Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE) Q4 2022 Earnings Call Transcript

Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE) Q4 2022 Earnings Call Transcript February 22, 2023

Operator: Good morning ladies and gentlemen and welcome to Cerevel Therapeutics Fourth Quarter and Full Year 2022 Financial Results Conference Call. Please note that this call may be recorded. I will now hand the call over to Matt Calistri, Vice President of Investor Relations.

Matt Calistri: Thank you. Good morning, everyone. We appreciate you joining us for our fourth quarter and full year 2022 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 2022 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.

Anthony Coles: Thanks Matt and good morning everyone and thank you for joining us for our fourth quarter and full year 2022 business results call. Cerevel aspires to become the premier neuroscience company and we continue to have great momentum towards achieving that distinction. 2022 was a particularly productive and successful year as we remain steadfast and focused on our mission to transform what is possible in neuroscience. We delivered positive results in our Emraclidine blood pressure trial in December, raised $599 million in new capital at mid-year to extend our cash runway into 2025 and started the year with positive anxiety data in Darigabat, marking an important set of achievements for the organization. Let me first specifically highlight Emraclidine, our M4-selective positive allosteric modulator or PAM.

We are especially pleased with the momentum of this program which remains our top priority. Our robust Phase II EMPOWER program for adults living with schizophrenia is enrolling well and remains on track for a data readout in the first half of 2024. We know that the patient need in this area is tremendous, more than 2 million people in the U.S. live with schizophrenia and the disease touches the lives of caregivers and communities at large with patients more likely to experience homelessness, addiction and death by suicide. We continue to prioritize this important Phase II program and the completion of the other necessary registration-enabling activities, including an open-label extension trial in order to bring this potentially transformative medicine to patients as quickly as possible.

We also proactively took an important step toward registration by conducting and concluding our ambulatory blood pressure monitoring trial early in clinical development. The positive results from this important risk-mitigating trial which were announced in December 2022, provided clear evidence that Emraclidine does not induce a sustained increase in blood pressure with chronic dosing in people living with schizophrenia. Driven by our strong belief and the differentiated advantages of a targeted, selective info mechanism, we are also exploring Emraclidine for the treatment of Alzheimer’s disease psychosis, a condition that affects more than 40% of people living with Alzheimer’s disease. We were pleased to receive fast-track designation for Emraclidine from the FDA for the treatment of hallucinations and delusions associated with Alzheimer’s disease psychosis and we initiated a Phase I healthy elderly volunteer trial to support development in this indication at the end of last year.

Our work with Emraclidine in schizophrenia and ADP, however, is only one part of the Cerevel story. Across our broad pipeline, we are also advancing therapies for other serious neurological conditions by targeting new pathways with novel selective approaches which is the central unifying thesis underlying Cerevel. As such, I’d now like to highlight Darigabat, our alpha-2/3/5 selective GABA A receptor PAM in development of both epilepsy and panic disorder. We’re currently conducting the REALIZE trial, a Phase II proof-of-concept trial in focal epilepsy. Epilepsy is the fourth most common neurological disorder, affecting 1 out of every 26 people. Our REALIZE trial seeks to advance Darigabat in this important indication and address an area of tremendous unmet need for patients who need better control of their seizures.

As Ray will discuss in more detail, enrollment has been affected by post COVID headwinds that are causing clinical trial delays across the industry. Given these landscape challenges, we have announced today that we no longer expect data for this trial in 2023. As we’ve recently done with Tavapadon, we are conducting a thorough review of the REALIZE sites and the clinical trial time line and are actively implementing robust mitigation plans to complete this trial. We will provide an update on that revised time line by mid-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 selectivity and it’s avoidance of the Alpha-1 receptor subunit which we believe is the main driver of the occurrence of side effects that plagues the diazepines.

It was this time last year that we shared our positive top-line data from our Darigabat Phase I healthy volunteer trial in a panic symptom model. These results provide strong evidence of Darigabat’s potential as a well-tolerated and differentiated daily maintenance treatment for anxiety-related disorders which would be an important breakthrough in the clinical treatment of anxiety. We’re enthusiastic about initiating our Phase II trial in panic in the second quarter of this year and that remains on track as well. As we begin 2023, our focus is on execution and continued fiscal discipline as we head into a data-rich 2024, when we expect 7 mid-to-late stage data readouts, starting with our 2 Phase II trials of Emraclidine for schizophrenia in the first half of next year.

As of the end of 2022, we had $950 million of cash resources which we expect will fund our operations into 2025 and we continue to look for opportunities to be creative in our ongoing efforts to maximize the value of our pipeline as we target our spending on the highest priority programs. Finally, I also want to acknowledge that our President, Ab Ceesay, will be leaving Cerevel as of March 9 to pursue an exciting CEO opportunity at a private biotechnology company. I want to publicly thank Ab for his leadership and many contributions to Cerevel and we all wish him well in his next endeavors. With that, let me now turn the call over to Dr. Ray Sanchez, our Chief Medical Officer, to provide some added color regarding our lead programs. Ray?

Raymond Sanchez: Thank you Tony and good morning to all of you. As Tony just mentioned, 2022 was a productive year that will allow us to continue to unlock the value and the potential of our pipeline to treat some of the most challenging neuroscience diseases. Let’s first turn to Emraclidine. Our robust Phase II trials are enrolling very well and are on track. We expect this momentum to continue and look forward to data in the first half of next year. We are observing that the ongoing inpatient trials for Emraclidine are not facing the same type of headwinds that we are seeing for trials, mostly in the outpatient setting. These 2 adequately powered 3-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 and 30 milligrams once daily versus placebo and the second trial will test Emraclidine 15 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. Running these 2 trials in parallel enables us to fully explore the therapeutic dose range of Emraclidine while minimizing the number of treatment arms with the hope of reducing the variability observed in clinical trials and the placebo response. In order to potentially accelerate a registrational package for Emraclidine in schizophrenia, we have moved forward with the initiation of a 52-week open-label safety extension trial, known as EMPOWER 3.

This program is a cornerstone for Cerevel and I am very pleased with our progress. Our momentum was bolstered by the positive results we announced in December in an ambulatory blood pressure monitoring trial which confirmed that Emraclidine does not cause a sustained increase in blood pressure with chronic dosing in people living with schizophrenia and provided an important risk mitigation step in the continued development of this program. Our decision to generate these data earlier in clinical development speaks to the benefits of our thoughtful and proactive approach and we are happy to have this important milestone behind us for this vital pipeline program. We also continue to progress our Phase I healthy elderly volunteer trial to support the development of Emraclidine in Alzheimer’s disease psychosis.

The symptoms of ADP, including hallucinations and delusions can be incredibly distressing for the patient and their loved ones and can drive fear and stigma around the disease. It is our hope that by selectively targeting the M4 pathway, we can harness antipsychotic benefits while minimizing the side effects associated with other . The results of the healthy elderly volunteer trial will guide our clinical development plan in Alzheimer’s disease psychosis. Turning now to Darigabat, our alpha-2/3/5 selective GABA A receptor positive allosteric modulator currently in development for epilepsy and panic disorder. We believe Darigabat has the potential for both antiepileptic and anxiolytic activity comparable to currently available benzodiazepine but with reduced side effects that results from the nonselective mechanism of benzodiazepines.

Darigabat’s novel mechanism of action and expected tolerability profile provides the potential for a new treatment option that can also be used chronically, addressing a significant unmet need in this area. Our Phase II REALIZE trial is progressing. Although as Tony mentioned, it has been impacted by the headwinds that are causing delays in a broad range of clinical trials. We have validated the industry-wide scope of these delays via a thorough review of peer trial time lines in clinicaltrials.gov and supporting data available in CRO and other industry analyses which corroborate our own direct experience. In addition, Darigabat has been affected by the use of excluded concomitant medications in the target population. As a result of these factors, we no longer expect data this year and are in the process of conducting a thorough review of the trial time lines, we will return with an update by mid-year.

We are steadfast in our commitment to advance this important therapy. We have an experienced team that is continually deploying new mitigations to address the headwinds associated with enrollment challenges while importantly, remaining focused on data quality. We added trial sites in new countries last year and we plan to add additional sites in the Asia Pacific region where our team has strong historical experience. We’re encouraged in our ongoing efforts by the over 90% rollover rate we have seen to-date to the REALIZE open-label extension which speaks to the potential benefit to patients of Darigabat in focal epilepsy. We’re excited about expanding the potential applications of Darigabat through the initiation of our Phase II trial in panic disorder in the second quarter of this year.

Panic episodes present with the constellation of symptoms, including a rapid pounding heart rate, sense of impending doom, weakness, dizziness, disorientation and even chest pain, making some people feel that they are experiencing a heart attack. We believe Darigabat has the potential to provide anxiety benefit, while minimizing the limiting side effects of nonselective GABA A PAM such as benzodiazepines. If correct, Darigabat may provide a well-tolerated daily option in the treatment of panic attack compared with the sparing and episodic use of benzodiazepines due to side effects. This would potentially be paradigm shifting for the important anxiety-related disorder and could transform the experience of these patients in terms of living with panic disorder.

Turning now to Tavapadon our D1/D5 partial agonist in development for Parkinson’s disease as both a monotherapy and adjunctive 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 can serve as the preferred monotherapy early in the disease with a potentially reduced side effect burden compared with existing therapies. For the more advanced Parkinson’s patients, 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 dyskinesias with the goal of allowing for 24-hour motor symptom control and delaying the need for L-Dopa dose escalation.

As Tony discussed, all 3 of our Tavapadon Phase III trials known as collectively as the TEMPO trials are ongoing, along with the corresponding open-label extension in which we are also seeing high rollover rates of over 90%. Given the challenges in the clinical trial environment across the industry, we announced in November that we were conducting a thorough review of this program and its time lines. With the deployment of new mitigations, including the expected opening of new sites in the Asia Pacific region, we now expect data for TEMPO-3 in mid-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 read out in the second half of 2024.

We have an experienced team that is navigating and addressing the challenges of the external environment as we continue to advance our broad and deep pipeline of neuroscience assets. We remain focused on maintaining the quality of the clinical trials we conduct and importantly, not compromising the collection of data for the sake of experiences. I’m looking forward to updating you on our progress as we look ahead to data from 7 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. 2022 is a very productive year for our research and early clinical programs. I’d like to begin by speaking to our selective kappa opioid receptor antagonist or KORA CVL-354. This exciting new mechanism of action has shown primates preclinically in depression, anhedonia and opioid withdrawal models. We also recently saw a demonstration of clinical proof of concept in a Phase II major depressive disorder trial completed by one of our peers. Our recent scientific presentations have revealed the receptor subtype selectivity of our compound CVL-354 in nonhuman primates PET receptor occupancy studies. These studies demonstrated dose-dependent target engagement of 354 with at least a tenfold more potent binding with kappa receptors than mere receptors.

This data set will be followed up and confirmed by our planned human PET receptor occupancy trial, examining kappa and new receptor selectivity and CVL-354 in humans. We believe that the clinical exploration of PET receptor occupancy binding of CVL-354, will be important to inform appropriate dose ranging in multiple potential indications. As Tony mentioned, we believe strongly in the potential of in-force selectivity based upon our clinical experience with Emraclidine. As we’ve disclosed previously, we are advancing our selective M4 full agonist program and we have identified a clinical lead candidate molecule in 2022. Our current understanding of the science behind receptor selectivity strongly supports our confidence and the ability to apply a full agonist pharmacological approach that may enable indication expansion beyond those that may be most aligned to Emraclidine, underpinning our excitement about the creation of an in-force selectivity based therapeutic franchise.

We look forward to further updating our progress on this program in the near future. I want to sincerely thank the teams who are hard at work in early-stage research and development. As you know, we are purpose-built to unravel the mysteries of the brain to treat neuroscience diseases and our scientists are passionate, experienced and skilled at what they do. I’m excited about what promises to be a very productive 2023. I’m now going to hand it over to Cerevel’s Interim Chief Financial Officer, Mark Bodenrader, who will review our financial performance for the fourth quarter and the full year. Mark?

Mark Bodenrader: Thank you John and good morning everyone. I’m pleased to provide an overview of Cerevel’s strong financial position. I’ll start by discussing our cash position and 2022 financial results and then I’ll spend a few moments on our financial outlook. Importantly, we will continue to exercise fiscal discipline as we target our investments and spend on the highest value opportunities in our pipeline. As of December 31, 2022, our cash, cash equivalents and marketable securities totaled $950 million, bolstered by the $599 million financing completed last August, reinforcing Cerevel’s strong financial position. Our cash resources are expected to fund our operations into 2025 which will support us through the 7 mid-to-late stage data readouts we expect in 2024 and allow us to achieve the next inflection point for each of our lead programs.

For full year 2022, total operating expenses were approximately $368 million which includes R&D expense of $280 million and G&A expense of $88 million. R&D expense for 2022 increased by approximately $118 million over 2021 which was primarily due to investment in our Emraclidine program, including the initiation of our robust Phase II trials in schizophrenia. The continued advancement of our other later-stage clinical programs, investment in our early discovery efforts and personnel and other infrastructure costs supporting the continued growth and expansion of our pipeline. R&D expense for 2022 also included $18.2 million of equity-based compensation expense versus $9.2 million for 2021. G&A expense for 2022 increased by approximately $29 million over 2021, primarily due to higher personnel costs and other costs to support organizational growth and the advancement of our programs.

G&A expense for 2022 also included $20.6 million of equity-based compensation expense relative to $14.7 million for 2021. For 2023, we will continue to proactively review our operating plan, adjust our spending plans commensurate with our shift in trial time lines and monitor for opportunities to manage and gate spend as appropriate. And as Tony mentioned, we’ll continue to invest in our pipeline where we believe there is long-term value creation potential. Looking forward, we expect our G&A expenses to remain relatively consistent for 2023 as compared to the fourth quarter of 2022 and we will focus our R&D spending on our top priorities, including advancing our ongoing comprehensive Phase II program for Emraclidine schizophrenia in the recently initiated Phase I trial of Emraclidine in healthy elderly volunteers to support the development in Alzheimer’s disease psychosis, initiating our Phase II trial for Darigabat in panic disorder and continuing the advancement of our other lead programs.

In closing, we remain well capitalized with cash resources expected to fund our operations into 2025 that will allow us to achieve the next inflection point for each of our lead programs, including the 7 mid-to-late stage data readouts we expect in 2024. I will now hand the call back over to Tony for closing remarks.

Anthony Coles: Thanks Mark and thank you all for joining us to discuss our full year 2022 results. We’re pleased with what we have accomplished so far and very proud of the work our team is doing in the pursuit of bringing much needed medications to patients suffering from debilitating neuroscience diseases. Our top priority is maintaining the momentum in our Emraclidine program in adults living with schizophrenia. We will continue to deploy the mitigation measures to offset the industry headwinds we and other companies are experiencing to advance the rest of our pipeline and expect to deliver the 7 data readouts that both Ray and I mentioned earlier in 2024. As always, we will be fiscally disciplined in focusing our spend on the highest value programs.

So I’ll underscore Mark’s point and maintain our cash runway into 2025 and we will remain open to new opportunities to maximize the value of our programs through creative deal making. We’re looking forward to keeping you posted on our progress throughout the coming year. And with that, let me open the floor for questions. Operator?

Q&A Session

Operator: Thank you. And our first question coming from the line of Michael Yee with Jefferies.

Michael Yee: Thanks Tony for the update. We had a question around the updates for the timing of Tavapadon, as well as the ongoing analysis around the potential new timing for Darigabat in epilepsy. I was wondering if you could just sort of reclarify — are there things that are different going on for Tavapadon versus Darigabat? And what are the learnings or what are the improvements you’re doing there as a read-through to Emraclidine for schizophrenia, what you’re saying will be in the first half ’24. So I want to sort of test your confidence towards your data for schizophrenia, given the changes for the other 2 programs? I think that makes sense.

Anthony Coles: Yes, Mike, that’s very clear. I’m going to ask Ray to comment with some specificity. But let me make a couple of very quick points. One, we’ve said that the enrollment for Emraclidine has proceeded well and does indeed continue to proceed well. Some of this may be that it’s an inpatient trial and it’s a more controlled circumstances setting. And some of these industry headwinds across the trials that we are seeing appear to generally occur more on the outpatient trial side of things. So that gives us certainly some confidence that at the moment, there’s no change in our guidance or our expectation for the Emraclidine in schizophrenia program and we are expecting those data in the first half of 2024. As to the rest of the trials and the industry headwinds that we’re observing there, there are certainly a number of macro environmental factors.

We’ve talked about this on our previous calls, staffing shortages at some of the sites, the ability to recruit new personnel to run the trials at these academic research centers and clinical trial sites and a number of things that are a result of the displacement and the discontinuities in the post-COVID environment. We’ve done a pretty exhaustive review of clinicaltrials.gov, just to get our arms around this particular dynamic and note that there are at least nearly a dozen companies experiencing 6-month to 12-month delays in their clinical trials likely affected by the same set of circumstances that we and others are encountering. So I offer that, Mike, just as context and landscape, because I think the landscape is everything and really trying to understand your question.

There are specific microenvironmental factors relevant to the Darigabat program and the Tavapadon program, enrollment trial design and where you can speak to some of those things but the bigger issue we expect is more broadly being experienced by a number of companies across the industry. But Ray, why don’t you provide some more specific comment on Tavapadon and Darigabat. I think I’ve dispensed with your Emraclidine question, as we are on track but talk about those 2 studies in particular.

Raymond Sanchez: Good to hear from you. So for Tavapadon, we’ll start with that first. As Tony mentioned, we’ve experienced the same challenges in the landscape that exists. The 003 which is the adjunctive trial will read out in mid-2024. And the monotherapy trials will read in the second half of 2024. To that end, in order for us to rescue that time line as much as possible, we’re adding additional sites in the Asia Pacific region and those will be up and running later this year. So we’re encouraged by that but we’re committed to those time lines. In terms of Darigabat in the epilepsy program, in the middle of last year, we implemented mitigation plans since we were impacted by the overall landscape but also the concomitant medication challenges.

However, as you know, it takes about 6 months to 9 months to implement these contingencies in another 6 months or so to see the enrollment impact. So in late January, we observed that these mitigations that we had implemented last year were not taking effect. It could not really offset the industry headwinds. And while there is good momentum currently and we’re encouraged by that. We know we will not read out in 2023, as we mentioned earlier and plan to update our new time lines for a data readout by midyear.

Anthony Coles: Operator, before we take the next question, Ray, I just — you always make this point for me and the rest of the team and that is our intense focus on maintaining data quality.

Raymond Sanchez: That’s right.

Anthony Coles: So one of the things I just draw this to the attention of everyone, one of the things — a simple question could be, we’ll just add more sites to actually rescue the time lines. And the risk in doing that is if you suffer in terms of the quality of the data and the quality of the enrollment of patients. And we saw this in a large pharma partners — a large pharma company announcement last week about some of the data quality issues that they had. So we don’t want to repeat that. And I think our clear focus on data quality and maintaining data quality. So we deliver high-quality information into these trials is really important. So there’s probably not more to add on that but feel free to append that. I’m really compelled by that piece.

Raymond Sanchez: That’s right. And to Tony’s point, we try to minimize the variability in all of our clinical trials. As you know, that ensuring the greatest likelihood of success is really the key objective. So unfortunately, mitigation when they’re put in place, you’re not doing it in real time. They take time to take effect but you don’t want to risk the trials by any means by adding too many sites. And so that’s part of the challenge of really maintaining the quality of the trial but we understand also how important the timing of the readout is to try to get the medications sooner than later to the patients.

Anthony Coles: Operator, we’ll take the next question.

Operator: And our next question coming from the line of Matthew Harrison with Morgan Stanley.

Max Skor: This is Max Skor on for Matthew Harrison. But just following up on the previous comments, can you provide any additional thoughts on the potential risk from the COVID enrollment issues? Have you changed any key criteria to improve enrollment? And could that impact the placebo rates? And also could you comment on the design and rationale for the panic disorder trial?

Anthony Coles: Ray, why don’t you take both of those?

Raymond Sanchez: Yes. So no, we have not changed any of the criteria in the trials. I think those trials were well designed and we’ll continue to focus on the quality of that data moving forward. So we’ve not amended any of those protocols moving forward. And the second question.

Anthony Coles: Would you — panic disorder study design.

Raymond Sanchez: Yes. So we are currently finalizing the trial design and we will disclose that later this year but it’s on track. And we plan to initiate that program in the second quarter of this year.

Operator: And our next question coming from the line of Paul Matteis with Stifel.

Paul Matteis: I have one financial question and one clinical. On the finance side, I was wondering if you could expound a little bit more on your cushion with cash into 2025. In an ideal world, right, you could finance on positive data but now there’s no more clinical catalysts this year. And it would seem like waiting until the muscarinic readout would run the risk of getting to 12 months of cash but maybe that math is wrong, so it would be helpful if you could expound there. And then on the clinical side, on the healthy elderly study, can you just lay out what a positive outcome in that trial looks like? It would seem like the adverse event rate is going to be higher than schizophrenia naturally. Where’s the line on what’s acceptable from a therapeutic index? And do you feel like you need to get to the same dose in ADP that you’ve been pursuing in schizophrenia?

Anthony Coles: Okay. Let me make a couple of general comments on the finance question, then I’ll ask Mark to comment specifically. One of the things that we do, Paul, is obviously, as you know, we make the investments to get our trials to the next inflection point and that’s true for everything that we’ve talked about today. The cushion is clearly into 2025 for what it is that we’ll be doing. But one of the things that we do is consistently sweep the budget for unused dollars that can be reinvested or put forward to additional expenditures in 2024. So we’re doing all of this in real time on an ongoing basis and we’ll continue to do that to make sure that we can extend our cash runway for as long as possible. We’re confident that the data readouts that we’ve talked about earlier today will give us additional opportunities to create value in the pipeline. But Mark, why don’t you make some specific comments about how we think about cash and cash management.

Mark Bodenrader: Yes. Sure, Tony. We do think about cash and cash management very carefully on a regular basis. And as Tony mentioned, is we’re constantly evaluating our choices but we always focus on maintaining our cash runway. And we’re focused on making sure that we can have the cash runway extended to 2025. But we’re really happy with the strength of our balance sheet. And our cash runway will support us through the 7 data readouts that we spoke of earlier. And that will — we’ve done a pretty good job matching our runway with our financing catalysts.

Anthony Coles: Good. And John Renger, would you mind talking about dosing in ADP?

John Renger: Sure. Thank you, Tony and thanks for the question, Paul. So yes, so what we’re looking for in the healthy elderly study, as you know, for any Phase I study, we’re looking for safety and tolerability in the age target population. And so in this case, as you know, we’ve characterized receptor occupancy by dose. As you know, we have data to support getting to 70% receptor occupancy or greater. Also as you’re aware, Paul, we have done a very careful analysis of correlating data of receptor occupancy with PK exposure and impact on the PAM score from the earlier schizophrenia study. We do expect that we would probably need to be in the same range. However, as you know, the standard of care in treating the Alzheimer’s population is on top of some type of acetycholine esterase inhibitor.

We do think that the safety and tolerability will be relevant to the population ultimately. And so, we’ll have to characterize that as we go past the healthy elderly study. But for us, it’s really getting to that 70% receptor occupancy to validate that the dose is tolerated and safe in the elderly population and then moving forward into the patient population with standard of care. And as you know, there’s been some characterization that’s been done by a peer company. It actually shows that when standard of care is added on to a PAM that what you actually see is a benefit in the ability of the PAM to bind because, as you know, PAMs encourage binding acetylcholine or a acetylcholinesterase inhibitor, you can actually increase that binding. And so we believe that tapering from the healthy population into the patient population with standard of care, there actually can be a boost into the efficacy of a PAM at that point.

And so we’ll have to look at all the data but we have a very good idea of what dose range and exposure we want to get to based on PET receptor occupancy and we’re thinking ahead around the standard of care interaction that will occur in the patients. I hope that helps.

Paul Matteis: Yes, John. Thanks.

Anthony Coles: And once the dosing .

Paul Matteis: Yes, that was my follow-up actually. You’re confident in QD for this population as well?

John Renger: Absolutely, yes. So it’s no titration in the once-a-day dosing is going to be really important for this particular cognitively challenged population, as you know, because med burden is a very serious concern in that population and how you manage those meds will be important. And so having a once-a-day formulation will be really key here.

Operator: Our next question coming from the line of Jessica Fye with JPMorgan.

Jessica Fye: Great. Two for me. First, with the Phase II for Darigabat starting up in panic disorder, what specifically do you think that product needs to show in that trial to support a clinically competitive profile? And then second, on Emraclidine, when the EMPOWER studies readout, what specifically are you going to be looking at to establish or define areas of differentiation from other approved or development stage drugs for schizophrenia?

Anthony Coles: Okay. Thanks for the question. I’m going to actually ask Ray to comment on the endpoints that we are considering or how we’re thinking about the design of that trial. And then I want to make a couple of marketing comments, Jess, on both of those questions. Go ahead.

Raymond Sanchez: Jess, thanks for the question. So we are currently finalizing the trial for panic disorder that just started the second quarter of this year. As you know, there hasn’t been a therapy approved for panic disorder since 2005. So it’s been about 18 years. But typically, what the FDA is looking for is really the reduction of panic attacks, usually in the last couple of weeks of the trial. These are trials that go on probably for 12 weeks in duration since it takes time for panic symptoms actually to mitigate for a longer period of time. So that’s the general premise and we will disclose that trial design after we’ve had those interactions with the agency. But again, the plan is to start in the second quarter of this year.

In terms of Emraclidine, as you know, that they are pretty standard trials in terms of what we’re looking for, we’re looking at the mean change from baseline on the PANSS total score. So we’ll be looking at that change in PANSS total score. We’ll also be understanding the change in PANSS also as a function of placebo. Those trials are 90% power to at least a 7 point placebo-adjusted difference. So we’ll be looking at that collectively. Of course, the tolerability profile is also important. So I think taking in its totality, understanding the full dose range of 10 milligrams to 30 milligrams and understanding the efficacy profile there, as well as the tolerability profile will collectively serve as the package that we’ll submit to the agency for the approval of Emraclidine to treat schizophrenia.

Anthony Coles: And then on the second half of your question for each one of those in terms of competitive positioning. I’ll just — I’ll start by framing it as what I always call the central unifying thesis for Cerevel which is this notion that targeted receptor selectivity matters. And in the case of Darigabat, if we are correct in the data hold up, then we should be able to deliver efficacy both in panic and in epilepsy, while improving the tolerability profile with what’s currently available. And that would largely be in the sense of avoiding withdrawal dependents, et cetera which are some of the common side effects observed with benzodiazepine. We think this is a big deal and we think it matters because right now, we know that those side effects for benzodiazepine are what limit the prescribing potential for those and to a shorter-term duration rather than a longer-term duration which we think will benefit patients in the end.

And similarly, for Emraclidine, we think the selectivity matters in terms of avoiding some of the side effects that are currently being experienced by patients for in-market and development stage programs. But as importantly in this fragile population, once daily dosing and no need for titration, we think we’ll be distinguishing features that will make a difference to patients and providers. So I’ll always draw us back to that central unifying thesis of targeted receptor selectivity because it is the reason to believe in Cerevel and in our programs.

Operator: Thank you. And our next question coming from the line from Umer Raffat with Evercore ISI.

Umer Raffat: I have a couple here, if I may, on the Alzheimer’s side of the program. Perhaps first, I was just curious, theoretically, you could go right into Alzheimer’s patients. And I’m trying to understand why do the healthy trial first. And when is the earliest we can actually expect data from the Alzheimer’s side? Secondly, I know the focus is hallucinations and agitation, in the Alzheimer’s program, there is some evidence perhaps even from the old Lilly trial on cognition. I’m curious how you’re thinking about that endpoint. Is that something you’d study as well? And then finally, there was a Merck M1 selective positive allosteric modulator which wasn’t successful on cognition but they never really broke out data in hallucinations and agitation. I’m curious if there’s anything you understand from that study which is also relevant here?

Anthony Coles: I think we’ll ask John Renger to attach answers to those questions and respond for us. JR?

John Renger: Sure. Thanks, Umer. So yes. So first, why do we need to go into the healthy population first? And so it’s a standard approach to actually show the safety and tolerability in healthy population before you go into a patient population just because you don’t want to find out in patients if there is a safety or tolerability issue which obviously, at this point, with the number of patient exposures we have, we don’t think it’s a concern but always, you want to go into a healthy population and establish the safety and tolerability of the dose range that you intend to test in patients as you go forward. So it’s an industry standard practice to do that. And so as you know, the Phase I study that we announced is actually a multiple ascending dose study.

And so we’ll go through a number of cohorts and we’ve talked about those — that dose range. And for those cohorts, they will be 2 weeks in duration. And after each cohort, we’ll have a safety and tolerability review before we go to the next dose escalation. And we haven’t announced when that data will come out. But it’s not that far into the future that you should be hearing something back.

Anthony Coles: JR, just before you go to the second response, we don’t actually currently have data in the elderly which is part of what we need to collect here. So I just underscore that for everyone because schizophrenia obviously skews a little bit younger. So we’ve got to go collect this data in that — in this older population.

John Renger: Yes. Thanks, Tony. Another question that you had was and I believe, Umer, you mentioned hallucinations and agitation, we’re actually looking at hallucinations and looking at delusions, not agitation in that study. So an agitation study would be separate. So what we’re looking at in the AD population, in particular, for the study that we have planned is looking at hallucinations and delusions, that’s separate from an agitation study which will be a slightly different population. And so the relevance of what we’re doing with cognition there is that obviously, what we believe with the M4 mechanism is it’s great potential for showing safety and tolerability based on our schizophrenia experience. And we know about the M4 receptors is expression in the stratum is ideal for actually targeting the part of the brain that underlies hallucinations and delusions and that’s really what we’re focused on.

Obviously, you could see a benefit in cognition but you would also have to address the pseudo-specificity of a potential increase in cognition that you might see once you address those issues. And so looking at cognition purely is a separate trial design. And so what you’d have to do is looking at in a stably treated population and then look for the cognition benefit to really separate a cognitive benefit from the benefit that a patient might achieve from addressing the hallucinations and delusions. And so that would have to be a separate study design in a patient population where you’ve achieved this suppression of delusions and hallucinations or even a separate population away from that. So it’s a little bit beyond what we’ve actually talked about doing right now at this point.

And to your point about Merck and their compound. So as you know, I was at that particular company at the time those studies were going on. So that data is published and it’s publicly available. They were very focused really on looking at 2 things, the ADAS-Cog and looking at activities of diluting which are the kind of standard areas for improvement that the agency wants to review. There was not any release data at that point on looking at hallucinations and delusions. However, I would refer you to this anomaly in data which actually showed really good dose-dependent effects on addressing things like out outburst, paranoia, hallucinations in that study. So it really gave a lot of confidence to the role for an M4 active compound and being able to address that aspect of the Alzheimer’s disease and really drives our excitement around the potential for bringing a highly selective import compound into a space where we know it works in psychosis and can address those particular issues in a patient population.

So we really believe that the M4 is really going to be able to address the hallucinations and delusions to do the cognition piece, that would be a separate study design and a further approaching an appropriate patient population.

Operator: And our next question coming from the line of Charles Duncan with Cantor.

Charles Duncan: I had 2 on the Emraclidine programs. The first is with regard to EMPOWER 1 and 2, you mentioned that enrollment was going well. Were you referring just specifically to patient numbers or, say, geographic spread of enrolling sites or some other phenotypic measure? And then the second question is regarding EMPOWER 3, in terms of the open-label extension. Could you provide a little more color how that works? Do — are patients taken off drug and then put back on? And if not, can you give us a sense of the rollover rate in that and perhaps even persistent in EMPOWER 3?

Anthony Coles: Okay. Ray, why don’t you take both of those for Emraclidine.

Raymond Sanchez: Sure. So in terms of — they are progressing and that those trials are enrolling well. So when we mentioned that earlier and it’s really the enrollment that we’re seeing in both EMPOWER 1 and EMPOWER 2. In terms of the open-label extension in EMPOWER 3, as you know, the EMPOWERs 1 and 2 are blinded, so we don’t know who’s on drug, who’s on placebo. But what happens is, if the participant wants do they roll over into those open-label extension and then they start on drug and it’s up to the investigator to determine what dosing of therapy they can be on and it lasts 52 weeks. And that will really serve for us to get the needed tolerability exposures. But when we filed the NDA of at least 300 at 6 months and at least 100 at 1 year at target doses will be added as the total package for approval of the treatment of schizophrenia.

Anthony Coles: And then the enrollment piece, when we said that enrollment is going well.

Raymond Sanchez: We mentioned that earlier. Yes, we hope that will.

Operator: Our next question coming from the line of Mohit Bansal with Wells Fargo.

Mohit Bansal: Great. And just wanted to dwell more on the Darigabat delay here. So I want to understand what exactly is going on? Are patients not getting diagnosed for epilepsy as much? Or is it the enrollment issue which is — or is it a follow-up issue? Because I wanted to ask because like you mentioned outpatient setting. I would also like to understand which trials you are looking at as well, because I mean where we stand, we are looking at Alzheimer’s trial going on and finishing on time at time Lilly ran a head-to-head trial against ADUHELM, they finished on time. So it seems a little bit difficult to understand why this trial, in particular, getting delayed in outpatient setting? What other trials you are looking at as well?

Anthony Coles: So we don’t — thanks for the question. We actually don’t make a habit of commenting on other companies specifically. But suffice to say, I ask the team to pull the relevant clinicaltrials.gov information and there are a number of other companies that are announcing 6- to 12-month delays across the landscape, including in epilepsy as well. And we won’t mention specific names, because that wouldn’t be appropriate. What we can say is that, these larger industry headwinds are not peculiar or particular to Cerevel or even to neuroscience, they are occurring across therapeutic area. And indeed, we do have some specific considerations for the inclusion criteria for the Darigabat trial which we are working through. And one of the things that we expect to be addressing as we add additional sites.

So I think that as unfortunate as these headwinds are for all of us in the industry, there are a number of really good examples. What I can tell you is that when the team executes, they execute very well, witnessed the delivery of several important milestones in 2022. So when it’s in our control, we execute at the top of our game. When it’s outside of our control, we work to put in mitigation plans and to address these issues as quickly and effectively as we can and that’s what the team is doing.

Operator: Our next question coming from the line of Douglas Tsao with H.C. Wainwright.

Douglas Tsao: Just as a follow-up on the open-label extension for Emraclidine, I’m just curious, do you have a sense of how that should affect timing or how quickly you’d be positioned to potentially file after completion of the Phase II studies if they read out the way that we expect they will.

Anthony Coles: Ray?

Raymond Sanchez: So thank you for the question. So we are — so the Emraclidine open-label extension is both comprised of individual patients who actually roll over from EMPOWERs 1 and 2. But we’re also adding up to 40 de novo sites and this is typically done to ensure that the open-label extension is not on the critical path or rate limiting to the submission of the NDA. So our hope is that by being able to have rollovers from EMPOWERs 1 and 2, as well as de novo patients that are starting to enroll currently that we will be able to complete that trial in time for timely NDA submission.

Anthony Coles: Okay, very good. Operator, I think we have time for just 2 more questions. What’s next?

Operator: Certainly. Our next question coming from the line of Graig Suvannavejh from Mizuho Group.

Graig Suvannavejh: Tony, I had a question for you. It’s a bit bigger picture. Certainly, you’ve got a nice cash balance that you’re saying is taking you into 2025. And I’m just wondering that given what we’ve seen in the financing environment over the past 12-plus months or so. Has there been at any point in time a thought within the company to think about a further prioritization of programs or maybe better set a deprioritization of certain programs? Just want to know, given everything that you’ve got going on, whether that’s been discussed internally and the reasons for and against?

Anthony Coles: Yes, Graig. Thanks for the question. Just a couple of things. One of the beauties of the way Cerevel is set up and the way we have invested our dollars into our programs is that we have tried to fund the most important and the highest value returning opportunities. One thing we do know is that we can’t do everything. And we are making very specific and hard decisions about how we prioritize not just the mid-to-late stage programs but also the early-stage programs as well and do a really artful work to create an artful balance between those highest value returning programs that will deliver value to patients and shareholders in the near-term and our investments for the long term. And that’s just the art of good biotech executive management.

So we do that on a consistent basis but we should also, as I do, think about the ins as well as the outs. And we’ve talked about the fact that we are open to a variety of interesting and potentially financial arrangements. We’ve got a track record of doing interesting transactions like the risk-sharing arrangement that we have for Tavapadon with Bain and NovaQuest and we’re open to those and kinds of ideas as well as partnerships. So I think you have to look at the composite perspective of how we think about capitalizing the business, how we form that capital on a nonequity-dilutive basis potentially and how we think about prioritizing our programs. We do have a robust portfolio prioritization process that we review twice a year that allows us to deploy our dollars in the most effective way.

So I appreciate the question and you got your finger right on the art of being a great CEO in a biotech company.

Operator: And our last question is coming from the line of Madhu Kumar with Goldman Sachs.

Unidentified Analyst: This is Omari on for Madhu. I have a couple of questions. First, how should we be thinking about the trial for Emraclidine in elderly patients in terms of safety, PK and PD. And then second, how should we think about the catalyst path for the company in the near-term?

Anthony Coles: Great. JR, do you want to take the ADP question?

John Renger: Yes. Thanks for the question. So I think the way to think about the ongoing study is that we’ve established previously the receptor occupancy using PET in the younger schizophrenia population. What we know is that there’s been a recent publication by that examined the M4 compound that they used in that paper. To look at the conservation of M4 and muscarinic activity in Alzheimer’s disease patients, they established that — while there was some decrease that largely there was a retention of M4 expression and they also demonstrated through the use of acetylcholinesterase inhibitors that those in-forced receptors are not only present but they’re still functioning. And so we think that, that’s very educational because what it suggests is that the charging is still there, it’s still functioning and that it can be potentiated both with an M4 selected molecule, as well as the standard of care.

And so this healthy elderly study that we’re looking at is really looking at 2-week safety and tolerability to establish the baseline dose ranging that we want to take forward. Once we confirm that, we’ll be going into patients. And so I think really what you’re looking at here is us examining the dose range that we think is appropriate to carry forward in the population showing safety and tolerability in patients up to 85 years old that will allow us to progress into the appropriate age group with the AD indication. And what we should be looking at is, the once-a-day non-titration approach that we have is really important, again, in this population that we want to intend to study that having a once-a-day formulation is going to be really important as far as med management, as I mentioned earlier.

And so really, this one is really to inform our next steps dose range, looking at achieving the appropriate receptor occupancy with safety and tolerability to support that and really helping us establish how we’re going to move forward as we plan the next set of studies.

Anthony Coles: And as to catalysts, we’ve talked a lot about the 7 mid-to-late stage data readouts we have in 2024. That’s 2 for Emraclidine which are expected in the first half of next year. We will update further on Darigabat, obviously. Tavapadon, the 3 studies comprised in the Phase III program and an 871 which we expect data for next year as well. So we’ve got a lot to work on, we got a lot to focus on and we’ll be looking forward to bringing you all the updates that we need to. I think, operator, that’s about time. I want to thank everyone for joining us this morning and we will be in touch with additional developments as they arise. We look forward to chatting with you next quarter. Thank you.

Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.