CGTX - NASDAQ

Good morning, ladies and gentlemen, and welcome to Cognition Therapeutics Incorporated Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. My name is Julianne and I will be your conference operator today. This call is being recorded. I would like to turn the presentation over now to your host for today's call, Daniel Kontoh-Boateng, Investor Relations for Cognition Therapeutics. Please go ahead, Mr. Kontoh-Boateng.

Thank you, Julianne. Good morning and thank you for participating in Cognition Therapeutics conference call today. With me today are Lisa Ricciardi, President and Chief Executive Officer of Cognition; and Andrew Einhorn, Interim Chief Financial Officer of Cognition. A press release detailing Cognition Therapeutics 2022 results is available on the Investors section of our website at cogrx.com. We encourage everyone to read this morning's press release as well as Cognition's Annual Report on Form 10-K, which is now filed with the SEC and available on our website. In addition, this conference call is being webcast through the company's website and will be archived for 30 days. Please note that certain information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Cognition's press releases and SEC filings, including its annual report on Form 10-K and previous filings. This conference call contains time sensitive information that is accurate only as of the date of this live broadcast. Cognition undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With that, I would now like to hand the call over to Lisa Ricciardi. Lisa?

Thank you, Daniel. Good morning, everyone and welcome to Cognition Therapeutics' earnings conference call covering 2022's results. On today's call, our Interim Chief Financial Officer, Andy Einhorn and I will share prepared remarks on the company's progress and financial performance in 2022, after which we'll be joined by Dr. Tony Caggiano, our Chief Medical Officer and Head of R&D in order to take your questions. It is an exciting time at Cognition Therapeutics, and I am proud of the momentum the company has built. We anticipate this momentum will continue into 2023. Looking back, what a year in the field of neurodegeneration. I believe all of us working in this clinical and scientific arena have a well-deserved sense of optimism for the first time in many years. With the approval of LEQEMBI, the Alzheimer's community saw true progress that many of us will build on. This serves as a testament that the biopharmaceutical industry together with patients, medical professionals, regulatory agencies can bring to market a product to slow Alzheimer's disease progression. At Cognition, we believe that CT1812, our lead candidate has the potential to be an important part of the evolving treatment paradigm for dementia and we are unwavering in our commitment to advance our work to develop therapies for these conditions. As many of you know, our primary focus is on the development of innovative, orally available drug candidates targeting age related degenerative diseases of the CNS and the retina. Our current clinical programs build upon the company's expertise with σ-2 receptor biology, which regulates a number of cellular functions that are disrupted as a result of neurodegenerative disease. Our drug candidate is currently in the clinic being tested for Alzheimer's disease and dementia with Lewy bodies or DLB as we refer to it. Within Alzheimer's disease, we are [sending] (ph) both early stage patients as well as patients with mild to moderate disease. In addition, we're now studying CT1812 in a new indication, geographic atrophy, secondary to dry age related macular generation, commonly referred to as dry AMD. Modulating the σ-2 receptor complex with a brain penetrant small molecule drug candidate is a unique approach and well differentiated from approaches both in neurodegenerative disease as well as in the optimology and retinal disease space. Now let me provide a brief update on our clinical trials and anticipated timelines for each study. In February, we completed enrollment of our Phase II sequence study for mild to moderate Alzheimer's disease where we're measuring brain waves tied to memory and processing information. We hope the trial demonstrates that a once daily dose of CT1812 can normalize EEG patterns by decreasing state of power relative to placebo, this will further support the role of CT1812 in protecting synapses from the toxicity of Aβ oligomers, we anticipate reporting top line data from SEQUEL later in 2023. Supported by multiple grants totaling approximately $30 million from the National Institute on Aging, our 144 patient Phase 2 SHINE trial for mild to moderate disease has been expanded internationally to Spain, the Netherlands and the Czech Republic where patients are currently being dosed. We are grateful to our partners for their diligence in getting sites up and running. Our SHIMMER study CT1812, which is also supported by a non-dilutive grant from the NIA for $30 million is enrolling patients with mild to moderate dementia with Lewy bodies in a Phase 2 U.S. based trial. The study which is being led by Dr. Jim Galvin from the University of Miami is expected to be conducted at more than 30 sites across the United States. An estimated 1.4 million people are affected by DLB, all of whom have no treatment options. We expect data from shimmer next year. Moving on, our 540 patient Phase 2 START trial is for patients with early Alzheimer's disease. We received FDA clearance on the protocol and are preparing to enroll patients. In collaboration with the Alzheimer's clinical trials consortium, that is our partner, the START trial will measure the efficacy and tolerability of CT1812 in subjects with mild cognitive impairment or early Alzheimer's disease who have elevated Aβ levels. We received an immense grant totaling $81 million for our work in this trial and we are pleased to join forces with the ACTC. With regulatory clearance on our proposed protocol, we expect site activations to begin in 2023. Shifting to the opportunity for CT1812 and ophthalmic indications, dry AMD and geographic atrophy, we presented data in connection with the ARVO conference that supports the proof of concept for geographic atrophy, secondary to dry AMD, somewhat paralleling the challenges to developing treatments for dementia, dry AMD is an area that has frustrated the ophthalmology community for decades with many failed attempts to develop effective treatments. Dry AMD is estimated to account for up to 90% of the population with age related macular degeneration. The advanced form known as geographic atrophy can lead to progressive and permanent vision loss. An estimated 1 million people in the U.S. have geographic atrophy making for a vital area of unmet need in a substantial market. With the recent groundbreaking approval of Syfovre from Apellis Pharmaceuticals, it is an exciting time to be adding dry AMD to our pipeline as we are seeing a surge in patient and physician education around this major cause of blindness. Looking at our opportunity, we have evidence from genome wide study as well as analyses of results from our Alzheimer's studies that demonstrate the treatment with CT1812 may have a beneficial impact on proteins implicated in dry AMD. As we recently announced, we've received FDA clearance to initiate a Phase 2 dry AMD geographic atrophy trial, which we plan to commence this year. The MAGNIFY trial, as we call it, is a randomized placebo controlled Phase 2 trial expected to enroll approximately 240 people who've been diagnosed with dry AMD and measurable geographic atrophy. Over the treatment period, change in geographic atrophy, lesion size and best corrected visual acuity, as well as other measures of safety and efficacy will be determined to assess that CT1812 in low vision loss. In closing, I am proud of the progress our scientific and clinical teams have made. Our trials are expanding into new regions of the world and we are expanding indications. We're optimistic that the work we're doing is moving us closer to benefiting patients. With this mindset, we decided that it was vital that we extend and expand our ability to communicate our messages and our patient centric mission. In order to reach various audiences including scientific and medical community, investment community, patients and caregivers we have launched the Cognition Conversations podcast. The podcast serves to provide information about the latest developments in the neuroscience arena and functions as an important clearinghouse with thought leaders to continue to educate the public about research. To summarize, the diligent work of our team in 2022 sets the stage for what we believe will be a milestone rich 2023. Looking back on our first full year of operating as a publicly listed company on the NASDAQ, I believe we have the tools and resources to continue our mission of creating therapies for age related neurodegenerative diseases of the CNS and the retina. With that, I turn the call to Andy.

Thanks, Lisa. We entered 2023 on a sound financial footing. The combination of the IPO towards the end of 2021, the follow on offering at the end of 2022, our ATM program, our recent agreement with Lincoln Park Capital together with our substantial grant funding have helped us establish a very solid financial infrastructure. Grants from the NIA, the Michael J. Fox Foundation and other key associations have helped us raise approximately $171 million in non-dilutive funding since the company was founded. Our new three year up to $35 million equity financing agreement with Lincoln Park Capital serves as a potential additional source of liquidity for us to tap into in an efficient manner. Additionally, we have and continue to be vigilant in controlling our expenses, which together with the aforementioned capital strategies enable us to extend our cash runway into the second half of 2024. With that context, let's now proceed to the financials for fiscal year 2022. Research and development expenses for the year ended December 31, 2022 totaled $30.3 million compared to $18.6 million for the 2021 prior year period. The increase was primarily attributable to greater spending on clinical programs as we proceed into Phase 2 trials and increased personnel costs. General and administrative expenses for the year ended December 31, 2022 were $13.2 million compared to $10 million for the same period in 2021. The increase in general and administrative expenses reflects higher employee costs, greater director and officer liability insurance costs and professional fees incurred during the first full year as a public company. For the year ended December 31, 2022, we reported a net loss of $21.4 million or $0.91 per basic and diluted share compared to a net loss of $11.7 million or $3.13 per basic and diluted share for the year ended December 31, 2021. At December 31, 2022, we had cash and cash equivalents of $41.6 million and $89 million in grant funding remaining to support certain of our clinical trials and no long term debt. A few comments about our recent transaction with Lincoln Park Capital. On March 10, we entered into an agreement giving Cognition the right, but not the obligation to settle up to 35 million of our common shares to Lincoln Park over a 36 month period, as more fully described in the 8-K filing made on March 10, 2023. Lincoln Park's commitment provides Cognition with potential access to liquidity, which, as recent events have shown, is critically important in turbulent markets. We believe the Lincoln Park facility, our ATM program and the availability under our recently filed S3 gives the company considerable optionality to access capital enabling us to continue managing our cash runway. I'll turn the call back over to the operator who could open the call to questions.

Thank you. [Operator Instructions] Our first question comes from Charles Duncan from Cantor Fitzgerald. Please go ahead. Your line is open.

Yes. Hi. Good morning, Lisa and Andrew. Thanks for taking our question and congratulations on a good year of progress. I had a couple of questions on the Alzheimer's programs. And then I'm actually quite intrigued with the geographic atrophy program. So I wanted to ask about that. First of all, with regard to SEQUEL, in terms of the EEG data that's coming up, could you give us a sense of what you're looking for? I think you mentioned top line data. Do you believe that has predictive value? Or are you really looking for activity that could then translate into efficacy with some of the other studies.

Hi, Charles. Good morning. Thanks for joining. Tony is here with me and he'll take your question on SEQUEL?

Sure. So as Lisa announced, we've completed enrollment in that study and we're looking for top line data to be reported sometime later this year. As you asked, what we're looking for is a shift in the relative data power, meaning, the portion of slow wave activity relative between the treated patients and the placebo treated patients. And this is really a measure of more acute activity that we're looking for following four weeks of treatment with CT1812.

And do you believe that his predictive value for symptomatic treatment or for disease modifying potential for the candidate?

Yes. So I think this is really a measure of whether the acute removal of Aβ oligomers from the synapses has positive effect on synapse activity as measured by EEG. Certainly, we believe that would be a positive indication overall [indiscernible].

Okay. And then moving on to geographic atrophy. I'm intrigued with that. Can you provide a little more color in terms of the connection for σ-2 receptor modulation in neurodegenerative diseases? And what you think that says about potential in geographic atrophy and then vice versa, what does geographic entropy activity tell you about the potential in neurodegenerative diseases? And then when would you anticipate early data out of the MAGNIFY study?

Yes. So we ended up in geographic atrophy based on, as Lisa mentioned just a few minutes ago, based on proteomic data coming out of our Alzheimer's disease study. So, we're kind of look at genome wide association studies in literature. Some basic science in the literature and then a series of studies that we performed ourselves and with collaborators demonstrating that σ-2 modulation could normalize the dysfunction that occurs within a certain cell type in the retina that we and others believe is really integral to the basic pathophysiology of geographic atrophy. And that gave us the confidence and the interest in pursuing GA. Now there are certain common features that σ-2 receptor is able to regulate these processes within cells, within the retina and the central nervous system. As to how they predict each other success in the end. We'll see as they come out. So I hope that answers your question.

Perhaps we'll come back to it offline. But last question, because I don't want to consume the entire call is actually for Andy. That is relative to the grants. You've notably been able to raise a lot of money, in fact more so than most companies I cover. And so, that is non-dilutive. So my question is, is this a strategy going forward? Could you anticipate filing for additional grants? And what percentage roughly of your R&D spend do you anticipate being able to cover with the existing grants? And is that money included in your balance sheet or is it on the come as you achieve milestone? Thank you.

So, Charles, it's Lisa. I'll take the first part of it, which is to say as we look at the grant opportunities in the two general areas we're looking in. The larger trials are currently not funded by much grant support. The expectation is, you have access to private investors or the capital markets. And so, I will say going forward, while it would be wonderful to have another $170 million in grant funding, we're looking at much smaller kinds of grants. So I would guide toward different kind of expectations going forward based on where we are in the clinic. I'll turn it back to Andy for your questions about the expense coverage.

Yes. Thanks, Charles. The grant revenue in 2022 covered approximately half the operating expenses that we have. In mind you, the trials that we're conducting right now with the exception of the MAGNIFY trial in dry AMD, all have grant funding supporting them in one way, shape or form. And in terms of where this money gets put on the balance sheet and so forth, when we incur eligible expenses, we draw on our grants and we get reimbursed by the NIA or whomever fairly almost immediately. When we pay a milestone or upfront payment to a CRO, for example, we'll draw that money and that gets -- and the grant revenue then gets hung up on the balance sheet as deferred revenue and then will be taken into -- recognized as income as the trial progresses and as work is done. That answer your questions?

Yes, it does. Thank you for taking our questions. Good luck for the near term milestones.

Our next question comes from Jay Olson from Oppenheimer. Please go ahead. Your line is open.

Hey, congrats on all the progress and thanks for taking the questions. Can you talk about the proteomic data that you have coming up at ADPD and what investors should be looking forward in terms of how it supports CE1812 mechanism in Alzheimer's? And then anything else you think investors should look out for ADPD that may have reacross to Cognition? And then I have a follow-up on dry AMD.

Terrific, Jay. Good morning. Great to hear from you. It's another exciting year. Last year at AAIC, we presented data. This year Mary, has some more data. I'll let Tony take you through what it is. We can discuss the data will be released in a week and a half and then the posters will be available. But at a high level, Tony?

Sure. So we presented data last year from the first 24 patients of our Phase 2 SHINE study and from the SPARC study, which was an imaging study we conducted at Yale. What's being presented this year at ADPD is a meta-analysis of the two studies. So these are two nearly identical studies with same doses, same patients. Those are powerful way to cross the two data sets and see which signals of drug exposure and effect come through both studies. So this is giving us good candidate biomarkers to follow in the future for treatment effect. As Lisa mentioned, we haven't released details at this point on which proteins those are and so forth. You can see that on the poster and we'll be able to distribute that when it comes up.

Okay, great. Thank you. We'll look forward to that. And then just on dry AMD, are there any human genetic data showing the involvement of the Sigma-2 receptor in dry AMD? And have you had any patients in your Alzheimer's study who also had dry AMD and showed efficacy signals that you could detect there? And then finally, where do you think CT1812 is an oral drug to fit into the treatment landscape of dry AMD, especially in particular combination regimens? Thank you.

Sure. So as we mentioned before, some of the impetus for us to move into GA was based on the genome wide association studies that are in the literature demonstrating that certain changes in the proteins that make up the Sigma-2 receptor confer either risk or protection against developing GA. So indeed there is some of that data out there. And then your next question was –

Do you have any patients in your Alzheimer's study?

Yes. So, yes, it's an interesting question. We don't screen those subjects for geographic atrophy. Obviously, these are complex studies in individuals with dementia. So that's not really part of our operations.

And last, Jay, with regard to the market, the great thing for us is that, you have drugs ahead of us that are building this market, right? Appellis [indiscernible] other companies coming behind them. And as we're going through development, we will see as the retinal community takes forward these products, we'll look at what the reimbursement is. We'll see how this landscape evolves. We believe for patients that an oral drug is a far simpler regimen to take for the long term than having intravitreal injections and we'll see what the practice of the retinal specialist court. So we're watching and waiting carefully. We think an oral drug has an enormous advantage. Could it be disruptive? Possibly. Could it work in combination? Possibly. Those are things we'll be looking to study as we progress.

Sounds great. Thanks for taking my questions.

Thanks, Jay. Our next question comes from Mayank Mamtani from B. Riley Securities. Please go ahead. Your line is open.

Good morning, team. Thanks for taking our questions and appreciate the level of detail. So maybe I'll go in reverse order. Staying on the GA Phase 2 trial design, sorry if I missed this. Could you touch on the treatment period for your primary efficacy endpoint, assuming it's GA lesion reduction? And are you also, by any chance, looking at Visual Equity, maybe as a safety measure? And at what time point could we have an update for that? And then I have a follow-up on Alzheimer’s question.

Good morning, Mayank. Thank you. Tony will take your questions.

Sure. Yes. So Indeed, we are following the precedents of others who have recently filed for approval in this field. They've taught us a lot, particularly about the approvability of measuring change in GA. So we're following very much what others have done. Our study is a two year trial. And this is largely because while the effects of changing GA are devastating, they are relatively slow progressing. So you need a significant period of time to measure change. Finally, to answer your next question. We are measuring visual acuity in various different ways. And indeed like others these will support our primary outcome, but they are not the primary.

If I may just ask a follow-up, that two year treatment period, was that your proposal to the agency or was that coming from Dr. Chambers?

So, we did have discussions with FDA. And we landed on this number based on what we and they thought was the most likely chance of success.

Got it. And then on the Alzheimer's program, I appreciate the level of detail on expectations for sequel. I was just curious, as you know, there's a big focus on CSF biomarkers, right? Also, I believe in your -- both your SEQUEL and SHINE studies. So could you just maybe elaborate on which markers are more relevant with oligomer displacement and you could expect to move acutely in a study like SEQUEL versus other markers where you may need sort of a six month to a 12 month time period, longer chronic dosing, that would be helpful, Tony.

Sure. Yes. Indeed, we've been very fortunate to have very significant support from NIA to run biomarker analysis from CSF in all of our studies. So we agree with the importance. Our process right now is really identifying those candidate biomarkers, which will be predictive of change. To answer the question of which ones will take longer and which ones will might be a more acute. We'll need to look at the data from the more acute studies in order to really tell you which ones will require a longer time. So certainly that is the kind of information we hope to have over the next many months.

Got it. And sorry, again, if I missed this, did you say what forum you're looking to present the SEQUEL data? Is there like a conference you're targeting? And...

We haven't announced yet. We haven't announced yet where that will be.

And a similar question on SHINE. Is there a particular time next year you're looking to present that data?

With SHINE, Mayank, our goal is to complete enrollment this year. The last patient comes in at the end of the year. It's a six month trial, several months to clean up the data and get top line results. This will really be a function of the enrollment being completed. So we're saying fall of 2014.

Understood. Thanks for taking our questions and good luck with all the progress.

Thank you, Mayank.

[Operator Instructions] We have no further questions. I'll turn the call back over to Cognition's CEO for closing remarks. Ms. Ricciardi, please go ahead.

Thank you. To conclude, I'd like to say that we are optimistic for Cognition's future and its evolution as we aim to improve the lives of those affected with neurodegenerative diseases. The science is sound and we continue to build evidence about what CT1812 can do for patients. We believe we're now well positioned to achieve and deliver on multiple clinical milestones and we are focused on creating long term value for our shareholders by doing so. Thank you for joining us this morning and everyone have a great day.