COMPASS Pathways Plc

Thank you for standing by. My name is Luella, and I will be your conference operator today. At this time, I would like to welcome everyone to the Compass Pathways third quarter 2024 investor call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star. followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Steve Schultz, Senior Vice President of Investor Relations. Please go ahead.

Welcome all of you and thank you for joining us today for our third quarter 2024 results conference call. Again, my name is Steve Schultz, Senior Vice President of Investor Relations at Compass Pathways. And today I'm joined by Kabir Nath, our Chief Executive Officer, Laurie Engelbert, our Chief Commercial Officer, and Terry Luxem, our Chief Financial Officer, who will be giving prepared remarks, as well as Dr. Guy Goodwin, our Chief Medical Officer, and Dr. Michael Gold, our Chief R&D Officer, who will join us for Q&A. The call is being recorded and will be available on the Compass Pathways Investor Relations website shortly after the conclusion of the call and will be available for a period of 30 days. Before we begin, let me remind everyone that during the call today, the team will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. you should not place undue reliance on these forward-looking statements. Actual events or results could differ materially from those expressed or implied by any forward-looking statements as a result of various risks, uncertainties, and other factors, including those risks and uncertainties described under the heading Risk Factors in our most recent quarterly report on Form 10Q, filed with the U.S. Securities and Exchange Commission, and in subsequent filings made by Compass with the SEC. Additionally, these forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statement, even if our estimates or assumptions change. I'll now hand the call over to Kabir Nath.

Thank you, Steve. Good day, everyone, and thank you for joining us. Let me begin by welcoming Laurie to her first quarterly call with Compass. As I said on our August call, we're pleased to have such an exceptional leader join the company and round out our executive team. Laurie brings deep strategic and commercial experience, having most recently launched Orvelity at Axome. That experience will be valuable as we prepare for the commercialization of Comp360, and we're thrilled that she has joined us. In a moment, I'll ask Laurie to update you on the commercial landscape and our commercial preparation, which we know are areas of major interest and focus for our investors. And as usual, Terry will provide you with a financial update. First, though, I want to address questions around the anticipated disclosure of our pivotal Comp 360 trials. On our August earnings call, we pushed the anticipated six-week disclosure date for the Comp 005 trial back to the end of this year or early next year. Based on our recruitment to date, it now looks unlikely that we will be able to disclose the six-week data in the first quarter, and we're therefore updating our guidance for the six-week 005 data to the second quarter of 2025 to give us more assurance. Our top priority is is completing our phase three trials, and we're doing everything we can to ensure that sites recruit as quickly as possible while maintaining the integrity and quality of the trial. Mike Gold, who came on board in May, has significant drug development experience in neuroscience and is spending much of his time on the ground with the sites, which has given us new insights into some of the challenges and helped us to refine our plans. We're the first company to conduct such large psychedelic trials. And we did not have the benefit of prior comparable phase three timelines to base our assumptions on. Our phase three enrollment projections were based on the phase two B enrollment curve. And while we did factor in some new aspects of the phase three trials into our projections, there've been a number of items related to the complexity of the trials that we're now learning along the way. The Phase 2b was a simpler protocol, with all active arms, a single dose, and blinded for just 12 weeks. Comp005, on the other hand, is a 52-week trial, blinded for the first 26 weeks, and has multiple parts where additional doses can be given, which significantly increases the logistical complexity for sites to schedule patients and therapists, as well as for patients themselves. These complexities are specific to the clinical trial setting, but have resulted in inexperienced sites carefully managing patient flow as they become more proficient. Mike and his team are paying close attention to the needs of each site and are providing the necessary resources to support them on a case-by-case basis. This hands-on approach is working, and we'll be continuing to dedicate all our focus to successfully completing these trials. There continues to be significant demand from patients at the top of the funnel, and it's a matter of blocking and tackling and helping sites get patients through the process as quickly as possible. Beyond timing for the trial, we're also frequently asked what data we will be disclosing with the 005 six-week data readout. Please remember that while the primary endpoint is at six weeks, the trial remains ongoing and blinded through 26 weeks. Therefore, we're going to be limited in what we can release at six weeks so that we maintain the integrity of blinding as much as possible. We will disclose three key efficacy measures for the six-week endpoint. The madras effect difference between the arms, p-value, and confidence intervals. We believe that these data should provide investors with a clear understanding of the treatment effect, and if positive, provide an important validation of the positive phase 2b treatment result. From a safety standpoint, we'll provide a high-level assessment from the independent DSMB, which looks at unblinded data on a regular basis to monitor safety risks for patients in the trial. Suicidality is an inherent feature of TRD, and suicidal ideation is expected in this population. As part of the DSMB assessment at the time of the data readout, they will also comment on whether they're seeing any imbalance in suicidal ideation. At this six-week endpoint, we will not be able to provide secondary endpoints or in-depth safety tables as that would require further unblinding. Let me now turn to the COMP006 trial, which is our second Phase III trial. As a reminder, 006 has three active dose arms of 1 mg, 10 mg, and 25 mg, with the same three-part structure as 005, with the primary endpoint at the end of Part A at 6 weeks, a fully blinded Part B through 26 weeks, and an open-label Part C through 52 weeks. In the 006 trial, each participant gets two doses of Comp360 three weeks apart at the start of the trial. The recent Lycos Adcom and the fact that they received a complete response letter provided key insights into the FDA's thinking and some of the challenges faced by this new class of drugs. While most of the FDA and Adcom concerns were specific to Lycos and their MDMA-assisted therapy program, there was a high degree of scrutiny regarding unblinding, which is very relevant to our studies. While both the 005 and 006 trials are blinded to 26 weeks, the 006 trial, with its three active arms, is designed to minimize the risk of unblinding as participants know they will receive a dose of COM360. With a 15% cap on recruitment of patients with prior psychedelic drug experience, it will be difficult for the overwhelmingly psychedelic-naive participants to determine which dose they received, particularly between the 10 and 25 milligram doses, which is what we saw with the overlapping responses between 10 and 25 milligrams in our Phase IIb trial. We believe that this is an effective strategy to maintain blinding, and given the importance of the 006 trial for COMPASS to gain valuable regulatory and commercial insights around redosing and durability, we want to ensure that we preserve that through the blinded portion of the trial. We've therefore made the very difficult decision to further protect the blinding of the 006 trial and only release data after the 26-week time point has been reached for all patients. While recruitment for 006 has been going well so far at the sites that are up and running, We're still working through some site initiations in Europe, some of which have taken longer than projected. And we're also relying on a number of the U.S. sites from 005 to rollover to 006. Therefore, taking into consideration the shift of disclosure to the 26-week time point for 006, as well as potential unpredictability in recruitment, we now expect to disclose data for 006 in the second half of 2026. While we have a better understanding of the variables impacting enrollment, we're continuing to actively consider all other opportunities to accelerate this trial. We remain fully confident in the potential impact psilocybin can have for patients. We want to do everything we can to ensure a successful development and regulatory outcome for Comp360, and we believe that these steps give us the best chance. In parallel to optimizing our regulatory strategy, we're also focused on building a robust commercial strategy and adequately preparing the market for a potential paradigm-changing treatment and that's where Laurie is focused. I'll now turn it over to her to go through some of the observations since joining.

Thank you, Kabir. Let me begin by saying what a privilege it is to be part of the Compass Pathways team. Our focus on advancing treatment options for patients with difficult-to-treat mental health conditions, especially for patients with treatment-resistant depression, or TRD, is an area I have a personal connection to and I am extremely passionate about helping deliver potential solutions for patients and their providers. By definition, treatment resistant depression is an area of extremely high unmet need. About one third of patients treated for major depressive disorder fail to achieve remission after two therapies and are therefore considered treatment resistant. Innovation and commitment to develop safe and effective products in this patient population has been limited. And currently, there are only two FDA-approved pharmacologic treatments with a TRD indication. If approved, Comp360 has the potential to change the way patients who are suffering from treatment-resistant depression are managed. And given the high unmet need in this patient population, we see significant commercial opportunity. As I have been diving in at Compass, I have been impressed by many facets of the commercial work that are already underway. all important steps forward in preparing for launch success. These areas include ensuring appropriate billing codes are established to align with our administration model, preparing states for DEA rescheduling, KOL interactions, and investing in health economics research to prepare for future payer discussions. One additional area of important work is our bidirectional learnings through strategic collaborations with select interventional psychiatry networks. Through these collaborations, we have the opportunity to gain insights and learn from providers in various care settings within the delivery centers. Some of the key learnings include understanding current operating models, how they have adapted to support Spravato, and working with the sites to identify opportunities to scale the Comp360 operating model. Ultimately, we want to use the learnings from our collaborations to make sure that delivery centers can fit Comp360 into their current operating infrastructure at launch and are prepared to support what we expect will be significant demand for a new and novel treatment beyond today's current treatment options. An area of consistent feedback, as we have been out in discussions with HTPs over the past year, is just how much enthusiasm there is for the potential of Comp360 and how much providers want to be ready for it. One key question, which investors have as well, is whether the Interventional Psychiatry Network is capable of managing sufficient demand for Comp360 at scale and how delivery centers will handle the monitoring time required. As I mentioned above, this is an area of focus with our collaboration partners and ongoing strategic planning. But it is also worth noting, when Spravato came to market, it was a change for these centers as well, in terms of patients needing to occupy rooms and monitoring requirements. Certainly, Spravato growth would suggest that these centers have adapted and are growing along with awareness and patient demand. As mentioned before, I've been impressed with the work to date. A great foundation has been established, and I look forward to advancing our approach to commercialization. We have work to do to determine exactly how we will optimize the commercial opportunity, but my team and I are committed to ensuring Comp 360, if approved, can get to patients, and we will be working tirelessly to ensure the market is ready. I look forward to meeting with many of you in the future and providing additional insights as we progress and learn more.

me now hand the call to terry for the financial overview thank you lori i'll now step through the q3 financial results cash used in operations in the third quarter was 22.2 million dollars which includes 13.6 million dollars related to our 2023 r d tax credit that we received in full in the third quarter but had not originally been included in our third quarter cash guidance as the timing was uncertain. Excluding this tax credit, cash used in operations would have been $35.8 million, which is at the midpoint of the range for guidance that we provided of $32 to $38 million. Regarding fourth quarter 2024 financial guidance, we expect net cash used in operations to increase to between $37 and $43 million, which would put cash used in operations for the full year 2024 between $114 and $120 million, near the midpoint of our prior guidance and includes the 2023 R&D tax credit that we received this quarter and which had been contemplated in the original full year guidance. At September 30, 2024, we had cash and cash equivalents of $207 million. This compares with $228.6 million at June 30, 2024. Debt under the Hercules loan facility was $29.8 million at the end of the third quarter. Given the timing and strategic changes made to the Phase III readouts, We are taking actions to preserve cash and ensure our entire focus is on successfully completing the Phase 3 Comp360 trials as quickly as possible. Therefore, we will be reducing our workforce, including stopping our non-Comp360 preclinical efforts, as well as the potential externalization of our digital tools. Over the last several years, we have developed digital tools and technology to test evidence-based methods for assessing mental health treatments. We are now exploring externalizing these technologies, intellectual property and associated employees to a new company established by our co-founders that could potentially support an evidence-based approach for anyone developing and delivering mental health treatments for the benefit of patients. We are still working through the details and look to a final decision on this externalization by Q1 2025. Collectively, these actions will result in a downsizing of the organization by approximately 30%. While we are still working through the full details and impact on cash, we expect our cash runway to fund operations at least into 2026. Thank you, and I'll now turn the call back to Kabir.

Thank you, Terry and Laurie. We're applying the resources necessary to get these trials done as quickly as possible and best position COM360 for regulatory and commercial success. And we continue to actively review all other ways to accelerate the 006 trial. As I mentioned earlier, Mike has been traveling to clinical sites to fully understand where assistance may be needed and directing resources to them. As we encounter challenges, we're addressing them rapidly and applying those learnings to the overall pivotal program. As Terry mentioned, we're also taking action to cut costs, further focus the organization and preserve cash. In saying that, I want to acknowledge that our actions today in reducing our workforce have much bigger implications preserving cash. I know that they will have a deep impact on the lives of many employees and their loved ones. I regret that, and as a management team, we're committed to supporting them through this transition. With our two robust Phase III trials and our large Phase IIb trial, we'll have more than 1,000 patients' worth of data from well-controlled trials, as well as a full package of supporting studies for a filing. We're confident that we're well positioned for success with a clear plan and a committed team to deliver on this plan. Thank you. And I'll now turn the call to the operator for Q&A.

At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ritu Baral with TD Cohen. Please go ahead.

Hi, guys. This is Athena on for Ritu for taking my question. Was your decision to move the . offline readout made after additional FDA correspondence or a face-to-face meeting? And do you foresee any other changes to trial operations and conduct? Thank you.

Thanks, Athena. It's good to hear. Can you just check? You can hear us clearly?

Yes.

Okay, great. So that was a compass decision. It was a compass decision that we made out of an abundance of caution, really after the observing all that happened through the Lycos process and debating internally around the need to really maintain that blind through the blinded portion of 006. And, you know, we said on the trial, on the call, we continue to look at all ways we can do to accelerate the conduct of 006, and that will continue to be an active effort.

Understood. Thank you.

Your next question comes from the line of Leonid Dimashev with RBC. Please go ahead.

Hi, guys. Thanks for taking my question. I guess I'm trying to understand how the potential complexities in the trial recruitment may or may not have any impact on how Comp360 would be used in the real world i i guess is this largely just due to limitations that um you know staffing sites or is this something where booking the therapist having you know all the appointments aligned is going to be a challenge for any initial commercial uptake so there are any learnings as you go through the clinical process that might inform how you go about commercialization just trying to understand you know how much of this is also demand versus really just logistical steps thanks

No, thanks, Leo. It's a really important question. I mean, and the fundamental answer is that a clinical trial setting is clearly very different from a commercial setting in the sense of what needs to be communicated to patients and so on. But let me ask Laurie to amplify that a little with some of the key differences and how we're thinking about the commercial side.

Yeah. Hey, Leonid. Thank you for the question. So, you know, as you know, clinical trials are intentionally onerous because they're working to fit within a regulatory construct. We do not anticipate that it will flow over to the commercial side. Most likely what will happen in commercial operations when the product is approved is that physicians will be regulated based on what they're restricted by, by utilization management, formulary access, and things like that. From an operational standpoint, we are learning a lot from our clinical sites. We're also learning a lot from our key collaborations that we mentioned on the call. And a lot of that has to do with really optimizing the patient flow. And the way that I think about how we will go about optimizing the patient flow, which is we're learning from the clinical trials, but is not necessarily analogous to the clinical trials, is that you have to think about it in two ways. One, you have to make sure that the patients are adequately being referred from referring physicians to the trial sites. That's what's happening in the clinical trials. It will be a very similar situation in commercialization. We're going to need to work very hard to make sure that physicians are adequately educated to make sure that they're referring patients to the treatment centers. This requires education. This requires education on TRD. It's really helping physicians identify the appropriate patients and really making sure that they understand comp 360's clinical benefit. This will all come very naturally through a sales and marketing effort as we get closer to launch. The second piece of it, which I think is important for the underlying piece of your question, and that really is ensuring capacity of patient flow at the treatment sites. You can think about this, in my mind, I think about it in two ways. You can either go broad and really have an inefficient process where you have a lot of treatment sites and not a lot of patients flowing through. Or you can think about how you might optimize the opportunity at your sites and really look at a real concentrated effort where you're optimizing opportunities to make that patient feel efficient at those treatment sites. And those are a lot of things we're learning from our collaboration partners. We're taking a look at opportunities there.

Your next question comes from the line of Charles Duncan with cancer. Please go ahead. Mr. Charles Duncan, please go ahead.

Yeah. Can you hear me? Yes, we can.

Hello.

Please go ahead. Okay. Good morning, Kabir and team. Although I'm a little disappointed pointed on timing, I do really appreciate the focus on maintaining rigorous clinical evaluation and ultimate regulatory success. So I have a question about, you know, what has changed over the course of the last six weeks? Have you discussed this with the agency in terms of, and is it possible that your regulatory strategy in terms of 05 and 06 being necessary to has perhaps changed, or do you have any other thinking about that?

Thanks for the question, Charles. And the short answer is no, nothing about our regulatory strategy has changed at this point. What has changed clearly is a decision around what data we disclose from 006 when, but we would still anticipate the base cases that 005 and 006 are needed for a filing.

Okay. And if you could provide a little bit of color on the enrollment patterns, are you still feeling good about the ability to wash out patients from antidepressant meds that are standard of care, or is that not a complexifier at all to the enrollment?

I'll pass that to Mike. Hey, Charles, it's Michael.

So we are actually seeing a greater than 90% successful washout rate for standard of care coming into the trials. I think we just published, and I was looking for a guy that had just came out, a paper reporting on that from the phase two study. So this is not, it's not a logistical obstacle. It does remain a point of education for our investigators and clinicians in the community, because there is some, there is a reluctance to sort of tell patients they do washout, but In fact, and from what we observed from the trials, it's not a problem. We have not seen an placebo effect from withdrawal. And like I said, higher than 90% ability to complete that washout in our trials right now.

Yeah, we saw that journal psych research paper. It was helpful. I appreciate that. Last question is with regard to 06 timing, the shift to 26 weeks, seems like a year, and yet that seems like it could be a little bit longer than you would expect just due to the shifts. So is there also a modulation of enrollment or your confidence in enrollment in 06 as well?

Your maths is correct. What I would say is, as we said on the call, there is still some uncertainty around the recruitment curve. I think we're very confident, therefore, on the guidance we've given for the 26-week endpoint, but we're doing everything we can to continue to accelerate both with European sites and also with the expectation that as 005 finishes those experienced sites that have done well in 005, will roll into 006, which will be an inflection point in that curve. So you're correct. It does incorporate an element of conservatism as well around moving from six to 26 weeks.

Super. One question for Terry in terms of more math, checking my math, and that is, it seems like you have sufficient cash through 2025. Into 06 seems a little bit more of a stretch to me. Could you anticipate having sufficient cash through the read given the current view on timing for 06?

Yeah, thanks for the question, Charles. So as we had mentioned, we have $207 million of cash as of the end of the third quarter. That gets us at least into 2026. we announced a restructuring along with these delays as the trials do cost more as they go longer. And so the savings that we anticipate from the restructuring are meant to offset that and preserve cash. We are still doing some detailed analysis on the potential for savings and working through whether we might be able to incorporate additional savings to further extend runway. And that is work that we'll be doing here over the coming weeks. So we're very comfortable. We'll have cash at least into 26. If we can extend beyond that, that's the work that we're doing. And we are committed to being disciplined in our expenses and our spend and ensuring Comp 360's success.

Okay. Appreciate all the color. Thanks for taking my question. Thanks, Charles.

Your next question comes from the line of Francois Brisebois with Oppenheimer. Please go ahead.

Thanks for the question. I just want to touch back on something that was brought up on a prior question about the difference between clinical and commercial. And it seemed like the answer was there is clearly a difference. At the same time, the education will be similar in terms of referrals on the commercial side. Could you just help us understand maybe why you still feel comfortable with maybe, you know, sales potential and, and just, and also as a second question, um, can you help us understand what needs to be done between these final, like data readouts now, um, and, you know, uh, launch and just like, what would be a good estimate for a year there? Thank you.

Thanks Frank. So, uh, I'm not quite sure I caught the second part of the question. What, what needs to be done in what context? Sorry.

In context of launch, you know, between the final readouts now with the timeline pushes, just trying to understand what else has to be done after these readouts to move forward to launch. Thank you.

Sure. I'll pass that to Laurie. Thanks.

Yeah, so I'll answer your first one or try to give you a little more clarity around the first one. Again, you know, really thinking about the main question that we get from either HTPs that we're in discussion with or HTPs that we're working with or the trial sites, as well as the collaboration sites that we're working with, really is about how do you optimize