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

I think we're live, right, now?

Yes.

Okay. Oh hi, everyone. Thank you so much for joining the Citi 15th Annual Biopharma Conference. My name is Neena Bitritto-Garg. I am one of the smid-cap biotech analysts here at Citi. So I am very pleased to have with us today management teams from ACADIA. So we have Serge from ACADIA. We have also management teams from Minerva Neurosciences and from Karuna as well. And I'm also joined by my colleagues, Joel Beatty and Mohit. They want to give some introductory remarks to introduce their management teams as well.

Great. I mean, from my side, I mean, we have Steve Paul, the CEO of Karuna with us, and Joel, over to you.

Yes. Hi, everyone. I'm pleased to have with Minerva, Rémy Luthringer, the CEO.

Great. So we'll just jump into questions here. So first question for all of the panelists. To start off, what are just kind of your high-level thoughts on the unmet need in psychiatry practice today? And what approach is each of your companies taking to address some of those unmet needs? If you will, I want to start with Serge and then maybe go around from there.

Sure. Thank you, and thank you for inviting us to this panel. I'd start by saying that probably we can easily agree that there is significant unmet need in psychiatry both -- and in the CNS development, both in respect to the medications that are available, but come with important pricing, side effects and untoward effects that are complicating patient treatment as well as a number of indications, where there is no yet approved treatment, difficult to -- both from the developmental perspective and difficult to treat. At ACADIA, we took approach to address really a high unmet need in the geriatric population. And starting with our first approved indication for NUPLAZID in Parkinson's disease psychosis, we are addressing the indication or disorder, where there was no prior treatment available, a prior approved treatment available. And NUPLAZID, by its pharmacology, proved to be ideal not only to address the hallucinations and delusions that often occur in patients with Parkinson's disease, but also by its nature of not affecting motor function, which is a critical element in Parkinson disease psychosis. We are currently expanding this approach to dementia-related psychosis by the same principle of providing efficacy without affecting underlying disorder, which is a cognitive function, and our data, so far, has been really supportive in that respect. In addition to that, we are tackling negative symptoms, schizophrenia and Rett syndrome and other 2 indications, where there is no currently approved treatment. We are in Phase III with both of these indications and are quite hopeful in terms of the potential of this pimavanserin in addressing this significant unmet need. Finally, I'll just say that recently, with our acquisition of CerSci, we are tackling another unmet need, and that is the pain management who are now -- via non-opioid mechanisms. And although there is a quite a bit of development in that area, we -- with this acquisition, we are developing first-in-class non-opioid approach, both for the acute pain and the chronic pain. So I'll stop there and let other comment on.

Okay. Yes. Rémy, if you want to go next?

Sure. So really, thank you for having me, yes. And thank you, Joel. Yes I'm very impressed with your tie, yes. I mean, you're looking beautiful. So I think as a more general comment and afterwards, obviously, I will speak about Minerva, but I think the understanding of the approach of neuropsychiatric disorders has really evolved dramatically. And it's true that I mean the classification, which is proposed by the DSM classification or ICD-10, is very useful for research in how to classify schizophrenia, depression and so on. But I think we know very well that there is a lot of overlapping between different disorders. I can give you an example. I mean if you're extremely depressed, you have probably anhedonia, which is part of negative symptoms. And we -- when you speak about schizophrenia, you know also, it's very difficult to discriminate between negative symptoms and mood disorders. And this is the reason why people were trying to have antidepressants overcome negative symptoms in schizophrenia, which, by the way, did not work. All the meta-analysis are against this. So I think that the new way to see the treatment of psychiatric disorders or even neuropsychiatric disorders, and they include in this also, neurodegenerative disorders and developmental disorders, is to really have transdiagnostic approaches. And obviously, our lead molecule, roluperidone, which is in Phase III, is really addressing specifically the negative symptoms in schizophrenia. So we have started with a disease, what I mean, negative symptoms are the most impairing for patients. But negative symptoms are present in a lot of other disorders. So this is really the approach we have taken. And we are working on definitely on negative symptoms. We are definitely working on insomnia, which is also one of a symptom, which is transdiagnostic, and we are working on mood disorders. We are also working on diseases like Parkinson's disease. But again, not trying to only improve the motor symptoms when they are present, but also to really improve cognitive impairment and negative symptoms because basically, when these patients start to have the first symptoms, the first symptoms are not motor symptoms, but definitely symptoms like negative symptoms. So we have a quite large pipeline, but our key molecule, our main molecule is roluperidone, which is in Phase III. We have probably seen that we put out an 8-K last -- yesterday, I guess, with jet lag, I never know it, sitting in Switzerland. But clearly, I mean, we will meet with the FDA on the 10th of November in order to share all the findings we have with our molecule and next steps. And so this is what we are trying to do, address unmet medical need in an approach, which is transdiagnostic.

Great. And then, Steve?

Neena, let me start with your first question and to build on what Serge and Rémy have said. In terms of unmet medical need, I've been a psychiatrist and neurologist now for almost 40 years. And so what I would say is that we are in dire need of better drugs, better medicines for treating the range of psychiatric and neurological disorders. When we think of psychiatric disorders, mood disorders or schizophrenia, for example, the current cadre of drugs are really not much better, if any better, than the first drugs that were introduced in the '50s. So namely chlorpromazine, Thorazine and imipramine. We may have somewhat better safety profiles in some cases. In some cases, not so good safety profiles. But overall efficacy is really very modest. Effect size is in the 0.2 to 5 range -- 0.5 range. So very minimal efficacy really overall. Now don't get me wrong. These are drugs that really help patients. But the truth is they're not that effective. And mechanistically, we've been dealing with the same old mechanisms that were introduced almost 70 years ago, 75 years ago. So we need better drugs, desperately need better drugs, and there's been a real lack of innovation in this space really since the SSRIs, SNRIs and the atypicals, which were all introduced 25 years ago. And I think what you're seeing now is the introduction of medicines in psychiatry and in neurology for symptomatic relief of mood disorders, psychotic disorders, Parkinson's psychosis, if you will, dementia-related psychosis that are, for the first time, really working, working well and will hopefully change the standard of care. And it's been a long time coming. Now at Karuna, we're developing what we hope will be and what we believe will be a best-in-class, first-in-class novel mechanism for treating psychosis, beginning with acute psychosis in patients with schizophrenia. I consider that to be the sort of cancer of psychiatry, if you will. A drug that we have demonstrated now in 3 Phase II studies, including 1 completed late last year, where we saw a very robust signal of efficacy, a Cohen's d of 0.75, very marked responses on negative symptoms. Will report soon on cognitive symptoms. Positive symptoms robustly treated with our drug. And again, unlike the current second-generation antipsychotics, no weight gain, no extrapyramidal side effects, the Parkinsonian-like side effects that can occur with these drugs. No evidence for sedation or somnolence. Likely a drug that doesn't cause tardive dyskinesia, which we now develop drugs to treat tardive dyskinesia. We'd like to avoid it altogether. And something that not only has applications to schizophrenia, but dementia-related psychosis, we believe. That's our next indication that we're pursuing. And also Parkinson's psychosis, levadopa-induced psychosis and even dyskinesia, where there's a strong rationale for a drug like KarXT, our lead program. So we're excited potentially about having a completely novel mechanism without any of the baggage of the current standard of care, and we think this is going to be really, really important for patients. Obviously, antipsychotic drugs can be used in bipolar disorder, in psychotic depression and whole variety of indications where psychotic symptoms are important features of the illness.

Great. Now that was a fantastic intro. So now a common thread, I think, between all 3 companies is schizophrenia, right? You're all developing programs for schizophrenia. So we've already touched a little bit on this. But if we could just go back through each one of you, one at a time, just talk a little bit about, kind of, positioning within schizophrenia. And kind of how you see from the ACADIA perspective, how you see pimavanserin potentially positioned within the schizophrenia -- the emerging schizophrenia market, and then the same for roluperidone and for CarTX (sic) [ KarXT ]?

Who should start?

Serge, if you want to start? We can go in the same order, if you want.

Okay. All right. Good. You are right. We are all targeting schizophrenia, but in a little different ways, and it's really good to hear today, some of the thoughts behind it. In our case, obviously, we are focusing on negative symptoms schizophrenia based on not only mechanistic rationale for it, but also on the clinical data, preclinical, and more importantly, clinical data we have at this point with pimavanserin. Our approach is adjunctive approach, and we are currently conducting a second pivotal trial following the first positive trial that we just reported this -- earlier this year. We are in a process of conducting that second trial. Now I will say, conducting trials in negative symptoms, as I'm sure my colleagues will agree, is a really a challenging proposition. Just by the nature of the disease and by the nature of the clinical trials within itself, present psychosocial intervention in these cases. The vulnerability to placebo response, vulnerability to a variety of variables that can impact the outcomes of the trial are high. And we see that, by the virtue of more than a dozen trials have been conducted with dozens of compounds in this particular indication, but 0 approval so far. So we are very excited about the positive data that we generated so far. The reception from the community, scientific community and medical community has been positive. And we learned quite a bit from the first trial and applying those learnings into the next trial.

Who is next? Me or Steve?

You're up.

Thanks, Steve. So I mean, I want to just to emphasize what you said, Steve, as I think you're completely right. I mean, we have such huge unmet medical needs here. And we are, I think, really leading a revolution here. But I mean coming back to how we approach negative symptoms is, I think, trying to not only improve negative symptoms, but also to demonstrate that. I mean the improvement you can measure with, whatever scale, I mean, PANSS or BLSS or NS-16 (sic) [ NSA-16 ] is translating into a functional improvement, yes, because you have to really understand that negative symptoms. So this is what is present before, you are doing the diagnostic of schizophrenia. So adolescents are really suffering from negative symptoms. We have to understand that the negative symptoms are really present all along the life of patients. And this is what is keeping them out of any functioning, any decent family life. And when you're looking to the number of -- and you always take this example, and this comes to what you are saying, Steve. When you take the example of antipsychotics, [indiscernible] antipsychotics. You had 5 person or patients, who had a more or less a small job, and you have still 5 person, who have more or less a small job. I mean, so nothing has moved in the life of these patients. And so what is really important is, yes, indeed, to address a huge such most important unmet medical need, which are negative symptoms. But to demonstrate that, I mean, you have a functional improvement, and I think this is what our drug is doing. We have really a very nice function improvement. The other aspect is also to know from where this effect is coming, yes, and we have very good data showing that evolution among these 5 exists, evolution of anhedonia and so on. That evolution is an extremely important driver because these patients are looking like lazy. These patients are looking like not engaged and not able to do something. But when you are pushing these patients to do, for example, a cognitive task, they're not so bad at a cognitive task, and this is really about evolution. Now we took another approach in terms of study designs and our friends from ACADIA. And I think the study design is a very important discussion. Because we know very well that you have primary and secondary negative symptoms, and you have to be extremely careful in your conclusions. I mean keep in mind that Risperdal has intra-labeling improvement of negative symptoms. And definitely, Risperdal is not improving negative symptoms. And so I think to go with a study design, which is a right study design, in order to reclaim about specificity is extremely important. And I think this is what we are trying to do. And then really, Serge, it's very challenging. It's very difficult. But I mean, when you see what these patients are suffering, I mean it's worthwhile to try to move this forward. But I think this is what we're trying to do to have patients improving at the end of the day.

Steve, you want to get next?

Yes. Let me just add a few comments to my colleague's comments. Schizophrenia is a common complex disorder. It's really a syndrome, positive symptoms, negative symptoms, cognitive symptoms, probably effective symptoms as well. And so the ideal treatment for many patients will likely require more than 1 drug. I think we -- I'm sort of starting to conceptualize a little bit more like oncology, where treating a cancer with a single drug is really not likely to be as effective as multiple drugs. And I think that's the same situation here. And as my colleagues mentioned, negative symptoms and cognitive symptoms tend to be the most disabling. So once these positive symptoms are more or less under control, although there's still a lot of patients, 30%, that don't have improvement in positive symptoms. And the rest, many of them are just marginally improved. But once those things are, sort of, under control, patients are out of the hospital, the most disabling symptoms are clearly negative and cognitive symptoms. I'm of the belief that many of the current drugs actually produce negative and cognitive symptoms iatrogenically. When you block doping receptors in brain or certain other receptors that the second-generation compounds block, you're going to get cognitive and negative symptoms. That's just what they do. So we need drugs that are effective there. Part of the problem has been that we haven't really had that many novel mechanisms that we really believe work. And so it's been difficult to show efficacy. It's always difficult to show efficacy, particularly with the drug that doesn't have efficacy, it doesn't work. So I think we're now seeing drugs, some of them mentioned here that have efficacy. In our case, we will get back to negative and cognitive symptoms alone in patients who have these symptoms prominently after positive symptoms are controlled. But our first initial foray is to really demonstrate in all-comer trials that we can improve negative symptoms along with positive symptoms and cognitive symptoms, the dementia of dementia praecox, without producing all of those bad side effects and adverse events I mentioned. And so far, as we've reported and will be reporting in negative symptoms, we have very positive data, a very nice effect size, a very low p-values, and we'll be reporting in the upcoming week or so, some encouraging, I should say, data in cognitive symptoms as well.

Great. I think Neena got kicked out somehow, so I'll probably take that for now. So maybe one question. Regarding the pharma, biopharma interest in these particular diseases, we have seen, and Steve, you were at Lilly before as well. There was a lot of interest from big pharma in these diseases, CNS diseases. But it's -- the field is a little bit risky, and we have all seen failures there in the field. So the big pharma interest kind of dried out because of that or some other reasons as well. Where do you think the interest is? That's the first question. And the second question is part of where do you think the clinicians interest is in terms of running those trials? Because all of a sudden, we are seeing all those trials, while for quite some time, there were no trials going on. So where do you think the physician as well as big pharma interest is right now? We can go in reverse order, if you want. Steve, you want to start this?

So let me start. At Lilly, when I was at Lilly, a very sizeable percentage of our sales and profits were based on our CNS portfolio. Drugs like Prozac and Zyprexa, Cymbalta and Strattera, that was a large part of Lilly for many, many years. I mean, we had a very strong diabetes business, an emerging oncology business, infectious disease, et cetera. And that did, Mohit, as you mentioned, sort of, dry up. And I think the main reason was really this lack of innovation. I don't think we lost the interest in the unmet medical need represented by psychiatric and neurological diseases. And certainly, commercially, as you well know, these were some of the most commercially large markets in the world in those days, right? And still drugs in that category, I'd say, antipsychotics, even recently, I think, not so long ago, 2014, Abilify sales were about $9 billion. So these are important markets. And -- but there's been a lack of innovation. So I think many of these big pharma companies have moved to other areas, to oncology, to inflammation, where the targets were clear, the path forward was clear. Now in terms of the clinical trials, and I'd be interested in my colleague's comments on this, too. They're not easy, but I don't know any indication in drug development that's easy. And I think if drugs really work in the psychiatric space, I can tell you they will ultimately get approved, even if there is a failed trial here and there. It took us quite a few trials to get Prozac launched. And we were a little higher percentage with Cymbalta, but you do see those trials, and you see them in the drugs that are being launched today, not all these trials are positive. Some are clearly failed trials. The FDA appreciates those challenges with this space. And usually, they don't penalize you for that. Still, I do think the big issue is how these trials are designed, in making sure that we don't repeat the mistakes of past years and designing these multicenter, very large trials, multi-arm studies and that we'd be disciplined and rigorous in how we approach it. In terms of the infrastructure out there, I think one of the advantages of developing these drugs today is that we don't have as much competition. There are fewer sponsors with drugs out there in Phase II and in Phase III, and yet, the patients are there. The patients are still there, and the infrastructure for doing these trials is still there, both in the U.S. and outside the U.S. So I think it's the right time, assuming we have the right drugs, to be pursuing these indications.