ACADIA Pharmaceuticals Inc. (ACAD) Earnings Call Transcript & Summary

All right. Good morning, everyone. My name is Cory Kasimov. I'm the senior large-cap biotech analyst at JPMorgan. It's my pleasure to introduce our next company, ACADIA Pharmaceuticals. Here to present for ACADIA's CEO, Steve Davis. And please note that following Steve's presentation, there's a breakout down the hall to the left in the Olympic Room. Steve, turning to you.

Great. Thanks so much, Cory, and good morning to everyone. Before we start, I just need to remind everyone that the pharmaceutical business has certain risks and uncertainties. Please see a copy of our SEC filings for a description of these risks as they relate to our business. I'd like to start this morning just reminding all of us why we do what we do. What you see in this picture are faces of actual patients that we serve and that we seek to serve together with some of our dedicated employees. And I'm always reminded when we meet with patients that these are real people. They have lives. By the time they develop Parkinson's disease psychosis, same will be true in dementia-related psychosis, they -- many times they're carrying a very high disease burden. The disease strikes later in life. And in the case of Parkinson's disease psychosis, they're already carrying a very high disease burden and then you layer psychosis on top of that, becomes a very heavy burden for both the patient, caregiver and their families. These are the people that we can help, and our mission is to provide the greatest benefit we can do them. When we think about where we stand as a company today in 2020, the starting point is pimavanserin or NUPLAZID, it's known by its trade name, is the first and only drug approved to treat Parkinson's disease psychosis. We launched this drug a little over 3 years ago. And at the time we launched it, we said what we expect is this very kind of linear-shaped curve as we educate the market with the first and only approved drug and grow the market and the number of patients that we're treating. And today -- in 2019, what we observed is a 50% increase in net sales growth year-over-year over 2018. So we're well on our way into fulfilling that promise. Second element that is important to point out in terms of where we stand in 2020 is we have a very innovative pipeline with 4 late-stage pipeline programs. Three of these programs are leveraging pimavanserin, the same molecule that we're approved for in PDP and other indications, and in all 3 of those indications, we've now concluded pivotal studies with very robust results. These 3 indications, in addition to PDP, represent a potential 35-fold increase in the number of treated patients. So we have a very strong foundation today in PDP. We've got a late-stage, very innovative pipeline that has the potential to be dramatically larger than the footprint we have today. There are 3 pillars to our business. First is to drive NUPLAZID growth in PDP. Second is to deliver dementia-related psychosis opportunity to patients. And third is to develop innovative treatments for unmet needs in additional indications and areas. Before I get into the pipeline and talking about the specific programs and just where we stand on each of these 3 pillars, I'd like to pause for a second and talk a little bit about pimavanserin and how this molecule differs from all other antipsychotics on the market. And I'll start by saying, even the term antipsychotics is a little bit of a misnomer because the traditional antipsychotics are approved to treat psychosis and schizophrenia. They're also approved to treat -- some of them are approved to treat bipolar disorder. Some of them are approved to treat depression. So they're -- they have kind of a rich pharmacology with benefits in multiple indications. None of them, however, are approved to treat Parkinson's disease psychosis or dementia-related psychosis. All of those drugs are more or less brothers, sisters and cousins of each other. They all work in a similar fashion, and they work primarily by blocking dopamine. Our drug works in an entirely different fashion. We work by very selectively blocking a subtype of the serotonin system. That's led to us, again, having the first and only FDA-approved treatment for PDP. We achieved breakthrough therapy designation from the FDA in the process of getting that approval. We have composition of matter patent protection for NUPLAZID. This also relates to pimavanserin and the other indications we're pursuing into 2030. As we go forward, we've now established robust efficacy in pivotal studies across 3 CNS indications. That was not a give-up. When we started down that path a few years ago, I said to you, I said this may not work in everything we tried and it doesn't have to. If it works in just one, it will be well worth the investment. And I said this is the kind of investment we love to make because we already know so much about this molecule. We know the efficacy in Parkinson's patients. We know the safety and tolerability profile. We know how to make it. We know drug-drug interactions. The thing we don't really know yet is the full extent of the utility. That picture has become much clearer, particularly based upon the results we've had over the last 12 to 18 months. What we've seen is in dementia-related psychosis, where we also have breakthrough therapy designation, a very robust efficacy response there and a safety and tolerability profile that looks very consistent with what we know about the drug. In MDD, same thing. We saw very robust response in -- as adjunct therapy in MDD. And in negative symptoms of schizophrenia, we recently were awarded in November positive results from a pivotal study there as well. In this space, what you see and what you don't see are both important. What we don't see with this profile is a lot of the side-effect baggage that you see with the older-generation dopaminergic compounds. These are just some examples of what we don't see. In dementia-related psychosis, we don't see a negative impact on cognition or impairment of motor function. In MDD, we don't see sexual dysfunction. In fact, we see an improvement in the sexual function in the pivotal study that we ran. We also didn't see increases in daytime sedation. In fact, we saw benefits to daytime sedation in that study. And we don't see -- consistently, in all of our studies, we don't see weight gain. In schizophrenia, in addition to some of the other baggage that I've previously described because it's a younger population, weight gain is a very significant issue there. These patients on these older-generation dopaminergic drugs can experience dramatic weight gain, which can lead to metabolic issues, cardiovascular risk, et cetera. We don't see that with the serotonergic profile that we have. So what kind of benefit do we see in the clinical studies we've done. And this slide represents -- tells really 2 stories that I think are very important. One is what we see is this internally consistent benefit. This is 4 different disease states. And in each of these disease states, we see a very robust efficacy response. The other take-home message here is, on the left-hand side of the slide, what we see is a very strong antipsychotic response. We see that in our Parkinson's disease study, where we established a p-value of 0.0014. We see it in our pivotal dementia-related psychosis study with a p-value of 0.0023. So a very strong antipsychotic response. On the right-hand side of the side, what we see with this unique profile is a very strong benefit on mood. We see it in our major depressive disorder study, where we saw a p-value of 0.0003. And in our recently announced results from negative symptoms in schizophrenia, we're at the 34-milligram dose, the dose that we're taking forward into the next pivotal study, we had a p-value of 0.0065. I mentioned earlier that the sum of these 3 additional indications is a 35-fold increase over the size of the treated patients in Parkinson's disease psychosis. So just to level set a little bit, in Parkinson's disease psychosis, we've guided to revenues in our third full calendar year -- third full fiscal year of launch 2019 being between $330 million and $340 million. We're continuing to grow at a very attractive revenue growth clip with a lot of room to grow. I think this will be a very substantial drug just in PDP alone. In dementia-related psychosis, we see a similar opportunity in terms of the unmet need that we see in Parkinson's disease psychosis, but it's dramatically larger. It's 10x the size of Parkinson's disease psychosis. So I mentioned we will be submitting an sNDA submission in the summer of this year for that indication. So that's very near term, getting to the finish line there. In major depressive disorder, if we just focus on the patients that receive adjunct therapy, that is 20x the size of Parkinson's disease psychosis. There, we have 1 pivotal study in the bank. We're running 2 additional pivotal studies now. We will only need 1 of them to be successful. One is we're running in the U.S. One is an international study. The U.S. study -- in both studies, we're running ahead of schedule. The U.S. study will have results by the end of this year. Negative symptoms of schizophrenia, I mentioned that we reported positive results there last year. We will be starting a second pivotal study in the summer of this year. It is a fivefold increase over the size of the Parkinson's disease psychosis population. Our business rests on 3 strategic pillars. First is to drive NUPLAZID growth in PDP. Second is to deliver the DRP opportunity. And third is to develop additional indications. I'm going to dig a little bit into driving growth in PDP. I mentioned already that sales guidance for 2019, we'll report our actual results at the end of February, but our guidance is $330 million to $340 million. That represents a 50% increase in revenues and a 38% volume growth year-over-year. We are currently in the high teens in terms of market penetration. As I mentioned, we've got a lot of room to continue to grow this drug in PDP. The levers that we're pulling now to continue this growth include -- the Movement Disorder Society published guidelines last year. They recognized NUPLAZID as the only therapy with clinically useful and accept -- that was clinically useful with an acceptable safety profile and didn't require specialized monitoring. We have new caregiver burden and long-term clinical safety data that will be published in later this year, and we're continuing to leverage digital and patient caregiver campaigns to close an information gap that I'll -- it's been just a second talking about. With PDP, when patients are first diagnosed, there's a 50-50 chance that they will ultimately develop psychosis, and it usually doesn't happen until the later stages of the disease. So for that reason, physicians many times don't talk about it at the diagnosis. And when it occurs, patients don't make -- they don't connect the dots. They don't realize that the psychosis, the hallucinations or delusions that they're experiencing are actually associated with Parkinson's disease. And so we do a lot of work to try to help educate patients, caregivers, start dialogue with physicians to close that information gap. We'll continue to do that this year. Second pillar, delivering the DRP opportunity to the market. As I mentioned earlier, there is no FDA-approved treatment for dementia-related psychosis. So what we have today is use of these older-generation dopaminergic compounds with very high side effect burden. They're used off-label to treat dementia-related psychosis today. Of the 1.2 million patients that are currently being treated, about 800,000 of them are taking these dopaminergic antipsychotics. I mentioned earlier that it's very problematic. They can accelerate cognitive decline in these patients. So it's a situation where -- because there's nothing approved and these drugs have these high side effect burdens, when you treat them with a dopaminergic antipsychotic, it's been well established in a very large study that you actually accelerate cognitive decline. So you're exacerbating the primary symptom that these patients are suffering from. I'll come back to that thought in a second when I talk about our clinical results. In addition, they can impair motor function, cause extrapyramidal symptoms, increase sedation, cause orthostatic hypotension. These are all side effects that would be problematic in a normal healthy young patient. They are particularly problematic in elderly frail patients. We have run a pivotal study that will serve as the basis for our sNDA submission. It's very straightforward study. It's a relapse prevention study, for those of you who are familiar with that study design. And in this study, we started by putting all patients in this study on pimavanserin. So they're highly symptomatic. They start on pimavanserin. If they show a significant and sustained response at weeks 8 and again at week 12, they stay in the study. If they don't show that response, we drop them from the study. For those that stay in, they're then randomized into 1 or 2 groups. They either stay on pimavanserin or they move to placebo. And the primary endpoint of this study is simply the time to relapse once they are randomized. So for those patients who were highly symptomatic, they started on pimavanserin, they showed a sustained response, they continue to show sustained response versus those patients who moved to placebo and we removed the therapy that demonstrated benefit, we're simply comparing the average time to relapse for those 2 groups. We saw extremely robust efficacy in this paradigm. We significantly reduced the risk of relapse of psychosis by 2.8-fold, represented in a hazard ratio of 0.353 and a one-sided p-value of 0.0023. In the open-label portion of the study before patients are randomized, we observed that almost 62% of eligible patients met that prespecified criteria. And that was a reasonably high bar. They had to show this response not only at week 8, but again at week 12. 62% of them showed that, that was actually above our expectations. And on average, we observed a 75% improvement from baseline on the SAPS-H+D score at week 12. Running a study of this sort also allowed us to observe safety and tolerability over a very long time frame. And what we saw there was very consistent with what we know about the drug. Pimavanserin was very well tolerated. We saw, importantly, no worsening of cognition, no worsening of motor function. This slide is a Kaplan-Meier representation of efficacy, where again, we saw this very robust response. One footnote on this slide is many times when we treat neuropsychiatric disorders and we study them in clinical studies, we're limited in the way we can observe the responses, not like measuring blood pressure, of course. So you're measuring many times mood or hallucinations, delusions. And so many times, we capture that by movement on a scale. To a treating physician, that's important, but they do have to interpret it. They do have to interpret, well, how many points movement on a scale that I don't use every day. What does that mean in terms of the patient that I'm looking at in my examining room. This study gets right to the way physicians think about treating their patients. The take-home message from this study is if you put patients on pimavanserin, you'll see a consistent response that's sustained over time and an almost threefold reduction in the risk that they'll have a relapse over this time frame. So that speaks very clearly to physicians in a way and then we get this feedback a lot from the KOLs that we talked about the study that it really helps drive home the point to them in terms of the benefit that patients should derive from the drug. I mentioned I was going to come back to cognitive impact -- no negative cognitive impact that we observed with pimavanserin. This is the second study where we observed this -- those patients for an extended period of time. What we see here is no negative impact on cognition. It's measured by the MMSE over 6 months compared to placebo. So of course, some of these patients were on drug even longer because this is the randomized period. So if we combine both the open-label period and the randomized period for those patients that were on pimavanserin that entire time, we see another -- again, a consistent story of no negative impact on cognition over now up to 9 months of treatment. Next steps for us. We have recently submitted our request to the FDA for a pre-sNDA meeting. We plan to submit our sNDA in the summer of 2020. That package will include the efficacy results that I've just described from our HARMONY study. They'll also include supportive data from 2 previous studies we ran looking at where we observed positive benefits on an acute basis with pimavanserin and, of course, a very large safety database now. Any time you file an sNDA, you include safety from all the studies you've run together with ongoing studies. Third pillar is to develop innovative treatments for unmet needs. This is a swim lane slide showing the robust pipeline we have. We've already talked about the first 2. So I'll now focus on the bottom 3 programs here, starting with major depressive disorder. Depression is a huge medical problem in the United States and -- as well as globally. There are 17 million patients in the U.S. A majority of these patients do not adequately respond to first-line therapy. They don't adequately respond to SSRIs or SNRI treatment. That results in about 2.5 million of them being treated with adjunct therapy. Today, the drugs approved for adjunct therapy in depression are the same class of dopaminergic antipsychotics that I've described earlier. These can lead to very significant issues in this patient population, including the issues here, sexual dysfunction, weight gain, sedation, et cetera. We ran a pivotal study in these patients using pimavanserin as adjunct therapy. And what we saw here was positive primary endpoint with -- on the HAMD-17 results. Importantly, in the stage 1 of this study, which was a parallel design portion of the study, in other words, the same study design we're using in 2 additional studies, we saw a very robust effect. P-value of 0.0003, an effect size of 0.63. We also saw very strong results on key secondary endpoint of disability, which is you don't often see with antidepressants. Take-home message here is when you look at the right-hand side of this slide and you think about the last slide in terms of what physicians need, we rang every one of those bells. We saw -- physicians said, I need faster onset. We saw early onset. I need a sustained and strong antidepressant effect. We had very robust efficacy there. Physicians would like to not see sexual function -- sexual dysfunction exacerbating with drugs, which many antidepressants do. We actually saw an improvement in sexual function. They don't want to see daytime sedation exacerbated through therapy. We actually saw an improvement in daytime sedation. We've never observed being for weight gain. No cognitive side effects, we've already talked about. And the extrapyramidal symptoms and tardive dyskinesias that can occur with use of the dopaminergic drugs are not an issue. With our serotonergic agent, we've never observed those. So I mentioned already that we had 2 ongoing Phase III studies with 1 additional positive study needed. The reason we're running 2 studies, of course, is in depression, you many times see a high placebo response. So to mitigate that risk, we're running 2 studies. We only need 1 of them to be positive. We already have 1 positive pivotal study. The first of those studies will read out by the end of this year. Negative symptoms of schizophrenia. About 40% to 50% of schizophrenia patients experienced predominant negative symptoms. So what are negative symptoms? It's really the kind of social withdrawal aspects of the drug. There's some -- it's some of the most problematic symptoms that schizophrenia patients deal with includes apathy, lack of emotion, social withdrawal, et cetera. This can lead to low social function, long-term disability and very significant caregiver burden. It's rare to have a positive study and negative symptoms of schizophrenia. We concluded a pivotal study that we reported out in November, where we saw positive results on the primary endpoint. This was the study where we're doing some dose-ranging. Importantly, at the 34-milligram dose, the dose that we're taking forward in the next pivotal study, we saw a very strong, very robust efficacy with a p-value of 0.0065. That second study, as I've already mentioned, will commence in the summer of this year. It would be remiss if I didn't say, here too, we continue to see this very consistent safety and tolerability profile. Rett syndrome is a debilitating disorder. There are about 6,000 to 9,000 patients in the U.S. I've got to underscore very debilitating disorder. These are really tough cases. These patients start life with normal development. And then some are usually at about 6 months to a year, they begin to experience neurocognitive decline. They ultimately almost always lose their independence. They can lose purposeful hand movement and most of the time loss of spoken communication. We -- our drug, trofinetide, has completed Phase II, and we recently commenced Phase III study. This is a drug that we in-licensed North American rights to from an Australian company. The positive results in the Phase II study they ran were recently published in neurology. Our objective is to repeat those positive results in a Phase III study using the same endpoints that they observed. If we're successful in doing that, I think we'll have a very valuable potential new drug here for Rett syndrome, where there, again, today is no drug approved. So we'll have results from this study next year in 2021. If we sum up the regulatory and clinical milestones in dementia-related psychosis, I mentioned we've recently requested a meeting with FDA. That will result in sNDA submission in the summer of this year. In major depressive disorder, we're running 2 pivotal studies. Again, need one of them to work. The first of those will read out this year by the end of the year. I should have mentioned that's actually ahead of schedule. Investigators have been very enthusiastic. Enrollment is running ahead of plan, and we'll have those results this year. We're, again, well ahead of schedule. Negative symptoms of schizophrenia, one pivotal study in the bank. We need a second. We will commence that study in the summer of this year. And Rett syndrome, as I just described, we'll have results from next year. So I'm going to close where I started, and that is by recognizing the patients, caregivers and families that we seek to serve and to whom we owe our very best. Thank you.

All right. Thank you. I just want to remind everyone this discussion will be webcast, and I want to thank each of you for coming out. There are 2 things I'll point out from the presentation that I just gave that I want to highlight here, one is, as you heard or you've seen from the presentation we filed, we've recently requested a meeting with FDA for our pre-sNDA meeting. So we're moving forward entirely on track on that, and we'll be submitting the sNDA this summer. And then secondly, as I mentioned in the presentation, we've had very enthusiastic support from physicians in our MDD studies. Those are both running ahead of schedule. We will have results from the U.S. study, the first of the studies to read out this year. So with that, I'll open things up for Q&A.

I'll start off. With regards to next steps for DRP, can you talk about what the gating factors or what you need to do aside for meeting with the agency to get that filing in this summer? [indiscernible].

Well, I'm going to let Serge answer that -- I'll just start by saying, basically, it's logistics. But Serge, do you want to...

Right. Yes. We have all of the data that will constitute our supplemental NDA. There are really no gating elements to watch our filing other than preparing the file, conducting the meeting with FDA where we will agree on the format and content of the supplemental NDA and preparing all of the documentation necessary for filing, which we believe will be in the summer.

And then on the MDD front, so good to hear that it's moving faster than anticipated. Can you just talk a little bit about your confidence in the design of the study and the sites that you chose. We saw MDD update last month from Sage where there are patients who are getting drugs because they believe it's in different sites. [indiscernible] confidence in trial execution there.

Just repeat the question.

The question is the level of confidence in the Phase III trial in MDD considering some recent reported MDD trials. What I will say that the most important element of our confidence is the data that we achieved in the Phase II trial. The design of our Phase III trial is essentially same as the Stage I in the Phase II trial, which means the parallel placebo control short-term treatment. And we achieved a very strong efficacy in the trial as well as the favorable safety profile. And using the same design with the same rigorous measure of quality of data acquisition, we believe that our level of confidence is really high for the trial. By the way, previous trial was done exclusively in the United States. So our U.S. Phase III trial utilizes a number of sites that we know that are used in our Phase II trial.

And then on the schizophrenia, the negative symptoms, next steps there, and you talked about starting the pivotal trial with that. Can you talk about this size and powering there and design similarities versus the study that you just recently reported?

Well, thanks for that question. I'm always glad to talk about schizophrenia trial because I think our reported results from the Phase II trial, considering everything about DRP, we're not as noticed as at the level of excitement that we have about that trial, particularly considering the rate of success in the negative symptom schizophrenia trials. It's a positive trial, and we are -- learned quite a bit from that trial. So design of our Phase III trial will be essentially same as the Phase II trial, but the learning that we have the most important is that 34-milligram dose performed particularly well in terms of both efficacy and tolerability and safety. And considering that we don't need to do any dose adjustments in the trial, we will be performing our Phase III trial at a single dose, fixed dose, 34 milligrams. So that's really the biggest adjustment in terms of the powering and the size of the trial. And otherwise, very similar to our Phase II trial.

And if you guys are fortunate enough to -- plus if you'll have the DRP indication and potential of the MDD and/or schizophrenia, do you believe the drug is adequately priced for that size market? Would you have to reconsider pricing? Getting ahead of ourselves a little bit, but...

Yes. It's a little premature to comment on that, but I'll give as much color as I can. First, starting with DRP because that's the closest to the finish line. I think the dynamics are very similar between PDP and DRP. Nothing approved, very high unmet need. Drugs used off-label are very problematic, including making the primary symptom of the disease worse. So as I think you and most people in the room know, we enjoy very strong access in PDP, and that's a consequence of the fact that payers get it. They understand there's nothing approved. Use of these other drugs is very problematic. So I see the dynamics as being very similar between DRP and PDP. We do not do any discounting today, I mean, other than statutory discounts and small customary discounts to distribution partners, but we don't do any discounting to payers. So we have a lot of dry powder if we ever need it in any of these indications. But I view DRP and PDP as being very similar dynamics. MDD is vast. And so, again, if we ever feel like we need it, we've got dry powder. I think the profile that we established in the pivotal study that we've done is -- really differentiates the drug and I think has the potential to move it to the head of the class as being the first choice for adjunctive therapy. And so I think we'll have a very strong case with payers there as well. And then negative symptoms of schizophrenia, I think, is very self-evident. There's nothing approved, dramatic unmet need. So we're operating in spaces where there's a very -- I know this term unmet need gets overused in this industry, but these are really significant unmet needs. And our experience so far is payers appreciate the benefit that we're bringing to the table. Michael, anything else?

No. Nothing to add.

So I guess, for Michael, I'm curious, have you seen any -- on the heels of CTAD and the presentation of DRP data there, have you seen any commercial tailwinds on the PDP front in terms of really converting physicians to believe more in NUPLAZID maybe than they did prior to that having another positive Phase III study?

No. I think there's a couple of nuances there. I think the data that was presented at CTAD was directed at an Alzheimer's-treated physician base and more on an academic level. I think the general rank and file physicians in the marketplace, certainly, the ones we're calling on for PDP, they're probably not even aware of the data. They'll have to become aware of the data on their own accord. The drug that we see most of the time is used on-label because we see the prescriptions. And so I don't see the halo, if you want to call it that, just yet in our base business of PDP. And I would expect that to be unlikely and throughout 2020 until the data gets published and we get closer to the actual launch of the drug.

So what do you see is kind of the key levers for PDP in 2020, kind of keep commercial momentum going?

Right. So we've established a great momentum in 2019, and we're expecting that to continue in 2020. We are in the high teens in penetration. So a lot of more room to grow. It's fundamentally a couple of different things. One, evidence. So we have the Movement Disorder Society evidence-based guidelines that we're using to profile the recommendations of NUPLAZID. We have new long-term extension open-label data that profiles more data on safety. We have data on caregiver burden. But importantly, it's closing the information gap and awareness gap between the signs and symptoms of hallucinations and delusions in Parkinson's between the patient and caregiver and the treating physician. We still have a lot of opportunity there. We're making great progress on that, but it is a very dynamic market because there's always a new set of physicians -- a new set of patients that are coming into the marketplace every year.

Just -- I'll just add one thing to that. When we launched, we said, look, we think this is something that's measured in years, not quarters, probably. We think there's an opportunity for physicians to start treating earlier and to treat without compromising. So historically, the standard of care was to first reduce the dopaminergic treatment that these patients are getting. Because L-DOPA, dopaminergic agonists can exacerbate psychosis. And so we're seeing now a reduction in that. We're seeing a meaningful reduction in that. So we knew that it would take time, but we're beginning to see that. And I think that we'll have very good prospects for that to continue to grow over time.

So then maybe Serge, to go back to CTAD, what was the feedback from kind of the academic Alzheimer's docs that were there? Were KOLs kind of as impressed by the hazard ratio on the data sets as many investors were?

When we saw the results of the study, we knew that we have really a strong study on our hands. But the feedback that we received at the CTAD was really overwhelming. I mean, the reaction from the KOLs in terms of the strength of the efficacy data, but also the safety and tolerability was tremendous. The 2.8x reduction of risk is a phenomenally strong result and people really do appreciate. But the most -- more than that, what people express particularly enthusiasm about was ability of pimavanserin to stabilize or to improve symptoms of psychosis in the open-label period to the extent it did. And that across all of the subtypes, and people were really impressed. So the reaction was extremely positive.

And your expectation and you're requesting a broad label across all DRP subtypes and your expectation is you would get that, right?

It's not only expectations. We have an agreement with the FDA that the study that we presented in the program that we have will lead to that indication. And we believe we fulfill all of the expectations that are outlined in that agreement, and we certainly expect that, that indicated -- broad indication of dementia-related psychosis will be the indication we will receive.

So there's always indications potentially coming online. I think the potential size of the drug is really not being debated anymore. Can you talk about the duration of this asset, your confidence in the NUPLAZID, pimavanserin's IP? How far do you think it can go to? What are the forecasting scenarios? And if we were to get Paragraph IV filers in the relative near term, what that means in the bigger picture time?

Yes. I'll start at the end and then move back. I mean, I -- yes, I'm sorry. The question is what IP do we have and what's the time frame for that? And what should we expect from Paragraph IV filers? And I think Paragraph IV filers are just a natural part of our business, so that will happen at a certain point in time. In terms of the IP that we have, with small molecules, you like to first look at composition of matter patents. We have composition of matter patents that take us into April 2030. That's the maximum amount of time you can get under Hatch-Waxman. Just to be completely clear, we've not selected which patent will apply Hatch-Waxman to yet. We have a very good idea. There's no need to make that selection yet. It happens later in the process, but we will. And when we apply that in the orange book, you'll see then the patent going out to April of 2030, the composition of matter patent. We have an important patent on formulation. As you and others know, we switched to a 34-milligram capsule formulation last year. That's been a very important development in the drug for reasons we can go into if anyone cares to, but we have a formulation patent on that, which is not trivial. And so that patent, again, goes out to 2038. So I think we stand here today with a really solid IP position and a lot of time to leverage the benefits of the drug that we're seeing.

So you're looking 2030 to 2038 from an IP to [indiscernible].

Yes. And I think the way most of us think about these things is with small molecules, you look at the composition of matter patent to April 2030, again, maximum 14 years. There's formulation patent, which I think is also a very important patent through 2038.

And then the other component in having all these indications is the ability and the infrastructures maybe for you to support everything. So how should we think about kind of the future SG&A spend, the ramp there versus maybe R&D investment that supposedly took down, I guess, once these indications are to come online?

Yes. So the question was about how investors should think about our R&D and SG&A investment. So with regards to R&D, the bulk of the spending for our ongoing studies is really 2019 and 2020. We will have increase in 2020 as the MDD study is continuing to ramp up enrollment as well as trofinetide and we initiate the ADVANCE II schizophrenia study. With regards to SG&A, we'll have leverage with regards to our PDP investments. We've made those investments. We continue to make them, but we see -- we'll have nice leverage as we continue to have momentum with sales in PDP and continue to grow NUPLAZID revenue. We will be making important investments this year ahead of the DRP launch. We'll make a lot in disease awareness with regards to medical education as well as caregiver and patient education, and we will be expanding the field team to support the DRP launch. That market size is about tenfold that of PDP. And so today, we have about 200 field-based individuals and that will be expanding for launch to about 450 to 500.

And then what would MDD require do you think if that were to be positive as well with added investment?

So the question was with regards to MDD and what additional investments we would need there? We haven't outlined that specifically. Michael, I don't know if you want to talk just about qualitatively your thoughts?

Well, I think you're going to get into a bigger audience. We'll already, at that point, have been, as Elena outlined, the footprint for DRP. And I think it would require an expansion probably into a deeper set of community physicians, but I don't think we're going to have to cover the entire primary care audience. So I'll outline that a little closer when we know the kind of full package of the indication.

And then the latest -- company's latest strategic thinking around Europe, now that you have DRP in hand, is this the right time to talk to your [indiscernible] and move ahead there? Do you wait for MDD before potentially filing?

So the question is strategy in the ex U.S. territories. So as we said before, we have frame shifted our strategy there. It's primarily driven by pricing. Unfortunately, in Europe, in particular, price for drugs like this can be dramatically lower. It could be 10% to 15% of the U.S. price, not discount but percent of the U.S. price. I could talk a lot about the geopolitical reasons, if that's the case, but it is the reality. And so for that reason, to maximize the investment that we've made, we're seeking to include multiple indications in what will be a single 10-year period of data exclusivity that we'll have in Europe when we have a similar period in Japan. So that's all we said up to this point in time. We'll continue to assess this as we pore through the data that we have. But we -- there is value there. That's what I want to be clear. There's value in Europe. There's value in Japan. The bulk of the value, of course, is in U.S.

The FDA approved a drug for schizophrenia. It's the only approved drug a week ago. So I can [indiscernible] that's the only drug been approved for schizophrenia. [indiscernible] how do you want to comment [indiscernible]?

So the question is there is a drug -- recently approved drug -- new drug for schizophrenia. And unfortunately, I would just say, we tend to not comment on other people's drugs. I would just simply underscore that in the schizophrenia, there are dramatic unmet needs today still. I think this drug that's recently approved will be a new drug in that class. But I think we're likely to see -- continue to see very significant unmet needs, most importantly, in negative symptoms, that drug, like the other drugs approved for schizophrenia today are approved for the treatment of psychosis, but not approved for negative symptoms.

I have a question about your MDD trial or trials, I should say. So the standard of care that patients are on, you're adding your comments on adjunct therapy. If you want a lot of [indiscernible] how homogeneous is the treatment background they're on before they can get? Would you give them information about running those drugs [indiscernible] in combination? And would you ever consider yours as a standalone [indiscernible]?

Serge?

So we already have experience with background SSRI or SNRI treatment and we achieved in the previous trial a fair representation across all different subtypes, and we will be collecting additional data. Just to say, the indication we are pursuing is adjunctive treatment. And there is no requirement for us to achieve any particular participation of any particular medication as a background. But so far, what we see in terms of the enhancement of the efficacy with adjunctive paradigm, we see that, that is fairly representative across different SSRIs and SNRIs that are included in the trial. In regard to monotherapy, we have decided based on all of the pharmacology and our understanding to pursue adjunctive therapy and so far had good clinical outcomes on that. So we will complete that development program. And following that, we may think further. But at this point, we are pursuing adjunctive paradigm.

Nobody ever talks about trofinetide. Can you guys discuss a little bit your confidence in this Phase III study that you have going on, maybe the opportunity that might exist with this product?

Yes. Serge, do you want to comment on the Phase III?

Yes. I mean, we based our Phase III program on the clinical data from the Phase II study where the endpoints that we are using as a co-primary endpoints in the Phase III program, which is the Rett syndrome scale as well as clinician global impression is -- are those that were successful in the Phase II trial. So we based our confidence in the data that is generated in the previous trial, which was sizable and we obviously expanded that trial further. I will remind you that the trial is conducted in the United States, where the previous trial was also done with the same complement of study sites and centers. As you certainly know, there is not too many centers that are specialized in the treatment of Rett syndrome, and we are using all of those. So there is a good experience by the investigator with the drug, with the design of the trial. And that really increases our confidence as we move forward with our Phase III trial.

Cory, I think the first part of your question was what would be the relevance of the new therapy. So Michael, do you want to speak to that?

Yes. I think Steve mentioned the fact that we're pursuing unmet needs. And in this particular case, there's nothing approved and the disease is very debilitating. We've had a number of experiences with patients and caregivers in our office and it's very moving. The Rett's family advocacy group is very well entrenched and they are working with us to help identify and understand the patient journey and the various needs. And so we're very much enthusiastic about bringing this therapy to market if it were to help the families and the patients.

Can you remind us the size of this opportunity?

We've 69,000 Rett patients in the U.S. An important fact here is the fact that there are about 5,000 of them in a registry today. So that's often -- many times, the challenge you have in these rare or ultrarare disease is can you find the patients? We actually -- the Rett syndrome society has a registry of 5,000 patients in the U.S., so that really can be very helpful in terms of actually finding our patients and getting therapy to them.

Okay. And then what's ACADIA's appetite for additional business development? [indiscernible] now. So how do you feel?

It's an important part of our business. We have a meaningful effort in looking for business development opportunities. We're all over these with through mother's eyes, but I feel like we've really established a very leverageable platform in terms of the R&D capabilities we have and the commercial capabilities we have. And so we will be doing additional deals, and you'll see that. And it's an important part of our business in terms of building a company for the long, long term.

Thank you very much. Our time is up.

Thank you.

Thank you.