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

Welcome to the Morgan Stanley Global Healthcare Conference. I'm Jeff Hung, one of the biotech analyst. Before we start, please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you are a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And if you would like to ask a question for the session, please submit it from your page below the video. So for this session, we have from ACADIA Pharmaceuticals, Steve Davis, CEO; Serge Stankovic, President; and Elena Ridloff, CFO. Welcome, everyone.

Thanks, Jeff.

So for those who may not be familiar with ACADIA, can you provide a brief introduction?

Yes, sure. Sure. Thanks much. So I just need to start with a brief reminder that we all know that the business of pharmaceutical development and commercialization has certain inherent risks. So please see a copy of our most recent SEC filings for a description of how those risks relate to our business. So I'd like to briefly highlight some of our key accomplishments so far this year as we execute on our 3 strategic pillars. First is, we will drive NUPLAZID growth in PDP. Our second quarter 2020 net sales were $110 million, representing 32% year-over-year growth. We continue to add new patients and see high adherence amongst continuing patients. And as a result, we expect our 2020 net sales to be between $430 million and $50 million (sic )[ $450 million ] representing approximately 30% year-over-year growth at the midpoint range. Beyond 2020, the long-term opportunity for NUPLAZID in PDP is very significant and growing. Our second pillar is delivering on the DRP opportunity. There's no approved treatment for DRP today. And this opportunity set, as you've all heard us say before, is about 10x the size of the PDP opportunity. There are serious consequences associated with DRP. For example, repeated hospital admissions, increased likelihood of nursing home placement, progression of dementia and increased risk of morbidity and mortality. So it's a very significant unmet need, and we're very much looking forward to getting to the end of the review cycle and potentially being able to help these patients. We're highly confident in both the efficacy and safety data supported by our sNDA submission for DRP with the PDUFA date of April 3, 2021, and we look forward to continuing to work with the FDA to facilitate their review. Finally, our third pillar is to develop innovative treatments for unmet needs. Recently, we initiated our second pivotal study evaluating pimavanserin in the negative symptoms of schizophrenia. We already have one positive pivotal study in this arena and would file for approval if, advanced to the second study we just initiated, was also positive. In addition, we initiated a Phase III program late last year evaluating trofinetide as a treatment for Rett syndrome, and we expect results from this program in the second half of next year. Another important element of this third pillar is we remain very active on the BD front and have completed 2 transactions this year. We've recently acquired CerSci Therapeutics, a clinical stage biotech company with worldwide rights to a portfolio of novel compounds for neurological conditions. The lead molecule, ACP-044, represents a first-in-class non-opioid mechanism for acute and chronic pain, and we expect to initiate Phase II studies in the first half of 2021. And earlier this year, we announced a licensing and collaboration agreement with Vanderbilt University, adding a muscarinic receptor program to our pipeline. This M1 PAM Program is a portfolio of early-stage candidates with the lead compound in early Phase I and several preclinical compounds. And as you guys have heard me say before, you will see more deals from us. Before I turn it back over to you Jeff, I just wanted to make note of one other thing. I'd like to mention a poster that was presented this last Friday during the MDS Virtual Congress. MDS is the Movement Disorder Society. It was -- the poster described a study done by members of the FDA, CMS and Stanford University where they studied Medicare Parkinson's disease patients treated with pimavanserin or a group of atypical antipsychotics, primarily quetiapine. And what they saw was that pimavanserin treatment was associated with reduced all-cause mortality compared to treatment with atypical antipsychotics. So it's a very interesting analysis with encouraging conclusions, and we look forward to any future publication to explore these important findings further in depth. With that, Jeff, I'll turn it back over to you.

Great. Thanks. So let's start with PDP. With your 2Q earnings, you indicated that new patient starts have returned to pre-COVID levels. And you've been able to continue adding patients despite everything going on with COVID. So what do you attribute that to? Is it the indication or specific initiatives you've implemented?

Yes. Thanks much. Let me start with the initiatives that we've implicated. So we're very pleased with our commercial performance in the first half. Much of this can be attributed to the initiatives we undertook as an organization from [ onset of the pandemic ]. So I think we pivoted very, very quickly. And by the way, I just want to clarify, our new patient starts have returned to pre-COVID levels in the specialty pharmacy or retail channel of the business. That represents about 2/3 of the business. And as I mentioned, we very quickly adapted to the very, very unfortunate situation with this pandemic. For example, we utilized our digital platforms to simulate patient and caregiver conversations with their physicians without -- about PDP. We implemented digital programming, which enables diagnosis, samples, reimbursement verification and prescription delivery to patients with the patient ever having to leave their home and the physician being able to communicate with them just through telemedicine. And we -- for example, we also immediately switched our speaker grow from live meetings to virtual meeting. So we did a number of things that I think were responsible for making a quick pivot there and being able to have a pretty quick rebound in that portion of that channel of the business. What we're seeing is fulfillment rates for continued patient base remains very strong. That's never dipped throughout the pandemic. And as we mentioned, we continue to add new patients and new physicians. Just a couple of other thoughts regarding the PDP indication itself. Of course, these symptoms don't stop without treatment. It's a progressive disease. It gets worse. And the caregiver burden gets greater and greater. So I think as a result of our initiatives, we're very well equipped and well positioned to help patients wherever they are, whether they're in a nursing home or still at home. And ultimately, the pandemic just simply underscores the need for medicines such as NUPLAZID.

And new 2 main channels, specialty pharmacy and specialty distribution, of which long-term care is a big part. On your 2Q earnings, you talked about specialty pharmacy having done well. Can you remind us the breakout for NUPLAZID in PDP?

Yes, Sure, I can. But Elena is on, so I'll just ask Elena maybe to answer that question.

Sure. So 2/3 -- roughly 2/3 of our business is the specialty pharmacy channel, which encompasses the action setting. So patients seeing their physician in the office setting. About 25% of our business is in long-term care, and then the remainder is largely the VA and TRICARE.

And can you remind us of the impact of COVID on the different settings, such as long-term care? And how have the impacted areas fared in recent months? Have things begun to turn around to growth?

Yes. So let me take it one channel at a time. So I'll start with the specialty pharmacy channel or the kind of retail doctors offices, as Elena mentioned. So in this channel, we were impacted mostly in the beginning of the pandemic as patients weren't having physician visits and the number of patient starts were down. So we saw a drop in new patient adds in the initial days of the pandemic. As a result, we adjusted our guidance for the year on our first earnings quarter call and reduced it by about 5%. Since then, new patient starts in that channel are back to pre-COVID-19 levels. They began rebounding pretty quickly, took 2, 3 months to get there and for the last 2 or 3 months, they've been back to pre-pandemic levels. In the long-term care setting, as we discussed on our recent earnings call, this segment has been more impacted and slower to adjust than the SP channel. And I think there are really 2 dynamics that are played here. One is the -- since its numbers are down, so fewer patients are being admitted to nursing homes today. Now that will very possibly result in a bolus of patients coming through or increased number of patients coming through eventually. And in the -- and for Parkinson's patients, in particular, Parkinson's psychosis patients, we're not seeing as much of a reduction as nursing home patients in general, where we're seeing some. And then the second dynamic is nursing home staffs initially were just completely overwhelmed in the pandemic. They were really many times focused on how can I get my patients fed. And so what we've seen in long-term care is things, while they degraded for several months in a row, have really begun to stabilize now in terms of what we see over about the last 6 weeks. So facilities have adapted, we've adapted, patients have, physicians have, caregivers have. And what we expect going forward in long-term care is that we'll see a return to growth, and we believe the impact that we're seeing today is a temporary one. And then just a reminder, I mentioned this earlier, but regardless of the channel dynamics, our commercial organization can reach patients wherever they are. So if they're at home, just -- even if they're deferring admission into a long-term care facility, they're still symptomatic. They still need to be treated.

And just to add one thing. We continue to see strong rates in the continuing patients through the pandemic, and we have not seen an increase in discontinuation rates.

Right.

Okay. That's helpful. Would you expect long-term care to increase with DRP? And might there be an impact to the potential launch for that indication?

So there's a larger proportion of dementia patients in long-term care facilities. And as we expect the DRP market could be as high as 50% in LTC compared to 25% in PDP. So regarding the DRP launch, there are a few things to take into consideration here. One is we've built an extensive platform and have extensive relationships already. So this is not like launching a new drug in an indication where you haven't -- we don't have any infrastructure. We already have a hub. We already have relationships in the neurology community and in the psychiatry community. And so this is very much a label extension that we will undertake as opposed to starting from scratch. And that applies, of course, also with the long-term care setting, where long-term care, there are more constituents involved in terms of getting the right patient on the right therapy and we already have those relationships. And as you have heard us say before, and today, when we are thinking about a long-term care facility, they may have 2 or 3 patients that are PDP patients sometimes, while that same facility may have 20 or 30 DRP patients. So there's a real opportunity for us to leverage the relationships that we have, the infrastructure that we have in long-term care as we move into our anticipated approval in DRP.

And you've touched upon this next -- part of this next question. But I guess, are there some overlaps between PDP and DRP? And could you talk about some of the similarities and differences between these 2 indications? And I guess, given the differences beyond additional reps, what changes or adjustments do you need to make to your organization to launch in DRP?

Yes, I'm going to ask Elena to address the second half of that. She can -- she'll speak to our plans to expand the sales force, et cetera. But before we do that, I'll just call out one really key similarity and one key difference between PDP and DRP. The similarity is, in PDP, of course, prior to the approval of NUPLAZID, the only option that physicians had was use of the dopaminergic previous generation atypical antipsychotics. And it's problematic when used in Parkinson's patients because those dopamine blockers can interfere with the motor therapies that those patients are receiving. If I shift over to DRP, it's actually a very similar situation. While those patients are not taking dopamine agonist, it's been demonstrated in a very large study that the -- those same dopaminergic atypical antipsychotics, when used in dementia patients accelerate cognitive decline and it's equivalent to about one year of disease progression. So it's not insignificant. And I would say, based upon the market research we've done, I think the physician concern with using those drugs in dementia patients is at least as high, maybe even higher than the concern of using those drugs in PDP patients. So the similarity is those drugs, which are not approved, when used off label, can exacerbate other elements of the disease. The significant difference between PDP and DRP is, PDP is treated largely by neurologists and their -- understandably their principal focus is on movement. Can I get this patient to walk? Can I get the feet, et cetera, can I reduce their off time? And while they certainly deal with hallucinations and delusions, it's not as high a priority as getting them to be able to move. If you compare and contrast that to physicians that treat dementia, the connectivity between cognitive impairment and hallucinations or delusions is just much closer. So it's more of a spectrum of symptoms that these patients have, and we're just much closer to the bull's eye there. So again, I think the motivation to treat from the perspective of being closer to the bull's eye is probably even greater in DRP than in PDP. And the compromise that you have to make when you use the off-label atypical antipsychotics creates at least as much of a concern in DRP as it does in PDP. Elena, you want to speak to some of the adjustments we're making?

Very happy to. So just to add on to what Steve was mentioning. Very importantly, this is a line extension in to DRP. So we will be leveraging both our commercial footprint as the brand awareness for NUPLAZID amongst the prescribing physicians and long-term care facilities. So our footprint is about 250 people. We will be expected to do around 450 to 500 in total. And there is a lot of overlap in the prescriber base today to where we will be going with DRP. So today, we call on neurologists, psychiatrists, a small group of PCPs who focus on CNS as well as long-term care. That is the same prescriber base with a little more additional increases in psychiatry, the primary care focus and long-term care as greater focus on DRP versus PDP today.

Great. The PDUFA date for DRP is April 3. We continue to get questions from investors on standard review, and I'm sure that you get this question even more. Can you remind us what gave you confidence for potential priority review? And has the FDA given any indication on why it chose standard review?

Yes. I'll start, and Serge, please feel free to jump in. So we were surprised that we did get priority review based upon having a breakthrough therapy designation. You usually do, not always. Serge can speak to this. There have been some recent examples where that's not always been the case, particularly in sNDA. But I think we recognize that when it's an sNDA and it's not a new chemical entity, the time frame for going from the time the FDA accepts the filing of the submission to the PDUFA date is 4 months. So it's really tight. And so we did inquire the FDA to try to get more color. And they simply reaffirmed that based on their preliminary review, they view the filing as appropriate for standard review and didn't provide any additional color. And we asked them a couple of times, we got the same response. So recognizing the very short time frame here, we felt it was best to focus on the review itself and that's what we've done. And we just note that when they indicated to us that they had assigned a standard classification, they also noted that they have not identified any review issues and also indicated that they do not plan to have an advisory committee. And we view both those as positive indicators.