Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE) Q1 2023 Earnings Call Transcript May 7, 2023

Operator: Good morning and welcome to Cerevel Therapeutics First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that this call may be recorded. I will now hand the call over to Matt Calistri, Vice President of Investor Relations.

Matthew Calistri: Thank you. Good morning, everyone. We appreciate you joining us for our first quarter 2023 earnings call. On today’s call, you’ll be hearing from Dr. Tony Coles, our Chairperson and Chief Executive Officer; Dr. Ray Sanchez, our Chief Medical Officer; Dr. John Renger, our Chief Scientific Officer; and Mark Bodenrader, our Interim Chief Financial Officer. During our call today, please refer to our press release from this morning, detailing our first quarter 2023 performance, as well as our updated corporate presentation, both of which are available on our website. I would like to remind you that we will be making forward-looking statements that reflect our current views related to, among other things, the potential attributes and benefits of our product candidates and the format and timing of our product development activities and clinical trials.

We strongly encourage you to review the information that we file with the SEC regarding specific risks and uncertainties. I will now hand the call over to Dr. Tony Coles, Chairperson and CEO of Cerevel to provide an overview of our achievements and outlook.

Tony Coles: Good morning and thank you, Matt. Thank you for joining us for our first quarter 2023 business results call. This morning we announced the appointment of Ron Renaud as the next President and CEO of Cerevel, and I am really looking forward to partnering with him as I return to where my career with Cerevel began in 2018 and that’s Chairperson on the Board. I have known Ron for more than a decade and his tremendous experience and leadership will serve the organization well as it prepares for an exciting future, most notably the seven data readouts that we expect in the coming year. As I worked with the Board to plan this transition and return to my role of Chairperson, we knew that a smooth change in leadership required the right timing and the right successor.

The fundamental strength of the company made now the right time, and we know that in Ron we get found the right successor. Ron brings deep experience in the life sciences sector and as the former CEO of both Translate Bio and Idenix Pharmaceuticals, he is truly the perfect fit to become the next CEO of Cerevel. I have great confidence in Ron’s ability to lead Cerevel into its next phase as we work together to unravel the mysteries of the brain. Ron will join Cerevel at a time when we are steadfast and focused on executing our clinical trials and optimizing our cash runway with thoughtful fiscal discipline. Cerevel has a tremendous pipeline that is poised to transform what is possible in neuroscience, and we look forward to bringing new treatment options to as many patients as possible as soon as possible.

Let me first review the status of our lead programs, starting with Emraclidine. Our M4-selective positive allosteric modulator, or PAM, our Emraclidine program has maintained strong momentum and our robust Phase 2 EMPOWER program for adults living with schizophrenia is enrolling well and remains on track for a data readout in the first half of 2024. At Cerevel, we’re committed to advancing our Emraclidine program on an accelerated basis and we continue to prioritize this important Phase 2 program and the completion of the other necessary preclinical and CMC registration enabling activities in addition to an open label extension trial in order to bring this potentially transformative medicine to the people who need it. Driven by our strong belief and conviction in the differentiated advantages of a targeted, selective, informed muscarinic mechanism, we are also exploring Emraclidine for the treatment of Alzheimer’s disease psychosis.

We were pleased to receive FDA fast track designation for Emraclidine for the treatment of hallucinations and delusions associated with Alzheimer’s disease psychosis, and we initiated a Phase 1 healthy elderly volunteer trial to support development in ADP at the end of last year. Beyond our work with Emraclidine in schizophrenia and ADP, we are also advancing therapies for other serious neurological conditions by targeting new pathways with novel selective approaches. Darigabat, our selective alpha 2/3/5 GABAA PAM is another Cerevel program with multiple potential indications. The first of these is epilepsy, the fourth most common neurological disorder. Through our Phase 2 REALIZE trial, we are studying Darigabat in focal epilepsy, an area of tremendous unmet need for patients who need better control of their seizures.

We announced today that we expect this program to readout mid-year 2024 as one of our seven anticipated mid to late stage data readouts next year. We have tremendous confidence in the potential of Darigabat to address important unmet medical needs, not only for epilepsy, but in the potential treatment of anxiety related disorders. Given its selective receptor subtype profile and its avoidance of alpha 1, the key receptor subunit, we believe is the main driver of side effects for benzodiazepines. We will be initiating our Phase 2 trial and panic disorder this quarter as planned and look forward to providing you with future updates as that trial progresses. Turning now to Tavapadon, the first D1/D5 partial agonist in development for the treatment of Parkinson’s disease.

We believe our registration directed Phase 3 program has potential to establish Tavapadon as the cornerstone treatment across the spectrum of Parkinson’s disease therapy. We believe Tavapadon could serve as both the preferred monotherapy choice for the newly diagnosed patient and the ideal adjunctive therapy choice to L-Dopa as disease progresses. All three of Cerevel’s Phase 3 trials in Parkinson’s disease known collectively as the TEMPO trials are ongoing along with the corresponding open-label extension trial. We expect data from TEMPO 3 now in the first half of 2024 and data from TEMPO 1 and TEMPO 2 in the second half of 2024. While we remain single-mindedly focused on executing our broad range of clinical trials, we recognize the need for continued fiscal discipline.

As Mark will explain in detail in a moment, we have reduced our planned 2023 operating expenses, while maintaining a rigorous focus on our key priorities, specifically the data readout, timelines for our lead assets and investing in our early pipeline where we believe there is long-term value creation potential. We will continue to monitor our expenses for additional opportunities to manage and gate spend where possible, and we will explore external business development and partnering opportunities such as risk sharing arrangements or XUS partnerships as appropriate. Cerevel’s cash, cash equivalents and marketable securities are expected to support our seven data — anticipated data readouts in 2024 and fund our operations into 2025. Importantly, we have ample cash and runway to see us through the top line data readout of our racking Phase 2 program.

The strong fundamentals of our business make this the ideal time to welcome Ron to the team as we look forward to a bright future for Cerevel and the patients we seek to serve. With that, let me now turn the call over to Dr. Ray Sanchez, our Chief Medical Officer, to provide some added color about our lead programs. Ray?

Raymond Sanchez: Thank you, Tony, and good morning to all of you. First, let me say how delighted I am to welcome Ron Renaud to the organization. Ron’s operational expertise and experienced leading dynamic organization like ours, fantastic fit for Cerevel as we seek to develop new treatment options in some of the most challenging neuroscience diseases. Let me start with a review of Emraclidine. Our robust Phase 2 trials are enrolling well. We expect this progress to continue and look forward to data in the first half of next year. These two adequately powered three arm trials called EMPOWER 1 and EMPOWER 2 are being conducted worldwide and will each randomize 372 adults living with schizophrenia and experiencing an acute exacerbation of psychotic symptoms.

The first trial will test Emraclidine 10 milligrams and 30 milligrams once daily versus placebo, and the second trial will test Emraclidine 15 milligrams and 30 milligrams once daily versus placebo. We designed these trials to potentially meet the criteria necessary to service pivotal trials based on what we expect the FDA will evaluate in a registrational package. We are also enrolling patients in EMPOWER 3, our 52-week open label safety extension trial, and we are prioritizing the completion of the necessary non-clinical and clinical pharmacology studies in order to accelerate a potential registrational package for Emraclidine in schizophrenia. This program is clearly a top priority for Cerevel and I am very pleased with our progress to date.

We are also moving forward with our Phase 1 healthy elderly volunteer trial to support the development of Emraclidine in Alzheimer’s disease psychosis. The results of which will guide our clinical development plan. Turning now to Darigabat, our alpha 2/3/5 selective GABAA receptor PAM, currently in development for epilepsy and panic disorder. We believe Darigabat has the potential for both anti-epileptic and anxiolytic activity comparable to currently available benzodiazepines over reduced side effects. Darigabat’s novel mechanism of action and expected tolerability profile provide the potential for a new treatment option that may be used chronically. Our Phase 2 REALIZE trial is progressing and we now expect results mid-year 2024. We are steadfast in our commitment to advance this important therapy, and we have an experienced team that is continually deploying new mitigations to address enrollment headwinds while remaining focused on data quality.

We remain encouraged in our ongoing efforts by the 90% rollover rate into the realized open label extension, which speaks to the potential benefit to patients of Darigabat in focal epilepsy. Beyond epilepsy, we’re excited about expanding the potential application of Darigabat to the initiation of our Phase 2 trial and panic disorder expected later this quarter. Panic episodes present with a constellation of symptoms including a rapid pounding heart rate, sense of impending doom, weakness, dizziness, disorientation, and chest pain. It is estimated at least a third of panic disorder patients remain untreated and a significant proportion of patients on therapy have a partial response to treatment. Benzodiazepine, which are non-selective GABAA PAMs are commonly used in panic as an acute treatment option, but utilization is typically reserved for more severe patients due to addiction potential and other side effects.

We believe Darigabat as a selective GABAA PAM can provide anxiolytic benefit while minimizing the side effects that result from the non-selective nature of benzodiazepines. Darigabat’s potential as a well-tolerated daily option in the treatment of panic attacks could potentially improve the experience of patients living with panic disorder. We’ll provide more details on our Phase 2 panic disorder trial design and progress at a future at future time. Turning now to Tavapadon, our D1/D5 partial agonist in development for Parkinson’s disease is both a monotherapy and adjustment treatment. The number of Parkinson’s cases is expected to double worldwide from approximately 6 million in 2015 to 12 million in 2040. We believe that Tavapadon could serve as a preferred monotherapy early in disease with a potentially reduced side effect burden compared with existing therapies.

For the more advanced Parkinson’s patient, Tavapadon could be a preferred adjunctive treatment with L-Dopa due to its longer half-life and potentially improved tolerability profile and reduced incidence of dyskinesia. The clinical objective for new therapies is, of course, to enable 24 hour motor symptom control and delay the need for L-Dopa dose escalation. As Tony discussed, all three of our Tavapadon Phase 3 trials known collectively as the TEMPO trials are ongoing along with the corresponding open label extension in which we are seeing high rollover rates of 90% or more. We now expect data for TEMPO 3 in the first half of 2024 and data for TEMPOs 1 and 2 in the second half of 2024. Our other D1/D5 program, CVL-871, which we are pursuing in the novel indication of dementia related apathy is also expected to readout a Phase 2 a trial in the second half of 2024.

We have an experienced team advancing our broad and deep pipeline of neuroscience assets. We remain intensely focused on maintaining the quality of the clinical trials we conduct, and importantly not compromising the collection of data for the sake of expediency. I am looking forward to updating you on progress as we look ahead to our data from seven to mid to late stage clinical trials in 2024. With that Dr. John Renger, our Chief Scientific Officer, will provide an update on our early stage portfolio. John?

John Renger: Thank you, Ray. Good morning, everyone. First I’d like to underscore Tony and Ray’s warm welcome to Ron. I’m personally really excited for all that we’ll be able to accomplish together to writes Cerevel’s next chapter. I’m extremely pleased with the progress that we’ve made in our research and early clinical development programs. Let me start with an overview of our clinical stage selective kappa opioid receptor antagonist, or KORA, called CVL-354. Kappa opioid receptors represent a key mediator of behavioral reinforcement linking [indiscernible] nuclei. The reward effects of both drugs of use and natural behaviors, including stress responses, coalesce at the key point of the kappa receptors via dynorphin signaling.

Therefore, we believe the core approach is one that could correct behavioral dysregulation and address a range of psychopathologies including major depressive disorder and substance use disorder. Recently, this novel mechanism of action has shown promise across a number of preclinical models of depression, anhedonia and opioid withdrawal symptom improvement. We refer to encouraged to see a demonstration of clinical proof-of-concept in the Phase 2 major depressive disorder trial completed by one of our peers. Our recent progress on our internal program has been featured in scientific presentations, which revealed the receptor step type selectivity of our lead molecule 354 and non-human primate PET receptor occupancy studies. These studies demonstrate dose dependent target engagement of 354 with at least a tenfold more potent binding and kappa receptors overview opioid receptors providing compelling evidence for the receptor selectivity of our compound.

These data are being confirmed clinically currently, and a recently initiated human PET receptor occupancy clinical trial examining the human kappa and knee receptor selectivity of this compound. We believe the clinical expiration of PET receptor occupancy binding 354 will be important to inform appropriate dose ranging across multiple potential indications. This will be important data to have in hand alongside our Phase 1 single and multiple sending dose study is currently concluding. Shifting gears, the secondary I would like to highlight is our work with the M4 pathway. We firmly believe in the therapeutic potential of muscarinic M4 receptor selectivity based upon our own clinical experience with Emraclidine today. As previously disclosed, in addition to our robust Emraclidine program, we advanced a highly selective M4 full agonist molecule into IND enabling studies.

Our current understanding of the science behind receptor selectivity strongly supports our confidence in the ability to utilize a full agonist pharmacological approach designed to enable therapeutic indication expansion, bolstering our desire to create a muscarinic M4 selectivity based therapeutic franchise. We’ll be further updating our progress on this program in the near future. Want to sincerely thank the teams are hard at work and earlier stage research and clinical development, as well as supporting our late stage program NDA filing activities. As I have stated previously, we are purpose-built to unravel the mysteries of the brain to treat neuroscience diseases, and our scientists are committed, passionate, experienced, and highly skilled at what they do and are actively expanding our earlier stage asset portfolio to ensure continuity in our pipeline for many years to come.

We’ll continue our updates in the is appropriate. I’m now going to hand it over to Cerevel’s Interim Chief Financial Officer, Mark Bodenrader, to review our financial performance for the first quarter. Mark?

Mark Bodenrader: Thank you, John. Good morning, everyone and let me also add a warm Cerevel welcome to Ron. I’m pleased to provide an overview of Cerevel strong financial position as we target investments in spend on the highest value opportunities in our pipeline. As of March 31st, 2023, our cash, cash equivalents and marketable securities totaled $863 million. And in April, we received an additional $31.3 million from our Tavapadon risk sharing arrangement. Our cash resources are expected to fund our operations into 2025, which all — which will support us through the seven mid to late data stage readouts we expect in 2024 and allow us to achieve the next inflection point for each of our lead programs. For the first quarter 2023, total operating expenses were approximately $100 million, which includes R&D expense of $78 million and G&A expense of $21 million.

Relative to the first quarter last year, R&D expense increased by approximately $23 million. This increase is primarily due to investment in our Emraclidine program, including the advancement of our two ongoing Phase 2 trials and the open label safety extension trial in schizophrenia and personnel related and other infrastructure costs supporting the continued growth and expansion of our pipeline. G&A expense for the first quarter increased by approximately $4 million over the first quarter last year. This was primarily due to higher personnel related costs and other costs to support organizational growth in the advancement of our programs. As Tony mentioned, we reduced our planned 2023 operating expenses while maintaining our rigorous focus on key priorities and timelines, including executing and achieving Emraclidine timelines in appropriate NDA enabling readiness activities, as well as driving Tavapadon, Darigabat clinical execution and trial completion.

To achieve these reductions in planned spending, we shifted certain activities commensurate with our changes in timelines, gated incremental spend pending the achievement of top line data and reduce planned headcount growth for this year. We’ll continue our focus on fiscal discipline and monitor our expenses for additional opportunities to manage and gate spend where possible. In closing, we remain well capitalized. We expect our cash resources to fund our operations into 2025 that will support us through the seven mid to late data stage readouts expected in 2024, and allow us to achieve the next inflection point for each of our lead programs, and we will continue to think creatively and opportunistically about further strengthening our balance sheet.

I’ll now hand the call back to Tony for concluding remarks.

Tony Coles: Thanks Mark, and thank you all for joining us to discuss the first quarter results. We’re pleased with what we have accomplished to date, and we are very proud of the work our team is doing in the pursuit of bringing much needed medications to patients living with some of the most debilitating neuroscience diseases. We’re executing a smooth leadership transition and are pleased to welcome Ron as the next CEO, at a time when our underlying business fundamentals are healthy and strong. We have continued momentum in our Emraclidine program and adults living with schizophrenia and look forward to a robust set of data catalysts in 2024 and are pleased to announce the expected Darigabat results in the middle of next year, and TEMPO 3 results in the first half of next year.

We remain fiscally disciplined with cash to fund our operations into 2025 and deliver the next inflection point for each of our lead assets, and we remain open to new opportunities to maximize the value of the pipeline through creative deal making, especially under Ron’s leadership, given his track record of partnerships and collaborations in his prior roles. Let me also add, since this will be my last quarterly call as CEO, that this has been a tremendous privilege to lead Cerevel through such an exciting time. I took on the additional role of CEO more than three years ago with a very specific set of goals to launch this new organization to raise sufficient capital and prove the Cerevel scientific thesis that are focused on neurocircuitry receptor subtype selectivity, and differentiated pharmacology could advance important new medicines for patients facing vexing diseases.

And with those objectives met, I’ve done what I came to do. Now is the time to return to my role as Chairperson, and I am proud of all that we’ve accomplished today. I’m grateful for the tremendous team we’ve assembled, and I look forward to partnering closely with Ron, the team and the Board as we continue on our journey to become the premier neuroscience company. And with that operator, I’d like to open the floor for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Paul Matteis from Stifel. Your line is now open.

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Tony Coles: Okay. Thank you. Thank you for that, Ray. Operator, I’m going to make some closing comments and I’ll turn over to you to end the call. As I said in my prepared remarks, this has been a remarkable experience and it’s been a wonderful way for me to cap my 30-year career in the industry. 15 of those years I was reflecting this morning have been spent as CEO. And in that time I have watched a significant amount of evolution in the industry. The people have changed, the faces have changed, but the essential mission of what we have to do hasn’t, which is to do the work that we do well and on behalf of patients, and in that create value for you as our shareholders and those who really do care about bringing new therapies to patients.

So it’s been a great pleasure for me to cap my career in the biotech industry with this particular experience where I believe we are just at the beginning of making a significant difference in neuroscience. I thank my teammates, I thank the employees, I thank the Board of Cerevel. And importantly, I thank you guys because I have truly enjoyed all of our interactions and the opportunity to describe and discuss with you all the exciting things that I think we can do to enhance lives and make families and those affected by these diseases, live a better existence. Thank you. And this does feel a little bit like a news anchor sign off. It really isn’t, but I just wanted to reflect more openly than I usually do about how you guys have impacted me.

So, thank you very, very much, and thank you for all the well wishes, the text, the emails, they are deeply, deeply appreciated and I will do my best to answer each one. Thank you operator for helping us with the call today.

Operator: Thank you. This concludes today’s conference call. Thank you all for participating. You may now disconnect.