CERE (2020 - Q4)

Good morning. Welcome to the Cerevel Therapeutics Fourth Quarter and Full Year 2020 Financial Results Conference Call. At this time, all participants are in listen-only mode. Please note that this call maybe recorded. I will now hand the call over to Matt Calistri, Vice President of Investor Relations. Matt Cal

Thank you. Good morning, everyone. We appreciate you joining us for our fourth quarter and full year 2020 earnings call. On today’s call, you will be hearing from Dr. Tony Coles, our Chief Executive Officer; Dr. Ray Sanchez, our Chief Medical Officer; Dr. John Renger, our Chief Scientific Officer; and Kathy Yi, our Chief Financial Officer.

Thanks, Matt and good morning, everyone. Thank you all for joining us for our first quarterly results call as a public company. I look forward to aligning our numerous achievements from 2020 and our outlook for this year. Here at Cerevel, we remain steadfast in our goal to become the premier neuroscience company. As you may recall, Cerevel was founded in 2018, with a rich and deep portfolio of 11 small molecule programs that have benefited from more than 10 years and over $1 billion of investment at Pfizer. Within this portfolio, we now have 5 clinical programs that we expect will generate up to 8 data readouts by the end of 2023 as we continue to leverage our receptor subtype targeting approach for addressing some of the most vexing questions in neuroscience. In the fourth quarter of 2020, in response to the onset of the COVID-19 pandemic, we passed enrollment in all of our trials as patient safety is always our top priority. I am proud to say that thanks for the hard work and creativity of our team, we have been able to safely reinitiate and start dosing in all of our current clinical trials, which includes 3 Phase 3 trials for tavapadon in Parkinson’s; Phase 1 and 2 trials for our GABA PAM Darigabat in anxiety and epilepsy respectively; and our Phase 1b trial in schizophrenia for our M4-selective positive allosteric modulator, CVL-231. Meanwhile, we have continued to expand our capabilities as a company, growing our organization from approximately 65 employees at the end of 2019, to just over 100 employees by the end of 2020, with the majority of that growth in our R&D department. In the fourth quarter of 2020, we completed a groundbreaking go-public transaction, the business combination with ARYA II, a special purpose acquisition company, or SPAC, along with a PIPE transaction that together yield net proceeds of $440 million. This deal enabled advancement of our lead programs and provided us with a cash runway into 2023. This year, our momentum continues. We have two key data readouts coming later this year for CVL-231 and Darigabat. We are opening our 60,000 square foot Cambridge Crossing headquarters, complete with over 15,000 square feet of lab space to enable speedy and efficient drug discovery, and the expiration of new targets. We have multiple INDs forthcoming for preclinical programs and we are focused on leveraging enabling technologies such as gene-editing and artificial intelligence to identify new drug targets for neuroscience diseases. We are proud of how far we have come at Cerevel in such a short period of time as we seek to transform what is possible in neuroscience and bring new treatment options to patients with challenging diseases like schizophrenia, anxiety, epilepsy, and Parkinson’s.

Thank you, Tony and good morning to all of you. As you know, at Cerevel, we have a broad and diverse pipeline of clinical and preclinical stage molecules. Over the course of 2020, we have made great strides in advancing our drug candidates into the clinic. As Tony mentioned, we have begun dosing patients in all our ongoing clinical trials. And I would like to update you on each of our upcoming data readouts. I will start with CVL-231, our M4-positive allosteric modulator, or PAM, which is currently in a Phase 1b trial in patients with schizophrenia. This is a two part trial. Part A is designed to evaluate the safety and tolerability of multiple ascending doses and Part B is a placebo-controlled, double-blind pharmacodynamic assessment to detect trends in the antipsychotic potential of the compound as measured by the PAM’s total score over 6 weeks of treatment. Although this Phase 1b trial is not designed to demonstrate statistically significant differences in efficacy, we hope to identify a magnitude of effect that will inform the design to later stage clinical trials. To-date, we have completed Part A and are currently dosing in Part B. We can now refine our timing for the data readout in both parts of the trial to midyear 2021. We also expect to complete to PET receptor occupancy studies for CVL-231. Those data will allow us to fully characterize the compound and select the appropriate doses for future clinical trials. In January, we hosted an R&D event during which we discussed in detail our Darigabat program in epilepsy and anxiety. Darigabat is an α2/3/5-selective GABA A receptor PAM, with great potential to provide therapeutic benefit without the limitations seen with non-selective GABA A PAMs like benzodiazepines. We are currently dosing in our ongoing clinical trials in both anxiety and epilepsy. Our Phase 1 proof-of-principle trial in acute anxiety is expected to readout in the second half of this year. And our Phase 2 proof-of-concept REALIZE trial in focal epilepsy, is expected to read out in the second half of 2022. For tavapadon, our Phase 3 clinical trial program also known as the TEMPO trials, is ongoing. We continue to dose in all three of the Phase 3 trials, TEMPO-3 in late stage Parkinson’s, and TEMPOs 1 and 2 in early stage Parkinson’s. We expect data from TEMPO-3 in the first half of 2023 and data from TEMPOs 1 and 2 in the second half of 2023. This month, we also submitted an IND for CVL-871, D1/D5 partial agonist, the next potential therapy to enter the clinic for us. We plan to begin an exploratory Phase 2a trial in the second quarter of this year to pursue a novel indication in dementia-related apathy. Since this is a new indication in CVL-871 as a compound that we haven’t discussed publicly before, I would like to take time today to walk you through both this disease state and our approach with CVL-871.

Thank you, Ray and good morning everyone. I would like to spend a few minutes updating you on our early pipeline. In particular, I am pleased to announce that we expect to receive cooperative grant funding from the National Institute on Drug Abuse, or NIDA, to support the development of CVL-936, an opioid use disorder. As you may recall, CVL-936 is our D3-preferring dopamine receptor antagonist, which is designed to block D3 signaling within the brain, while also simultaneously reducing inhibitory signaling of the D2 receptor subtype. CVL-936 has shown encouraging activity in translationally relevant preclinical models of both substance use cessation and relapse using both nicotine and opioid induced cues. During 2020, we concluded dosing of the Cohort 1 of our Phase 1 single-ascending dose trial of CVL-936 in healthy volunteers, after receiving sufficient clinical data for the intended purposes of the trial. We are currently evaluating that data and formally plans, for continued development of this compound. We are excited about the potential for 936 as an important therapeutic option in substance use disorder. I am looking forward to updating you on our continued progress. Finally, as Tony mentioned, we are opening our Cambridge Crossing headquarters, of a nearly 60,000 square foot facility, with 15,000 square feet of the wet lab space will enable greater drug discovery, flexibility, and speed our internal drug discovery program efforts. Within our lab we are focused on essential core capabilities, we leverage our own internal expertise to drive solutions to complex scientific questions, and establish unique intellectual property positions, including the development of novel bioassays. Importantly, our lab will also provide the infrastructure to support compound synthetic and formulation activities, human iPSC cell models, in vivo genetic models and biomarker identification capabilities for both our lead programs and our early pipeline, with respect to our early discovery pipeline with multiple INDs forthcoming, in addition to one already submitted for CVL-871.

Thank you, John. I will start by discussing our 2020 financial results, and then I will spend a few moments on our cash position and expected runway. Starting with last year’s operating results, R&D expenses in 2020 were $103 million compared to $50 million in 2019. The increase in R&D expenses was primarily attributable to the advancement of our lead clinical programs, including initiating dosing in all of our ongoing clinical trials as well as investment in our early discovery efforts and increased headcount cost to support continued pipeline execution. General and administrative expenses in 2020 were $46 million compared to $33 million in 2019. The increase was driven primarily by investments in infrastructure, IT and headcount to support organizational growth, and higher facility costs associated with the commencement of a lease for our new headquarters in Cambridge Crossing. G&A expenses for 2020 also included approximately $5.5 million of one-time expenses related to the completion of our go-public transaction and other financing activities. As of December 31, 2020, cash and cash equivalents were $384 million compared to $80 million as of December 31, 2019. Our cash position was bolstered in the fourth quarter of 2020 at the completion of our go-public transaction that yielded approximately $440 million in net proceeds. This raise has allowed us to enter 2021 with a very strong balance sheet that will enable us to execute on our lead programs and continue to develop earlier stage assets.

Thanks, Kathy. As you can see, 2020 was an extremely productive year for Cerevel and we have entered this year with significant momentum. I opened today’s call by sharing our aspiration here at Cerevel to become the premier neuroscience company and we certainly remain on track to achieve that ambition, with a broad, deep and rich pipeline of new potential therapies. We have numerous programs underway that seek to address high unmet needs for millions of patients with neuroscience diseases, including schizophrenia, anxiety, epilepsy, Parkinson’s and as Ray and John have highlighted for us today, dementia-related apathy and substance use disorder as the newest considerations. At Cerevel, we are leveraging our unique expertise in neurocircuitry to advance our deep portfolio and ultimately to bring new medication to the patients who need them. Before I conclude, I want to thank our employees who are so committed to making a positive impact on patients’ lives and also thank all of the physicians, caregivers and participants in our clinical development programs. I also want to thank our investors for their support and belief in our mission. It is true that we can certainly not do this without you. With that, operator, we can now open the floor for questions.

Our first question comes from Paul Matteis with Stifel. Your line is open.

Great. Thank you so much. I have one schizophrenia question and one on your dementia apathy program. On the schizophrenia readout for 231, I guess given that the study is not p-value driven, would you agree that the best way to kind of evaluate these data is to sort of compare the PANSS reductions to what you currently saw and think about seeing something in the margin of that as a hurdle? And then on the apathy program, I was wondering if you could maybe go a little bit deeper into how you might plan on selecting patients. Specifically, how do you think about differentiating apathy versus depression or agitation? And would you include patients in this study that also had depression and want antidepressants, etcetera? I guess, maybe really in a more direct way, how can you specifically homogenize the population to this specific symptom that you are talking to? Thanks.

Hey, thanks, Paul for both questions. I am going to ask Ray to take both questions. But let me just make a very quick comment. And I know that you and others are very well familiar, but there are some listeners who may not appreciate that the CVL-231 study in schizophrenia patients is still a Phase 1b study. So, the primary goal is safety and tolerability. But Ray, why don’t you talk about how we think about – looking at that particular trial and making our decisions for the next steps of development? And then we will move to Paul’s question about dementia-related apathy.

Sure, Tony, so excited to see a question regarding CVL-231 in the schizophrenia trial. So, Paul, it’s a good question. We don’t have any preconceived ideas of what the PANSS reduction should look like or would look like. We want to see the totality of the data so we can then use that information to inform the design of our next phase trials. So, I don’t want to speculate at this juncture of what that may look like and what the data will of course inform us moving forward. In terms of the dementia-related apathy, it’s a good question as you know that trying to diagnose patients with apathy is going to be quite critical. We are using the new diagnostic criteria for apathy, which has been in development with the ISCTM working group. And with the agency, we are really looking to identify them using a criteria of the NPI apathy domain score of 4 or greater, which suggests significant apathy in an early to mid-stage dementia population, but really understanding that delineation as you are pointing out, will be one of the critical factors in the Phase 2a trial. To ensure that one, we are diagnosing the patients and really enrolling the correct patients, which is critical based on what I just outlined and two, that we choose the correct endpoint so that we can call that path forward for registration, but all important considerations as you are raising as we develop and execute this program moving forward.

Great. Thank you, Ray. Operator, why don’t we take the next question?

Our next question comes from Michael Yee with Jefferies. Your line is open.

Hi, guys. Thanks. I will ask a follow-up question on 231 as well. Given what you have just said about no preconceived notions, maybe you can describe some of the thoughts around what makes 20 mgs BID and 30 mgs QD have on receptor occupancy and how to differentiate those two doses? And is there an idea that you just want to see a nice healthy delta and would consider tolerability, you would push that forward and you just don’t want to read too much into exact numbers on the result? I was pulling up the Karuna data, right it’s like 11 to 12 point benefits. So rather than set a bar, you just try and show some healthy delta and receptor occupancy, maybe just talk to that a little bit, particularly the differences between the two doses? Thank you.

Okay. Thanks. Thanks, Mike, for the question. Ray, why don’t you take that one? You may be on mute, Ray.

Apologies that question cut out part of it. Michael, if you could repeat part of it again?

Yes. The question is in the 231 study, you have the 20 mg BID and a 30 mg QD, can you just talk about the differences between those two doses, receptor occupancy, thoughts around those two doses and what you would like to see in between those two?

Okay. So I will let John talk, Michael, around the receptor occupancy, but we are really looking at those two doses in terms of its pharmacokinetic profile and really understanding the sustainability of efficacy as a function of its – of its PK profile, meaning while it would have reasonable therapeutic levels sustained throughout the course of the day in order to achieve the antipsychotic effect that is needed in a 20 BID model versus a QD model and then looking at that – those parameters, but John can speak more to the receptor occupancy achieved with both those two doses.

Thanks. Michael, thank you for the question. So, what we believe is based on projections that can 10 milligrams BID is actually enough to achieve 70% receptor occupancy. Of course, the intent of receptor occupancy study is to confirm that. What we are really looking at with the two doses of 30 mg QD and 20 mg BID is maintaining a receptor occupancy over 24 hours with the BID dosing to extend the exposure over the daytime as well as the nights there is drug available the next morning. Our plan is to have a once a day drug and this will help inform us the difference between the two dosing presentations, will help inform us on the importance of a formulation and whether we need to maintain receptor occupancy over the 24 hours and whether that equates to an improvement in the PANSS score. But the other important point of the receptor occupancies as you know is we need to understand that dose range going forward in both 30 milligram and 20 milligram dose as we believe are really at the upper end of what we need to test for efficacy. And so what we really want to understand is what is the rest of the dose range going to look like and really the appropriate doses to take forward into the late stage program where we have to cover a dose range to really understand the safety and efficacy safety benefit ratio as we move forward.

Great. Thank you. That’s very helpful.

Okay. Thank you for the question. Operator, we will take the next one.

Our next question comes from Greg Suvannavejh with Goldman Sachs. Your line is open.

Hi, good morning. Thanks so much for the update and for taking my questions. I’ve got two this morning. One is on the dementia-related apathy program and the other is more on the financial outlook. On the first question, given that it’s a relatively new area for me, but can you give us a sense of what the history has been in terms of looking at therapeutic interventions in dementia-related apathy? I think I have come across some studies with the donepezil and bupropion. And I am just wondering what has been the success or lack thereof that’s been seen with industry and how that might help frame how we look at the opportunity that you see for your asset? And then my second question just has to do with really modeling out 2021 and is SG&A the fourth quarter number, is that a good run-rate to look at for the four quarters in 2021? And then on the R&D side, should we just be thinking about a steady evolution and increase in R&D throughout the year? Thanks.

Great, thank you. Thank you for the questions. Kathy, why don’t we take the financial question first and then we will lateral to the question around apathy, standard of care and therapeutic study.

Yes. So to address, Greg, your question on the R&D expenses, it will steadily increase throughout the year as we increase our patient enrollment. And I think it should be something that we should expect. In the G&A space, the Q4 was I think a good representation I would say for the four quarters coming in 2021.

Okay, good. Thank you, Kathy. Kathy is spot on with that. The only thing I would add is, obviously, as the year progresses, I am assuming we have got every trial is up and running, it is likely that we will add some headcount to support the expansion of the programs, but we are really focused on the disproportionate share of our spending behind the clinical programs and our other discovery efforts. So, we will keep a very careful eye on SG&A as Kathy suggests and want to make sure we are investing in the programs. Ray, do you want to take the Greg’s first question about the therapies that are currently used in apathy?

Sure, Tony. Thank you. And thank you for that. It’s a great question. So, apathy is something that’s being recognized more and more in the last decade as something that as I mentioned earlier in the call, can be quite debilitating to patients with dementia. However, our motivation really to address it is not as that, but also the fact that there are no approved therapies. And the reason for that is that if you look at the anti-cholinesterase inhibitors, there is really no proven effect that they work well in treating apathy. The SSRIs and SNRIs have been used historically, but with really no established benefit. In fact, in some cases, they can actually worsen the apathy symptoms as well. But there is some evidence supporting the hypothesis that modulation of dopamine signal may improve apathy in patients with dementia that’s been obtained from trials that have been done with methylphenidate. As you know, that’s the dopamine and norepinephrine reuptake inhibitor. And there are couple of trials that have been done that show significant effects there. And so our hope is that with this compound, because of its roughly 40% partial agonism that it will work optimally in areas of the brain, the mesolimbic areas of the brain that actually are related to motivation and reward, which operate under lower and more balanced dopaminergic tone compared to the motor pathways that don’t suffer from the same level of profound dopamine producing neuronal loss. And so that’s our thesis. And our hope is that we will be able to show those benefits in this patient population. But again, nothing approved and the medications that are currently used are not effective, which is the impetus of underlying why we are excited about this program moving forward and why the agency is working closely with us moving forward as well.

Great. Maybe just a quick follow-up just on how you are thinking about the clinical development program? And I understand that discussions are still ongoing with the FDA in terms of endpoints, but is there a clear primary endpoint on efficacy that’s universally embraced or is it still an opportunity to – or is there an opportunity for you to think creatively about a novel endpoint?

Right. So, the methylphenidate trials use the neuropsychiatric inventory, the NPI-A and they looked at the apathy global score. We are going to be using a series of endpoints, including the NPI-C, which is a broader scale that takes caregiver burden into consideration and some other shows I mentioned earlier in the call that will give us an idea of which one will probably be most sensitive to really delineate the best approach to detect the improvements in apathy. So in fact, that’s part of the exercise of developing this Phase 2a trial is to conduct the trial, collect that data, do the necessary validation work, work closely with the agency and their teams to really look at what would be an ideal primary endpoint moving forward that will really heighten the benefits of this therapy and what it is that would be a reasonable incredible way to evaluate the improvements in apathy. So, we are literally carving the path forward by working very closely with the agency naturally to do so.

Thank you very much.

Very good. Thank you. And thanks for the question. Operator, we will take the next question please.

Our next question comes from Omar Saad with Evercore ISI. Your line is open. Omar, your telephone maybe muted.

Operator, is the line still showing active?

Yes, sir.

Okay.

Omar, your telephone is muted. Please un-mute.

Go ahead, please operator.

The last person left the queue. There are no further questions.

Okay. Very good. We had some technical problems there. Well, just to wrap, thank you guys for joining us this morning. It was a great 2020, very successful on all fronts, and 2021 is shaping up to be an equally promising year. We anxiously await the results of CVL-231 in the midyear, the Darigabat anxiety study in healthy volunteers. And we look forward to providing continued updates on our progress as we move through the year. So thank you guys for joining us and enjoy the rest of your day.

Ladies and gentlemen, this does conclude the conference. You may now disconnect. Everyone, have a great day.