Vistagen Therapeutics, Inc.

Greetings and welcome to the VistaGen Therapeutic first quarter 2022 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded today, Thursday, August 12th, 2021. I would now like to turn the conference over to Mr. Mark Flather, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Nadir. Hello and welcome to the Vistagen's conference call covering its fiscal year 2022 first quarter financial results and corporate update. I am Mark Flather, Vice President of Investor Relations at Vistagen. Thank you for joining us today for this business update, and welcome to our shareholders, analysts, and anyone taking an interest in Vistagen. Joining me today are Sean Singh, our Chief Executive Officer, Jerry Dodson, our Chief Financial Officer, and Dr. Mark Smith, our Chief Medical Officer. The format for this call consists of prepared remarks from management, followed by an opportunity for questions. This call is being webcast and will be available for replay. The link can be found in the Investors IR Calendar section of our website, vistagen.com. On today's call, we will make forward-looking statements regarding our business based on our current expectations and current information. The forward-looking statements speak only as of today and accept as required by law. We do not assume any duty to update in the future any forward-looking statement made today. Of course, forward-looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated by any forward-looking statement that we may make today. Additional information concerning risks and factors that could affect our business and financial results is included in our most recent quarterly report on Form 10Q filed earlier today with the Securities and Exchange Commission. And in the future, filings that we make with the SEC from time to time, all of which are or will be available on the SEC's website. Now with the formalities out of the way, I'd like to turn the call over to our Chief Executive Officer, Sean Singh.

Thank you, Mark. Good afternoon, everyone. On behalf of our entire team here at Vistagen, I thank you for joining our call today. And with the recent surge in the pandemic from the Delta variant, we certainly hope you and yours are healthy and doing very well. As I've mentioned many times before, at our core, we're changemakers, a team at Vistagen that's committed to improving the mental health of individuals around the world. with new medicines that go beyond the inadequate current standard of care for anxiety and depression disorders. During the first quarter of fiscal 22, we maintained that steadfast commitment to our core mission and continued the strong momentum that we generated throughout fiscal 21 across all aspects of our business. Even before the pandemic, anxiety and depression disorders represented a large and growing unmet medical need both in the U.S. and across the globe. Unfortunately, while the prevalence of these conditions has grown substantially during the pandemic, meaningful expansion of differentiated FDA-approved treatment alternatives has not yet occurred. Now, arguably more than ever before, those suffering from anxiety and depression disorders need new and differentiated treatment alternatives. Against the backdrop of the substantial progress we made throughout fiscal 2021, and now through the first quarter of this fiscal year, we are confident and excited about the potential of our CNS pipeline to make meaningful changes in the lives of those impacted by mental illness related to anxiety and depression. Our most significant milestone during the quarter was the initiation of our Palisade Phase III program, led by Palisade I, our U.S. Phase III multicenter randomized double-blind placebo-controlled clinical study to evaluate the efficacy, safety, and tolerability of PH94B for the acute treatment of anxiety in adults with social anxiety disorder, or SAD. According to the U.S. National Institute of Health, SAD is the third most common psychiatric condition after depression and substance abuse. The Phase III trial is a key step in our efforts to confirm the positive efficacy and safety results that we've seen in Phase II development of PH94B as a differentiated rapid onset acute treatment in SAD. PH94B is designed to be an acute as needed treatment of anxiety for adults with SAD, treating their anxiety in the context of a triggering or anxiety provoking situation or events similar to how a rescue inhaler is used to prevent the onset of an asthma attack. At a time when we are seeing a continuing increase in the number of Americans suffering from SAD, now over 23 million Americans, and a current drug treatment paradigm that falls short of delivering necessary relief without worrisome consequences, an innovative, differentiated, fast-acting acute treatment alternative is imperative. If successfully developed, H94B has the potential to be the first fast-acting, non-systemic, non-sedating acute treatment of anxiety for the millions of Americans and others around the world who suffer from the debilitating effects of SAD and several other anxiety disorders. During the quarter, we advanced significantly on our plan to initiate, by calendar year-end, several additional clinical studies in our Palisade Phase III program, to enable the eventual submission of a PH94B new drug application to the FDA should the program be successful. Notably, Palisade 2, which will be a replicate of Palisade 1, is expected to be initiated before the end of this year. We also made significant progress with the FDA to enable the initiation of our exploratory Phase 2A clinical program for PH94B. program that will include activity in at least four additional anxiety indications, the first of which will be adjustment disorder with anxiety. With the study may proceed notice from the FDA now in hand, we are on track to start the phase 2A study in adjustment disorder with anxiety as planned before the end of calendar 2021. We also completed certain additional non-political studies of PH10, our depression candidate. that we believe are necessary to advance our Phase 2B development plan for PH10 as a potential standalone rapid-onset, non-systemic treatment of major depressive disorder. Finally, we also advanced on our plan for clinical development of AV101 in combination with probenicin, and we are on track with our plan to initiate the Phase 1B drug-drug interaction study for that combination by calendar year-end. We believe our current cash position is sufficient to advance our CNS pipeline through a very exciting stream of potential clinical and regulatory milestones with potential to be value-adding catalysts for the company. Another important milestone for Vistagen during the quarter was our recent inclusion in the Russell 2000 Index, which, as many of you know, is one of the most cited performance benchmarks for small cap companies. This milestone is notable as a notable example of how far we've advanced our company, especially during the past 15 months since our consensus-building meeting with the FDA in mid-2020. We believe we are only in the beginning stages of what has exciting potential to be a remarkable growth curve for all of our stakeholders. Inclusion in the Russell 2000 Index has already increased awareness of our company within the investment community, and we expect this trend to continue in the years ahead. We certainly welcome the larger audience. We continue to execute on additional noteworthy milestones during the second half of this year and well beyond. Vistagen is dedicated to creating change in the mental health landscape. And to help accomplish this, we continue to strengthen our team with individuals who not only possess vast knowledge and experience, but who also share our passion for social change and align with our company values. We believe that in the search to create medicines for a diverse global population with unmet needs, we must seek out and listen to the opinions of diverse individuals. Recently, Vistagen announced the appointment of two new female members to our board of directors, Mary Rotono and Margaret Fitzpatrick, who combined with prior appointments of Anne Cunningham and Dr. Joanne Curley, bring Vistagen's board to a female-led majority. significant advancement and worthy distinction in board representation within the public biopharma space and beyond. Ms. Rotuno brings extensive healthcare expertise to Visigyn's board as both a leader and a strategist. She began her career serving patients as a registered nurse and transitioned to serving clients in healthcare law, allowing her to pursue both her commitment to helping others and advancing the future of mental health and wellness. Ms. Fitzpatrick has a strong background in developing and executing multiple high-impact, customer-focused marketing communications initiatives for some of the world's largest and most successful companies, including Johnson & Johnson and Cigna. Both of these announcements highlight the importance of bringing broader perspectives and experiences to our boardroom, and we hope to enact meaningful change, helping to set the stage for more public and private companies across all sectors to continue to diversify board memberships. I would now like our CFO, Jerry Dodson, to provide a summary of some of the highlights from our fiscal year 2022 first quarter financial results. Gary?

Thank you, Sean. As Sean mentioned, I'll highlight a few items from the first quarter of our fiscal year 2022 financial results. I would also encourage everyone to review our quarterly report on Form 10-Q, which was filed with the SEC earlier today. this afternoon for additional details and disclosures. Vistagen recognized $0.4 million in sublicense revenue pursuant to its PH94B development and commercialization agreement with Ever Insight Therapeutics, which is now Afamed Therapeutics, during the first quarter of fiscal year 2022, which ended on June 30th, 2021. compared to none in the first quarter of fiscal year 2021, ending on June 30, 2020. Our research and development expenses increased from $1.7 million to $5.6 million for the quarters ended June 30, 2020 and 2021, respectively. This increase is primarily due to expenses related to the commencement of our PH94B Palisade Phase III program, notably the initiation of the Palisade I Phase III clinical trial, but also including expenses for the preparation for and execution of other clinical and non-clinical development, outsourced manufacturing, and regulatory activities for both PH94B and PH10, which in aggregate accounted for increased expenses of approximately $2.7 million. during the fiscal 2022 first quarter. Salaries and benefits expense for the quarter ended June 30th, 2021, increased by approximately a million dollars versus the comparable prior year quarter, primarily due to the hiring of additional senior management and other personnel focused on clinical operations, outsourced manufacturing activities, and regulatory affairs. General and administrative expenses increased to approximately $2.5 million from approximately $1.4 million in the first quarter ended June 30th, 2021 and 2020, respectively. The increase was primarily due to the hiring of additional senior management and other administrative personnel. Our net loss for the first quarter of fiscal 2022 ended on June 30th, 2021. was approximately $7.7 million versus a net loss of $3.1 million for the comparable period of fiscal year 2021. At June 30th, 2021, the company had cash and cash equivalents of approximately $97.8 million. I would also note that from July 1st, 2021 through today, The company has received approximately $900,000 in cash proceeds from the exercise of outstanding warrants. Again, please refer to our quarterly report on Form 10-Q filed earlier today with the SEC for additional details and disclosures. I'll now turn the call back to Sean.

Thanks, Jerry. Our patient-focused and investor-focused priorities have guided us through these challenging times and have led our company to what we believe is the strongest position in our history. Our journey to this point would not have been possible, nor will our future success be possible without the commitment and patient endurance of the entire Vistagen team, our collaborators, and our stockholders. With relentless effort to focus on creating life-changing value for patients and our shareholders, All of us at Vistagen are grateful for the privilege and the opportunity to make a difference, to improve the lives of those battling mental health challenges all over the planet.

Thank you, Sean. This concludes our prepared remarks. Naderj, we'd like to now open up the call for questions.

Thank you. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Once again, to register for a question, please press one four. Our first question is coming from the line of Andrew Tsai with Jefferies. Please go ahead.

Okay, great. Thanks and good afternoon. Appreciate you taking my questions. First one is on the Palisades. Glad to hear it's on track and so forth. For that study, are you By chance, are you taking a look at the overall safety efficacy data as well as discontinuation rates, for example, on a blinded basis? And if so, would it be fair to assume that no news is good news, at least on the safety front? Because if you had seen an SAE, for example, in one of your patients, you would have shared it to the street.

Most importantly, share that with the FDA. Thanks, Andrew. Mark, anything else you want to add on that?

Yeah, I think it's safe to say yes, and I agree. No news is good news. We're on track. We're following it closely, but yeah, so far so good.

Fantastic. Thank you for confirming. And then separately for the adjustment disorder study that's starting up by year end, can you just give us a little bit more framework or context, maybe what common drugs or treatments are are used for adjustment disorder, if at all? And if there are any existing treatments, what are their limitations? And then maybe a corollary to that is, how are you thinking about the study design? How long in duration? Are you using the same doses as you are in the SAD trial? How many arms? You know, what are the geographies so far? Thank you.

Yeah, sure. Sure. Let me address that. Happy to address that. So we're kind of paving new ground here. in the U.S. especially, there really haven't been any placebo-controlled trials to speak of against, you know, known agents because nothing has been approved for this disorder. You know, so what do people take? You know, they often take benzodiazepines, which, you know, adjustment disorder should be, you know, somewhat self-limited disorder. And yet, as you know, people start on benzodiazepines and they're on them for years. because of the dependence issues. So nothing's been approved. Very little has been studied. Now, we thought our drug would be ideal for this because of its risk-benefit ratio. Because it has a very good safety margin, we believed it would be appropriate for this disease, which you can kind of conceive of as PTSD-like. As far as the study design, it's a one month in duration, placebo versus our drug, PH94B at 3.2 micrograms. But different from what we're doing in social anxiety disorder, we're giving our drug four times a day. And that's as much as we feel comfortable prescribing it to people because that's what we did in the preclinical tox studies. So people are taking it four times a day. In this study, we'll do a number of things. One, it's our first look-see into a disorder beyond an anxiety disorder, beyond social anxiety disorder. Two, we're giving it on a fixed regimen, four times a day versus as-needed basis, an SAD. We don't know, you know, if it will treat this disorder or not, but because we believe the mechanism of action is should be relevant to many anxiety disorders, will at least get a first read on whether it's possible to go beyond PRN treatment in social anxiety disorder. So, again, this is really an exploratory trial. But, you know, I think it could reveal quite a bit of information to go into a larger study in adjustment disorder and beyond social anxiety disorder.

Thanks.

Actually, I have one thing to add to that, Andrew. The primary endpoint in the study is the change from baseline in anxiety measured by HEMA at the end of the four weeks of treatment.

Okay, great. And it's just basically the idea of the exploratory trial, just looking for a signal. If you find a signal, that's good, a green light. Okay. And then my last question is, you know, you mentioned, I think, preclinical talk studies. Actually, my last question is just on the peripheral studies you're running, carbon-14 FMR imaging studies. Can we expect you to share those results to the street over the coming months. I'm assuming those would be completed later this year, but I could be totally wrong. What are those timelines and so forth? Thanks.

The carbon-14, yes, will be completed this fall. We'll certainly share those results. I think you're going to find them interesting. The fMRI will probably start this fall, but we won't – the study won't read out until – What do we say? I think second half of next year. It's going to take a little while to run that study.

But yes, we will certainly share them when we get the results.

Thanks. Very good. Very helpful. Thanks, Andrew.

As a reminder to register for a question, please press 1-4. Our next question is coming from the line of Tim Lugo with William Bear. Please go ahead.

Hi, guys. This is John on for Tim. Thanks so much for taking our question. So just to start, just wondering your thoughts about how enrollment in Palisades may be impacted with this latest COVID-19 wave, specifically around the study being a laboratory study requiring in-person visits?

Yeah, sure. So obviously, we're monitoring this. So far, it has not been an issue. We've been running this summer throughout the country. And, you know, the enrollment is going well as expected. We haven't, I have not heard of patients turning this down because of fears of coming in the clinic. So our sites are up and running and, you know, they're following their own individual protocols. But no, we haven't slowed down on account of this. And so unless something gets much, much worse, I think we're still on track here.

All right, great to hear. And maybe as a follow-up, how you maybe are thinking about and managing any impacts of palisades due to just overall rising anxiety given the pretty anxious time that we're all in right now?

Is that addressed to me or to Sean or?

Whoever wants to. John, can you restate it? I'm not totally clear on what you're asking.

Sure. So just given that overall anxiety is rising right now in the U.S., given just another COVID-19 wave, how you're thinking about how that might impact the study?

Okay. Well, all of us in the industry are facing similar concerns. And fortunately, we've got 18 months or so of activity at the various sites across all different sectors that have got SOPs in place to protect the staff, to protect subjects. So, fortunately, implementing those, as Mark said, seem to do what needs to be done. Of course, the needs continue to rise, as you said, and I think that's all the more reason why we hope we can continue with the execution efficiency that we've seen so far.

Yeah, I would echo that. You know, obviously, you know, Yeah, obviously, there is a lot more anxiety. And unfortunately, it's continuing to rise. And actually, from what I'm hearing, is that the clinical sites are busier than ever. And I think it's probably because people recognize that we do need new medicines in both depression and anxiety. And so things are quite busy now. And I actually... you know, expect them to continue to be so throughout the rest of this pandemic. So, yeah, it's busy times because we need these new medicines.

Great. Thanks so much for the updates and congrats on the progress.

Thank you.

As a reminder to register for a question, please press 1-4 on your telephone keypad. And we do have a follow-up question coming from the line of Andrew Tsai with Jefferies.

Please go ahead.

Thank you. I wanted to ask on PH10 as well. I mean, it sounds like you finished non-clinical studies, I guess. What did the data look like? What were they? And then because it sounds like you're initiating the phase two in mid-2022, so can you remind us what the gating steps are until you can initiate the study? Thanks.

Yeah, we haven't announced the results of those studies yet, Andrew. The goal for us is to get all the regulatory package together, submit it before the year end, if not the year end, right around the corner into 22, and to initiate the Phase 2b study in the first half of 22, so as early as we can. But, you know, fortunately, we have, as with 94b, it's a very safe drug. everything we've seen so far to date. So we just have to make sure we get the U.S. regulatory package in order to be able to put us in a position to launch what we expect to be about 150 subjects, a phase 2B study with PH10, slated as a potential standalone treatment for major depressive disorders. So very excited about it. It's MOA in many respects is similar to that of 94B. at least in terms of acting on the peripheral neurons and then through the olfactory bulb neuron, as we've talked about. And we're excited to get some early reads to see whether we do have what we expect, which is a rapid onset activity for a drug that's got a remarkably different safety profile than what we've seen to date with other antidepressants. We'll keep you posted on the progress, but so far it's all moving in the right direction to be able to green light the effort in the first part of 22. Got it.

Thanks again.

All right. That's all the time we have for questions today. If you have any additional questions, please contact us at ir.vistagen.com or call any of the phone numbers listed on the bottom of our press release today. Thank you for tuning in, and we appreciate everyone's attention and support. We look forward to keeping you current on our continuing progress. This concludes our call. You may all disconnect now and have a great day.