COMPASS Pathways plc (CMPS) Q3 2020 Earnings Call Transcript

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COMPASS Pathways plc (NASDAQ:CMPS)
Q3 2020 Earnings Call
Nov 12, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Compass Pathways third-quarter financial results. [Operator instructions] I would now like to hand the conference over to your speaker today, Ms. Tracy Cheung. Please go ahead, ma’am.

Tracy CheungChief Communications Officer

Thank you, operator. Good morning or afternoon to everyone, and welcome to today’s call to review Compass Pathways results for the three months ended 30th of September 2020. With me on the call are George Goldsmith, chairman, chief executive officer, and co-founder; Lars Wilde, president, chief business officer, and co-founder; and Piers Morgan, chief financial officer. You may have seen the press release we issued this morning at 7:00 a.m.

Eastern Time. It includes our financial results for the three months ended 30th of September 2020, as well as a business update. The press release is also available on the Investor Relations section of our website. Our results for the three months ended September 30, 2020, are also being filed with the SEC on Form 6-K.

George will begin today’s call with a business update on our recent progress. Piers will follow with a review of our financial results for the quarter. We will then open the call to questions, and expect the call to last approximately 60 minutes. The call is being recorded, and the recording will be available on the Compass Pathway Investor Relations website shortly after the conclusion of this call.

During the call today, the team will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. In some cases, forward-looking statements can be identified by terminologies such as may, might, will, could, would, should, expect, intend, plan, objective, anticipate, believe, contemplate, estimate, predict, potential, continue, and ongoing, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. The forward-looking statements on this call are neither promises nor guarantees, and you should not place undue reliance on these forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, many of which are beyond Compass’ control and which could cause actual results, levels of activities, performance, or achievements to differ materially from those expressed or implied by these forward-looking statements. These risks, uncertainties, and other factors include, among others, preclinical and clinical development is lengthy and uncertain, and therefore, our preclinical studies and clinical trials may be delayed or terminated or may never advance to or in the clinic, and those risks and uncertainties described under the heading Risk Factors in Compass’ prospectus filed with the U.S.

Securities and Exchange Commission on 21st of September 2020, and in subsequent filings made by Compass with the SEC, which are available on the SEC’s website at www.sec.gov. Except as required by law, Compass disclaims any intention or responsibilities updating or revising any forward-looking statements made during this conference call in the event of new information, future developments, or otherwise. These forward-looking statements are based on Compass’ current expectations and speak only as of the date hereof. And with that, I will now hand over to our chairman, CEO, and co-founder, George Goldsmith.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Thank you, Tracy. Welcome, everyone, to our first quarterly update call as a publicly traded company. As you know, earlier in the year, we completed an upsized IPO on NASDAQ and raised gross proceeds of $146.6 million. Our American depository shares began trading on the NASDAQ Global Select market on the 18th of September.

As some of you may be new to Compass, I’ll take a few minutes to give a brief introduction. Compass Pathways is a mental healthcare company dedicated to accelerating patient access to evidence-based innovation in mental health. Our focus is on improving the lives of those who are suffering with mental health challenges and who are not helped by current treatments. We are pioneering the development of a new model of psilocybin in therapy in which our proprietary formulation of synthetic psilocybin, COMP360, is administered in conjunction with psychological support.

COMP360 has been designated a breakthrough therapy by the U.S. Food and Drug Administration, or FDA, for treatment-resistant depression. We are currently conducting a Phase 2b clinical trial with psilocybin therapy for treatment-resistant depression and plan to recruit up to 216 patients. As we indicated in our press release earlier today, we are making steady progress with this trial with the addition of a new site in Berlin — just hold on one second.

The new site in Berlin this month. We will now have 21 trial sites in 10 countries across Europe and North America. While the COVID-19 pandemic has impacted our trial, our plan to report data from this trial in late 2021 remains unchanged. We are working closely with our trial sites to carefully assess the ongoing COVID-19 situation and will always put the safety of patients and our teams above everything else.

Over the last few months, we have continued to strengthen our board and leadership team. In September, we were delighted to welcome Linda McGoldrick to the board. Linda brings healthcare and life sciences experience from a range of public and private companies and nonprofit organizations, including Financial Health Associates International, Zillion Inc., Veos plc, and Kaiser Permanente International. In 2018, Linda was appointed by the governor of Massachusetts to serve on the state’s Health Information Technology Commission.

Earlier this week, we welcomed Greg Ryslik to our team as senior vice president, data science, machine learning, and digital health research. Greg is a data scientist and artificial intelligence executive. He is an instructor at Stanford continuing studies and has held senior positions at Mindstrong and at Tesla. Digital health and digital technology will be core to the future of mental healthcare and Greg will add tremendous expertise to our digital team.

Stephen Schultz will join us on 1 December 2020 as senior vice president, investor relations. Stephen has more than 30 years’ experience in Investor Relations and joins us from GW Pharmaceuticals. To round off our senior management hires earlier in the quarter, Steve Levine joined us as vice president, patient access. Steve was formerly founder and CEO at Actify Neurotherapies; and Sarah Bateup, who is appointed our head of therapy research and training, having come to us from Ieso Digital Health, where she was chief clinical officer.

Turning to other developments, in August, we entered into a sponsored research agreement with the University of the Sciences in Philadelphia to establish a drug discovery center. The center is also exploring and developing optimized psychedelic and other compounds targeting the 5-HT2A receptor, a receptor in the brain that has been implicated in mental health illnesses. This work is in its early stages but will enable us to broaden our portfolio beyond psilocybin therapy. Our primary focus is, of course, on the development of our psilocybin therapy.

In July, we’ve been granted our second U.K. patent, adding to our U.S. patent and German utility model. The patent includes claims covering crystalline psilocybin, pharmaceutical formulations, medical uses, and a method of manufacturing.

Our U.S. patent granted in December 2019 was a subject of a petition for post-grant review filed in February 2020. The petition was dismissed on the merits in August. We continue to work with a number of academic and other partners to accelerate research or to provide our COMP360 psilocybin for use in their independent studies.

For example, we are providing funding and support to the Aquilino Cancer Center at Adventist HealthCare Shady Grove Medical Center in Rockville, Maryland. In August, the Aquilino team launched the first clinical trial of psilocybin therapy with simultaneous administration and one-on-one patient support to treat depression in cancer patients. Simultaneous administration with one-to-one support could potentially help to accelerate clinical trials and access for patients, and this trial is an important milestone in developing that. The first psilocybin administration session was successfully administered last week with all patients receiving psilocybin, combined with a one-to-one support from specially trained therapists.

Finally, earlier this month, we joined the Psychiatry Consortium, an international collaboration of medical research charities and pharmaceutical companies focused on the challenges of identifying and validating novel drug targets to address the unmet therapeutic needs of people living with mental health conditions. We will work alongside like the Psychiatry Consortium members and academic partners to advance research projects, providing support through access to funding, expertise, and commercialization know-how. The Psychiatry Consortium seeks project proposals from the global psychiatric research community via biannual open calls for applications. The next call for applications will open in January 2021.

We are a mental healthcare company, and our vision is a world of mental well-being. We are facing an urgent crisis in mental healthcare. Every 40 seconds, someone in the world dies from suicide. And in that same time, 20 people attempt suicide.

We can and must do more to help the millions of people who are suffering with mental health challenges and do not have access to any options. With that, I will now hand over to Piers, who will share — give you an update on our financial results for the third quarter. Piers?

Piers MorganChief Financial Officer

Thank you, George. As George mentioned, we completed in September 2020, our upsized IPO of 8,625,000 American depository shares, or ADSs, which represents 8,625,000 ordinary shares at a price of $17 per ADS. This included 1,125,000 additional ADSs issued upon the exercise in full by the underwriters of their option to purchase additional ADSs. The ADSs began trading on the NASDAQ Global Select market on the 18th of September 2020.

The net proceeds from our oversubscribed IPO were approximately $132.9 million after deducting underwriting discounts and commissions and offering expenses. We held cash and cash equivalents of $196.5 million at 30th of September 2020, compared with $67.6 million at 30th of June 2020. This is expected to fund operations into 2023. I will now recap our financial results for the three and nine months ended September 30th, 2020.

The loss from operations for the three months ended September 30th, 2020, amounted to $13.5 million, compared to $6.3 million for the prior-year period. The loss from operations included noncash share-based compensation expense of $5.2 million for the three months ended September 30th, 2020, compared to $1.8 million of noncash share-based compensation in the prior period. The loss from operations for the nine months ended September 30th, 2020, amounted to $39.9 million, compared to $13.9 million for the prior-year period. This loss from operations included noncash share-based compensation expense of $16.6 million for the nine months ended September 30th, 2020, compared to $2.5 million noncash share-based compensation in the prior period.

Research and development expenses were $6.9 million for the third quarter of 2020, compared to $3.1 million for the same period last year. The change was primarily related to increased activities associated with our ongoing development of COMP360 as well as increased share-based compensation and other increases in personnel costs to support the development of COMP360. Research and development expenses were $18.8 million for the nine months ended September 30th, 2020, compared with $8 million during the same period in 2019. General and administrative expenses were $6.6 million for the third-quarter 2020, compared to $3.1 million for the same period in 2019.

The increase was primarily related to share-based compensation expenses as well as higher legal and professional fees, personnel and consulting expenses, and facilities costs. General and administrative expenses were $21.1 million for the nine months ended 30th September 2020, compared with $5.9 million during the same period in 2019. Other nonoperating items, net amounted to an expense of $3.1 million for the three months ended September 30th, 2020, compared to an income amount of $0.6 million for the corresponding period in 2019, primarily related to the impact of movements in foreign exchange rates on the translation of cash balances. Other expense was $1.5 million for the nine months ended 30th September 2020, compared with other income of $1.9 million during the same period in 2019.

The net loss was $16.7 million or $1.30 loss per share for the third quarter of 2020, compared with $5.7 million or $0.73 loss per share during the same period in 2019. And the net loss for the nine months ended 30th September 2020 was $41.5 million or $3.90 loss per share, compared with $12 million or $1.68 loss per share during the same period in 2019. And with that, we will now open the line for questions. Thank you, operator.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Ritu Baral with Cowen. Your line is open.

Ritu BaralCowen and Company — Analyst

Good morning, guys. Thanks for taking the question. I wanted to ask about how you were seeing the impact of COVID on your current Phase 2 time lines. Any additional protocol modifications or considerations you might be adding to the trial with the new COVID wave? And then further, I wanted to ask a follow-up question on the recent psilocybin publication and JAMA Psychiatry.

I think the dosing — the dose and the dosing paradigm in that trial is different than in the current Phase 2. I was wondering your thoughts on that paradigm and whether that might be incorporated into forward clinical trials. Thanks.

Piers MorganChief Financial Officer

George, I don’t [Inaudible]. Are you on mute?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Hello. Sorry, I will take that. I apologize. Our plan to report — hello? Can you hear me?

Ritu BaralCowen and Company — Analyst

Yeah. We can.

Piers MorganChief Financial Officer

We can hear you.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

OK. Great. Thank you. Our plan to report data by late 2021 remains unchanged.

But obviously, this is subject to the impact of COVID, which no one can really predict at this point. We’re working closely with all of our trial sites to carefully assess the ongoing COVID situation and we always put the patient safety and team safety above everything else as I stated. We do continue to make steady progress over the last months, and we’re opening a new trial site in Berlin as I mentioned. So that will be increasing our sites to 21 sites in 10 countries.

So that’s our response to the COVID. We stand firm with our current prediction in terms of the report out. The headline in terms of the recent JAMA study is we developed very carefully with regulators on both sides of the Atlantic, the current protocol used for Phase 2s because it answered some really important questions, including the most tolerable dose and the durability of a single dose. Until we have that information, we don’t really see a reason to be then looking at different dosing paradigms because that’s actually required by regulators as a foundation for developing psilocybin therapy.

Ritu BaralCowen and Company — Analyst

Great. Thank you for taking the questions.

Operator

Thank you. Our next question comes from Josh Schimmer with Evercore. Your line is open.

Josh SchimmerEvercore ISI — Analyst

Hey. Thanks for taking my question. So the urge on legalization of psilocybin as medical therapy updated is a little reminiscent to the trends we saw to legalized medical marijuana. How are you thinking about this update? What are the opportunities or the threats that may ultimately present to Compass, if any? And are you aware of any other states or grassroot efforts to legalize psilocybin? Thanks.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

So to be clear, what has been passed is a two-year period to explore options to actually conduct this process so that it will be effectively designed and developed. So the two-year process now starts for that. I think in general, from our point of view, we share the long-term goals of those who involved both in the legalization efforts, but those who voted for this, which is that mental health conditions simply aren’t treated well enough for enough people and we need new options. So we’re in agreement on that.

What I think we differ on is that it’s really important that according to regulators on both sides of the Atlantic, and we’ve met with very large number of regulatory agencies. There simply isn’t yet enough evidence of safety and efficacy of psilocybin therapy, which is why we’re doing our trials. And it’s also not clear in the Oregon model who would pay for the therapy. So we believe as we’ve designed and developed Compass that the review and approval through regulatory agencies is really the best way to ensure the safety, efficacy, and quality of any medicine or therapy.

As such, we’re developing COMP360 psilocybin therapy through clinical trials and are currently running a Phase 2b for psilocybin therapy for treatment-resistant depression. COMP360 proprietary formulation of psilocybin therapy is being developed to meet the quality criteria associated with the regulatory standards for medicinal therapy. Again, that’s quite different than what’s being looked out at Oregon. And then lastly, our commitment to patient safety includes the training of licensed therapists who are going to provide support to our patients in our FDA clinical approved trial.

So I think it’s — there are quite a number of differences. We also believe that because our — we’re committed to access, the clinical evidence and regulatory approval are prerequisite for reimbursement consideration. This means that we believe that our strategy of regulatory route is the safest and most effective way to get psilocybin therapy if it’s approved into the health system, reimbursed, and made available to all the who might benefit from it. So that’s the Oregon story.

I think in terms of other countries or other places where this is being looked at, there are various levels of decriminalization, which is essentially to prevent prosecution of people for using these substances, but it’s different than legalization. And again, legalization even in Oregon is under these carefully controlled circumstances, which are being developed and articulated over two years. So there are a variety of these different things. In terms of its impact on our work, we see that our focus through reimbursement and access for patients continues to be a model that we’re committed to in implementing.

Josh SchimmerEvercore ISI — Analyst

Thank you.

Operator

Thank you. And our next question comes from Esther Hong with Berenberg. Your line is open.

Esther HongBerenberg Capital — Analyst

Hi. Thanks for taking my questions. So just a few. There are multiple investigator-initiated studies ongoing.

Results are expected over the next 12 months. How should we think about how these studies read through to Compass’ program? Second, data from the ongoing Phase 2b trial COMP360, they’re expected next year. Can you speak a little bit about assumptions, expectations, what are the powering assumptions? And then third, although a bit — maybe a little bit early, what would a Phase 3 program look like for COMP360? How many trials do you expect will be required and any additional details? Thanks.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

OK. I guess I will start that. So the first question, could you repeat the questions, I’m sorry. So the first question — I was lost when you got to three.

If you could do it one at a time, it would be easier for me.

Esther HongBerenberg Capital — Analyst

OK. So first question, so there’s multiple investigator-initiated studies ongoing.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Yes. OK. I can respond to that. So yes, there are multiple investigator-initiated trials, some of which are using COMP360, some of which are not.

Obviously, for any regulatory program, the focus is on the drug product that was going to be regulated. So we certainly will be looking closely to the results of our IIS studies or of our investment studies we support with our psilocybin to bolster our safety databases. We are, again, not designing those IISs, that’s a part of our program. And it’s a way that we can help facilitate research and generate early signals.

Other studies that are being done by others may contribute to interesting results, which we will be looking out for, but it should not have any direct impact on our program. Second question?

Esther HongBerenberg Capital — Analyst

Second question, assumptions, expectations around the Phase 2b trial.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

These really haven’t changed. So the Phase 3 trial has been under way. We do plan to have it complete, as we said, at the end of next year, barring any additional impacts from COVID. It has been powered, 90% likelihood of detecting a six-point difference in address at three weeks, and it continues to progress as we expected.

And the only change which has been shared has been elimination of an upper age limit in the United States as a change that’s been made, but no additional changes have been made recently.

Esther HongBerenberg Capital — Analyst

And then —

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

And then question three.

Esther HongBerenberg Capital — Analyst

Question three, last question. What would a Phase 3 program look like? How many trials? Would it be something similar to what was required for esketamine?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

It’s really hard to forecast what might be needed in that. Obviously, we’re looking at different scenarios, but those scenarios are largely based on what we’ll find in Phase 2b. So I think this is really dependent upon what we will see in Phase 2 and the nature and size of the effects, and that will really lead us into having clarity about our Phase 3 program.

Esther HongBerenberg Capital — Analyst

Great. Thank you.

Operator

Our next question comes from Sumant Kulkarni with Canaccord. Your line is open.

Sumant KulkarniCanaccord Genuity — Analyst

Good morning. Thanks for taking my questions. I have a few here. So the first one, we know you’re evaluating safety and efficacy of COMP360 in a clinical trial program.

But if you had to pick a key risk to achieving your stated goals in your Phase 2 trial that’s ongoing, would that risk be along safety or efficacy lines or something else, such as the ability to achieve blinding, for example, on the very low dose? That’s my first question.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Thank you for the first question. We don’t anticipate — we’ve developed these trials in close collaboration with regulators on both sides of the Atlantic as well as a very significant group of people who have done research and TRD. So we are — we believe that the trial has been effectively designed so we don’t have concerns along any of those dimensions from a design perspective. Obviously, the clinical research is in progress, and we will kind of determine what happened at the end of the trial.

So I can’t really comment beyond that. When you think something — is there a follow up you’d like to ask there?

Sumant KulkarniCanaccord Genuity — Analyst

No. I’m onto my second question. I never got it at this point. So given the nature of these psilocybin trials, is there any chance to have an interim look on the Phase 2 that’s going prior to late 2021?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

There is always an opportunity to do that. We’ve chosen not to do that. And largely, we want to conduct the trial as it’s been designed, and our team is fully behind that.

Sumant KulkarniCanaccord Genuity — Analyst

And my final question is maybe a little premature, but I’m going to ask it anyway. How is the company thinking about potential pricing of a product like this when it makes it to the market? And also, how much support will you need to have or give to the existing center infrastructure at the time when you’re able to launch this product?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

You are correct in your assertion that it’s premature to talk about pricing until we have any view of efficacy and patient response. In terms of the support, that’s something that we are learning to do and looking at as we develop our therapist training for the clinical trials.

Sumant KulkarniCanaccord Genuity — Analyst

Thanks a lot.

Operator

Thank you. [Operator instructions] We have a question from Patrick Trucchio with H.C. Wainwright. Your line is open.

Patrick TrucchioH.C. Wainwright — Analyst

Hi. Good morning and afternoon. I have a few questions. I think the first one is just a key focus is on the inclusion of digital solutions and the possibility of predicting relapses or remission.

So I’m wondering where are we in the development of those solutions? And then should we anticipate IP around the digital technologies? And if so, what’s the timing for an update on the IP on this front or the IP around COMP360 broadly?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Thank you for the question. We are right now developing and we’ll be sharing plans as they become clearer in terms of the areas of digital phenotyping and digital therapy support. So that will be forthcoming, but those plans are being developed as we speak. Finally, in terms of your second question, I’m sorry?

Patrick TrucchioH.C. Wainwright — Analyst

Just in terms of an IP update around those — around the digital phenotype —

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

We will be — of course. So we will continue to reflect intellectual property in that area as it’s developed. And again, as we announce our various patent grants, etc., that will become visible to everyone.

Patrick TrucchioH.C. Wainwright — Analyst

Got it. And then the feasibility of the simultaneous administration was demonstrated in the Phase 1 study. I’m wondering if you can kind of go through how that was demonstrated and specifically how the feasibility of simultaneous administration is being evaluated in the clinical development plan as we go forward? And specifically, how, if at all, is the COVID pandemic impacting the ability to evaluate COMP360 with simultaneous administration?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

So right now, what we were able to demonstrate is that up to six people could receive one-on-one support in a shared simultaneous administration setting as healthy volunteers. That work was completed with no safety concerns emerging from that. And that then was the basis, as I mentioned, for submission of the Aquilino protocol, which also uses simultaneous administration with one-on-one support, and that’s the first study in patients with that model. And again, the first session was conducted last week.

So we will be watching that in a patient population. And so that’s the first question. Could you repeat your second question, please?

Patrick TrucchioH.C. Wainwright — Analyst

Yeah. Just is the COVID pandemic, is that impacting the ability to evaluate the simultaneous administration?

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

It really doesn’t — I mean, the only way that would impact our simultaneous administration assessments, which will be, again, done in specific studies would be if there are difficulty in recruiting that we’ve experienced no such thing yet. So we don’t see any link between COVID and simultaneous administration studies and evolution of that model.

Patrick TrucchioH.C. Wainwright — Analyst

That’s helpful. Thank you very much.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Thank you.

Operator

And there are no further questions in the queue. I’d like to turn the call back to George Goldsmith for closing remarks.

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Thank you very much to everyone for participating in today’s call. We will be participating in the Berenberg and Evercore investor meetings upcoming, and we look forward to seeing some of you there. Thank you very much for your participation today.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Tracy CheungChief Communications Officer

George GoldsmithChairman, Chief Executive Officer, and Co-Founder

Piers MorganChief Financial Officer

Ritu BaralCowen and Company — Analyst

Josh SchimmerEvercore ISI — Analyst

Esther HongBerenberg Capital — Analyst

Sumant KulkarniCanaccord Genuity — Analyst

Patrick TrucchioH.C. Wainwright — Analyst

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