Good day, everyone, and welcome to the BioXcel Therapeutics Second Quarter 2018 Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Lee Roth. Please go ahead.

Thanks, Anne. Good afternoon, and once again, thank you all for joining us for BioXcel Therapeutics Second Quarter 2018 Earnings Call. With me today from management are Vimal Mehta, Chief Executive Officer; and Richard Steinhart, Chief Financial Officer. Vince O'Neill, our Chief Medical Officer; and Frank Yocca, Chief Scientific Officer are on the line as well and will be participating in the Q&A session. Before we begin, I'd like to remind everyone that certain matters discussed on today's call or the answers that may be given to questions asked are forward-looking statements that are subject to risks and uncertainties relating to future events and/or the future performance of the company. Our actual results could differ materially from those anticipated in such forward-looking statements. The risk factors that may affect results are detailed in the company's most recent public filings with the U.S. Securities and Exchange Commission, which can be found on our website www.bioxceltherapeutics.com or www.sec.gov. Please note, the company is under no obligation to update any forward-looking statements made today and investors are cautioned not to place any undue reliance on these statements. With that said, it's now my pleasure to turn the call over to BioXcel Therapeutics Chief Executive Officer, Dr. Vimal Mehta. Vimal?

Thanks, Lee. Good afternoon, everyone, and welcome to BioXcel Therapeutics first conference call as a public company. It is a real pleasure to introduce our story to those of you who are new to BioXcel Therapeutics and also to brief everyone on the tremendous progress we have made since our IPO in March. For those of you unfamiliar with BioXcel Therapeutics, we are a clinical-stage biotech company harnessing the power of artificial intelligence to identify the next wave of medicines, addressing unmet medical needs in neuroscience and immuno-oncology. Our AI partnership with BioXcel Corporation enables us to identify and develop therapeutics more quickly, cost effectively and with a higher probability of clinical and regulatory success than traditional R&D methods. Moreover, through this partnership, we have the opportunity to leverage data on thousands of compounds into these targets. With this information, we can systematically expand our pipeline and add truly innovative treatment regimens with the potential to improve patients' lives. Before I review over lead-stage programs, I would like to highlight the successful execution of our initial public offering in the first quarter. We raised $60 million in gross proceeds, generating sufficient funds to advance the development of our lead programs and emerging pipeline. We are grateful to everyone who contributed to the success of our IPO and are excited for the opportunities ahead of us. Now let's focus on our lead programs BXCL501 in neuroscience and BXCL701 in immuno-oncology. BXCL501 is a potential first-in-class sublingual thin-film formulation of dexmedetomidine, or Dex, being developed for the acute treatment of mild to moderate agitation in neurological and psychiatric disorders such as geriatric dementia and schizophrenia/bipolar disorder. BXCL501 directly targets the causal mechanism of agitation. It's sublingual thin-fin formulation has a rapid onset of action and provides ease of administration in agitated patients.…

Thanks, Vimal. Once again, thank you all for joining us this afternoon, and welcome to our new shareholders. Our initial public offering in March brought in $60 million in gross proceeds. These proceeds will give us the essential capital to move forward with our planned clinical developments of both BXCL501 and 701, including initiation of multiple studies in each program through the second half of this year. For the second quarter of 2018, we reported a net loss of approximately $3 million compared to a net loss of approximately $600,000 for the second quarter of 2017. Research and development expenses totaled $1.84 million for the second quarter of this year compared to approximately $300,000 for the same period in 2017. The increase in research and development expenses reflects increased development activity in both our BXCL501 and BXCL701 programs, including increased personnel cost, professional fees, clinical trial and manufacturing cost. General and administrative expenses in the second quarter of 2018 were approximately $1.5 million compared to approximately $200,000 for the second quarter of 2017. The increase was primarily due to additional payroll, payroll-related expenses, professional fees and the costs associating with operating BioXcel as a public company. We had total cash and cash equivalents of $50.3 million as of June 30, 2018 and that generally reflects the proceeds from our IPO. We believe that our current cash position is sufficient to meet our needs for at least the next 18 months. That concludes the financial review, and I'd like to turn it back to Vimal for his concluding remarks. Vimal?

Thanks, Richard. I would like to thank everyone for participating in the BioXcel Therapeutics story. That concludes our prepared remarks. We would like to open the call to questions. Operator?

[Operator Instructions]. We'll take our first question from Geoffrey Meacham with Barclays.

This is Jason Zemansky on for Geoff. Real quickly, do you have a sense of if and when you'd start to engage discussions for partnerships for bringing both 701 and, potentially, 501 to market, just given kind of the complexities?

That's a great question. As you noticed that we have recently hired Dr. Vikas Sharma as Vice President of Business Development, and that part - that was part of a strategic growth plan for the company. As we are progressing 701 - I will talk about it first and then I will go to BXCL501. We are realizing that as a company, we can execute on two tumor types, the rare tumor types we have selected. And there is a large potential for combining 701 with other immunotherapies as well as other modalities like RT, vaccines, ADCCs and some of the other therapies that are being currently marketed. So we were getting some inbound request. And having a business development person on board will help us evaluate those opportunities and seek some strategic partnership for 701 program outside the therapeutic areas we are focusing ourselves. And for 501, our plan is that we will initiate registration trial in 2019. And just around that time, we will look for partners which - who could be regional partners. We have not embellished the whole strategy around 501, but strategy will be to look for a regional partner for 501. Could be in Japan territory or other areas. And we will develop our strategy for commercialization in U.S. and Europe.

Great. And then just a quick follow-up. In terms of selecting the next development program, is there anything you can tell us regarding your experiences with something that's maybe a little bit more straightforward like agitation versus a little bit more complex with immuno-oncology but potentially greater upside, where you would want to go in terms of kind of balancing the portfolio, which you kind of search for something that maybe is a little bit lower-hanging fruit but not as much potential or return to something like immuno-oncology?

So regarding the strategy, I will first tackle the neuroscience. Our strategy continues to be with the hiring of Michael DeVivo as our VP of Neuroscience, who will complement our CSO Frank Yocca, so our team in neuroscience is very strong. And we are pursuing a dual strategy. Continue to develop symptoms-based treatment like agitation. So in agitation, expanding the franchise in acute agitation for multiple indications. That will be our first focus. Then in addition, there are other symptoms that are pretty large resulting from neuropsychiatric diseases but there are no treatments, so we'll continue to explore that path. And as you indicated, those are normally 505(b)(2) rapid path to development and going to the finish line. In addition, we have had success in neuro rare and ultra-rare diseases. In the past, we had developed a compound which was a marketed drug. And then we saw that we could align that drug into the NF2, which is neurofibromatosis 2. And that validated our platform and gave us the confidence that there is a huge opportunity lies ahead of us in developing treatment for neuro rare and ultra-rare diseases where population is well defined. So we'll continue to explore that in the neuroscience. So those - that will be the strategy for the neuroscience program. And in immuno-oncology, currently, we are seeing such a vast potential with 701. Its mechanism getting validated and all the data is coming out is looking quite promising. So we will continue to explore potential combination regimens for 701. And then we will - once we have exhausted that space, then we will determine what are the other agents which can have a transformative impact in immuno-oncology and what we can identify using our artificial intelligence platform.

We'll take our next question from Do Kim with BMO Capital Markets.

This is Keith Deveron [ph] for Do. Congratulations on the successful IPO. I just had a quick question. If you could talk a little bit about the variability of PK and PD for Dex in individual patients and what factors contribute to an individual's - a patient's tolerance? For example, should we expect to see the duration of sedation to change as you transform - or you go from IV to sublingual or based on disease state?

So I will pass on this question to Frank Yocca.

So in reference to your question, that's the reason why we're looking at the IV studies right now to get to handle on that. Our plan really is to develop several dosing strengths because there is the possibility that treating a dementia patient with the level of dexmedetomidine may be different than treating a patient with say, for example, schizophrenia or bipolar. So there is that possibility there. Whether or not that will translate into a difference of the therapeutic index of the drug, we just don't know yet, okay? So far, what we've dealt with, with the subjects is that the PK/PD has been pretty consistent. We really are beginning to understand - this is a drug that is very predictive in its actions. So that's what we like about it. And once we translate it over into the film, we believe that it should continue that way. But we'll look at the different populations to see if there's a different dosing regimen for them.

Okay, that makes sense. And just a follow up with that, not to be redundant, but could you add some color to what you think it might take to consolidate the general agitation market to a standard therapy like 501, and if there are any challenges that you see for inhaled ADASUVE, how that would be different than 501?

Well, agitation is a big market because it's being affected, but - it's really coming out of both psychiatric and neurological disorders. So you have I think a very broad market that you can apply a drug like 501 to. And remember, what we're dealing with here is a drug that is an acute treatment. Right now, what you're seeing in the marketplace is a lot of chronic treatments. We believe our drug can actually work well with them and quite nicely. So I think the bottom line here is that I think you're dealing with a situation with agitation that's become part of a number of different diseases and needs to be controlled because of the situation that occurs with that, which is a dangerous situation for both the patient and the caregiver. So I think that 501 and a focus on acute treatment actually fits quite well. But there's clearly a big market and a big need.

We'll take our next question from Sumant Kulkarni with Canaccord.

Just a quick one. You've made some significant hires in the neuroscience side. Are you done with the hiring on that side, and what are your plans on the oncology part of the portfolio?

I think we have just kind of been - since becoming public, started very aggressive recruitment of the talent. And what talent we have found and where we saw the urgency, we have placed that talent in place. We'll continue to broaden the depth in our immuno-oncology space also. And we feel that we have currently a strong team and we will continue to build on it.

And then a specific one on 501. Are there any specific non-contraindications for using 501 in the population of patients that you may be trying because they might be on several other drugs at the same time?

Yes, this is Vince. I would say, based on the lethal M [ph] for Dex currently doesn't seem to be any obvious. I have a contraindications based on con meds or clear drug-drug interaction. That's something we will be looking at, but currently, there doesn't seem to be anything that concerns us.

We'll go next to Ram Selvaraju with H.C. Wainwright.

I just wanted to, first of all, start by asking about the timing of the announcement of CRO selection for both the BXCL501 and 701 clinical programs. And if you anticipate or you continue to anticipate formally announcing that over the course of the coming weeks, or if you wouldn't announce the CRO selection per se and just focus on the initiation of the actual clinical trial itself?

So we have been in a constant evaluation process for selecting the CROs. It's a very long-term commitment for both the programs, so we have like to narrow down our CROs. And we have started the process of selecting and choosing. We have currently not made a decision in any way that would we announce it or we will directly announce the initiation of the trial. That will - choice and the decision will be made in future. But as you can imagine, this is a very constant process. And we you want to open the site and initiate the trial in 2018, we have to be completely ready with both GMP manufacturing of the product as well as the CROs and all the IRB approvals done to initiate the site.

Okay, got it. And then, I was wondering whether you could provide some more granularity on the design of the benchmarking studies assessing sublingual Dex against IV Dex. Because previously, the healthy volunteer study with the IV Dex Phase Ib appeared to demonstrated success in terms of identification of an optimal starting dose. But my question was based on that information, do you now feel you have a good handle on how many arms are likely to be in these benchmarking strategies? Which doses you are most likely to focus on? How narrow is the spectrum going to be?

Ram, Hi. This is Vince. So just to be clear, we're not planning to run an IV versus sublingual study. We clearly have conducted the IV study and have a - we feel some comfort around the dose that we will take forward with the sublingual film, and then we will run multiple arms to define which sublingual dose to take forward. Does that answer your question?

So basically, what I was asking is based on the knowledge you got from the Phase Ib study, do you feel confident that you can focus on studying a small number of doses? And if so, what might that number of arms be? Is it going to be 3 or 5? Or can you give any sense of reference there?

Yes. So I think the short answer is we are confident that we can test a small number of doses. We haven't really decided on the number of arms or doses to test. It's likely to be less than five. I think that's fair to say. Frank, did you want to like to add anything?

No, I agree. We've gone through some extensive modeling, Ram, to try to understand that fully, and I think we are getting very comfortable around a dose range. The question is how fine to get with that dose range. So I would agree with Vince. It's is going to definitely be less than five.

Okay, that's very helpful. And then with respect to the mild sedation aspect of this, I just wanted to ask how - what's the time frame within which patients, let's call it, in a real-world setting being given this drug to address the agitation context, for example, would effectively be mildly sedated? How many hours are we effectively talking about? Just if you could provide a frame of reference regarding what the real-world application of this is, is likely to be?

So Ram, this is Vince again. If you're really talking about on time, in the clinic, it would likely to have to be around 30 to 45-minutes. And I say that because that would be beyond time for an IM, intramuscular injection. So 30 minutes would be the target on time.

Okay, great. Just two very quick things. I noticed that there was a significant difference between the first quarter and second quarter's comp. I just wanted to ask, Richard, if we should be using the second quarter number as the frame of reference going forward, or is the first quarter is more indicative of kind of steady-state there?

No, Ram. Use the second quarter. As we've said in the script in this discussion we had that we're hiring people, so people are coming on. So the number of people on board will go up, and obviously, the comp cost will go up as well.

We will take a follow-up from Ram Selvaraju with H.C. Wainwright.

So just two of very quick things. In a general sense, if you are looking at broadening out into other areas in the neurology space, at this juncture, would you be more likely to prioritize opportunities in neurodegenerative or neuropsychiatric indications? Or is it really impossible to say at this point? And if you were to prioritize one versus the other, what might be some of the reasons why?

So Ram, right now, I wouldn't speculate because we're using the engine to figure that out. But if I had to - again, what we're trying to do here is, we're trying to come up with de-risk programs that have easy readouts, okay. So for example, in neurology, we would stay away, for example, from cognition. But we might say, for example, go into movement disorders or things of that nature. Or as another example, diseases - orphan diseases, where the readouts are movement related or things like that. So that's really what our driver is. And it's not really whether it's neurological or psychiatric. There are a couple of things that we need to add up in the entire equation that tells us whether or not something is a viable candidate to prosecute.

Okay, fair enough. And then just one quick question regarding the 701 development path in pancreatic. Has a definitive decision been made regarding the design of the proof-of-concept study or studies that you would be conducting in pancreatic? And if that's the case, can you confirm at this time whether you will definitely pursue a triple therapy or if you're going to go first with a dual therapy?

So Ram, in general, the data is very compelling. And key opinion leaders who are going to be doing these trials, they like to pursue triple combination. I will pass it on to Vince and like what exact plan will look up - look like is being worked upon. Vince?

Yes. So just to pick up on that, so those - around those, there's a clearly compelling case to move the triplet into the clinic as soon as possible. Now the most I can tell you here is that, that's actively under discussion. It's certainly - our clinical advisers would like us to do that.

And with no further questions in the queue, I would like to turn the call back over to Vimal Mehta with any additional or closing remarks.

I'd like to thank everyone for participating in the Q&A session, and we really appreciate all the help and support provided by everyone. Thank you again on behalf of the management team of BioXcel Therapeutics, and have a good evening.

This does conclude today's conference. We thank you for your participation. You may now disconnect.