facing or patient-facing.

Yeah, that's a very relevant question, Thomas. I'll pass this on to Mark Bierman.

Thanks, Frank. And thanks, Thomas. That is a wonderful question and good morning. So the FDA is fairly clear that as a manufacturer of a form of software as a medical device, it really is our mandate to continue to monitor the performance of the product once in a commercial state and to engage in continuous improvement. And they've set up some very helpful frameworks to help guide that process. And the way to think about it is it's a risk-based process where we have to have the internal quality management system that allows us to be thoughtful about what changes we make to the software to make sure that all those software changes are validated and verified. And they go through a risk approach to make sure that we're not injecting any new risk. ultimately get to a point where if you make substantive changes, completely change the underlying software, then you are, as a manufacturer, subject to reporting requirements so that in some cases you may need to file a 510 with the FDA. But the expectation is that would be the exception, not the rule, the vast majority of changes that one can make to improve the user interface and improve the patient experience over time. are things that can be handled internally. So this is new territory in the last many years, but has evolved, and the FDA has been very supportive of this, so we overall don't have any concerns about that process.

Great. I appreciate you guys taking the questions. Thank you.

You're welcome. Thank you. One moment for our next question. And our next question comes from the line of Rahul Ruckit from LifeSci Capital. Your question, please. Hey, guys.

Congrats on a successful quarter. Just one for me, actually. I was just wondering if there's any meaningful difference in the real-world program study design that we should be aware of. You know, is there any reason to expect that the outcomes observed in the pivotal study could be relatively similar or any different, given that that study was designed to be reflective of a real world population and environment in the first place. Thanks.

Yeah, good morning, Rahul. Thanks for that question. Mark, do you want to take that?

Absolutely. Good morning, Rahul. And as you rightly pointed out, the pivotal trial that we conducted very much was intended to mirror as much as possible real-world conditions. So, I think you're right to assume that in the real-world evidence studies, we largely have a similar setup. This is intended to mirror as much as possible a real-world setup. So, the differences between the study designs are what I would consider minor, not major. The main difference is, of course, the length and duration of these studies, which which exceeds six months and go to a minimum of 12 months of follow-up. And so that allows the potential for additional cycles of behavioral therapy, which are up to the judgment of the prescribing physician, whether a patient may benefit from, example, a third or a fourth cycle. So that will be very helpful for us in terms of understanding more real-world prescription patterns, understanding the durability of effects at 12 months. But overall, we don't have any concern that we would see inferior outcomes in this setting as a result of the study design.

Got it. Okay. That's super helpful. I really appreciate that. And actually, just one more housekeeping item. Mark, I know you kind of got it for modest increases in OPEC over the next couple quarters, but I guess more specifically in terms of R&D, how should we be thinking about that? Was this quarter kind of reflective of what we might see throughout the rest of the year, or do you expect that to increase or decrease, obviously, as well? Mark, go ahead.

Sure. Sure.

Yeah, good morning. I would expect R&D to stay relatively flat, maybe a minor increase over the next couple quarters, but relatively flat as we head into next year. The largest increase will really be as we prepare for commercial readiness. Got it. Okay. I appreciate that.

Well, Frank, welcome. I'm starting and really excited to work with you guys moving forward, but I appreciate the time.

Thank you. Thank you. And our next question comes from the line of Kee Nakai from Chardon. Your question, please.

Yes, thank you. Your PDT for NASH and NAFDI, how should we think about the positioning of that as an adjunct to something else or a standalone?

Yeah, good morning, Kee. Thanks for your question. Mark, do you want to address that?

Absolutely. Morning, Kee. At this point, there are no FDA-approved therapies for NASH or NAFL, so it really would be a standalone therapy at this point.

Okay, and assuming the data is positive but mindful of the cash position, how would we think about you advancing that into a next stage?

Yeah, as we mentioned, the purpose of this initial study really is to then inform the design of a pivotal trial. And we intend to provide the data as positive to evolve that process as quickly as possible. And as I mentioned, we have a very clear milestone out there to address our financial needs in the next six months, and that will be well in time to then kick off a potential next pivotal trial.

Okay, thank you.

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to management for any further remarks.

Well, thank you very much for your time this morning and for continuing to track our progress. As you heard, we continued our strong momentum in the second quarter, and we look forward to keeping you informed as we continue to execute on the upcoming clinical and regulatory milestones. Please feel free to reach out to us if you have any questions in interim, and I look forward to hopefully seeing and meeting some of you out on the road over the next few months. Thank you. Bye-bye.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. The conference will begin shortly.

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