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Charles Rhyee:
Hello, my name is Charles Rhyee, TD Cowen's Healthcare Technology and Distribution Analyst, and welcome to a special edition of the TD Cowen FutureHealth Podcast. We're recording this at our ninth Annual FutureHealth Conference on September 10th, and I'm joined by Randall Stanicky, Chief Financial Officer of Click Therapeutics, where we've just hosted a panel looking at the what's next for digital health. Thanks, Randall.
Randall Stanicky:
Yeah, no, Charles, thanks for inviting us and it's great to be here in this capacity with you, by the way.
Charles Rhyee:
Exactly, right. For those that don't know, Randall and I go way back, but now we're sitting across here from each other to talk about something exciting. Maybe to start, for those unfamiliar with Click, can you provide a quick overview of the company and what you do.
Randall Stanicky:
Yeah, of course. So Click Therapeutics, the company was founded back in 2012, but really started to scale the last couple of years. We are a software as a medical device biotech company. And really when I say biotech, like bio and tech in the truest sense of the form, because we're effectively tech platform with a whole medical office and traditional commercial pharma company overlay on that.
We are focused on creating digital medicines. And so what I mean by that, because I get this question all the time, is we look for cognitive deficits in the brain and try to find those deficits and map them to disease and figure out how to digitally fix them, as well as create a behavioral overlay of things that we know work like CBT and other behavioral mechanisms from our drugs.
And so the company is a hybrid company, so we have several large global partnerships with pharma companies, but we also have internal assets that we're taking through FDA on our own and likely going to partner those. But it's a hybrid model today. All the products, AI driven. So theoretically, as we have patients on our drugs, as we engage them better as we learn them with the AI, theoretically, we could see efficacy improve over time.
And then the biggest thing I'd say with our company versus others is, and this is a huge point, Charles, is we're data-driven. So we have a view internally that if you can't create drug-like outcomes that, for example, if it was a pill, would pharma launch it, then if you can't do that, then you don't have a drug. And so we're looking to literally compete and disrupt existing drug classes that are out there.
Charles Rhyee:
Yeah, that's really helpful. Let's maybe dive into it a little bit more. You talk about this hybrid model and partnerships very distinct from a lot of the digital therapeutic companies that have come public and then actually have all mostly gone away at this point. Maybe dive a little deeper into that because I think that is really one of the big distinguishing points for the difference in strategy that you guys have approached. I think it goes into the data-driven part of it as well, but maybe elaborate a bit.
Randall Stanicky:
I joined in 2021 and that was the tail end of the good times, if you will, in terms of capital availability and you saw a lot of capital raised. And what we saw, we had a group of peers, broader peers, in the space that had go-to-market commercial strategies that were backed at the time with capital. And there was two things. And as you know, I spent 20 years on Wall Street covering pharma and specialty pharma, and there was a couple of things that we looked at at the time.
Number one, we didn't see the rigorous data going back to the drug-like outcomes that were being generated by these companies. And that was to us a little bit concerning in terms of the commercial viability. And then secondly, when the market started to turn, and this is where having a great board that's hands-on really helps you, we were able to pivot quickly and lean more towards our partnership side.
We took migraine forward on its own, but we pulled back on what would've been additional products that we would've raised capital to go forward with. And we just went into capital preservation mode. And what we saw was that several of our peers who went public, once you're public with a subscale platform with equity that's under pressure from investors, it's hard to raise capital.
And a lot of them, most of them are no longer here, whereas we haven't done an equity raise since October of 2020. We have line of sight to profitability and we've managed the business from a very, very tight perspective, but at the same time, we've really scaled the business.
Charles Rhyee:
When you think about that too, you are also benefiting from the structure of how you're contracting or you're partnering with pharma. Example Otsuka, they put up all the money for the trial. They incorporated the Click technology into it. Maybe talk about how the way you're partnering is also benefiting you in terms of how are you building the business?
Randall Stanicky:
Yeah, I mean, the one thing I'd say just up front, we have phenomenal partners, and the best type of partnership is two really committed partners who both bring different things to the table. And what we were able to do for them is develop a drug for major depressive disorder called Rejoyn that's actually on the market now for them, but with a lot of, I would say, clinical rigor and very, very close relationship.
And they've been a fantastic partner, but it's also one where we learn and as we build out and scale the business, the platform, we have the ability to bring additional products in different areas. And we've said this, we literally think that we can hit or develop a digital drug for almost any therapeutic category out there.
And we joke around sometimes, it's certainly not funny, but the potential to bring something in some of these other areas that are very perceived to be historically difficult to get to, we think that there are digital angles and we've looked at it internally where we could get there. Now, one very serious area is potentially over time we think we can impact overall survival in cancer by helping patients figure out the best drug regimen for them, but also manage the secondary awful conditions that come along with cancer.
So when you think about some of the areas that we can go to, people today look at us as, well, you're a mental health or you're a psychology or you're a company that can do certain things that are what we've been doing, schizophrenia, major depressive disorder, migraine, but we think that there's so much more that we can do as you look across different therapeutic areas.
Charles Rhyee:
When you're looking at some of those then, because when I've heard of when other digital therapy companies have talked about, oh, we can approach things like multiple sclerosis or oncology, they tend to talk about in terms of addressing the cognitive deficits that occur with those conditions or even like COVID fog, et cetera. Is that what you're talking about here? Or you're looking at different digital angles in terms of supplementing people who are let's say in cancer?
Randall Stanicky:
Yeah, I mean, to be clear, cancer's not one of our near-term targets, but we're going with where we think we can have the biggest impact out of the box. And migraine for us was just a no-brainer, no pun intended, but place to go here because... We just PR'd our recent pivotal study that was positive in migraines. We're very excited about what we've been able to do there, but there's different areas.
We're running early-stage basket studies looking at these mechanisms that target different components of the brain looking for deficits. And that's guiding us on where we're going with some of our early-stage research. And that success of some of that early-stage research is where we're leading in heavy with some of our partnership discussions.
Charles Rhyee:
Got it. Maybe going back to migraine, tell us a little bit about the results that just came out and why we should be excited about it.
Randall Stanicky:
Yeah, no, we looked at reduction in monthly migraine days per month. Again, similar to all of our studies, we use traditional validated drug scales, the MADRS scale for MDD. And I think it's very important that patients, physicians, and the medical community can look at our data, the rigor of our data and say, look, maybe it's not directly comparable in certain instances because all the CGRP migraine trials are a little bit different, but we're using scales that people can compare.
And so we talk about internally the blind taste test. If we can put our data in front front of a physician or payer and then the data of best in class or another competitor in the class that's an actual physical drug, and then you don't know which is which, the goal for us is to say, look, we're as good or better than the physical drug. But again, when you think about difference, we don't have the safety profile.
We're digital. Nothing goes in your body. And so that's a very big difference. When you think about the breadth of all the therapeutic areas that are out there and the unmet need... And migraine is a great example, Charles. Because if you think about people on CGRPs, the vast majority of these patients still have an issue. They still have several migraines per month. So they still need therapeutic care.
And so if you could overlay, for example, a Click digital migraine drug on top of existing therapy, well, then the hope is that we're addressing areas that drugs can't do alone. And there are so many other areas across the broader therapeutic spectrum like that that are obvious. Depression is one that makes a ton of sense. And Rejoyn is for adjunctive use to standard of care, so the trial is structured that way. The white space in front of us to go after these targets, it's huge.
Charles Rhyee:
And obviously it seems like a lot of this could become accelerated with the guidance coming from PDURS. Maybe talk a little bit about PDURS and what is so pivotal about that that you think could be a real accelerant for this market?
Randall Stanicky:
The prescription drug use related software guidance, which we expect to be final soon, is a game changer. I mean, the FDA introduced this draft guidance a year ago last September. It's starting to get a lot more attention. And what it effectively does in a nutshell is it says that if you can take a digital drug, combine that with a traditional drug and run a randomly controlled trial and show clinical benefit, then that study, that data should go into the drug label, so effectively created a combo pathway.
And when I was still on the sell side before I left, this was in 2020, I wrote a report, and in that report I talked about the future of healthcare, one of my three big surprises of healthcare, one of them being in the future, we're going to be combining traditional prescription drugs with digital drugs. And that's going to change the therapeutic landscape. And I wrote about this in a recent piece I published as one of the big reasons I came to Click.
Now, you could argue that maybe I was a little bit early, but in my mind, this guidance from FDA is a game changer. I mean, it just changed the future landscape of therapeutic care as we know it from a drug perspective. And so if you think about it this way, just in simple terms, and I'll use our migraine drug, which still has to go through FDA for clearance and approval, but if you just take that, if you were to combine that with, for example, a CGRP you, what does that do?
Well, you've got two drugs that we know are efficacious based on the published data. You can combine them. So now you've got, theoretically, a differentiated smart drug that is differentiated from the rest, has better chance for market to take market share. You'd have digital connectivity from physician to patient, which is huge. Think about if you can keep a patient on a drug, and I'm making this up, but from six months to nine months, you've just increased peak sales by 50%.
But the patient experience is what we're most focused on. You're getting really valuable longitudinal data that's going to help us in the future of drug development, try to understand patients on who should be on the best drug or certain drugs, so on and so forth. You now would have pharma with this smart drug that can theoretically continue to improve and get more efficacious over time.
And obviously that franchise has a lot more robustness over time and then potential for formulary positioning. And just at the end, the patient wins and that's the most important thing. But when we look at the landscape, again, of drugs out there where we can come in theoretically with a PDURS combo play, I just think this is going to be a very big opportunity in the future.
Charles Rhyee:
What is expected in the guidance? Because I guess my first question would be if you get this into the label, does that then extend patent life, or is it get a whole new NDC and has its own patent that way.
Randall Stanicky:
It's a complex question and the answer is potentially both in terms of you would get... We have patents on our drugs, and so there's a patent estate that's associated with our drugs. The other thing is with our drugs, given that they're AI driven, and again, we're able to improve them over time to improve the engagement, but we don't have to go back to FDA necessarily every time, unless we make major changes.
So theoretically, we can continue to improve on the patient experience, improving the engagement, and thus potentially the efficacy. And so as we do that, I just think it's going to be very hard for somebody to come in with a generic copy of the combo, because to genericize what we do beyond the patents is going to be difficult.
But again, as we think about the patient journey, I think, and this is just me speaking, but in the future it would be ideal if there's so many comorbidities associated with just broader health conditions in the US. If you could be on a Click drug that maybe is combined with for diabetes or pick your area and then add Click components to address some of the secondary impacts, the benefit to the patients over time, incredible.
And then as you start thinking about what we can do with the data, predicting these comorbidities, predicting on what type of drug, what type of patient demographic and otherwise, what we're going to be able to do from that data and that data lake that we have I think is going to be extremely valuable, but again, change the way that we think about that care for patients going forward.
Charles Rhyee:
Yeah, no, that makes a lot of sense. I guess the other question that I'd have is what is then the requirement in terms of trial design, trial length? If you think about let's say in Biosymmetry, you just had to do a modified efficacy trial. It's a little bit more simplified. Because we're talking about drugs that are already existing and already gone through, to run another trial, is the requirements easier? Is it simplified?
Randall Stanicky:
Yeah. So per the draft guidance, it is one or more randomly controlled trials. That'll be a discussion with the FDA. But as you know, if a drug is on the market with proven safety, proven efficacy, theoretically, we don't have additional safety. In fact, we think we can manage the safety aspects of a lot of drugs out there, depending on the drug and the therapeutic class. So again, it's a discussion with the FDA.
It should be, I guess to the core of your question, a much more defined path to market with potentially one study. And then again, to show clinical benefit and get that in the label, that gives the pharma company or our partner a completely, I'd say, smart drug that is differentiated from its peers. And you asked me another question in terms of is this something that we're seeing pharma companies go after on a recent panel.
Charles Rhyee:
Yeah, I wanted to ask you that.
Randall Stanicky:
And it was an interesting question and I'm glad you asked it because what we are seeing is a lot more interest. There's some companies really investing heavily behind this. We're starting to see other companies allocating more resources. But it's more of the companies that are still going after this. The draft guidance is still draft. It should be finalized shortly, and I think that's going to increase more attention.
But the answer I gave you on the panel, and I truly believe this and this is what I wrote in my paper, is that if you're a big pharma company with a therapeutic class, pick your class, I mean, migraine we've been using as an example, so keep with migraine, and you see one of your competitors announce a PDURS deal and bring a drug to market with outsized efficacy, the ability to be engaged with the patient alliance, digital alliance, and pay your formulary positioning will get thrown in a lot of different things that could make that company competitively in a better position.
If you're a CEO of one of these other companies in that drug class, that should scare you. And then I think you're going to start to see reactionary responses because the potential benefit to pharma and depending on the class I think is huge.
Charles Rhyee:
And I would imagine is that for pharma, you're sitting on these huge portfolios of drugs and you're always betting on, hopefully, your next new drug will be... You need that next new drug to really keep the pipeline going. But if you can start monetizing your existing portfolio to enhance them, it just seems like a no-brainer just to look back and say, hey, particularly in competitive classes, where can we get that edge?
Randall Stanicky:
And again, you're a sell side analyst, I'm a former sell side analyst, so we think a certain way, but I've said every CEO of every pharma company should be looking at their entire portfolio and pipeline trying to understand where a PDURS play could benefit them competitively. And again, this is all about patient outcomes, but benefiting competitively is who can deliver those patient outcomes the best.
And one thing that we didn't talk about, and you know probably better than anybody, some of the competitors in the space that have gone away and we've consolidated some of those assets, but one of the challenges that those companies ran into was the space is still evolving from a digital reimbursement perspective. And what PDURS brings, what it could bring is the potential just to move right into the existing payer coverage.
So you bypass having to go through digital on a standalone basis. So there's also some thoughts dynamics around from that perspective as well that could, I'd say, expedite the impact to patients, if you will.
Charles Rhyee:
Do you think PDURS can... And maybe this will be the last question just to wrap things up here. Do you see PDURS potentially being a catalyst to revitalize the digital therapeutics industry? Obviously you're at the front of it. But as Otsuka's competitors go out, maybe you're already partnered with Otsuka, so they need to find somebody else that can help them from a PDURS angle, do you see this maybe revitalizing this industry?
Randall Stanicky:
I think it has to, but in a different way because what we saw initially in the first wave is clinical rigor that just was not good enough. And if you look at the PDURS guidance, it also creates a separation between wellness products and very, very clinically rigorous software as medical device. We came into this space on the ladder with rigorous data, and our partners have focused on rigorous data.
The wellness companies and products, just they're not getting traction. And what the PDURS guidance calls out is those would need to be referenced in the marketing materials. So it creates a separation between the two. So it really does create the need to come to market with clinical rigor, and that's where I think the space is going to have to move to for anybody following behind us in this.
We've also spent more than 10 years building this tech platform, validating our mechanisms of action, both in the cognitive and behavioral side, creating what I think is a moat, but also a library of MOAs, mechanisms of action, that we could pull from to lift up drugs in a quicker way.
And if you even took big pharma, or sorry, big tech, and pick your big tech company and pick your dollar amount, you can't buy your way through the time that it would take to create all of this validation with FDA and everything we've built up. So there's going to be a leg to this for anybody that's trying to fast follow here. I just don't think the opportunity to fast follow is there.
Charles Rhyee:
Probably fast follow is not the right way, but eventually you would think though because of the potential demand there is in the pharma, it's going to really attract that capital to companies that will do the rigorous work, because I got to think that eventually just the demand in pharma alone will be enough to attract investors.
Randall Stanicky:
Yeah, I think that's right. And the other part of this too is does pharma do this on their own or is it companies with a platform like ours? I just don't see the top engineers in the space necessarily. I think there's a value in working for a company that's building and scaling that's tech driven.
Charles Rhyee:
Not pharma doing it, but new digital therapeutic entities coming together doing the rigor.
Randall Stanicky:
I mean, just to answer your question directly, I think there'll be an entire industry formed around PDURS over time. We hope to be the leaders in that space, but I do think five years from now, we're going to start to see this real validation in this combo PDURS opportunity.
Charles Rhyee:
Randall, great to have you, great to see you again, and look forward to see how things continue.
Randall Stanicky:
Great. Thanks, Charles.
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Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.
