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Edited Transcript of NERV earnings conference call or presentation 6-Nov-17 1:30pm GMT

Q3 2017 Minerva Neurosciences Inc Earnings Call

Cambridge Nov 8, 2017 (Thomson StreetEvents) -- Edited Transcript of Minerva Neurosciences Inc earnings conference call or presentation Monday, November 6, 2017 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Geoffrey Robin Race

Minerva Neurosciences, Inc. - Executive VP, CFO & Chief Business Officer

* Rémy Luthringer

Minerva Neurosciences, Inc. - President, CEO & Director

* William B. Boni

Minerva Neurosciences, Inc. - VP of IR & Corporate Communications

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Conference Call Participants

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* Biren N. Amin

Jefferies LLC, Research Division - MD and Senior Equity Research Analyst

* David A. Sherman

LifeSci Capital, LLC, Research Division - Analyst

* Jason Nicholas Butler

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Joel Lawrence Beatty

Citigroup Inc, Research Division - VP and Analyst

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Presentation

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Operator [1]

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Welcome to the Minerva Neurosciences Third Quarter 2017 Conference Call. (Operator Instructions) This call is being webcast live on the Investors section of Minerva's website at ir.minervaneurosciences.com. As a reminder, today's call is being recorded.

I would now like to turn the call over to William Boni, Vice President of Investor Relations and Corporate Communications at Minerva. Please proceed.

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William B. Boni, Minerva Neurosciences, Inc. - VP of IR & Corporate Communications [2]

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Good morning. A press release with the company's third quarter 2017 financial results became available at 7:30 a.m. Eastern Time today and can be found on the Investors section of our website. Our quarterly report on Form 10-Q was also filed electronically with the SEC this morning and can be found on the SEC's website at www.SEC.gov.

Joining me today on the call from Minerva are Dr. Rémy Luthringer, President and Chief Executive Officer; and Mr. Geoff Race, Executive Vice President, Chief Financial Officer and Chief Business Officer. Following our prepared remarks, we will open the call for Q&A.

Before we begin, I would like to remind you that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors that are more fully detailed under the caption Risk Factors in our filings with the Securities and Exchange Commission including our quarterly report on Form 10-Q for the quarter ended September 30, 2017, filed with the SEC on November 6, 2017.

Any forward-looking statements made on this call speak only as of today's date, Monday, November 6, 2017, and the company disclaims any obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today's call except as required by law.

I would now like to turn the call over to Dr. Rémy Luthringer.

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [3]

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Thank you, Bill, and good morning, everyone. Thanks for joining us today. I am pleased and excited to inform you that we continue to make good progress as we complete preparations for the initiation of advanced clinical stage efficacy trials with 3 product candidates: MIN-101; MIN-202, also known as seltorexant; and MIN-117. All of these products target significant unmet medical needs highlighted by MIN-101 for the treatment of negative symptoms in patients diagnosed with schizophrenia, an unmet medical need for which no treatment is currently available.

Our overall objective and primary focus is to ensure that our trials are rigorously conducted with the same high level of attention and expertise as in our earlier trials, particularly the Phase IIb for MIN-101. In this way, we believe that the data generated will support the timely transition to regulatory review and commercialization beginning with MIN-101. We're looking forward to initiating our pivotal Phase III trial with MIN-101 before the end of the year. The final protocol for this trial has been submitted as part of the IND and we have received the first Institutional Review Board, IRB, approval for the study in the U.S. Of particular note, the trial design merits the design of our successful Phase IIb trial.

The trial will include a 12-week, 3-month randomized double-blind placebo-controlled core period followed by a 40-week, 9-months open-label extension period. The primary endpoint will be improvement in negative symptoms as measured by the MADRS score for negative symptoms, which is extracted from the PANSS scale and like the pentagonal score used in the Phase IIb trial, includes an item, which more accurately correlates this functional outcome and benefit in patients. The [postdoc] analysis on our Phase IIb data using the MADRS score shows larger effect sizes and p-values related to placebo as compared to the pentagonal scale using that trial. So 2 doses to be tested will be the same as those in the Phase IIb study, 32 milligrams and 64 milligrams as administered once daily. We expect to enroll approximately 500 patients at approximately 60 clinical sites across the U.S. and Europe, with 30% of patients coming from the U.S.

In addition, we have initiated the Chemistry, Manufacturing and Controls, CMC program, for MIN-101, to ensure its timely inclusion in the potential submission of an NDA pending a successful Phase III data readout. Over the last 6 months, we have taken a detailed and systematic approach to assessing the capabilities of clinical sites so that we recruit the right patients for this trial.

We are placing a special emphasis on gaining access to patient disease histories, which we believe will help ensure the quality of patients screening. Specifically, we will be enrolling patients who are symptomatically stable for several months, with moderate to severe negative symptoms as measured by a score of 20 or greater on the PANSS negative symptoms scale and stable positive symptoms.

We believe that these eligibility criteria represent a significant portion of the overall patient population suffering from schizophrenia and having negative symptoms resulting in the inability to function well in everyday life. We expect topline results from the 3 months double-blind phase on this trial in the first half of 2019. In 2018, our R&D team will focus its attention on execution of this key Phase III study. In addition, we will continue our extensive interactions with key opinion leaders, which began after the readout from our Phase IIb study.

Furthermore, we are expecting additional scientific publications in the near future that will elaborate on several topics initially addressed in the recent publication of Phase IIb data in the American Journal of Psychiatry. We're also making good progress in evaluating and defining market size and potential of MIN-101 and we plan to communicate related details next year.

MIN-202, also known as seltorexant, is our second clinical-stage product. There's a selective orexin-2 receptor antagonist under development in partnership with Janssen Pharmaceutica NV (Janssen). The first patient was enrolled during the past quarter in a Phase IIb trial of seltorexant as adjunctive therapy to antidepressants in other patients with major depressive disorders, MDD. These patients have not responded well to their existing antidepressant therapies. We plan to enroll approximately 280 patients in this double-blind randomized, parallel-group, placebo-controlled adaptive dose-finding clinical trial at more than 85 clinical sites in the U.S., Europe, Russia and Japan.

The trial consists of 3 phases: A screening phase lasting up to 4 weeks; a 6-week double-blind treatment phase; and a 2-week posttreatment follow-up phase. The primary objectives of this trial are to assess the dose-response relationship and antidepressant effects of up to 3 doses of seltorexant compared to placebo and to continue to assess its safety and tolerability.

Two additional clinical trials of seltorexant are planned for initiation in the fourth quarter of this year. These include a second phase IIb trial in MDD and the Phase IIb trial in insomnia. We believe these 3 studies will constitute a significant Phase IIb package for both insomnia and MDD, and pending the successful completion will help in the design of Phase III programs for both indications.

An amendment to the company's co-development and license agreement with Janssen became effective on August 29, 2017, following approval of its terms by the European Commission.

Moving on to MIN-117. Our Phase IIb clinical trial preparation has started, and we plan to initiate patient recruitment in early 2018. We will include patients with MDD who also have symptoms of anxiety, thus, building up on Phase IIa clinical results that showed effects in both depressive symptomatology and anxiety.

In preparation for the Phase IIb trial, we expect topline results from the competitive clinical portion of a food-effect study to be available in the near future.

Finally, we are continuing to conduct preclinical, toxicology and other IND-enabling studies, with our preclinical stage product candidate, MIN-301. These studies prepare the way for regulatory filings in the U.S. or Europe that will allow us to advance this compound into the initial stage of clinical development.

MIN-301 is a recombinant protein with an extracellular domain of neuregulin-1 beta primarily activating the ErbB4 receptor. Dysregulation of NRG-1 signaling pathway has been linked to neurodevelopmental and neurodegenerative disorders including and beyond Parkinson's disease.

In summary, we have embraced the endeavor of conducting the pivotal Phase III trial with MIN-101 with the potential to alter the treatment landscape of schizophrenia. We recognize the burden of this disease on patients and their families. We also recognize that we have the potential to deliver a new treatment for the significant unmet need caused by negative symptoms in patients suffering from schizophrenia and beyond.

We are highly focused on the successful execution of the pivotal Phase III trial with MIN-101, as well as our other trials, and look forward to providing updates on our progress during the coming year.

I will now turn over to Geoff who will address our financial results.

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Geoffrey Robin Race, Minerva Neurosciences, Inc. - Executive VP, CFO & Chief Business Officer [4]

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Thank you, Rémy. Earlier this morning, we issued a press release summarizing our operating results for the third quarter of 2017. A more detailed discussion of our results may be found in our quarterly report on Form 10-Q filed with the SEC earlier today.

Cash, cash equivalents and marketable securities as of September 30, 2017, were approximately $143.3 million compared to $83 million as of December 31, 2016. We received a $30 million cash upfront payment on August 29, 2017, following European Commission approval of the amendment to the seltorexant co-development and license agreement with Janssen. The $30 million payment and $11.2 million in previously expensed and accrued collaborative expenses, which were forgiven upon the effective date of the agreement, will be earned and recognized as revenue as the services are performed from the commencement of Phase III development to the completion of the development activities using the proportional performance method. The $41.2 million was recorded as deferred revenue as of September 30, 2017.

We also closed the public offering of common stock on July 5, 2017, that resulted in net proceeds to Minerva of approximately $41.6 million. Research and development expenses were $9 million in the third quarter of 2017 compared to $5.9 million in the third quarter of 2016.

R&D expense in the 3 months ended September 30, 2017 and 2016 included noncash stock-based compensation expenses of $0.5 million and $0.3 million, respectively. This increase in R&D expenses primarily reflects higher development expenses under the seltorexant program for Phase II clinical trials, increased expenses for the MIN-101 program and an increase in noncash stock-based compensation expenses.

For the 9 months ended September 30, 2017, R&D expenses were $23.7 million compared to $13.9 million for the 9 months ended September 30, 2016. R&D expense in the 9 months ended September 30, 2017 and 2016 included noncash stock-based compensation expenses of $1.5 million and $0.7 million, respectively. This increase in R&D expenses primarily reflects higher development expenses under the seltorexant program for the Phase II clinical trial. Increased R&D expenses also included higher expenses for the MIN-101 program, an increase in personnel costs and an increase in noncash stock-based compensation expenses. These amounts were partially offset by lower costs due to the completion of the Phase IIa clinical trial of MIN-117.

General and administrative expenses were $2.5 million in the third quarter of 2017 compared to $2.4 million in the third quarter of 2016. G&A expense in the 3 months ended September 30, 2017 and 2016 included noncash stock-based compensation expenses of $0.8 million and $0.7 million, respectively. This increase was primarily due to an increase in professional fees during the 3 months ended September 30, 2017.

For the 9 months ended September 30, 2017, G&A expenses were $7.9 million compared to $7 million for the same period in 2016. G&A expense in the 9 months ended September 30, 2017 and 2016 included noncash stock-based compensation expenses of $2.3 million and $1.8 million, respectively. This increase was primarily due to an increase in professional fees and an increase in noncash stock-based compensation expenses during the 9 months ended September 30, 2017.

Net loss was $11.3 million for the third quarter of 2017 or a loss per share of $0.28 basic and diluted compared to a net loss of $8.4 million or a loss per share of $0.24, basic and diluted, for the same period in 2016. Net loss was $31.7 million for the first 9 months of 2017 or a loss per share of $0.84, basic and diluted, as compared to a net loss of $21.6 million or a loss per share of $0.71, basic and diluted, for the first 9 months of 2016.

Now I'd like to turn the call over to the operator for any questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Jason Butler from JMP Securities.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [2]

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Just a couple on seltorexant. First, Rémy, are you able to give us any color on the differences in trial designs between the 2 different Phase IIb MDD trials?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [3]

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Yes, Jason, it's a pleasure, obviously. So the 2 trials, I mean, one trial is really focusing on defining the final doses -- or the final doses -- or final doses, which will be pushed into Phase III. So this is really a dose-finding trial, whereas the second trial is an exploratory trial, which is really trying to differentiate between adding seltorexant to an antidepressant versus a standard of care in order to really position well our molecule compared to standard of care.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [4]

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Okay, helpful. And then are we going to get results from all 3 seltorexant trials, the insomnia or MDD trials in 2018 or do you not have that visibility yet?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [5]

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Well, I think as we have already disclosed over the past, I mean, these trials will read out in the first half of 2019, Jason. So you'll never know how clinical trials are going, but I mean the first half of 2019 is a target here.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [6]

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Okay, great. And then just lastly, can you just remind us what the contribution for the amended agreement with the Janssen is for the costs for the insomnia program?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [7]

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Geoff, can you take this one?

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Geoffrey Robin Race, Minerva Neurosciences, Inc. - Executive VP, CFO & Chief Business Officer [8]

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Yes, certainly. So thanks for the question, Jason. We have no further contribution to make to the seltorexant program until the IIb studies are completed.

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Operator [9]

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Our next question comes from the line of Joel Beatty from Citi.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP and Analyst [10]

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The first one is on the MIN-101 Phase III trial. With the new sites that will be coming online compared to the Phase II trial, what are you doing to ensure a level of consistency between the sites, both with regards to enrolling the right patients and then also in assessing the response to the patients?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [11]

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So Joel, a great question. Yes, and a very important question. I mean, I tried to really highlight that we are really taking all the precautions here in getting the right patients into the study. So to ensure that we have the right patients, because as a primary endpoint, it's really looking to negative symptoms. We have to ensure that the negative symptoms are present over time before you're enrolling the patient into the study. So what it means, this means that you have really a lot of work to be done and which has been done since the readout of the Phase IIb and the start of the Phase III is to ensure that you have access to sites or to PI's who have ready access to the history of the patients who will be included at the end of the day in the study. So this is the real key factor. The second factor in order to get a good readout or a consistent readout is really to come up with an extensive training of all the PIs in order to bring them to the same level of expertise and not only at the beginning of the study but during the course of the study. So what we will do, we will re-ensure our homogeneity in terms of scoring of negative symptoms and the overall PANSS scale, but also the additional scales like CGI and the PSP scale, but we will also check, obviously, completely blinded during the study. The fact that, I mean, all the sites, all the PIs are scoring in the same way all along during the course of the study. So this I think are the 2 key factors of success at the end of the day.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP and Analyst [12]

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Great. And another question is related to finances. Are you able to give a sense of -- if your current cash position will be sufficient to fund Minerva through the Phase III results in the first half of '19?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [13]

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So Geoff, can you take this one?

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Geoffrey Robin Race, Minerva Neurosciences, Inc. - Executive VP, CFO & Chief Business Officer [14]

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Yes. Thanks for the question, Joel. We don't normally give guidance with regard to financial runway other than to say that our cash will extend beyond the next 12 months, but what I can say is, we certainly have enough cash with $143 million to fund the 101 Phase III study.

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Joel Lawrence Beatty, Citigroup Inc, Research Division - VP and Analyst [15]

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Great. And then one last question. It's related to cariprazine, which Allergan had filed for approval in the treatment of negative symptoms of schizophrenia. And in Q3, received a refuse to file letter from FDA. Could you discuss a little bit about how your Phase III program for MIN-101 is different and could support a potential approval compared to the path that was taken for cariprazine?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [16]

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Yes, Joel. Obviously, I will not comment about cariprazine, yes, but I think, basically, in order to get the approval for negative symptoms in patients with schizophrenia, you have to demonstrate that you have a specific effect on negative symptoms. So in other words, because there's no approved drug currently available. Second, because all the treatments currently on the market, even if they are not approved for negative symptoms, they have side effects. So you agreed to ensure that these 2 confounding aspects are not in your trial. So basically, the only way in order to demonstrate that you have a specific effect on negative symptoms is to compare your drug versus placebo, keeping in mind that your drug should be devoid of side effects. This is the case with MIN-101. As you know, we have no sedation with the molecule, we have no extrapyramidal symptoms with the molecule, and we were able to show a maintenance of positive symptoms at the same level during the course of the trial, I'm speaking about the Phase IIb trial. So having all these in mind, if we are able in Phase III to have the same readout with the same comparison versus placebo for the 2 doses we will use in the Phase III study, I think, here, you can really come to the conclusions that you have a specific effect that you can hopefully file for an NDA filing because this is a way to do in order to claim an effect on negative symptoms.

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Operator [17]

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Our next question comes from the line of David Sherman from LifeSci Capital.

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David A. Sherman, LifeSci Capital, LLC, Research Division - Analyst [18]

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I was just wondering if you could give a little bit more color on the Phase IIb study for insomnia? What are you going to be testing there? And what will it add to your Phase II program for 202?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [19]

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So thank you for the question. So what would the Phase IIb in insomnia will provide us is, again, dose finding. So we will test several doses in order to really narrow down the therapeutic dose we should push into Phase III, yes. So it's really dose-finding study with several doses in patients suffering from insomnia result of psychotic disorders. So this is the purpose of this study.

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Operator [20]

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(Operator Instructions) Our next question comes from the line of Biren Amin from Jefferies.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [21]

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Maybe just on the Phase III trial. How do you think clinicians would view the PANSS MADRS from a clinical relevance standpoint?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [22]

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So I think if what clinicians are looking for is to have a treatment for negative symptoms because there is nothing available. But I think -- and this, I mean, I think it is important to understand that -- I mean, what the authorities are looking for is really to show an effect or a significant effect on the negative score coming out from the PANSS scale. And in this case, from the extracted MADRS scores. But I mean, obviously, as you know, and this is enough to get approval. But as you know, negative symptoms are probably in addition with cognitive impairment are the main contributors to the bad of -- to the really bad functional outcome in these patients. So the fact that these patients are not able to cope with everyday life. So the difference, as explained already between the MADRS score and the score we have used in the Phase IIb study, which was the pentagonal score is that there is an item, which is called the G16 item from the PANSS scale, which is looking to the ability of the patients to interact socially. And I think this is the advantage of the MADRS scale, it gives us such kind of window. It opens a window of how the patient is improving on a functional level. So this is the reason why we have proposed the MADRS scale and discussed this with the FDA.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [23]

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Got it. And then I think you are also allowing patients that are on previous antipsychotic medications and they'll be switched over to MIN-101 at time of enrollment in the study. Is there a significant washout period between the switch from their prior antipsychotic med to MIN-101?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [24]

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Again, a great question. So the switch from the previous treatment to MIN-101 is very short. It's a question of few days, yes? And why is this? This is very simply because, I mean, we try as much as possible to mimic the condition or the clinical situation when the drug will be on the market and this had also been discussed in length with the authorities. So here what we are doing, yes indeed, you need to have the patient who is not responding well in terms of negative symptoms with his previous treatment. He is switched to MIN-101 after a very short washout period and afterwards, he goes back to his normal place of living, which is also an important factor because we want really to avoid confounding factors. So it is a very day-to-day approach in order to really mimic what will happen when the drug is in the market.

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Biren N. Amin, Jefferies LLC, Research Division - MD and Senior Equity Research Analyst [25]

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Got it. And then, just a question on seltorexant, the second exploratory trial in MDD. Is this going to be sequential parallel comparator design as we've seen some other companies use? And what endpoints are you evaluating in that trial? And if it's a MADRS-type endpoint, are you going to control for variability like we've seen Alchemy do this by averaging the MADRS score in the last few weeks of the trial?

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Rémy Luthringer, Minerva Neurosciences, Inc. - President, CEO & Director [26]

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No, no. This is, I mean, sometimes, to keep it simple is the best if you want to test the hypothesis of this parallel-group design and the endpoint will be the end of treatment versus comparison versus the different conditions, which are explored. So very simple straightforward design. Nothing sophisticated there.

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Operator [27]

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And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to William Boni for any further remarks.

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William B. Boni, Minerva Neurosciences, Inc. - VP of IR & Corporate Communications [28]

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Thank you everybody for joining us on the Q3 call, and we look forward to our ongoing dialogue in the weeks and months to come. Have a great day. Take care. Bye-bye.

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Operator [29]

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Thank you. Ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.