Earnings Transcript for CERE - Q4 Fiscal Year 2021

Operator: Good morning. Welcome to the Cerevel Therapeutics Fourth Quarter and Full Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the Q&A portion of the call. Please note that this call maybe recorded. I will now hand the call over to Matt Calistri, Vice President, Corporate Strategy and Investor Relations.

Matthew Calistri: Thank you. Good morning, everyone. We appreciate you joining us for our fourth quarter and full year 2021 earnings call. On today's call, you will be hearing from Dr. Tony Coles, our Chairperson and Chief Executive Officer; Dr. Ray Sanchez, our Chief Medical Officer; Dr. John Renger, our Chief Scientific Officer; and Mark Bodenrader, our Interim Chief Financial Officer During our call today, please refer to our press release from this morning, detailing our 2021 performance as well as our updated corporate presentation, both of which are available on our website. I would like to remind you that we will be making forward-looking statements that reflect our current views related to, among other things, potential attributes and benefits of our product candidates and the format and timing of our product development activities and clinical trials. We strongly encourage you to review the information that we file with the SEC regarding specific risks and uncertainties. I will now hand the call over to Dr. Tony Coles, Chairperson and CEO of Cerevel to provide an overview of our achievements and outlook.

Tony Coles: Thanks, Matt, and good morning, everyone. Thank you all for joining us for our fourth quarter and full year 2021 business results call. Cerevel is well on its way to achieving our aspiration of becoming the premier neuroscience company. We have got the pipeline, the people and the capital we need to transform what's possible in neuroscience, and we have seen that born-out with the two positive trial results we have recently announced in schizophrenia and anxiety. First, in June of last year, we announced positive Phase 1b data in schizophrenia for emraclidine, M4-selective positive allosteric modulator, or PAM. We are eager to bring this potentially transformative therapy to as many patients as possible, as soon as possible, and are working aggressively and creatively to do so. Earlier this year, we shared the details of our comprehensive Phase 2 program in schizophrenia, which we expect to initiate in the middle of this year. And just two weeks ago, we announced positive anxiety data for darigabat, our selective α2/3/5 GABAA PAM. This trial demonstrated for the first time proof-of-principle in the clinic that a compound that targets α2/3/5 selectively and spares α1 can generate anxiolytic activity and minimize the side effects that limit benzodiazepines to only episodic use. Benzodiazepines are widely known to be nonselective GABAA PAMs and have a challenging side effect profile, including sedation, withdrawal, and abuse potential. These impressive clinical results support the distinct Cerevel approach to treating neuroscience disease, an approach that is grounded in the deep understanding of neurocircuitry, is focused on targeted receptor subtype selectivity, and which is distinguished through differentiated pharmacology as illustrated on Slide 8 of our corporate presentation. We've grown our dynamic, innovative and experienced team of employees bringing forward these and the rest of our clinical programs. We've almost doubled in size from 104 employees at the beginning of 2021 to 200 at the beginning of this year with the majority over 70% working in research and development. Another strength of Cerevel is our robust financial position, which we bolstered in 2021 through innovative deal making. In April, we announced a non-dilutive financing deal for tavapadon that secured funding for our most advanced program through NDA submission. And we raised $350 million through a follow-on offering in July after the announcement of our positive emraclidine data. As a result, we're very well capitalized to fund our operations into 2024. Now turning to our pipeline, which is Slide 9 of the presentation. We'd like to highlight the depth and the breadth of the late stage programs in the Cerevel portfolio. With two important readouts already completed, we're rapidly advancing rest of our pipeline in the hopes of addressing the unmet needs of patients suffering from not only schizophrenia and anxiety, but also epilepsy, Parkinson's, dementia-related apathy and other neuroscience diseases. Slide 10 highlights the upcoming milestones for our lead programs. In the second half of this year, we're looking forward to Phase 2 proof-of-concept data from our ongoing trial of darigabat in focal epilepsy. In the first half of 2023, we anticipate having data from our ongoing Phase 2a trial of CVL-871 in dementia-related apathy. Also in the first half of 2023, we expect to have Phase 3 tavapadon data in late stage Parkinson's with early stage Parkinson's data to follow later in the year. And in the first half of 2024, we expect to have data from our two recently announced Phase 2 trials of emraclidine in schizophrenia. We also have a robust early clinical and discovery pipeline that we are actively advancing, leveraging the state-of-the-art laboratories at our Cambridge Crossing facility. In sum, Cerevel is in an enviable position, bringing together a strong pipeline, a talented team, and a robust financial position to advance the treatment of neuroscience diseases. Now, let me turn the call over to Dr. Ray Sanchez, our Chief Medical Officer, to review the key updates for our lead programs. Ray?

Ray Sanchez : Thank you, Tony. And good morning to all of you. As Tony has outlined, Cerevel truly is poised to transform what is possible in neuroscience. Our pipeline is one of the most exciting I've seen in my career, and it is a great privilege to be part of this organization. The last year in particular has been momentous for us as we had two positive data readouts, which have created a lot of excitement in the physician provider community. Let's first turn to emraclidine, formally known as CVL-231 or M4 positive allosteric modulator. In June of last year, we announced positive Phase 1b data in schizophrenia outlined on Slide 13. The results of that trial are very impressive. Both doses of emraclidine demonstrated clinically meaningful and statistically significant antipsychotic effects with no meaningful differences in gastrointestinal side effects, extrapyramidal symptoms or weight gain compared with placebo. The 30 milligram once daily group demonstrated an absolute improvement versus baseline of 19.5 points, while the 20 milligram twice daily cohort showed an improvement of 17.9 points on the PANSS total score. Relative to placebo, both treatment groups had statistically significant reductions of 12.7 points and 11.1 points respectively. We were very encouraged by these robust results and we are moving rapidly into our next stage of development. This past January, we were pleased to announce the details of our comprehensive Phase 2 program in schizophrenia, which will begin by the middle of this year. Now, as you can see on Slide 14, this program will consist of two adequately powered placebo controlled Phase 2 trials running in parallel. Running these two trials in parallel is meant to fully explore the therapeutic dose range of emraclidine, while minimizing both the placebo effect and the increased variability that can result from having four or more arms in a single trial. We designed these trials to potentially meet the criteria necessary to service pivotal, based on what we expected agency will examine in a registrational package. The data we generated will determine whether these trials are sufficient and ultimately the final decision on the approvability of the data package will be up to the FDA. As you'll see on Slide 14, the first trial will evaluate emraclidine 10 milligrams and 30 milligrams once daily versus placebo. The second trial will evaluate emraclidine 15 milligrams and 30 milligrams once daily versus placebo. Each Phase 2 trial is 90% powered to detect a placebo adjusted change in the PANSS total score of 7 points or greater at week six. We expect top-line data from both of these trials in the first half of 2024. In conjunction, we plan to initiate an open label extension trial, which will accept both rollover and de novo patients in order to begin generating the required safety database to support the NDA filing. Beyond schizophrenia, we also plan to evaluate this mechanism in other indications and populations, including dementia-related psychosis. Now moving on to darigabat. Two weeks ago, we announced positive top-line data from our Phase 1 healthy volunteer trial in acute anxiety, another great proof for Cerevel’s differentiated approach to neuroscience. I was thrilled by these results and believe they represent strong evidence of darigabat’s potential as a differentiated therapy that might be a daily maintenance treatment for anxiety related disorders in contrast to benzodiazepines. As Tony mentioned, benzodiazepines are nonselective GABAA PAMs and are limited to episodic use due to their tolerability issues. This data readout supports our thesis that darigabat may optimize anxiolytic effect by selectively targeting the α2/3 and 5 subunits of the GABAA receptor, while minimizing the α1 associated tolerability concerns. We were very encouraged to see clinically meaningful and statistically significant anxiolytic effects after eight days of treatment for both doses of darigabat tested. We were also pleased to see that darigabat was generally well tolerated with no serious adverse events, no treatment related discontinuations, and no incidence of withdrawal symptoms in the darigabat treatment groups. Now, a couple of points I would like to highlight about the trial design before I discuss the specific results. First, this trial was optimized to show in healthy volunteers an anxiolytic effect over a relatively short duration of treatment, approximately one week and alprazolam was used solely to ensure sensitivity of the hypercapnia model, which occurred. Second, we utilized a very quick four day titration regimen for both doses. As again, the purpose of this particular trial design was to detect an anxiolytic effect rather than elucidate the safety and tolerability profile. With that in mind, I would like to turn your attention to Slide 20 of the corporate presentation. As you can see here, the darigabat 7.5 milligram and 25 milligram twice daily doses demonstrated statistically significant improvements of 3.9 points and 4.5 points on a placebo adjusted basis, with P values of 0.036 and 0.008 respectively. We stated previously that a 2 point to 3 point placebo adjusted improvement in the panic symptoms list or PSL-IV total score would be considered a clinically meaningful reduction in anxiety symptoms. So, the robustness of our results are quite impressive and clearly exceeded expectations. The clinical effect seen with alprazolam of 1.6 points was within the range of expectations for this model, and again, confirmed the validity of the model for detecting anxiolytic activity. Although this was a trial in healthy volunteers and not patients, we were quite pleased by the tolerability profile we observed in this study. Both doses of darigabat demonstrated anxiolytic effect and 97% of adverse events reported were considered mild. The incidents in temporal pattern of these AEs appeared to be related to the dose and speed of titration. So in future trials, a longer titration period may help us better understand the actual adverse event profile we might expect to see in the relevant patient populations. Later in the presentation, Dr. John Renger will provide some details on what we learned about the relationship between drug exposures and anxiolytic activity from the trial, and we look forward to presenting additional details on this trial at future scientific conferences. As a reminder, in the second half of this year, we expect the results from our Phase 2 proof-of-concept trial in focal epilepsy. We are also conducting a corresponding open-label extension trial, which continues to have a very high rollover rate. Turning next to tavapadon, our D1/5 partial agonist, which we are developing for Parkinson's disease symptoms as both a monotherapy and adjunctive treatment. We continue to dose in all three of our Phase 3 trials known collectively as the TEMPO trials and all remain on-track with our expected timelines. We expect data from TEMPO-3, the adjunctive trial in late stage Parkinson's to read out in the first half of 2023, and data from TEMPOs 1 and 2 in early stage Parkinson's to read out in the second half of 2023. Turning to CVL-871, another D1/D5 partial agonist, which we are currently evaluating in a Phase 2a exploratory trial in dementia-related apathy. We expect data in the first half of 2023. In June of last year, we received Fast Track designation for CVL-871 in this indication, which enables early and more frequent interactions with the FDA as well as the potential for rolling NDA submission and priority review. We are looking forward to interacting closely with the agency in determining the best path forward for developing a treatment in this novel indication. Before I hand the call over to Dr. Renger, I wanted to address the war in Ukraine and any questions you may have on the impact to our trials. Our thoughts are first and foremost with the investigators and patients at clinical trial sites, and indeed with all the people of Ukraine. Specifically for Cerevel, we do not believe our clinical trial timelines are impacted at this time, but we are acutely aware that this is a grave humanitarian crisis in an important country for clinical research and development. Among our ongoing trials for tavapadon, we have a small number of clinical trials for the Phase 3 TEMPO program, less than 10% of all sites that are located in Ukraine. We are proud of the meticulous approach we take to trial execution. And in fact, we began planning for geopolitical uncertainties and potential disruptions in the region a while ago. For example, in January, we started taking mitigation measures as a contingency, including pre-shipment of clinical drug, product and supplies to the country. As we have in the past with the COVID 19 pandemic and as with any rapidly evolving crisis, we are constantly evaluating clinical operations across our portfolio to ensure we continue to meet our goals with respect to data integrity, enrollment quality, and trial timelines. I'd not like to turn the call over to Dr. John Renger, our Chief Scientific Officer to speak about our early stage portfolio. John?

John Renger : Thank you, Ray. Good morning, everyone. First, I really do want to emphasize that the recent data from our acute hypercapnia panic trial on healthy volunteers represents an important scientific and medical breakthrough for scientists, clinicians, and especially patients who are desperately seeking new mechanisms for the treatment of anxiety related disorders. These data are the first clinical validation in humans that demonstrate that robust anxiolytic benefit can be achieved by selectively targeting the α2/3 and 5 sub units, while at the same time sparing the α1 sub unit containing GABAA receptors. In this particular clinical trial, we evaluated a broad range of drug exposures and the concurrent receptor occupancies to best inform future dose selection and for confirming the necessary drug levels required to reduce anxiolytic symptoms. As context, our preclinical studies have previously shown that receptor occupancies of at least 50% to 60% were sufficient to demonstrate anxiolytic activity with darigabat. In this healthy volunteer trial, the 7.5 milligram twice daily dose achieved 50% receptor occupancy at the α2 sub units of the GABAA receptor, while the 25 milligram twice daily dose achieved approximately 76% α2 receptor occupancy. Importantly, as a reminder, this is relative to less than an estimated 15% or lower α2 receptor occupancy achieved with alprazolam at the 1 milligram twice daily dose, a dosage level that is on the low end of what is typically described as the starting treatment for the reduction of anxiety symptoms in patients in the clinical practice setting. Our goal in this study was to push the upper bounds of receptor occupancy selectively at the α2/3 and 5 sub units in order to more fully investigate the maximal level of drug activity to obtaining high levels of α2/3/5 receptor occupancy well beyond what is achievable with non-selective benzodiazepines, which are dose limited to the side effects of sedation, body discoordination or ataxia, and cognitive impairment such as amnesia. The extended range of high receptor occupancies achieved in this trial were multiple folds higher in the 15% to 20% that's normally achieved for the non-selective benzodiazepines at clinically use dosages. Our data give us great confidence of sparing the GABAA α1 receptor and selectively targeting the GABAA α2/3 and 5 receptors at these occupancy levels may provide anxiolytic benefit, while avoiding the issues that underlie dose limitations associated with benzodiazepines. From this data, we also have gained important insights in the exposures needed to be achieved for exploring beneficial effects and the culmination of this information will enable our teams as we consider future options for alternate doses formulations. We're eager to keep you updated as we pursue the development of darigabat as a potential daily dose therapy for the treatment of anxiety disorders, giving patients who are counting on Cerevel the potential for new options for maintenance therapy. Within our early pipeline, I'd first like to highlight CVL-354, our highly selective kappa opioid receptor antagonist, as a potential therapy for the treatment of both Major Depressive Disorder and substance use disorder. The FDA recently accepted our IND for this program and we are currently conducting Phase 1 single and multiple ascending dose trials in healthy volunteers. We're very excited about the potential for this program to be differentiated in multiple areas of high unmet patient need, particularly due to recent clinical validation by others in a Phase 2 depression study and an extensive amount of our internal pre-clinical work that supports the potential for this mechanism of action. We are also well positioned as the scientific leader in identifying and progressing a host of selective M4 muscarinic receptor directed compounds with a range of pharmacological profiles, complementing our promising M4 PAM emraclidine. Our teams of scientists are actively evaluating additional highly potent muscarinic M4 receptor selective M4 agonist and allosteric modulators to potentially advance into the clinical setting to expand upon our lead molecule emraclidine. These additional molecules are expected to expand the clinical utility that we've already demonstrated for emraclidine in multiple additional psychosis-related therapeutic indications, potentially further increasing our lead in the much targeted M4 muscarinic receptor therapeutic area space. As you can see, 2021 has been an extraordinarily productive year for Cerevel and we are looking forward to many exciting updates in 2022 and beyond. I’d now like to turn it over to Mark Bodenrader, our Interim Chief Financial Officer, to review the specifics of our financial performance and our outlook for this year. Mark?

Mark Bodenrader: Thank you, John. I'm pleased to provide an overview of Cerevel's strong financial position, which was bolstered by our capital raises in 2021. I'll start by discussing our 2021 financial results. And then I'll spend a few moments on our cash position an expected runway. Full-year 2021 total operating expenses were approximately $220 million, which includes R&D expense of $162 million and G&A expense of $58 million. R&D expense for 2021 increased by approximately $59 million over 2020, primarily due to the continued advancement of our later stage clinical programs, increased investment in our early discovery efforts, and an increase in personnel and other infrastructure cost to support the continued growth of our pipeline. R&D expense for 2021 also included $9.2 million of equity-based compensation expense versus $3.2 million last year. G&A expense for 2021 increased by approximately $12 million over last year, primarily due to a full year of public company operating costs, and higher personnel and other costs to support organizational growth. G&A expense for 2021 also included $14.7 million of equity-based compensation expense relative to $7.3 million for 2020. As of December 31, 2021, our cash and marketable securities totaled $618 million $618 million, compared to $384 million as of December 31, 2020. Our cash position was bolstered by the $350 million follow-on offering completed in July, shortly after the announcement of the positive Phase 1b data for emraclidine in schizophrenia. In addition, we approximately $55 million in the third quarter from the redemption and exercise of our public warrants. And in April, we received the first funding payment under our tavapadon financing agreements of $31 million and we anticipate receiving an additional $37.5 million under these agreements in the second quarter this year. Looking forward, we expect R&D expense to continue to increase this year, as we initiate our comprehensive Phase 2 program for emraclidine, continue to advance our Phase 3 program for tavapadon and continue to invest in darigabat, CVL-871 and our early discovery efforts. In addition, we expect R&D personnel costs to continue to grow this year to support the advancement of our pipeline. We also expect G&A expenses to increase as we support the continued growth of our research and development efforts and initiate pre-commercialization activities. In closing, we remain well capitalized. We expect our cash resources to fund our operations into 2024. We look forward to multiple value-creating data readouts over the next couple of years. And finally, we continue to think creatively and opportunistically about further strengthening our balance sheet to support our extensive pipeline. I would now like to hand the call back to Tony for concluding remarks.

Tony Coles: Thanks, Mark. At Cerevel, we continue to advance our mission to improve the lives of people living with neuroscience diseases. We have reported two successful data readouts in less than a year, continued to make progress in the rest of our extensive pipeline of both clinical and pre-clinical programs, and we have secured the people and the capital we need to continue our journey to become the premier neuroscience company. Our programs are focused on addressing high unmet needs for millions of patients with neuroscience diseases, including schizophrenia, anxiety, epilepsy, Parkinson's, dementia-related apathy, and now, depression. At Cerevel, we are leveraging our unique expertise in neurocircuitry to advance our deep portfolio, and ultimately, to bring new medications to the patients who need them. Before I conclude, I'd like to, as I always do, thank our employees who are so committed to making a positive impact on patients’ lives, and live that mission every day; to the physicians, caregivers and participants and our clinical development programs, we say thank you. And I also want to thank you, our investors, for your support and belief in our mission, and I can tell you that we truly couldn't do this without you. With that, Sarah, let's now open the call for questions.

Operator: . Your first question today is from the line of Michael Yee from Jefferies. Please go ahead.

Michael Yee : Hey, good morning, Tony and team. Thank you. I had a question on darigabat. Appreciating, the recent exciting data I think you presented in anxiety. I know there is a little bit of debate there, but I think that we all agree there was proof-of-concept, the proof of biology. We were wondering how you have thought about that data, now that's it out there? And how you think about the translation to the epilepsy study later this year, both on an efficacy scenario standpoint and a safety tolerability standpoint? What do you think the bar is for efficacy and how to think about those scenarios? Thank you so much.

Tony Coles: Okay. Thanks, Michael, and good morning. So the first point I'd like to make is, we are really excited, as Ray said in his prepared remarks, by these results, because they demonstrate that it is possible to achieve the efficacy that we see with benzodiazepines, the non-selective GABAAs without any α1 activation. So that's a really important demonstration of the power of this particular mechanism and it's being α1 sparing. And now we've seen this clinically for both epilepsy in our earlier studies and anxiety. The other thing I'd like to do is highlight this is further validation of this selectivity that I've just spoken about. And it complements all the work that we're doing both in healthy volunteers, which was this study and in patients. I don't think I'd specifically read through either safety tolerability or efficacy findings from the anxiety trial, there are some important differences. I'll ask perhaps Ray to comment or J.R. to comment in just a moment. There are some really important differences in healthy volunteers as distinct from patients. And we've discussed this previously, because obviously healthy volunteer -- this particular trial for healthy volunteers was of shorter duration and had a much more rapid titration than we would expect to be in either common practice or in clinical trialing patients with anxiety. So I think in sum, Mike, we really are excited about the mechanism, its potential across multiple disease opportunities, and what this can mean, and we'll know soon about epilepsy. But J.R. let me turn it over to you for any additional detail.

Michael Yee : Specifically on the bar. How you're thinking about the bar there for efficacy and whether we should just compare to other datasets out there?

Tony Coles: Mike, I'm sorry. You broke up on my end. Would you just repeat the second half of your question?

Michael Yee : Yes. Specifically on how you think about the bar for efficacy, assuming it could be positive, what magnitude and what reduction of seizure would you like to see? And should we just compare that to other datasets out there for other drugs?

Tony Coles: You mean for epilepsy specifically?

Michael Yee : Yes.

Tony Coles: Yes. Okay, okay. So J.R. why don't you provide some additional detail? We'll have Ray answer that part of the question separately. J.R.?

John Renger: Sure. Thank you, Tony. Yes, so Mike, I think, you're referencing the data and how we interpreted, I can speak to that and then Ray can speak to the clinical meaningful difference for the treatment in epilepsy and how we designed that trial and powered it. I just want to reemphasize that this is really the very first time that a selective compound has demonstrated the ability to achieve a resolution of panic symptoms. And even though this is a healthy trial, we think that it has a very strong read through to the potential for demonstrating efficacy in anxiety-related disorders. Of note, the receptor occupancies that we targeted in this study were very similar, identical in fact to the ones that are being used in the epilepsy trial. So what we know is with the dosage that we've used that again demonstrated efficacy in the dose ranges that are also being used in the epilepsy trial. So as you know in the photoepilepsy study, we've shown efficacy in treating epilepsy previously. And this one, this is a second indication now looking at different neural pathways in the brain that underlie the feeling of panic that patients can have. We've also demonstrated with the same dosage range efficacy in treating those symptoms in this healthy study. So what this indicates to us is that we understand the effective dose range, and we believe that in either population that we're actually covering the important receptor occupancy range that we want to cover, that demonstrates CNS activity. So, I'll let Ray speak actually to the design of the epilepsy trial and what we've powered to see there. Ray?

Ray Sanchez: Thank you, John. Good morning, Michael, thank you for the question. So as you know that the ongoing epilepsy trial is 80% powered to show a reduction of 31% in seizure frequency. To give you some juxtaposition in terms of the other therapies in the landscape, Keppra is about 28% is what they demonstrated. We're hoping to show at least 31% if not higher given the selectivity of the mechanism, but also the data that's been generated to date in the proof and principle photosensitivity trial. So we'll stay tuned for that data later this year, but we're encouraged by what we've seen in anxiety and what we've seen in epilepsy to date, and hoping that we can see the benefits of this therapy in the epilepsy population as well.

Operator: The next question is from the line of Matthew Harrison from Morgan Stanley.

Matthew Harrison: I guess I have 2. So first, on schizophrenia. Can you just comment on the trials and the potential to pool those? So for example, because you have the 30 mg dose in 2 trials, would you be able to pull them if the effect size was smaller than the 7-point delta that you were assuming? And then second, just on tavapadon, can you remind us how you're imputing for missing data there? And sort of what percentage of dropouts you were expecting in the original stats plan?

Tony Coles: Okay. Ray, why don't you -- if you would take both of those, but I really appreciate you perhaps underscoring that part of your prepared comments about how we design these trials and what we think that they can do in terms of answering the central registrational questions. So we all know that the agency is going to be looking for a full characterization of the dose range for emraclidine. They want long-term safety, and there are, of course, 2 adequately powered placebo-controlled trials. So we think we've got the right -- we're asking the right questions for the FDA to evaluate but we know they'll be looking for registration. But Ray, why don't you just expand on that and speak to the specific question about the possibility of pooling data for the effect size and then take the tav question.

Ray Sanchez: Right, right. So good morning, Matthew. So as you know, as Tony has mentioned and I've said, I think, before as well, that these 2 trials were designed to potentially be pivotal in nature, really looking at the full dose range of the top dose of 30 milligrams and the minimum effective dose of 10 milligrams or 15 milligrams. In order for them to be registrational in nature, they each have to separate from placebo, as you know. So the opportunity to actually combine the data, it's probably not the approach that the agency will likely accept. They've not done that historically in very few cases but with very different populations and different trial designs. So we will stay tuned to present the data that we generate to the FDA at our end-of-Phase 2 meeting to see the viability of the program in terms of its registrational potential. But the plan is not to pool that data moving forward in order for them to be registrational in their potential. The second question, you asked about tavapadon. And in terms of imputation of data, we're using a mixed model of repeated measures, the MMRM approach, as you know. We anticipate, when we designed the trials, approximately a 27% discontinuation rate. We'll obviously see how that fares versus what the trial actually produces once it reads out. But that's our assumption going into it based on historical trials and precedent from other trials in Parkinson's disease.

Operator: The next question is from the line of Paul Matteis from Stifel.

Paul Matteis: I had 2 questions on the M4 program. One, on the cardiac safety study that you're doing, can you just maybe talk a little bit more about why you decided to do this study? And I guess maybe just sort of set it up, what are you hoping to sort of describe? And do you view the cardiac changes that you see, changes in blood pressure, changes in heart rate, as things that are likely maybe more labeling or monitoring issues? Or how should we sort of be thinking about this? And then just separately, I was wondering if you could talk about any plans you have to go into the elderly with things like Alzheimer's psychosis.

Tony Coles: Okay, let me just -- I'm going to ask Ray to take the question, but let me just make a couple of quick comments, Paul. I appreciate the question, but this ambulatory blood pressure monitoring study isn't really a cardiac safety study. That would be designed very, very differently. This is to look at the more narrow question specifically of heart rate pressure. As we showed in the Phase 1b, we did not have AEs associated out of proportion to placebo. And what we did observe is, as you certainly know, tolerated over time. So I just don't want the notion that this is a cardiac safety study. We're answering a pretty specific and narrow question that we know the agency will ask about blood pressure and heart rate. So I want to make that distinction, but Ray, why don't you add to my comments in any way you like?

Ray Sanchez: Yes, yes. Thank you, Tony. So Paul, as you know, and I think Tony mentioned here that we were very encouraged at the end of our 6-week trial, the Phase 1b trial, for emraclidine where we saw negligible increases in really heart rate and blood pressure versus placebo. But really what's of interest to the agency is really the sustained effects in blood pressure, not so much heart rate. And that's why we were conducting the ambulatory blood pressure monitoring trial, as outlined in a guidance that was developed in 2018. But really to understand is there a sustained increase or a sustained effect in systolic blood pressure. And that's what the ABPM trial does in fact. It's an 8-week trial, as you know. And it's 90% powered to rule out a greater than 3-millimeter of mercury effect that is sustained in systolic blood pressure over the baseline. So the patients get recorded at a baseline. They get recorded at week 8 at 24-hour monitoring. And then the blood pressure sustained effects are evaluated. And of course, it's powered, as I mentioned, to rule out greater than 3 millimeters of mercury. So that's what we were trying to understand and better elucidate. But based on the Phase 1b results at 6 weeks and the study being at 8 weeks, we don't have any concerns. And -- but again, it's something that we have to do in order to characterize the effect, per the FDA and per guidance as well.

Tony Coles: Yes. The only point I'll underscore there, Ray, is that the FDA only recently instituted this guidance, say, in the last 2 or 3 years, for ambulatory blood pressure monitoring studies. So this is part of the registration package that any company in our situation would have to do. I know, Paul, you asked a question about dementia-related psychosis. I think, J.R., if you would take the first part of that because there's a clear mechanistic rationale that we should go through. And then A.C., our President, who has responsibility for commercial, is available to answer questions. Abraham, why don't you take the second half of that?

John Renger: Sure. Thank you, Tony. Good morning, Paul, thanks for the question. So yes, so absolutely. So we completely and fully appreciate that there's a potential for the M4 mechanism to work in dementia-related psychosis. As you well know, one of the first studies that was actually completed with xanomeline was actually done in an AD population and showed a benefit in treating the psychotic symptoms in an AD population. As you know, the interpretation of that study was somewhat compounded, however, because of the high dropout rate because of the tolerability issues. And so we do believe that the dose-responsive effect that they saw there really demonstrated that the muscarinic approach which we refine with our M4 selectivity with emraclidine is an appropriate and very promising and potentially validated way to approach that indication. And so we're absolutely aware of that and focused on that, but what I want to emphasize is that we'd like to proceed very thoughtfully and carefully here because what we want to do is fully understand the dose range that we want to take forward in that population. But we also have to establish the tolerability and safety profile of the compound, so we have to think about the most efficient approach and the best approach to demonstrate in an elderly frail population the appropriate dose range, the safety and tolerability profile. And then really go after replicating what we believe is the clinically validated approach of using the muscarinic pathway as a way to treat psychotic symptoms there. So absolutely in line with what your question is getting to. And we're actively pursuing that. Abe, I don't know if you would like to take over the second part.

Tony Coles: Actually, J.R., I've just been informed that Abe doesn't have a speaker line this morning, so let me take the second half of it. I think we all see the great potential and the potential benefit that we can bring to elderly patients with emraclidine. I think it has made the point about making -- ensuring that we have a good handle on both the dose range and the safety profile in the elderly population, which is work that will be ongoing. And this is 50 million people who suffer from dementia globally, with 10 million new cases every year. And it's quite debilitating, so this is of the utmost urgency for us to figure a path forward and to do that as we sort through the schizophrenia requirements for registration. So it's very important to us and we will figure this out.

Operator: The next question is from the line of Douglas Tsao from H.C. Wainwright.

Douglas Tsao: So first, on emraclidine, I was just curious. I think in the 1b study, the patient population was enriched for certain types of schizophrenia or certain symptoms. I'm just curious if you're going to be enriching the population for the Phase 2 study. And then I guess my second question is from a big picture standpoint. How are you prioritizing or thinking about prioritizing assets in terms of sort of advancing new drugs versus expanding the ones that you have which have broad utility into new indications? And then also, maybe sort of related follow-up, advancing individual assets into new indications versus potentially tuning them further, which you've shown an ability to do, for -- to achieve greater effect or specific effect for certain indications.

Tony Coles: Great, Doug. Thank you for the question. Ray, if you could take the emraclidine question about population enrichment. And I'll answer the second.

Ray Sanchez: Thank you, Tony. So in the Phase 1b trial, we didn't enrich the population per se, but what we did do is make sure that the patient -- like we do with all our trials, that the patient profile was actually the one that could be sensitive to detect drug signal. And we did that by making sure that we had this -- a population that was a bit more severe. So the severity played a role. And then we did that also by breaking it down in terms of the positive symptoms, that they actually met a certain threshold in terms of individual positive symptoms on the PANSS score, subscale scores. So not enrichment per se but I would say refining the patient population is something that's critical across all trials regardless of population, but that's what our approach was in the 1b and our approach will also be in the Phase 2 program as well.

Tony Coles: Yes. And then Doug, I think the second half of your question, which is a really important one, about asset prioritization, let me just make a couple of contextual points. First of all, we've built an internal capability to analyze the portfolio, to assess different opportunities to try to figure out and place our next dollar. And to do the kind of tradeoffs that companies that have a portfolio like ours need to do. So that integrate -- that function is very much alive and well and really guiding the strategic decision-making for the organization. I'll also comment that we're in a strong cash position and are clearly well capitalized. You've heard Mark's report on our year-ending cash balance. And the current operating plans we have really are driven by following the science. And that is what I'd say. When we took over these particular programs at the formation of Cerevel from Pfizer, we realized that there were some new opportunities, anxiety is a great example, that had not been fully exploited previously. So I think our -- not only our track record of designing the trials and really trying to pay very careful attention to what the science is telling us is really how we think about this. To the extent that there are multiple indication opportunities for the same asset, we'll pursue those if that makes sense. But we also know that given the richness of the portfolio and the pipeline that we have, and we have an extensive, for instance, muscarinic program with a number of M4 agents or allosteric modulators. We've got additional opportunities to really build and deepen our franchise, and we'll be thinking about that as we prioritize. So I love the fact that we're well capitalized. I love the fact that we've got a very strong and well-integrated portfolio analytic approach to how we invest the dollars. And importantly, we will just follow the science and really do so on behalf of the benefit of patients.

Operator: The next question is from the line of Madhu Kumar from Goldman Sachs.

Omari Baruti: This is Omari on for Madhu. So first, how do you think about the efficacy and tolerability in initial pivotal studies in schizophrenia compared to long-term studies in terms of product profile?

Tony Coles: Okay. And do you have more than one question because we'll take both together, please.

Omari Baruti: Sure. And then second question is what are -- can you just walk us through the expectations for darigabat in REALIZE in epilepsy?

Tony Coles: Okay. Sure. I think on the -- I just want to make sure I got the first question. I think you're asking about what we see as the potential differentiation for emraclidine versus currently available therapies or other agents. So I'll ask Ray to talk through what we believe mechanistically and also about the potential efficacy tolerability profile, which is what I think the first of your question was. So Ray, if you would take that one, that would be terrific. And then we'll come back around the darigabat question just to clarify and make sure we're answering it.

Ray Sanchez: Sure. So thank you for the question. As you know, that there is a great need in the schizophrenia population for novel therapies other than the D2 antagonist or partial agonists that don't have the side effect profile that is -- can be quite malignant for patients with schizophrenia. And so we have an agent here who -- that actually has shown a very favorable tolerability profile in our Phase 1b trial to date. But with also a very robust PANSS total score reductions of close to 20 points. And so that's something that's very -- excites us because it gives us the opportunity to provide a therapy that not only has an efficacy profile that is very exciting and encouraging, but also safety tolerability profile that is relatively benign compared with what's available on the landscape. In terms of your question of acute versus long term, we are doing, as you know, starting the acute trials later this year. And we powered them accordingly to show at least a 7-point placebo-adjusted difference, and that's really based on the landscape and what's been shown historically, but we hopefully expect to see a more robust outcome. In terms of the long-term effects, that would be something that the agency would most likely require for us to show in a Phase 4 commitment to understand the longer-term maintenance treatment effect. But it's not something that we will be including in the immediate NDA package. It will be a subsequent approach. The open-label extension, as you know, and I think you mentioned that is really more to collect longer-term safety and tolerability data as required by the agency at 6 months and 1 year. But it's very difficult to really ascertain any efficacy longer term from an open-label extension, as you know. So that's our approach, and we're excited about the potential for this therapy and how it will be transformative to the landscape.

Tony Coles: And Ray, thank you. And then I think that the second half of Omari's question really had to do with what we might consider success from the darigabat epilepsy Phase 2 study. Obviously, Omari, we're hoping to extend what we saw in the Phase 2a and the photosensitivity epilepsy study. But Ray, I think, if you don't mind, just touch on the 31% difference in how we powered the study, please.

Ray Sanchez: Right. So the trial was powered 80% to detect a 31% seizure reduction. We're hoping that with what the data that we've been seeing to date in the photoepilepsy trial that has suggested it actually could be even more robust. I mentioned in an earlier question that you see about a 28% seizure reduction with Keppra as you know, it's used quite often. And so we're hopeful that we can see even greater benefit than what we powered for. But obviously, later this year, we'll have more clarity in terms of how darigabat performs in the focal epilepsy population.

Operator: The last question is from the line of Cory Kasimov from JPMorgan.

Tiffany Sun: This is Tiffany on for Cory. Just one that we got a lot of investor questions on how might you be thinking about Karuna’s Phase 3 data readout midyear. So obviously, it’s a similar OLE and it could potentially provide some positive read-through to emraclidine as effective. But just any initial thoughts or feedback to the market research there? And then a follow-up to that, just thinking about the required safety database in OLE? Is this anticipated to be the gating factor for filing?

Tony Coles: Okay. I think on the Karuna question, I'll make a couple of really quick comments. Obviously, we're focused on what is our most important next clinical data milestone, which is the derivate epilepsy program. And that's certainly going to be an important catalyst for the company. Clearly, we're rooting for Karuna's success and certainly support innovation in the antipsychotic space where there's as we've said a couple of times, really great unmet need. We know there is plenty of room. There's plenty of room for multiple players in the market, but we have a deep belief that the muscarinic pathway has a lot of potential as an exciting new mechanism. Having said all of that, there are some important features that make our inforce selective approach, particularly interesting, including the reduced GI side effects, the once-daily administration, the no need for titration. And those are features that we hope to both confirm and leverage as we do move to the Phase 2 program. So clearly, for patients, it would be wonderful if we can document success anywhere and add new therapies. But we've got strong reason to believe that we've got a differentiating profile with emraclidine and that's where we're focused at the moment. The second question about the OLE. Ray, do you mind just taking that one and what we're looking for there?

Ray Sanchez: Sure. So you are correct, the open-label extension is needed for registration. We have to have 3 patients exposed at 6 months at least, and at least 100 patients at 1 year. Our approach is always to exceed those numbers, of course, for FDA. And we're going to be using an approach where we not only have the patients roll over from the pivotal trials, but we're also adding additional sites for de novo exposures. And so that will get us the exposures we need by the time we file the NDA. So in terms of rate limiting, that's something that, of course, we've always thought about, so it doesn't become the critical path, the open-label extension. And our hope is that it will not be. And so that we will have all the data that will be necessary. If indeed, both Phase 2 trials are positive, and we're -- our other preclinical and other CMC work and so forth to try to get this medicine to patients sooner than later. But we'll have to wait and see how that all transpires once the data reads out.

Tony Coles: Thank you, Ray. And Tiffany, thank you for that question. I think that's going to wrap it for us. Thank you, guys, for joining us. We're off to a really strong start in the year with the great anxiety data that we've talked about. We'll close the year with -- in the second half with the epilepsy data. So a lot of really important value drivers both coming up this year and in subsequent years. The balance sheet is strong. The team is strong. So I think we've got all the right elements to continue to deliver great results. And we appreciate you guys in the conversation this morning, I think we've given good perspective about how confident we are about our ability to change the landscape. So thank you guys for joining, and have a good day.

Operator: Thank you. That does conclude the conference for today. Thank you for participating, and you may now disconnect.