Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) Q2 2023 Earnings Call Transcript

Marinus Pharmaceuticals, Inc. (NASDAQ:MRNS) Q2 2023 Earnings Call Transcript August 10, 2023

Marinus Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $-0.61, expectations were $-0.76.

Operator: Greetings and welcome to the Marinus Pharmaceuticals’ Second Quarter 2023 Financial Results and Business Update Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. And now it is my pleasure to introduce you to your host, Sonya Weigle, Senior Vice President Investor Relations, Human Resources, and Corporate Affairs. You may now begin Ms. Weigle.

Sonia Weigle: Thank you and good morning. With me from Marinus are Dr. Scott Braunstein, Chairman and Chief Executive Officer; Christy Shafer, Chief Commercial Officer; Dr. Joe Hulihan, Chief Medical Officer; and Steve Pfanstiel, Chief Financial Officer and Chief Operating Officer. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under the Securities Laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, future results, performance or achievements to differ significantly from those expressed or implied by such forward-looking statements. These risks and uncertainties and risks associated with our business are described in the Company’s reports filed with the Securities and Exchange Commission including Form 10-K, 10-Q and 8-K. I will now turn the call over to our CEO, Scott Braunstein.

Scott Braunstein: Thank you, Sonia and welcome to our call. We’ve made strong progress this quarter on both the regulatory and commercial front, as well as advancing our oral and IV ganaxolone clinical programs positioning us well for the catalyst rich year ahead. We are pleased to report ZTALMY’s second quarter sales of $4.2 million. The launch momentum has continued and as a result, we are raising for year 2023 ZTALMY sales guidance in the range of $17 million to $18.5 million. Christy Shafer, our Chief Commercial Officer will be reviewing some of the key initiatives for 2023 that we believe will support the continued long-term growth of the ZTALMY franchise. Additionally, we see significant potential for ZTALMY following a successful outcome in seizures associated with tuberous sclerosis complex, an indication that would offer important commercial synergies.

This will be one of the topics that we will be discussing in more detail during our Investor Day on September 19th. We are making meaningful progress, expanding access to ganaxolone for patients around the world. On July 31st, we announced that the European Commission approved our marketing authorization application for ZTALMY in CDKL5 deficiency disorder. This approval required a tremendous effort from the Marinus team to respond to the many technical and clinical questions raised by the EMA during the review process. To further support global access, we recently submitted the marketing authorization application in the UK. Our ex-U.S. partnerships are a central part of our commitment to reach the global patient community. As previously reported, Marinus entered into an exclusive distribution agreement with Biologics in selected markets in the Middle East and Africa and we hope to have ZTALMY available for patients in the MENA region in early 2024.

In China, our partner Tenacia has made significant progress, and we expect the submission of our CDD NDA in the near term. Moving to our clinical pipeline, I want to start with an update on the Phase 3 Raise trial in the refractory Status Epilepticus, which I’m sure is top of mind for many of you. Total enrollment continued to move in the right direction, however, the summer months have been a time of turnover for many clinical site personnel, which we believe has resulted in a slowdown in recruitment. This phenomenon has had a much bigger impact than previously anticipated, particularly while our team has continued to work hard and completed the majority of remaining site activations in the second quarter. As a result of this summer slowdown, which Joe will discuss in more detail, we have moved the interim analysis out three months to Q1 of next year.

While we are disappointed in this delay, we believe that it’s critically important to continue to enroll the right patient population for a successful trial outcome. We are confident that the diligent screening efforts by our clinical team and Raise study sites will drive a placebo rate well within our expectations, creating the opportunity for a meaningful clinical result and putting us in a position to demonstrate a benefit across multiple healthcare utilization measures. The organization is working towards an expected NDA filing and preparing our future commercial execution. Importantly, the one quarter delay to our interim data review is not expected to impact the timing of our commercial launch and may allow us to submit our NDA filing with a valuable alternative bottle size, which Christy will discuss shortly.

We look forward to providing an overview of upcoming milestones and next steps following the interim analysis as well as an update on enrollment during our Investor and Analyst Event next month. When the interim analysis is conducted, and if it meets the stopping criteria, we plan to begin transitioning the majority of Raise sites to an open label extension, and then to shortly transition a subset of these sites to the Raise II study. This will help support a smooth and rapid completion to Raise II with the goal of driving improved timelines for the European filing and a potential U.S. label expansion. The trial is on track to begin enrollment later this year. Let me move to the oral franchise clinical development program and begin with a quick update on the TrustTSC trial.

We are actively enrolling refractory patients in this global study and continue to expect top line data in mid-2024. Blinded discontinuation rates in the TrustTSC trial had been low, which supports our belief that adjustments to dose titration made following the Phase 2 results can drive improvements in tolerability and deliver a clinically meaningful outcome. One of the elements that is critical to the success of the Trust trial is working closely with our advocacy partners at the TSC Alliance. Next month, we will be attending the international TSC Research Conference where the team and I will be meeting with a number of key opinion leaders, patients, and advocates. We believe that ZTALMY has the potential to address a significant unmet need for TSC patients suffering from refractory seizures, and we are the only product currently in Phase 3 development for this indication.

At the same time, we have spent considerable energy broadening our patent portfolio for the oral franchise and are pleased that a new method of use patent has been granted by the USPTO for ganaxolone for its use in treating seizures associated with TSC. This new method of use patent expires in 2040. Finally, and equally exciting, I’m happy to share that we’ve enrolled the first patient in the multiple ascending dose study using our second generation oral ganaxolone formulation, and are on track for preliminary data by year end. We believe this formulation has the potential to be the future of the oral franchise and will continue to target its use in patients suffering from LGS and other refractory epilepsies. We saw meaningful improvement in pharmacokinetics in our single ascending dose trial, and are hopeful that this MAD study will reinforce our belief that the second generation oral program will allow twice a day dosing and provide physicians the ability to dose titrate to higher serum concentrations of ganaxolone that can be — then can be achieved today.

Both of these attributes are critical to offering an enhanced solution to the broader refractory population. With that, I would like to turn the call over to our Chief Commercial Officer, Christy Shafer.

Christy Shafer: Thank you, Scott and good morning. I’m pleased to present the progress we’ve made in the second quarter and the underlying drivers of our strong performance as we continue to grow the ZTALMY brand. In Q2 net product revenues grew to 4.2 million with approximately 120 commercial patients active on therapy, and continued positive payer coverage and access for ZTALMY. 83% of U.S. commercial plans have extended labeled coverage to ZTALMY with Allstate Medicaid plans extending coverage at the end of the second quarter. With the exceptional early performance of ZTALMY we are thrilled to increase our revenue guidance for 2023 to a range of $17 million to $18.5 million dollars. I want to thank the entire commercial team who’s worked tirelessly to ensure a successful launch of ZTALMY, and for the passion they demonstrate day in and day out bringing meaningful change to patients we serve.

The International Foundation for CDKL5 Research has established two new centers of excellence at Vanderbilt and Montefiore bringing a total of 10 CDD COEs to the U.S., which is a direct reflection of the need for more centers that provide multispecialty care for CDD families. We continue to collaborate closely with the Centers of Excellence helping connect them with our community and local HCPs to maximize access to care for patients they treat. As we look to the next phase of launch, our commercial team is focused on executing a comprehensive strategy that addresses each phase of the patient journey, while building on the core capabilities needed to reach our full potential for current and future potential launches, including TSC. This strategy is anchored in four key areas; patient identification, activation of the caregiver community, establishing its autonomy as the standard of care for CDD seizure management, and continuously enhancing the patient experience.

To start, we’re continuing to invest in better and more informative third party data and analytics. Insights are enabling increased identification in two ways. First, we’ve gained visibility into nearly two times the number of ICD 10 coded CDD patients than we could see at this time last year. And second, we’re beginning to identify patients and look alike cohorts who have not yet been diagnosed with CDD or coded with the appropriate ICD 10 code. In both cases, we’re expanding our call targets to meet patients where they are in the continuum of therapy and care. The insights driving us to these call points are enabling continuous improvement in our message delivery to ensure reps are focusing education on ZTALMY as a treatment option for providers with known CDD patients and for providers with suspected CDD patients on disease state, genetic testing, and coding.

This includes dispelling cost and access misperceptions of genetic testing, which is widely accessible and reimbursed under most insurance plans. Appreciating the integral role of the caregiver we’re pleased to announce the kickoff of our patient engagement program, Shining Moments later this month. We have three dedicated HCPs on the speaker’s bureau and one caregiver family that will perform five webinars in the back half of 2023. Strong recruitment efforts are ongoing in conjunction with the IFCR, our target HCPs and a significant media outreach plan. We’re confident that by sharing the experiences of those who have initiated treatment CDD families will be inspired by the potential for more good days with ZTALMY. To round out our strategy we plan to continuously refine ZTALMY One patient support program to meet the evolving needs of the CDD community and enhance the patient experience.

Finally, planning is underway for our second American Epilepsy Society Annual Meeting as a commercial organization, where we look forward to showcasing these initiatives. For our acute care franchise, we continue to prepare for a potential commercial launch with the quarter ahead, focused on leveraging insights from the real world data project I introduced on our Q1 earnings call. You may remember this project is a first of its kind approach leveraging data across four distinct claims providers to generate patient progression through distinct status episodes. Now complete, this refined collection of insights has yielded three fundamental areas of findings that will guide our subsequent steps towards launch preparedness. First, the data provided an updated detailed view of the overall Refractory Status Epilepticus population through transitions across settings in the hospital and the treatment provided as patients move through both the SE continuum and hospital departments, informing our stakeholder mapping and highlighting specific areas of unmet need along the patient journey.

Second, utilizing the data we tackled the heterogeneity of RSC patients by creating archetypes within the diagnosis and two clear cohorts emerged. RSC patients who progressed to IV anesthesia, and those who progressed through a cycle of ASMs. Third, we were able to overlay SE patient episodes across the broader spectrum of community and academic hospitals to identify accounts that are involved in RSC patient care, including patient referral pathways in especially high volume receiving centers. In essence, the data reinforced our significant market potential and gave us a clear roadmap for the acute care franchise’s commercial debut. I look forward to providing more details on September 19th during our Investor Day. As Scott mentioned, we’re also making important manufacturing investments to ensure IV ganaxolone is optimized for physician use and can be seamlessly integrated into the hospital setting.

We are developing a smaller 250 ml bottle compared to the existing 500 ml bottle for increased storage flexibility in the hospital setting. This will allow IV ganaxolone to be stored in a wider variety of locked cabinets on the unit for ready access and was preferred for controlled substance distribution, tracking, and waste recording. The smaller volume is also expected to reduce barriers and initiating treatment with less cost impact if the bottle is punctured and not used or not used in its entirety. We were originally planning on filing the RSC NDA with the 500 ml bottle and then filing a supplemental NDA with the 250 ml bottle. But the additional three months may allow us to file with the new, smaller bottle. With the early successes of ZTALMY launch as our foundation, I look forward to building on our commitment to deliver innovative new treatment options to patients suffering from rare genetic epilepsies and refractory seizure disorders.

I’ll now hand the call over to our Chief Medical Officer Joe Hulihan to discuss our ongoing development programs.

Joseph Hulihan: Thank you, Christy and hello, everyone. It’s my pleasure to provide an overview of the substantial pipeline progress we’ve made since our first protocol. Starting with our development programs and Status Epilepticus, as Scott mentioned, we now expect to conduct an interim analysis of the Phase 3 Raise trial of IV ganaxolone in refractory status in the first quarter of 2024. If the analysis meets its predefined stopping criteria, we plan to announce top line results at that time. We continue to tackle industry headwinds affecting clinical trial recruitment, and then recognize that the summer is a busy time of year for many institutions with the transition to the residents and fellows and turnover among other research staff.

We believe these factors have slowed Raise study recruitment, resulting in the delay of our top line results to the first quarter of 2024. To address these challenges, Marinus is supporting new Raise trial champions through onsite and virtual education at our study centers in the United States, Australia, and Canada. In June and July alone, we have successfully activated 13 new sites across these three countries and are pleased to share that we’ve already enrolled our first patients in Canada. We are encouraged by the enthusiasm, dedication, and motivation of the site staff and look forward to continued collaboration to complete the Raise study. We expect to complete final site activations for Raise this month, at which point the team will be fully focused on completing the double blind phase of the trial and initiating the open label extension.

While we’re disappointed by the enrollment impact to the study this summer, we’re optimistic about the volume of patients being screened and we firmly believe that enrollment will return to its usual pace with the integration of new sites and the normalization of clinical personnel transitions. Now I’d like to provide a few operational updates on the study. Raise sites are now being resupplied with the new citrate buffer formulation of IV ganaxolone. This new formulation does not require refrigeration and is expected to have a 24-month shelf life. Also, the data monitoring committee met recently to review safety information and the integrity of trial conduct. Following this review, they recommended continuation of the study without modification.

As a reminder, we plan to conduct an interim analysis of two thirds enrollment or 82 patients. There are two co-primary endpoints and two key secondary endpoints that will be analyzed and reported at the interim. The co-primary endpoints are proportionate participants with status agents within 30 minutes of study drug initiation and proportionate participants with no progression to IV anesthesia for 36 hours. To meet the stopping criteria, we need to achieve statistical significance on both endpoints. The two key secondary endpoints are time to SE cessation and no progression to IV anesthesia for 24 hours off study drug where it is 72 hours. Other secondary endpoints include additional clinical measures, functional outcomes, and metrics on healthcare utilization such as number of ICU days, length of hospital stay, and time on mechanical ventilation.

We plan to present the results from the analysis of these additional secondary endpoints at upcoming medical meetings. Urine analysis with data on 82 patients is powered at over 90% to show a 40% difference between ganaxolone and placebo and in fact, the study could achieve statistical significance with treatment differences of less than 30%. We continue to closely monitor the baseline characteristics of patients entering the study and have seen that the patients are largely similar to those enrolled in Phase 2. This gives us optimism that the results from Phase 3 will mirror those from Phase 2. We also know from review of characteristics of the patients who have failed screening that we are enrolling in appropriate study population. Between this and the similarity of the study populations in Phases 2 and 3, we continue to believe that we’re enrolling the right patients in the Raise study.

Our August corporate deck now includes an update of the baseline characteristics of patients enrolled in the trial. One difference between the Phase 2 patients, and those entering a Phase 3 study is the baseline seizure burden. Based on feedback from our scientific advisors and to align with published guidelines for diagnosis of Status Epilepticus, we reduced the required seizure burden from 50% in Phase 2 to 20% in Phase 3. So as expected, the baseline seizure burden is somewhat lower in the Phase 3 study. Based on detailed review of EEG and patient outcomes from Phase 2, we expect the difference in seizure burden to have no impact on resolution of status in either the placebo or ganaxolone arms. In addition, we have an independent blinded central EEG reading group that reviews the — from a study on an ongoing basis to validate patient eligibility.

At our upcoming Investor Day we will provide you with information on patient demographics and baseline characteristics as well as further detail on the interim analysis plan. Our other trials in Status Epilepticus continue to make meaningful progress. The study team has done a great job navigating the new clinical trial regulations in Europe and we expect to begin enrollment in our European registration study for refractory status Raise II later this year. By transitioning a portion of Raise sites to Raise II following a successful interim analysis, we would expect a quick and seamless site activation process. In addition, we’ve initiated screening interface to Reset trial in established Status Epilepticus and expect to complete the first study cohort by the end of the year.

Also, as Scott mentioned, we’re supplying ganaxolone to physicians upon request under emergency IMDs for Super Refractory Status Epilepticus, or SRSE. Our clinical team has developed a new dosing paradigm designed specifically for these extremely difficult to treat cases rather than recommending a 48-hour regimen, like the one we were using in the Raise study. So far, three patients have been treated with the new SRSE regimen, including a patient with new onset Refractory Status Epilepticus, or Norse, a condition that’s one of the most poorly responsive to treatment. I am pleased report to all three patients were weaned off IV anesthetics with resolution of their status. Moving to our oral franchise, I can report that we’re actively enrolling patients in the global Phase 3 TrustTSC trial in tuberous sclerosis complex, and that we remain on track for data by the middle of next year.

As we’ve previously discussed, to address the higher than expected rates of [indiscernible] we saw in our Phase 2 TSC study, we developed a lead titration schedule for Phase 3. By using a slower initial titration, we believe that we can improve tolerability and potentially efficacy as well. Even though the study remains blinded we have had few reports of somnolence and have seen low discontinuation rates to date, bolstering our confidence in the new titration schedule. We are pleased to report that we’ve also begun enrolling TSC patients in China, which is an important research region for us. I recently visited some of the clinical sites in China and I’m encouraged by the high level of engagement from Tenacia, our collaboration partner, as well as the expertise and enthusiasm of their study investigators.

Finally, turning to our second generation product development efforts, we’re pleased to have initiated enrollment in our multiple ascending dose study. We expect that the study will confirm the feasibility of b.i.d. dosing with preliminary data anticipated by year end. In parallel, we plan to finalize the clinical program design for Lennox-Gastaut syndrome in the first quarter of 2024 pending results of the MAD study. Development of ganaxolone pro-drug also continues to advance with submission of an IND application targeted for the fourth quarter of 2024. We’re pleased so far, the profile of the pro-drug appears to support dosing once a day. We’re also glad to share that we’ve submitted seven abstracts for presentation at the American Epilepsy Society Annual Meeting in December, including two-year data from the Marigold Open Label Extension.

To conclude, we’ll continue to focus our efforts on successfully executing our Phase 3 programs throughout the remainder of the year. The next 12 months hold great promise with numerous data catalysts on the horizon and I look forward to seeing the positive impact our work could have on patients and families suffering from refractory seizure disorders. I’d now like to turn the call over to our CFO and COO, Steve Pfanstiel, who will provide you with a financial update.

Steven E. Pfanstiel: Thanks, Joe and good morning to everyone. I am pleased to be able to share our financial results for the second quarter of 2023. Prior to diving into the details of our financial performance, I’d like to provide a few key updates for the business. For the fiscal year 2023 I am pleased to provide an update to our revenue and operating expense guidance. The ZTALMY net revenue, we are increasing our guidance with net revenues now projected to be in the range of $17 million to $18.5 million, which represents an increase of $2 million on the lower end and $1.5 million on the higher end of the prior guidance range. As Christy mentioned, the increased guidance reflects the strong continued execution of our launch.

For BARDA revenue, we are also increasing our guidance, with revenues now projected to be in the range of $11 million to $12 million, which represents an increase from the prior guidance range of $8 million to $11 million. The increase is a result of continued progress of the API onshoring activities, and ongoing IV ganaxolone development. We now project our GAAP operating expenses, inclusive of SG&A and R&D expenses to be in the range of $160 million to $165 million, of which we expect approximately $15 million to be non-cash, stock based compensation. This is a reduction from our prior guidance of $165 million to $175 million and is driven by ongoing efforts to drive prudent cost management and focused investments on ZTALMY commercialization and our ongoing Phase 3 trials.

We expect that our current cash, cash equivalents, and short-term investments of $175.3 million will be sufficient to fund our operations into the second half of 2024 inclusive of maintaining the required minimum cash balance of $15 million under our credit agreement. The approval of ZTALMY by the EU in July of this year marks a significant milestone for CDD patients throughout Europe. Our commercial partner Orion recently announced it has begun preparations for the launch of ZTALMY there, including engaging the required processes for obtaining pricing and reimbursement approval in the various European countries. While the reimbursement environment can be challenging in Europe, we believe that ZTALMY brings a number of differentiated attributes for CDD patients, including the safety profile and meaningful durability of effect, as evidenced by the two-year open label data.

As a result of the EU approval, Marinus is also eligible to receive royalties and commercial and sales milestones under our collaboration agreement with Orion. As a reminder, royalty rates under the Orion agreement range from the low double digits to the upper teens towards ZTALMY. I’ll now move into our financial results. For the second quarter of 2023. We recognize product revenues of 4.2 million and 7.6 million for the three and six months ended June 30, 2023. These revenues consist of ZTALMY product sales, which was launched in the third quarter of 2022. Separately, we recognize BARDA revenues of 1.8 million and 8.9 million for the three and six months ended June 30, 2023, as compared to 1.8 million and 3.3 million for the same periods in the prior year.

The increase is driven primarily by activity associated with startup of our API onshoring initiative. Research and development expenses were 21.4 million and 49.3 million for the three and six months ended June 30, 2023, as compared to 21.5 million and 39.5 million for the same periods in the prior year. The year-to-date change was due to increased costs associated with our API onshoring effort, increased TSC and RSC clinical trial activity, and increased headcount. As a reminder, the API onshoring effort is approximately 70% funded by BARDA so that the increase in R&D expenses is partially offset by the increased BARDA revenues reflected in the first half of 2023. Selling, general, and administrative expenses were 15.7 million and 30.9 million for the three and six months ended June 30, 2023 as compared to 17.1 million and 28.8 million for the same periods in the prior year.

The primary drivers of the change on a year-to-date basis were increased headcount related to the U.S. launch of ZTALMY. Interest income was 2.1 million and 4.5 million for the three and six months ended June 30, 2023, as compared to less than 0.1 million for the same periods in the prior year. The increase in interest income was driven by the overall increase in cash, cash equivalents, and short-term investments and increased yield on those balances. Interest expense was 4.2 million and 8.4 million for the three and six months ended June 30, 2023, as compared to 2.7 million and 4.3 million for the same periods in the prior year. The increase is driven by drawdown of an additional 30 million of credit under the Oak Tree agreement in March 2022 upon FDA approval for ZTALMY and non-cash interest expense related to our revenue interest financing with Sagard.

The company reported a net loss before income taxes of 33.5 million and 68.2 million for the three and six months ended June 30, 2023 as compared to a net loss of 39.4 million and 58.8 million for the same periods in the prior year. As a note, the 2022 net loss includes the one-time gain of 12.7 million related to recognition of a portion of the upfront payment associated with our Orion partnership. These totals also include non-cash stock based compensation expense of 3.9 million and 7.6 million for the three and six months ended June 30, 2023 as compared to 3.8 million and 7.2 million for the same periods in the prior year. Cash used in operating activities was 65.8 million for the six months ended June 30, 2023 as compared to cash used in operating activities of 61.3 million for the same period in the prior year.

Now I’ll turn the call back to Scott who will provide concluding remarks.

Scott Braunstein: Thanks Steve. With a solid foundation for continued success and expansion, we are confident in our ability to execute against our near-term milestones to drive Marinus into the next stage of growth as a leader in the development of innovative treatment options for patients with rare genetic epilepsies and refractory seizure disorders. As we’ve mentioned, we’ll be hosting a hybrid Investor and Analyst Day On September 19th, in New York City for a deep dive into our pipeline and commercial launch preparations in RSC and TSC. We hope you will be able to join and I look forward to seeing many of you there in person. Operator, can you now open the call for questions?

Q&A Session

Operator: Yes, thank you. [Operator Instructions]. Your first question comes from the line of Brian Abrahams of RBC Capital Markets. Your line is open.

Brian Abrahams: Hey, guys, good morning. Thanks for taking my question and congrats on all the continued progress and the nice quarter with ZTALMY. I wanted to ask if you could expand a little bit more on the baseline characteristics that you’re seeing in the Raise study. It looked like the — you mentioned the seizure burden being lower versus the Phase 2. And it looks like actually, the seizure burden has gone down quite a bit since the last cut of the baseline characteristics. So I guess I’m wondering if there’s any differences in the types of patients that you’ve enrolled more recently into the study, maybe how that dovetails with the stringency in the screening criteria, and what the potential impact could be to the placebo rate on the progression to IV anesthesia endpoint? And then maybe along those lines also noticed the proportion of patients with prominent motor features has actually come up quite a bit, so I’m also wondering how that fits in as well? Thanks.

Joseph Hulihan: Hey Brian, thanks for the question. This is Joe. I think, yeah, while we changed the inclusion criteria, as I mentioned and remarked for this baseline seizure burden to be 20% and that actually the American Clinical Neurophysiology Society has published that as a guideline for diagnosis of status. And I don’t — the baseline seizure burden, I don’t believe it’s going to influence either the placebo or drug response. The placebo response on either endpoint is driven mainly by status severity, which is identical in both from the Phase 2. So that was something that we saw may make a difference in outcome, but all the patients in the high dose group, regardless of the severity of their status or the baseline seizure burden in the Phase 2 study had virtually complete resolution of status that we persisted after the drug was stopped.

So the baseline seizure burden, I don’t think is going to have any effect nor the motor features. The prominent motor features, that could be anything, that could be any type of motor activity either focal motor status or non-convulsive status with motor features. That shouldn’t have any bearing on outcome either. So I think that regardless of those differences from the baseline characteristics, I don’t think it’s going to make any difference. And we have looked at whether there have been a change in the characteristics of the patients over time, haven’t really been able to see anything there.

Brian Abrahams: Got it. [Multiple Speakers]

Scott Braunstein: Brian, the only thing I’d add too is I think we were surprised at the first kind of the data, how high the seizure burden was, right. Because, it looked as though very similar to the Phase 2 where the seizure burden was 50%. So we’ve expected that number to come down and overall, we’re really not surprised by it. That was our expectation going into the study that we’d be somewhere between 30% and 40%.

Operator: Thank you. Your next question comes from line of Joseph Thome of TD Cowen. Your line is open.

Joseph Thome: Hi there, good morning. And thank you for taking my question. Maybe just on the Q120 24 interim timing, maybe what gives you confidence that this is going to be what you’re seeing over the updated goal and then in the updated metric, under 50% of the patients are getting dosed. So what’s the main reason why a patient is maybe a screen failure that you’re seeing in the Phase 3? Thank you.

Scott Braunstein: Thanks, Joe. Let me take the first question on timeline and then I’ll pass it over to Joe for a little bit more color. As we met with investors, Joe in the first half of the year, we were seeing very steady enrollment on a monthly basis for several months. That gave us a lot of confidence on the timelines and the completion of the study. And since the beginning of the year, we’ve almost doubled the number of sites that are now open and activated. Actually more than double if we go back and look at our January numbers. So we feel very confident now that the study has all the right sites throughout the U.S., Canada, and Australia. And we were surprised that we saw a slowdown over the summer. We really expected to be in a different place but as we’ve talked to our medical science liaison teams, our clinical ops teams, as Joe mentioned in his prepared remarks, we’ve had such a high degree of turnover in the hospital, I think we really underestimated that short-term impact.

So we’re quite confident in terms of the sites that are now participating, their level of activity that we’ll see back to normal levels of enrollment. And we’re using that normal baseline for our Q1 projections and certainly, if we see accelerated relative to the first half of the year, some are excluded. We would hope that we can move the timelines up. So we have a lot of reason to be enthusiastic. We’ve really doubled our resources in the last six or nine months on this study. Disappointing to us about the summer. But from an overall study perspective, confident it’s a short-term hit. Joe, I’ll turn it over to you to talk a little bit more on ZTALMY’s second question.

Joseph Hulihan: Yeah. Hi, Joe. So yeah, I think one of the major reasons is the patients end up responding to another AED, and then don’t come into the study, which actually when we say looking at screen failures gives us confidence for enrolling right patients, that could have been a potential placebo responder. Not necessarily in the first endpoint, but perhaps on the second endpoint, the intubation within 36 hours or IV anesthesia within 36 hours. And so, the stringency of the criteria is greater than in Phase 2, and I think that by far that’s the main reason patients are being screened out.

Joseph Thome: Okay, great. Thank you very much.

Operator: Your next question comes from the line of Andrew Tsai of Jefferies. Please go ahead.

Andrew Tsai: Hey, good morning. Thanks for taking our questions. Appreciate the update. So just really quickly, on the baseline reanalysis, what percentage of patients is this reanalysis based on? And then secondly, as we think about the interim top line release, what is your latest thinking on whether you will announce when the 82nd patient has been enrolled, could it be an individual press release or should he have to wait for the top line data itself in Q1? Thank you.

Scott Braunstein: Yeah. Thanks, Andrew. We’ve gotten the question a lot and I would generally say my bias today is that we would top line the second patient. I think we owe it to the investor community given that our timelines have shifted and that was a disappointment to us. This baseline characteristic is really a recent cut. We’ve updated the data, really to the last few weeks. We’re not going to give you that absolute number, but we are going to talk a little bit more about the numbers in September. So stay tuned. Did I miss anything there, Andrew?

Andrew Tsai: Nope. All set. Thank you, very clear.

Joseph Hulihan: And I think importantly, we’ve gotten to questions a lot of investors now with the protocol amendments that we made last summer, and really, I would say, really took effect at year end, as we talked about it took a while for all those sites to get through their IRB’s. We thought it was important to really show you this updated data set with a large number of patients that have been enrolled since the protocol amendment. So I think that’s a critical piece there as well, Andrew, that this is really I would call it a mixed population, although we would argue it’s really the population that we initially intended to study in the Phase 3.

Andrew Tsai: Right, agreed, thank you again.

Operator: Your next question comes from the line of Charles Duncan of Cantor Fitzgerald. Your line is open.

Charles Duncan: Yeah, good morning Scott and team, congrats on a good quarter, commercial quarter of progress and on the recent EU approval. I had a two-part question that I wanted to ask you regarding first of all, Raise I. You mentioned that the DMC have recently met and recommended continued enrollment. Could you provide some color on the observations that were being assessed within that DMC assessment? And then the second part of this question is regarding the TrustTSC trial. You mentioned topline in mid-2024 and you’re seeing lower blinded basis, lower discontinuation rates. Could you give us some color on what those discontinuation rates are? Thanks.

Scott Braunstein: Joe, you want to start on the DMC?

Joseph Hulihan: Sure. Yeah, the DMC was looking at safety. They look at unblinded safety data to see if there’s an imbalance and adverse effects that indicate something going on with the drug. And that’s really all they look at. When they convene they look at the interim analysis data, obviously, they’ll see efficacy, but for right now, they’re just looking at safety. And in terms of the TrustTSC study, could you repeat that one more time? I’m sorry.

Charles Duncan: Yeah, in terms of the discontinuation rate and what really are you seeing, I mean, it sounds great that you’re reducing — the reduced titration rate is helping but what is the discontinuation rate thus far?

Joseph Hulihan: Well, it’s extremely low. I mean, it’s in the single digits in terms of patients discontinuing. So that I mean, that’s the basic answer of the question in terms of the reasons for discontinuation. But yeah, that very low discontinuation rate. And the other thing too I think we mentioned, there is very few calls from physicians about adjusting titration or what to do with titrations to manage side effects. So we’re very optimistic about that titration schedule.

Scott Braunstein: And Charles the one thing I would add, this to Scott, if you recall, Marigold, as our kind of benchmark 80% of patients achieved standard dosing. And we had less than a 10% discontinuation rate. There was only one patient who discontinued because the tolerability in the double blind Phase 3. In the Phase 2 TSC study, we saw about a 25% discontinuation rate, again, really surprised us with about 70% of patients who are acquired aggressive dose adjustments. And that really persisted throughout the trial. So that dichotomy in two data sets was really the onus for us amending the dose titration. And I think we feel very confident now where we are with a meaningful number of patients enrolled in trust. We’re seeing effectively baseline characteristics, discontinuation rates, and what appears to be in a blinded discontinuation rates and blinded dose titration adjustments much more similar to the Marigold dataset than the Phase 2 TSC data set.

I think that’s giving us a lot of confidence, both the efficacy and the safety signal.

Charles Duncan: Very good. Thanks for the notes.

Operator: Your next question comes from the line of Joon Lee of Truist Securities. Your line is open.

Joon Lee: Hey, thanks for taking our questions. And given how challenging it has been to enroll in Phase 3 arrays, what gives you confidence on the commercial opportunity ganaxolone in RSC, I mean, is it that difficult to find patients to enroll in, why would that differ in commercial situations? Thank you.

Scott Braunstein: Yeah, let me kick it off and then Christy, if you want to add any color, I’ll be happy to pass it over to you. A few different things, Joon. And I think, like any clinical study and particularly in the hospital setting, we really narrowed this population to a very small slice of the RSC population because we need — we really wanted to show the value proposition versus IV anesthesia. And I think different than our Phase 2 where we had several patients who’ve had multiple therapies, but a physician wasn’t necessarily ready to give IV anesthesia that allowed the patient to enroll in the Phase 2, where we’re really using the strict criteria of a physician. In a physician’s mind IV anesthesia needs to be the next therapy.

I think as a result of that we’ve kept this as a very, very narrow inclusion criteria. Now, the flip side of that is we think that’s the critical piece to driving low placebo rates. So I think, in retrospect, we really have — are looking at a smaller subset of the status population that we will ultimately look at. It’s very interesting to me in the Phase 3 study, the average time to enrollment is 24 hours as of today, which means physicians are really observing these patients, treating them with multiple AEDs, sometimes more than two AEDs in the Phase 3 study. And I think what we really believe is the ultimate paradigm shift here and one that shouldn’t be difficult is that would you want a family member in Status Epilepticus for 24 hours, no, who is quite ill.

And so, we’ll start with the dataset in Raise which is all about the avoidance of general anesthesia, and those very severe complications. But we will move very quickly to this drug being used faster, showing faster response rates, and other AEDs. And, the importance of time is brain which, I do think makes the Raise II trial more and more important. I think it’s critical. People ask me all the time, why did we choose to do the interim analysis on the Raise trial. On one hand, I think we are more than sufficiently powered to get the answer. And on the other to your question, Joon, as we look at the market I think Raise II becomes a very critical part of the marketing story. Christy, let me pass it over to you.

Christy Shafer: Sure, Scott. Thanks. And Joon, thanks for the question. We’ve been thinking about the same sort of thing over here. But what I’d love to say that Scott touched on initially, is that this selection is really amazing for us on the commercial side, given the data that we expect to get out of this. Clinical trial efforts certainly differ from commercial promotional efforts and what we have been very encouraged by and I spoke to it a little bit in our prepared remarks was the data that has come back about how these patients move through the hospital system, the cost of these patients as they progress through the hospital system, and the value that we think that ganaxolone can bring to them. So again, from a promotional perspective, it is wildly different but we feel confident that the selection that the clinical team is working on will directly affect how we be able to present value in the hospital.

Operator: Thank you. Your next question comes from the line of Marc Goodman of Leerink Partners. Your line is open.

Marc Goodman: Yes, good morning. There was a comment earlier about the number of patient’s number, CDD patients I guess it was from the coding that you’ve been evaluating. Can you talk about what the number is that you believe that there are CDD patients in the U.S., what was the old number, what’s the new number and maybe just give us a sense of how the revenue in the quarter probably got their gross to net, just where the pricing is these days? Thank you.

Scott Braunstein: Marc, I’m going to flip it over to Christy to talk more on the ICD numbers. And just a reminder for you and everyone, both of our patient advocacy groups, so the Loulou Foundation and IFCR were really instrumental in creating that ICD 10 code. So we’ve only had that ICD code available to us and physicians for about three years, and we’ve actually changed our data sources to really try to be more sensitive. But Chris, you feel free to share the numbers with Marc.

Christy Shafer: Sure. So all of our modeling has really dictated an addressable patient population of about 2000 pediatric patients, and we stay firm on that number. And that’s the number that is continuing to inform our forecasts. However, when I spoke earlier about doubling our ICD 10 coded patients, we invested in a dataset early on that tracks the ICD 10 code and the usage of it. We had really strong confidence that that would grow with our promotional efforts and it certainly did. We saw a very nice increase in numbers. However, we decided, as a team to invest in further amounts of data that is capturing even more coded patients. And so that number has actually doubled from the initial dataset that we purchased and so with that we’re getting unique patients, unique physicians treating these patients, which has then led us to increasing our target size of physicians across the United States.

So we still stay firm on that 2000 approachable patients that are pediatric and this has now enabled us to find them a little bit easier.

Operator: Thank you. Your next question comes from the line of Douglas Tsao of H.C. Wainwright.

Scott Braunstein: Operator, I am sorry, we didn’t answer the second part of Marc’s question.

Operator: My apologies.

Scott Braunstein: Yeah, no, no problem, Marc. Yeah, happy to provide additional commentary on the launch. So revenues in the quarter were 4.2 million. I think, as you saw in the detail, we had about 120 patients on commercial therapy, actively on commercial therapy at the end of Q2. No big changes in assumptions. Our gross to net discounts had been around that 20%, maybe a slight upside to that number could be projected for the year. From an average WAC basis, though, that’s where we have seen some upside. We had indicated we thought our average age would be around four to five years old. Initially, we’re actually seeing that an average median age of around nine years old, that takes our average WAC closer to 150,000 annually or a little more.

I think what the quarter really gave us confidence in is what we’ve been saying all along as we have this steady, continued build of patients, and that that build is driving us and giving us confidence that again, we view this as a breakeven kind of investment in the CDD commercial launch within about a two-year window. We’re investing about 25 million annually between our reps, our market access, and this kind of small team going after these 2000 patients. At an annualized sales run rate of 30 million, we get to break even, we still think that’s very much on track to happen by the middle of 2024.

Joseph Hulihan: And, Marc, I just want to answer your question there a little, I know you asked a direct question. So year one, when we looked at the ICD data we were seeing somewhere between 200 and 300 patients. And now we’re seeing well north of 700 patients coded for CDKL5, and that number is growing every year. Apologies that we didn’t get that to you earlier. Go ahead operator.

Operator: Douglas Tsao, your line is open.

Douglas Tsao: Hi, good morning. Thanks for taking the question. Just one question for me. I’m curious, Scott, now that we see a lot of progress on the pro drug. And it’s not that far behind, the second generation. How are you thinking about the development of that that asset in terms of the overall oral franchise?

Scott Braunstein: It’s a great question that Doug. I was keeping in our back pocket to really look at the depression space. And we all know what happened this week, unfortunately, in the depression space. And to be very frank, given the fact that our second gen formulation has really shown at least early on better characteristics than we initially expected, I think it was a little bit more of the reverse where we always saw the pro drugs being the once a day solution in the marketplace. I think very honestly, the one with the strongest intellectual property. But given that the new formulation really looks to be twice a day, looks like we should be able to get the vast majority of patients up to blood levels of 150 to 175 nanograms very quickly.

It was almost a no brainer in our mind to make that investment and think about moving very aggressively into LGS. So I think based on what we see in this healthy volunteer, multiple ascending dose data, as long as we continue to see good progress, for us to take that compound into Phase 3, potentially into Phase 3 in the second half of 2024, to me is incredibly exciting and I think our team feels quite strongly that we only would require a single Phase 3 efficacy study, which is also pretty unique in the seizure world from an FDA perspective. And we can really leverage the ganaxolone clinical package to accelerate that approval. So I look at it a little bit the other way that, I’m sorry, our second generation program is kind of staring us in the face as a new alternative.

The pro drug is equally exciting to us. The ones that a potential of that drug looks great is thus far what we believe the preclinical safety profile looks very strong. And I think we’re going to have to take a long look in a year or two from now where we are across the board and how exactly we slot pro drug in. I’m not sure at this point in time, and I think a lot of it’s going to be dependent on the success of our second generation formulation. And it’ll be a great problem to have. And, I think as we move forward and really expand into broader refractory epilepsy, there may really be a role here for us to work with a strategic partner, so we can accelerate development programs. And I’m pretty open minded to thinking about how this — how the pro drug will fit in.

But right now, I would say we feel really good about the second gen program, and we’re going to take it from there. We had a better answer Doug but…

Douglas Tsao: No, that’s very helpful. I mean, that provides some clarity. Thank you.

Operator: Our last question comes from the line of Jay Olson of Oppenheimer. Your line is open.

Jay Olson: Hey, guys, thanks for taking the question. In the event that Raise does meet the pre specified stopping criteria in the first quarter next year, can you just walk us through the next steps and timing of commercialization in that scenario? And also, how important are the secondary incentives for commercialization?

Scott Braunstein: Well, I’ll let’s start with the timing Jay and then we can talk a little bit about the secondaries. With the completion of the study in Q1, we certainly would expect to file the NDA in 2024. We would expect — we think our team can put the NDA together in a rapid fashion and we’ll talk about those timelines a little bit more in September. And certainly, we think that we would expect a priority review not guaranteed. And in general, our soft launch times are really looking at the middle of 2025. And as Christy mentioned, with those type of timelines, we can incorporate this 250 ml bottle into the launch planning into the NDA. And be ready for that at launch. We had thought historically that we would file with the 500, get approval, and then look for the supplemental approval with the 250.

But we’re now going to incorporate all of that. And I think, when we talk in September, Kristin Rudisill, our lead on the IV program will talk a lot about the NTAP program. And we think that launch, that roughly that launch timing in the middle of 2025 will really set us up for strong NTAP reimbursement for three full years. And again, we’ll lay out all those timelines in September for you. The secondary endpoints we think are critical. I mean, we’ve gotten the questions on how big is the market earlier. Are we — is this a much smaller market than we originally thought. I think we truly believe the answer is no and again, by us really narrowing the field here. The key secondaries are — the key primaries and key secondaries are critical for us getting this drug approved.

But if we want proper reimbursement in the hospital, we really have to show the economic value of the drug. And I think we designed the study to do that. We’re enrolling the right patients to do that. And so, I think many of the exploratory secondaries are going to be the basis of our health economic arguments. And as a reminder to folks, we’re very enthusiastic that we can use the larger data set to make those arguments as we put those second — those exploratory secondaries into the public domain, into our publication strategies. So, I think it’s going to be a combination of the two. We know that anesthesia in and of itself has high morbidity, high mortality, lots of costs from longer hospital stays typically 10 to 17 days in a neuro ICU for these patients.

High rates of cardiac support, high rates of ventilatory complications, GI complications, so the bar is pretty low for us to really show some meaningful outcome benefits. Chris, anything that you wanted to add on that, that I didn’t hit on?

Christy Shafer: No, you really did and I think what’s important to note is that that work right now is being informed by the larger pieces of work that we just finished. And so cost of care and value is where we’re spending the majority of our time right now. And to Scott’s point, those secondaries are driving most of what is coming out of that book.

Scott Braunstein: Great, thanks, operator. We’re out of time and we’re going to end the conference call. Want to thank everyone for dialing in, for your support, and we look forward to seeing many of you live in September. And we also look forward to really giving you a deep dive, a little bit more on the Raise trial. We’ll do a deep dive on baseline characteristics. As we’ve talked about, we’ll go through the enrollment numbers. You’ll really get to hear a deep dive on our commercial plans and we’re going to spend quite a bit of time on the oral franchise as well. The team has been doing a great job to prepare for that. So we look forward to seeing you then. Thank you.

Operator: This concludes today’s conference call. You may now disconnect.