Good morning, and welcome to the BioXcel Therapeutics First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Just to remind everyone, certain matters discussed in today's conference call and or answers that may be given to questions asked are forward-looking statements that are subject to risks and uncertainties related to future events and/or the future financial or business performance of the company. Actual results could differ materially from those anticipated in these forward-looking statements. Risk factors that may affect future results are detailed in the company's annual report on Form 10-K for the year ended December 31, 2022, which can be found at www.bioxceltherapeutics.com or on www.sec.gov and which will be updated in its quarterly report on Form 10-Q for the quarter ended March 31, 2023. As a reminder, today's conference is being recorded. Joining us on today's call are Dr. Vimal Mehta, Chief Executive Officer; Richard Steinhart, Chief Financial Officer; Matt Wiley, Chief Commercial Officer; Dr. Rob Risinger, Chief Medical Officer of Neuroscience; Dr. Vince O'Neill, Chief R&D Officer of OnkosXcel Therapeutics; and Dr. Frank Yocca, Chief Scientific Officer. It is now my pleasure to turn the call over to Dr. Mehta, the CEO and Founder of BioXcel Therapeutics. Please go ahead.

Thank you, operator. Welcome, everyone, and thank you for joining our call today to discuss BioXcel Therapeutics' first quarter 2023 financial performance and business highlights. This is shaping up to be a momentous year for BioXcel Therapeutics. Our success in advancing our corporate objectives continues on an exciting trajectory. We are maturing as a commercial organization, solidifying our position as a leading innovator in a nascent agitation market and advancing our pipeline towards critical value-creating and business transformative milestones. We believe we are well on track to realizing our vision of becoming the leading AI-enabled neuroscience company. I have truly never been more excited than I am today for BioXcel's promising future. Now let me highlight our commercial progress and upcoming clinical milestones. On the commercial front, we continue to execute on our launch for IGALMI, approved for the acute treatment of mild, moderate and severe forms of agitation associated with schizophrenia and bipolar disorders in adults. With our integrated commercial team now fully deployed for only one full quarter, we are already seeing encouraging market traction. For example, since our last earnings call, we have more than doubled our number of formulary wins. This is opening a significant addressable market opportunity for IGALMI. I would like to emphasize that we are continuing to build a new agitation market because IGALMI represent the first innovation for this indication in nearly a decade. While we recently celebrated the anniversary of IGALMI’s FDA approval in April 2022, it is still less than 1 year since our trade launch last July. I'm proud of the strong performance we have achieved to date and the real-world utility IGALMI is demonstrating. I will be sharing several inspirational anecdote of this later on the call. On the clinical front, we are very excited for three key…

Thank you, Vimal. This is indeed a very exciting time for our neuroscience clinical pipeline at BioXcel Therapeutics. We are expecting three near-term data readouts across the BXCL501 program. These will potentially help expand this novel asset outside of the institutional setting and into additional therapeutic areas of significant unmet need. Let me briefly summarize these important milestones, their clinical relevance and significance. We are on track to announce top line data in schizophrenia and bipolar disorder from part 1 of our SERENITY III study this month. This study will report both efficacy and safety information for a 60-microgram dose. Given the purpose of this study, we chose a lower dose to help establish a greater safety margin for at-home use while maintaining a margin of efficacy. Dose selection was informed by our experience with the 60-microgram dose in our Phase Ib trial. Our goal is to arrest agitation episodes in its earliest stages at home. Patients at home are aware of becoming agitated and have not yet reached the magnitude requiring emergency treatment. This contrast with the magnitude of improvements in PEC total score in SERENITY I and II, which were designed for the emergency setting, where patients require a rapid onset of action, considering their acuity. In Part 1 of the SERENITY III study, we have 80% power for a single 60-microgram dose to separate from placebo by 1 point or greater in the PEC total score with an alpha of 0.05 or better. For potential home use, we have powered the SERENITY III trial for a dose intended to maximize the margin of safety for broader community use. Data cleaning and verification is in progress with expected readout this month. Part 2 of our SERENITY III study is expected to initiate this quarter and is designed to…

Thank you, Rob, and good morning, everyone. Before we dive into the specific commercial metrics for the quarter, I want to score IGALMI's positive reception as our commercial organization continues to build and shape the agitation treatment market. Following the full deployment of our 70-person field force last December and building upon a strong early launch foundation, we've had a very productive first quarter and start to the second quarter across our sales, market access and marketing functions. While we're still relatively early in the hospital launch, particularly for the recently deployed 2/3 of our field force, our commercial momentum is building. We are very enthusiastic about our progress and confident in our prospects for success. The team is working diligently to ensure IGALMI is on hospital shelves and available to patients as quickly as possible. We have made great progress with IGALMI's formulary adoption, achieving more than 130 formulary wins, which more than doubled the number of wins reported just 2 months ago. Along with approvals for over 14,000 Target Integrated Delivery Network or IDN beds, this equates to over $55 million addressable market that has been unlocked to date. Beyond these secured approvals, the efforts of our combined field teams have resulted in formulary votes scheduled for approximately 600 hospital P&T committees and for IDNs covering another 70,000 target beds. This represents 25% of our target IDN universe. Taken together, this represents approximately an additional $255 million in market opportunity that's scheduled to vote. We're pleased with our current approval rate of nearly 70% of votes. This reinforces our confidence in IGALMI's perceived value to our hospital customers. Given the standard formulary time lines, we expect to see a meaningful uptick in votes in process later this year. We have also observed that more than half of all…

Thank you, Matt. I will now review the first quarter 2023 financial results. Net revenue was approximately $206,000 for the quarter, similar to our prior quarter. We expect to see a notable uptick in revenue in the second half of the year as we believe we will continue to accrue more formulary approvals. Research and development expenses were $27.8 million for the first quarter of 2023 compared to $18.6 million for the same period in 2022. The increased expenses were primarily attributable to multiple clinical trials and CMC costs related to our upcoming 3 data readouts. Sales, general and administrative expenses were $23.6 million for the first quarter of 2023 as compared to $12.9 million for the same period in 2022. The increased expenses were primarily attributable to personnel, sales, market access and marketing costs associated with the commercialization of IGALMI in the United States. BioXcel Therapeutics had a net loss of $52.8 million for the first quarter of 2023 compared to a net loss of $31.5 million in the same period of 2022. Cash and cash equivalents totaled $165.5 million as of March 31, 2023. We believe that full execution of our strategic financing with Oaktree and Qatar Investment Authority and IGALMI revenues will result in a cash runway into 2025. Thank you. Now, I'd like to turn the call back to Vimal.

Thank you, Richard. Before turning to Q&A, I would like to briefly highlight a few of the many recent unsolicited real-world examples that were relayed to me by our sales organization. These 2 anecdotes demonstrate the profound benefit IGALMI is having for patients and caregivers. An STP customer last week described a highly agitated uncontrollable patient who were jumping on the bed, taking their clothes off and yelling. The patient appears to be a danger to themselves and to hospital staff. The patient was offered IGALMI, took the drug and in under 30 minutes was sitting back on the back, fully dressed and much more cooperative. The psychiatrist feedback was that IGALMI worked fabulously for this patient. Another hospital informed us that they have multiple patients coming in and requesting IGALMI by its name. One of these patients after taking IGALMI was described by her caregivers as firm, clear headed and able to hold conversations. And that she desperately wanted to get IGALMI to use at home. As you are aware, BXCL501 is currently under investigation for at-home use. We are constantly receiving such anecdotal feedback, which further assures us that not only is IGALMI providing real-world utility for those in need in the institutional setting, but it also supports our expansion strategy. Hearing first-hand accounts of these positive changes we are creating also continues to be both ratifying and motivating. As you know, we are beginning to make an important societal chain. We would now like to open the call for questions. Operator?

Thank you. [Operator Instructions] Our first questions come from the line of Robyn Karnauskas with Truist Securities.

So I have one main one and then two follow-ups. So with regard to SERENITY III, thank you for giving the powering, but what can we expect for the bar to be considered successful in terms of the PEC score change in regulatory approval?

So I appreciate that there's confusion over the magnitude of change in PEC total score, which could be considered approvable by regulatory authorities. So I'll be clear. The magnitude does not have to be large. As always, for regulators, it's the safety that allows approval, hopefully, for at-home use. Safety is the critical bar for FDA to approve any drug for at-home use. So, for example, look at Flonase or Claritin or older treatments even like Tylenol, not only were lower doses approved, but the increased margin of safety was really enabling for these drugs to move all the way to nonprescription over-the-counter use. So to back it up for a moment, our overall regulatory strategy has been built upon moving a drug routinely used in the ICU setting and gaining our initial approval, demonstrating discrete low exposure to treat agitation in an emergency room at the 120 and 180 microgram doses. This trial, SERENITY III, is next designed in order to potentially expand upon this safety to potentially enable approval for at-home use. Although low doses of drugs have been approved with marginal statistical significance, achieving significance versus placebo is, of course, the regulatory bar. So to answer your question, this study is engineered to achieve this. Prior to initiating our pivotal SERENITY I and II trials, we tested the 60-microgram dose in a dose-ranging trial in schizophrenia. We observed a group mean difference versus placebo of 1 point or greater across multiple time points through 2 hours. This data set was the basis for our initial powering assumptions, where an [indiscernible] provides 80% power to detect a statistical separation from placebo with an alpha of 0.05 on the change from baseline in PEC score. So to confirm that estimate, after 40% of subjects were enrolled in SERENITY III, we conducted a blinded interim sample size reestimate, which concluded a sample size increase was not necessary. Therefore, with 200 total patients randomized at 1:1 ratio, meaning 100 assigned to drug, 100 assigned to placebo, this provides 80% power to detect a significant difference versus placebo.

There's a lot of color. You actually answered a bunch of my follow-ups. So thank you very much. Appreciate it.

Our next questions come from the line of Greg Harrison with Bank of America.

This is Mary Kate on for Greg. Maybe also looking at the at-home setting here, I guess, how are you looking at the potential commercialization strategy for the setting, if approved, compared to the ongoing institutional setting?

Yes. So it's a great question. We're going to provide more color on at least a 30,000-foot view of the market reaction and potential deployment scenarios as we read that data out. So stay tuned on that. Suffice to say that we're building momentum now and a very nice bridge to get to the community. I think as Vimal mentioned, we had a case of -- and we've had several instances across the country where patients who've already received IGALMI have asked if they could have this therapy at home. So we believe that, that bridge will be very strong and will accelerate our uptake into that market.

Great. And just one more, if I could. Then we'll discuss with the anecdotal feedback. Maybe just looking at another setting here. As you enroll patients for the TRANQUILITY III trial, could you comment on the interest you're receiving from physicians and caregivers for 501 in Alzheimer's?

I can say there is interest. At this point, we're not approved for use, for example, in a nursing home setting, and we're also not approved for use in Alzheimer's. However, we are studying this. So I encourage family members and patients to stay tuned. We are going to present this data to the FDA post-haste, extremely fast. And as you know, we have breakthrough designation for the development and fast track. So we hope to meet with the FDA probably shortly after we describe the top line results to investors.

Our next questions come from the line of Colin Bristow with UBS.

I guess the main one that we've been getting from investors is just what is the disconnect between these improving metrics you're getting in terms of formulary wins and institutional outreach, et cetera, versus the sort of essentially sort of flat sales performance? And when do we start to see the correlation between these metrics and the sales performance? And then just as a follow-up to this, can you give any metrics in terms of repeat orders? And then I have a follow-on up to that.

Sure. So I'll address the question about revenue versus the metrics. I mean, the metrics that we focus on is obtaining formulary wins because that is a leading indicator. Revenue is a lagging indicator. Revenue can be -- the gating of that revenue can be disjointed, especially early in launch. And so I think that you're seeing the phenomenon of that now. As hospitals order in units, they may work through that inventory before reorder, and we cannot predict those ordering patterns. It should smooth out over time, and we expect it to. And as I said before, we expect to see a significant inflection in the revenue later this year.

And then on the repeat orders, can you give any color there?

Yes. So I would point you to that Slide 25 in the corporate deck that we posted this morning. That will give you a really good indication of the ramp that we're seeing in the hospitals that have begun ordering out. The way that we had to perform that analysis is they had to have ordered at least for six months and had to have some experience with the drug. But what you're seeing there is a pretty nice inflection. In fact, we get to, I think, 4.3% on average impact or penetration into that annual agitation market. So I think that, that's a fairly useful way of maybe predicting the ramp. We've had -- we've observed over half of our ordering hospitals have reordered. And that's the expected early launch. I mean remember, as we pull new hospitals online and they place their first order, they -- if we're including those in the calculation as we do, they will have ordered one time. And so we expect them to have repeat orders. And in fact, we've seen that as hospitals trial this in patients in their hospital, they're pretty impressed with its performance

Okay. Great. And then just as we look forward to the Alzheimer's launch, which I think is the focus of everyone, should we expect a similar lag between these metrics and the sales performance? Or because you'll be so established at that point, do you expect sort of a much greater correlation and more rapid uptake. Thank you.

So that's a great question, Colin. And no, we wouldn't expect that. I mean this is a traditional Rx therapy. So we would expect to see the same type of ramps that you see in traditional retail markets. And in fact, being able to build that bridge from the hospital experience to the community, even in Alzheimer's dementia is going to be very important. Remember, 20% of those 100 million episodes in Alzheimer's dementia wind up in the emergency department where we're going to have a lot of experience with IGALMI and bipolar in schizophrenia patients. So we expect to leverage that and build a similar request for those patients who have been treated with IGALMI to go back out in the community and request it from their physicians.

Okay. So that's really helpful. Thanks a lot, guys.

Thank you. Our next questions come from the line of Corinne Jenkins with Goldman Sachs. Please proceed with your questions.

Hi. This is [indiscernible] on for Corinne. I have a couple of questions. So post SERENITY III, how do you expect doctors to determine the dose in the emergency room setting. And then should they choose to use the lower dose? Are there any implications to revenue we should be thinking about?

So the approved and labeled doses are 120 and 180 micrograms, which may be given again half doses, 2 hours after the first dose in the emergency room or hospital setting. The 60-microgram dose is being tested for at-home use.

And this is Vimal. I can add that currently, there is no differential based on the dose, whether it's 120 or 180, our price is same.

That's helpful. And my other question was, could you contextualize the risk of falls in the TRANQUILITY study? And what do you view as a tolerable rate within this population?

So we know that agitation itself is a risk factor for falls. Obviously, the population is at risk, elderly, especially patients with multiple comorbidities, hypertension and on anti-hypertensives. These are all reasons why patients fall. And so I don't know that the -- a single fall is not a good thing. It never is. Falls with consequence are worse, consequence, like broken hips and arms and bones. And so we'll be monitoring this. In fact, we are monitoring this, and we'll be presenting data on this as part of our regulatory package and you will see this as part of our safety data in the top line results.

That's helpful. Thank you.

Thank you. Our next questions come from the line of Yatin Suneja with Guggenheim Partners. Please proceed with your questions.

Hey guys, thank you. A question on the TRANQUILITY II. So I think the primary endpoint is at day 1, but the study is 3 months. Could you maybe articulate for us how did you come up with the 3-month study, at least in the open label? What sort of regulatory discussions were? And then in terms of filing requirements, help us understand what would be needed. Do you need III or TRANQUILITY III to read out or II enough? Just curious how did you come up with the -- what the negotiation of back and forth was with the FDA when you were designing the II and III TRANQUILITY II and III studies. Thanks.

Sure. So we designed these studies in consultation with the FDA. And one of their questions was okay, if you're able to demonstrate single dose efficacy and that's how we got breakthrough, you'll need to demonstrate that again. And not only for one episode, but continued efficacy over a period whenever it may be used. That's why it is, in fact, double blind. It is double-blind, placebo-controlled for a period of 3 months. So that 3-month period is not open label. And the FDA puts a lot of weight in double-blind placebo-controlled data, thus, we're able to describe the efficacy not just for the first dose, although that is primary, but we're able to describe efficacy and safety whenever it's used as an agitation episode arises. So that is been agreed with FDA. We've agreed on the analysis plan, and that is the data that we'll be presenting to them.

Got it. One more question I have. This is regarding the adjunctive MDD study. So the Phase I is actually in healthy volunteer. Just curious like what would you like to see at least in how the volunteer that could inform proof of concept for this MDD readout. Thank you.

Yes. So it's true. The study is in healthy volunteers, and it is principally designed to explore safety and tolerability of doses taken on a daily or twice daily basis. So starting with a low dose, it escalates to greater doses and frequency up to twice a day. The highest dose regimen considered acceptably tolerated is tested then in combination with a standard of care serotonin and norepinephrine reuptake inhibitor or SNRI. So we'll describe the development plans in terms of depression after we have that data in hand, we do have advisers who will review that data and our various options for developing in depression. So at this time, we're considering development as an accelerant to the antidepressant response of standard of care, SS and SNRIs. We may choose to test 501's capacity to more rapidly accelerate those patients into response and remission, especially in the first month or so of treatment. These plans will be detailed after we have the data, and we've reviewed this with advisers and literally codified our strategy.

Thank you. Our next questions come from the line of Graig Suvannavejh with Mizuho. Please proceed with your questions.

Hi, good morning. This is Richard [ph] on for Graig. And so 2 questions from me is that in SERENITY III, since you're looking for the same efficacy as you have seen so far, in the at-home setting, what is the FDA looking for? Specifically, what are they worried about?

I don't know that the FDA is worried about anything. We believe we have adequate data. And so we're literally taking that data to the FDA.

So just to add to that, Richard. As Rob mentioned, that purpose of SERENITY is that it can be used broadly for the patients at home. So our goal was to test the efficacious dose, while maintaining the efficacy margin as well as maintaining the safety margin. So 60 dose was very well selected as Rob said, in the trial and agreed with the FDA that this is a dose we want to test. And in a couple of weeks, we will have the data readout. So we will take -- and we are gearing up to start the part 2 of the study with 60 dose can be given and also a second dose patient can take it at home, which is a safety part of the study. So it's very well-engineered. It's very thought out, it's agreed with the FDA, and we are excited about upcoming data readouts.

Okay. Thank you. And one on commercial, Matt this is for you, is I think questions have been asked about what you think about the uptick now. And so I think you've mentioned a metric of your sales force panting 75%. But what do you expect is -- how does that also correlate to uptick from now? And when can we see that uptick?

Yes. So Richard, great question. And that's why we provided the metrics we did this morning, we dollarized what's already been voted upon as well as dollarized the market potential that we can penetrate into with what's scheduled already this year. We expect that most of those votes will happen in Q2 and Q3 that are scheduled, and we'll pick up additional boats and process over the back half of the year to the impact of the additional 44 reps in the field. So I would take that $310 million all in that we have either unlocked or about to unlock. And I would use that uptake curve that's in Slide 25 as a good surrogate as to how that happens. Once we knock down the positive votes and they have the drug in their requisite systems, et cetera, we expect to see similar uptake curves.

And Richard, I would like to add what Matt said, this is Vimal, that our current approval rate is 70% for formulary wins, which is really very exciting. So we are very excited that we will have a lot more formulary wins in next quarter and in second half.

Great. Thank you.

Thank you. Our next questions come from the line of Sumant Kulkarni with Canaccord Genuity. Please proceed with your questions.

Thanks for taking my questions. Actually all around SERENITY. So the first one, in the at-home use context, how can we tune them is the company to an important fact that in 2015, the FDA approved oral mucosal gel, for at-home use for in dogs and [indiscernible] at a strength of 90 micrograms per mil and do you expect an advisory committee meeting for use.

Well, I'll point out that it is, in fact, that same gel is approved for horses, dogs and cats. And we now have a sublingual film approved for humans with schizophrenia and bipolar who are agitated. So we have great confidence in our development program.

Got it. And then for SERENITY III, how do you approach a scenario where the 60 micrograms strength does not have a statistically significant score and efficacy, but is otherwise safe. I'm asking because the Phase Ib/II study did not hit significance for the 60-microgram dose when you announced the results in July 2019.

So at the end of the day, the regulatory submission will entail both Part 1 for a single dose and Part 2 where we allow that second dose. And I'll just say, although we remain blinded, we have been closely monitoring the overall safety in Part 1 from the single dose, and we are initiating part 2 of the study.

And I'll stop a commercial question and a quick one. What time of the year do the bulk of the IDN votes happened?

That depends. I mean the voting schedule is going to be dependent on our engagement when they put it on their schedule to vote. We're seeing them happen now. In fact, we just had a well-known system, relatively small system, but a well-known system and approve us on Friday. And so that was a nice add. And we see this happening every week. And so the cadence of those should continue to improve. We've been engaging with the IDNs ratably since we've launched, and we expect to see more and more of those take place. Remember, we have 70,000 votes or 25% of the targeted IDN beds that are scheduled to vote already. And so we should see even more of those come online as we move throughout the year.

Got it. Thanks.

Thank you. Our next questions come from the line of Ram Selvaraju with H.C. Wainwright. Please proceed with your questions.

Thanks so much for taking my questions. First of all, I just wanted to ask if you expect to maintain reporting of the same commercial metrics going forward? Or if we should expect specific changes? And if so, what those changes might be, just what types of numbers you expect to report going forward? And the second question is with respect to OnkosXcel. Just give us your updated thoughts regarding the strategy there and potential timing of any possible spinout or other equivalent type of transaction. Thank you.

So Ram, we do expect to report out the same metrics. We've been consistent since commercial day of last year and reporting on hospitals, formulary and process formulary votes one, and IDN beds in process and IDN beds one. The only difference between those metrics that we reported over the last 2, 3 quarters now. And today is that we've dollarized that opportunity so you can actually see what market we could impact today. And what dollar value we should be able to impact, assuming positive approvals of those in process. So that's the only change. Everything else will stay consistent.

Good morning, Ram. This is Vimal. Regarding OnkosXcel, we continue to explore our strategic options. That includes potential financing as well as partnering. So it's an active process, and we are looking forward to providing an update once we have a confirmed position on which direction likely we're going to go.

Thank you. There are no further questions at this time. I would now like to hand the call back over to Dr. Mehta for any closing remarks.

Thank you, everyone, for joining us. And if you have any questions, please feel free to reach out to us, and have a great day.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.