COMPASS Pathways plc (CMPS) Q4 2020 Earnings Call Transcript

COMPASS Pathways plc (CMPS -4.44%)
Q4 2020 Earnings Call
Mar 09, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the COMPASS Pathways fourth-quarter 2020 conference call. [Operator instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Steven Schultz, senior vice president of investor relations. You may begin.

Steve Schultz -- Senior Vice President of Investor Relations

Thank you, operator, and welcome all of you, and thank you for joining us today for our fourth quarter and full-year 2020 results call. This is Steve Schultz, senior vice president investor relations at COMPASS Pathways. And today, I'm joined by George Goldsmith, chairman and chief executive officer; and Piers Morgan, chief financial officer. George will begin today's call with a business update on our recent progress.

Piers will follow with a review of our financial results for the quarter and full year. We will then open the call to questions. The call is being recorded and will be available on the COMPASS Pathways investor relations website shortly after the conclusion of the call. We hope you've had a chance to review the press release -- the quarterly press release that we issued earlier today.

Before we begin, let me remind everyone that during the call today, the team will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. You should not place undue reliance on these forward-looking statements. Actual events or results could differ materially from those expressed or implied by any forward-looking statements as a result of various risks, uncertainties and other factors, including those risks and uncertainties described under the heading Risk Factors in our annual report on Form 20-F filed with the U.S. Securities and Exchange Commission earlier today, and in subsequent filings made by COMPASS with the SEC.

Additionally, these forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements. I'll now hand the call over to our chairman and CEO and co-founder, George Goldsmith.

George Goldsmith -- Chairman and Chief Executive Officer

Thank you, Steve, and welcome to all of you who have joined us today. The last few months have been a busy and productive time for COMPASS Pathways. Following our successful IPO on NASDAQ in September, our team has continued to make good progress toward our goal of bringing evidence-based innovation in mental health to patients. Our initial focus is on the development of a new model of psilocybin therapy, in which our proprietary formulation of synthetic silicide in COMP 360 is administered in conjunction with psychological support from specially trained therapists.

We are currently conducting a Phase IIb trial of psilocybin therapy for treatment-resistant depression, or TRD, and we're on track to report data from this at the end of the year. Earlier this year, we welcomed a new site to our trial, St. Pancras Clinical Research in London. We now have 22 trial sites in 10 countries across Europe and North America.

While the COVID-19 pandemic has impacted our trial, this level of site geographic diversity has helped to enable continued recruitment. We work closely with all our sites to assess the ongoing COVID-19 situation and we'll always prioritize the safety of patients and our teams. Psychological support from trained therapists is an integral part of our psilocybin therapy model. Last month, we shared details of our comprehensive and rigorous therapist training program in a paper jointly written with a group of academic researchers and published in Frontiers in Psychiatry.

The program sets out a formal and scalable methodology for providing psychological support in psilocybin therapy. This training will continue to evolve, and we hope that by sharing our approach, we will encourage collaboration among therapist training providers as we work toward bringing psilocybin therapy to all who might benefit from it. Our centers of excellence, which are research facilities and innovation labs are designed to help us to bring therapies to patients on a large scale, and we're delighted to establish our first center of excellence at the Sheppard Pratt institute for Advanced Diagnostics and Therapeutics in Baltimore, Maryland. Sheppard Pratt is one of the world's leading research institutes in mental health and is consistently ranked as one of the top psychiatric hospitals in the United States.

It has a long history of excellence in clinical service delivery and commitment to its community of patients. Our centers of excellence will generate evidence to shape therapy models in mental healthcare; train and certify therapies; conduct clinical trials, including proof-of-concept studies; and prototype digital solutions to improve patient experience. The first wave of research will focus on COMP360 psilocybin therapy and investigator-initiated studies, or IISs, are already under way in severe TRD and in bipolar type two depression. In addition to Sheppard Pratt, we are working with a number of independent partners and academic institutions on IISs.

These are single generating exploratory studies that are using COMP360 in a number of different indications, all in areas of high unmet medical need. These indications include anorexia, chronic cluster headache, body dysmorphic disorder and major depressive disorder. If these studies provide signals that merit further investigation, we will continue moving them into late stage trials. COMPASS has the right to exclusively license new IP generated through these studies.

Our preclinical program is also progressing well, with over 20 new studies completed in 2020. In addition, we've expanded our discovery center through new collaborations with world-leading scientists from UC San Diego School of Medicine and Medical College of Wisconsin. The discovery center is a sponsored research agreement between COMPASS and the University of Sciences in Philadelphia, led by Dr. Jason Wallach from New Sciences.

The scientists are working together with our team in a virtual network to develop new optimized psychedelic compounds targeting the 5-HT2A receptor, a receptor in the brain that has been implicated in mental health illnesses. COMPASS will be the exclusive licensee for all new compounds generated. This work is in its early stages, but we believe it will enable us to broaden our portfolio beyond psilocybin therapy. With that, I will now hand over to Piers, who will give you an update of our financial results for the quarter.

Piers Morgan -- Chief Financial Officer

Thank you, George. Following our successful upsized IPO, which we completed in September 2020 with net proceeds of approximately of $132.8 million, we held cash and cash equivalents of $190.3 million at December 31, 2020 compared with $96.5 million at September 30th, 2020. This is expected to fund operations into 2023. I will now recap our financial results for the three and 12 months ended December 31, 2020.

The loss from operations for the three months ended December 31, 2020 amounted to $11.5 million compared with $7.3 million for the prior-year period. The loss from operations included noncash compensation expense of $1.4 million for the three months ended December 31, 2020 compared with $0.8 million noncash share-based compensation in the fourth quarter of 2019. The loss from operations for the 12 months ended December 31st, 2020 amounted to $51.4 million compared with $21.2 million for the prior-year period. The loss from operations included noncash share-based compensation expense of $18 million for the 12 months ended December 31, 2020 compared with $3.3 million of noncash share-based compensation in the prior period.

Research and development expenses were broadly unchanged at $4.5 million for the fourth quarter of 2020 compared with $4.6 million for the same period last year. Research and development expenses were $23.4 million for the 12 months ended December 31, 2020 compared with $12.6 million for the same period in 2019. The increase in research and development expenses over the full year was primarily attributable to: one, an increase of $4 million in development expenses, which primarily relates to increases of $2.8 million in clinical trial expenses and $0.8 million in preclinical studies, offset by a decrease of $0.1 million in therapies training and $0.5 million in drug product development; two, an increase of $1.9 million in personnel expenses, reflecting new hire; three, an increase of $4.5 million in noncash share-based payment compensation; and four, an increase of $0.4 million in other expenses, primarily on consultants. General and administrative expenses were $7 million for the fourth quarter of 2020 compared with $2.8 million for the same period in 2019.

The increase was related to share-based compensation expenses, as well as higher legal and professional fees, personnel and consulting expenses and facilities costs. General and administrative expenses were $28 million for the 12 months ended December 31, 2020 compared with $8.6 million during the same period in 2019. The increase in general and administrative expenses over the full year was primarily attributable to: one, an increase of $2.5 million in personnel costs, primarily attributable to new hires; two, an increase of $10.2 million in noncash share-based compensation costs; three, an increase of $4.2 million in legal and professional fees, primarily related to our Series B financing, IPO and other corporate activities; and four, an increase of $2.5 million in facilities and other expenses, including rent, depreciation and insurance. Other nonoperating items net amounted to an expense of $7.4 million for the three months ended December 31, 2020 compared with an expense of $0.3 million for the corresponding period in 2019, primarily related to the impact of movements in foreign exchange rates on the translation of cash balances.

Other nonoperating items net amounted to an expense of $8.9 million for the 12 months ended December 31, 2020 compared with other income of $1.6 million during the same period in 2019. Net loss was $18.8 million or $0.52 loss per share for the fourth quarter of 2020 compared with $7.6 million or $0.90 loss per share during the same period in 2019. The net loss for the 12 months ended December 31, 2020 was $60.3 million or $3.55 loss per share compared with $19.6 million or $2.62 loss per share during the same period in 2019. And with that, I will now hand you back to George.

George Goldsmith -- Chairman and Chief Executive Officer

Thank you, Piers. COMPASS Pathways is a mental healthcare company and our vision is a world of mental wellbeing. Today, we are facing an urgent crisis in mental healthcare and the pandemic is exacerbating this crisis. And every 40 seconds, someone in the world dies from suicide.

And in that time, 20 people attempt suicide. We can and must do more to help the millions of people who are suffering with mental health challenges and do not have any option. We believe COMPASS Pathways is well positioned to lead the industry in transforming mental healthcare and developing solutions to these challenges. We have a team with broad experience across the spectrum of expertise needed to discover and develop a portfolio of therapies through the R&D and regulatory process, and ultimately bring them to patients, making them widely accessible.

Thanks to our investors and future investors, we have the financial resources to accelerate this development, and we are making good progress toward our goals. Thank you for your time today and for your interest in COMPASS. We look forward to keeping you updated on future calls. With that, we will now open the line for questions.

Operator?

Questions & Answers:

Operator

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

Ritu Baral -- Cowen & Company -- Analyst

Good morning guys, thanks for taking the question. I wanted to ask just how the Phase IIb conduct was proceeding? Are dropouts and safety, as you can see it, within expectations? And then I had a follow-up on the new research programs.

George Goldsmith -- Chairman and Chief Executive Officer

Ritu, thank you so much for your question. Our Phase IIb program continues at pace and I think we've been very effective in navigating some of the earlier challenges raised by COVID. We are now recruiting very well and are committing to our end of year time line. There have been no major safety issues at all, and thus the study continues to progress.

We've had a number of safety issues, which have been looked at to be expected in this patient population. DSMB has reviewed the three instances that came up. And there has been absolutely no regulatory concern about those, sadly they go with this population. So those are the key updates to your question on the current program.

We're progressing well, and we'll be reporting out at the end of the year as we've been stating for -- since the time we've had an IPO.

Ritu Baral -- Cowen & Company -- Analyst

Great. And then on your new research program and center, forgive me, I don't have the exact terminology because my computer crashed right now. But on the lead programs and the discovery projects, what are you targeting? Are you -- and sort of like what new program -- but what's the profile of the new entities that you are looking to develop? And how might those differ in profile from psilocybin at the 5-HT2A receptor specifically?

George Goldsmith -- Chairman and Chief Executive Officer

Great. I'll hand that over to Lars Wilde, who has been driving up activity for us.

Lars Wilde -- President and Co-Founder

Yes. Thank you, George. Look, Ritu, I think in terms of new initiatives in -- with new centers, I think there are two elements here. One is on the clinical side or -- centers of excellent approach.

And George spoke about some of these indications that we're exploring, such as anorexia, bipolar to others that we are doing with partners through our centers of excellent strategy and academic partnerships. And then we're developing novel chemical entities around the treatment structure ship with psilocybin and serotonin. And the goal here is to create substances that are differentiated from psilocybin in so far that they would have a shorter duration of effect. And we need to understand if they will then still have the same benefits that have been seen in the early studies with psilocybin.

But at the moment, our hypothesis is that there is somewhat of a sweet spot duration that is hopefully, somewhere between a two-hour and the five- to six-hour experience with psilocybin, which would then have benefits in terms of the commercialization process of such a novel compound. And then we're also looking at modifying the experience that patients have undergoing these therapy sessions other then what tailored to the various psychiatric disorders so that we would have a specialized approach, for example, for anorexia, which might then differ from the approach we would be taking for a patient population with PTSD, for example.

Ritu Baral -- Cowen & Company -- Analyst

Great. Thanks for taking the follow up.

Operator

Thank you. Our next question comes from the line of Patrick Trucchio from H.C. Wainwright. Your line is now open.

Patrick Trucchio -- H.C. Wainwright -- Analyst

Hi, thanks. Good morning. I have a couple of follow-up questions. First, can you tell us how many therapists are trained to deliver COMP360 presently? Secondly, how many therapies do you think you'll need trained for potential pivotal Phase III program? And lastly, in the past, I think the idea was to have around 200 therapists in the U.S.

available to deliver COMP360 at the time of potential launch. I'm wondering if that remains the target? And if you're on track to have that many therapists trained in years ahead?

George Goldsmith -- Chairman and Chief Executive Officer

Thank you, Patrick, George here. In terms of the number of therapists trained, it's approximately 65-plus or minus. And those are conducting various trials, both the primary COMP001 trial for TRD, as well as others. We also have plans to grow that to over 100 therapists as we go into Phase III.

Obviously, that's contingent upon the data in Phase IIb to determine the size and scope of the Phase III program, which will be discussed obviously as we go forward. And in terms of the long-term rollout for therapists, we're not commenting on that. Again, we have to look at the data. We have to look at the model.

And so as we learn we will be able to say more. But at this point, we're not commenting on that number for the ultimate market. I will comment also that we have had a publication looking at our model in the Frontiers of Psychiatry this past month that we developed with, a series of academicians, as well as our own therapy training team to talk about the key challenges and opportunities to develop therapists training to provide safe and effective care for patients in these using psilocybin COMP360.

Patrick Trucchio -- H.C. Wainwright -- Analyst

Got it. That's helpful. And then I have a follow-up on the build-out of COMP360, it's indications beyond TRD. First, just regarding some of the additional indications like anorexia, chronic cluster headache and body dysmorphic disorder.

I'm wondering if you can tell us if the signal generating studies currently under way would be the first evaluating psilocybin in humans in these indications? And why are these studies being conducted in these particular indications? And then secondly, can you tell us if there's a safety and efficacy bar that COMPASS has in mind with the investigator-initiated studies in these additional indications, and I suppose as well bipolar? And then is there a particular effect size or some other metric we should be looking for with these studies?

George Goldsmith -- Chairman and Chief Executive Officer

So these are all very well-designed regulatory -- entrance regulatory design studies. So they're designed with the path to patients in mind. If prior studies have existed that often has not been the case, but predominantly truly academic studies. So we're looking at, first and foremost, starting to build the evidence requirements for regulators because of our commitment to accelerate patient access evidence-based innovation.

In terms of the criteria, again, we look at areas where there's high unmet need, quite often that's referred to as treatment resistance. However, we've not encountered patients who are resisting treatment and so this is a failure of innovation. Hopefully, the innovation we're prototyping in trials will address that issue for some patients, and that's our goal. So we're looking at areas of high unmet need currently and places where we have a reason to believe from the mechanism of action and a mechanism of change perspective that we can benefit patients.

So that's our selection criteria, if you will, for that. In terms of effect sizes and so forth right now, these are exploratory studies, which will help us understand that whole space as we move forward in well controlled studies. So difficult to comment on. And as always, we're looking at collecting safety data for specific patient populations in the most rigorous way to help with regulators and societies assessing the safety.

And how this can fit into current treatment paradigms. I don't know if anyone else on the team would like -- you bet.

Patrick Trucchio -- H.C. Wainwright -- Analyst

Got it. Thank you very much.

George Goldsmith -- Chairman and Chief Executive Officer

Thank you, Patrick.

Operator

Thank you. Our next question comes from the line of Sumant Kulkarni from Canaccord. Your line is now open.

Sumant Kulkarni -- Canaccord Genuity -- Analyst

Hi. Thanks for taking my questions. My question is specifically on intellectual property. We've gone through your annual filing and seen your specific patent related disclosures on Pages 135 and 136.

We know you're laser-focused on the trial in TRD and in that indication, you appear to be in the lead. But given the sheer number of companies that are attempting to develop psilocybin or derivatives, how could intellectual property batters play out in other indications such as MDD, for example? And how soon could you be in a position to start in-licensing IP from investigator-initiated study and also novel compounds from your new discovery center?

George Goldsmith -- Chairman and Chief Executive Officer

I will hand that over to Lars for answering.

Lars Wilde -- President and Co-Founder

Sumant, thank you for your question. And obviously, we have a very strong focus on IP and protecting any novelty and unexpected findings coming out of the work we have done. I think you're aware, to date, we've received four patent grants, including a composition of matter patent on our high-purity polymorphic form of crystalline psilocybin and then attach to that claims toward treating various psychiatric neurological sleep and pain disorders. Beyond that, the application of psilocybin therapy and manufacturer, different formulations, structure combination with our technology combinations.

And I think we are obviously working on through the national phases in our key markets with the -- through the PCT process. So we're expecting further patent grants in the future. And then as you said, we are very active on the business development front, talking to market participants, especially in early drug discovery, where we're looking toward licensing, acquiring potentially, programs that could complement our core development programs. And then obviously, the work we're doing in our own drug discovery efforts that are protected in terms of composition of meta patents and driving these forward then into treatment-related claims and so forth.

Sumant Kulkarni -- Canaccord Genuity -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Esther Hong from Berenberg. Your line is now open.

Esther Hong -- Berenberg Capital Markets -- Analyst

Hi, thanks for taking my questions. So my -- I've got two questions. The first is -- so since COMPASS' IPO, there seem to be a lot more companies coming forward that are developing psilocybin, including some with formulations that are different from COMP360. So I was wondering if you could speak about the competitive landscape for COMP360? And then I've got a follow-up.

George Goldsmith -- Chairman and Chief Executive Officer

I will start, and Lars will probably continue on to this. But I think our whole focus with COMP360 was to develop a highest quality possible, druggable substance and to formulated appropriately, so that patients worldwide could have confidence in the quality of the medicine. And that's why we've been working from earliest days with regulators to do just that. So our view is that we've developed a very effective substance here, and we have protected that.

Lars, would you like to build on that?

Lars Wilde -- President and Co-Founder

Yes, I think that's a great point, George. I think we're flattered by all the activity in the field. It shows that there is indeed a lot of promise in psilocybin therapy for patients and clearly, the need is huge and only exacerbated by the COVID crisis, further worsening the global mental health pandemic. And I think in terms of our competitive space, we feel that we are very well protected in terms of our regulatory strategy, our team, which is very execution focused and then the protection, we have built in terms of intellectual property around our solution.

We're already seeing some of these new market entrants leaving the field and focusing on other innovation. Obviously, we are very confident in our position here to be first to market and defend our position.

George Goldsmith -- Chairman and Chief Executive Officer

And Esther, I think what's really important here, just I'd like to just build on this for a quick moment. I think that what we have to do here is to really look at the companies and the organizations that are deeply committed to providing evidence, right? And doing the comprehensive preclinical, clinical work, building up the evidence. So that patients can actually feel comfortable in the claims being made. And I think that if you look at our programs of 20 preclinical studies last year, for example, the wide range of IISs and so forth, were all about generating evidence and really focusing on the science and the regulatory path to ensure patient safety and make sure that patients can actually benefit from those scenarios where they have no other place to look.

So I just think this is critically important and what differentiates us is our commitment to science and evidence generation with regulators and to finalize that. We're doing our study in 10 countries right now at 22 sites. And the reason for that is this is not a U.S. problem, it's not a U.K.

problem. It's certainly a global problem, and we're starting to look at how do we address that at scale.

Esther Hong -- Berenberg Capital Markets -- Analyst

Great. That's very helpful. And then just a follow-up. So the company is also developing a digital technology.

How does the technology work? When could we possibly see data?

George Goldsmith -- Chairman and Chief Executive Officer

That technology is being developed as we speak. We'll be commenting on it further as we have more to say about it. We have a really incredibly talented team forming right now. The real issue that we have, that we all need to address in order to make this widely accessible is the fact that early data suggests that this has a significant durability from one treatment.

However, what we don't know is how long that durability is for which patients set. That, coupled with the fact that relapse is one of the most difficult things for patients, we really need to look at, are there ways of anticipating relapse and helping provide patients with tools to prevent that. And so this idea of having precision, predictive and preventative care is really the core thrust of our technology, and you'll be hearing more about our digital strategy in the months and year ahead.

Esther Hong -- Berenberg Capital Markets -- Analyst

Oh, great. Thank you.

Operator

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to management for closing remarks.

George Goldsmith -- Chairman and Chief Executive Officer

I wanted to thank everyone for their continued interest and engagement with COMPASS and our commitment to help patients. And we look forward to keeping you updated on future calls. Thank you very much.

Operator

[Operator signoff]

Duration: 30 minutes

Call participants:

Steve Schultz -- Senior Vice President of Investor Relations

George Goldsmith -- Chairman and Chief Executive Officer

Piers Morgan -- Chief Financial Officer

Ritu Baral -- Cowen & Company -- Analyst

Lars Wilde -- President and Co-Founder

Patrick Trucchio -- H.C. Wainwright -- Analyst

Sumant Kulkarni -- Canaccord Genuity -- Analyst

Esther Hong -- Berenberg Capital Markets -- Analyst

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