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

Okay. Welcome back to our next session at the SVB Leerink Global Healthcare Conference. I'm Marc Goodman, one of the biopharma analysts. And we're lucky to have ACADIA Pharmaceuticals next. The management team joining us. And we have Steve Davis, CEO for the past 6 years. We have Serge Stankovic, who is the President, but also Head of R&D, as everybody knows, the past 6 years; and Elena Ridloff, who joined the company 3 years ago and is currently the CFO. Thank you, all 3 of you, for joining us. And Steve, I'll let you make some opening comments before we jump into Q&A.

Yes. Great. Thanks much, Marc. So just to level set with everyone. First, I'd like to start by highlighting our key accomplishments in 2020 and touch on a few expectations for 2021 as we execute our business across 3 strategic pillars. First, we're driving NUPLAZID growth in PDP. In 2020, we achieved net sales of $441.8 million, representing 30% year-over-year growth. We continued to add new prescribers and new patients and see high adherence amongst continuing PDP patients. Based on our 2020 performance and current outlook, we expect our 2021 net sales in PDP, I want to be really clear, this is just in PDP, to be between $510 million and $550 million, representing 20% year-over-year growth at the midpoint of the range. This, of course, is the potential launch here for DRP. We're not including revenue expectations for DRP in our guidance at this point. Beyond 2021, the long-term opportunity for NUPLAZID and PDP is significant and growing. Second pillar is delivering on the DRP opportunity. Our sNDA submission for DRP remains on track for the PDUFA date of April 3. And we are ready -- we will be ready to launch on day 1. There are no approved treatments for DRP today. However, there are very serious consequences associated with the symptoms of psychosis, including repeated hospital admissions, nursing home placement and increased risk of morbidity and mortality. So we're very much looking forward to our potential launch in DRP. Our third pillar is to develop the next wave of breakthrough therapies in CNS. This year, we're advancing our pipeline with clinical trials across 5 separate indications. We have 2 ongoing Phase III programs. We initiated our Phase II -- excuse me, our ADVANCE-2 Phase III study for pimavanserin for the negative symptoms of schizophrenia in the third quarter of last year. And we progressed LAVENDER, our Phase III study for trofinetide in Rett syndrome, and expect results in the fourth quarter of this year. In 2020, we further expanded our pipeline with strategic business development. We acquired CerSci Therapeutics, bringing us a first-in-class non-opioid pain program. And through our collaboration with Vanderbilt University, we brought in a novel muscarinic receptor program. Business and development remains a critical pillar of our strategy, and we'll continue to execute high science deals and expand our pipeline. As I said before, you will see more deals from us. And with that, I'll turn it back over to you for questions.

Great. Thank you. So Steve, why don't we just start with the base business, the PDP business first and talk about your key goal, I think you said on the call, was new prescribers, right? Let's get new prescribers, let's get new patients. Maybe you can help us with past year, 2020, like how many new prescribers did you get? Was that a big part of what happened? How many new patients? How much COVID impacted that? Just give us a sense of what was going on before, how much COVID -- so we can get a sense, and what your goals are for '21 for those numbers.

Yes. Yes, I am. Thanks for the question. So despite the pandemic, we had very strong growth in the PDP business last year. We had double-digit growth in prescribers. Yes, I think that's a real testament to the commercial execution we have as well as the high unmet need that these patients experience. We grew our market share, and importantly, grew the overall pie. So the PDP business, PDP number of patients being treated grew 4% to 5% last year. And that's about double what you would expect if you just look at growth based upon purely demographics. So we continue to look at a trajectory, a growth trajectory that's been very linear shaped since the time of launch, and we expect that to continue as we move forward in PDP. And as I've said before, I think this can be a very large drug just in PDP. And so we're at a point where we're continuing to add breadth, as I mentioned, double-digit growth in new prescribers last year, but also continuing to add depth. So number of physicians that are writing 2 scripts, 5 scripts, 10 scripts, continues to grow. So the business in PDP overall looks -- continues to look very, very strong. We -- the impact of the pandemic was different on our 2 primary channels. In the long-term care channel, we've seen more of an impact on -- which is related directly to the census numbers. That is the number of patients in and entering long-term care facilities. So that's had an impact on all drugs that are administered in long-term care. On a relative basis, we've performed very well. We've performed better than a basket of long-term branded, long-term care drugs. In a basket of 15 drugs, 13 drugs decrease, we were the ones that increased and -- as adjusted for the census numbers. And we -- and today, that long-term care businesses continue to be stable. It stabilized at a level below the pre-pandemic levels, but stable. And with vaccines being more and more distributed and with us getting closer and closer to a point where we expect those census numbers to change and return to kind of pre-pandemic patterns, we recognize that the situation in long-term care is temporal and we'll expect to return to pre-pandemic growth patterns there as well. Outside of long-term care, we've pivoted very rapidly. Within 30 days, we had moved all of our promotional materials to Veeva Vault, so that our reps and health care professionals could be looking at the same document at the same time. We immediately transferred our speakers bureau to a virtual speakers bureau. We -- within a matter of weeks, we [ put ourselves in a position ] so that physicians could do -- could write the drug virtually in concert with them treating patients who telemedicine. And as a result, we saw a very short-lived dip in new patient starts at the beginning of the pandemic. And of course, when you lose patients that you expect to be gaining in the early parts of the year, then you still get the recurring revenue. So it did have a slight impact on us, but it was very small. And we returned to pre-pandemic levels really quickly. Excuse me, just one second, turn this one off.

I was wondering if that was my alarm.

Sorry about that. That was my wife's alarm. She's already up. So as we look to 2021, again, I can't tell you the precise timing, but I'm certain that since these numbers will return in LTC. And outside of the LTC channel, again, we've been back at pre-pandemic growth levels for some period of time and expect that to continue through 2021.

Yes. Good, good. And the DTC that you're doing, TV, I mean, has that been pretty consistent throughout the year? I mean I see every now and then, but I'm not the demographic.

That's right. I'm glad you're not seeing it frequently because you're not the demographic. Yes. DTC, let me just back up for a second. In PDP, there's a information gap or an awareness gap, I would say, between patients and caregivers on one side and physicians on the other when it comes to connecting the behaviors that these patients are experiencing, the hallucinations and delusions with the underlying disease. And so DTC has been an important component. It's a broader initiative we have, but a very important component in helping close that gap. We've continued to enjoy a very positive ROI on the DTC investments that we've made. And because Parkinson's disease psychosis strikes late in life, the life expectancy of these patients is obviously shorter than it would be if we were treating bipolar depression, for example. And so as a consequence, the patient pool is continually turning over and the information gap that exists continues to be perpetuated. And so I see likely a continuing role for use -- continuing to use the tools that we're using to try to close that gap as we progress in PDP. Just about everything I've just said on PDP applies to DRP as well. There's a similar information gap in terms of patients making the connectivity. But in this case, it's -- sometimes, it's more associated with just understanding the elements of the disease that they suffer from with dementia. And so understanding how the difference between a cognitive impairment and hallucinations or delusions or other symptoms that these patients suffer from, sometimes they get melded into one. And so helping them -- helping the physicians, patients and caregivers crystallize around the lexicon and crystallize around identifying the behaviors with a disorder and then treatment to treat that disorder will be a very ripe opportunity for us as well in DRP.

And let's just presume that you are going to get approval, like we all hope, help us understand, like how fast are we going to be able to ramp sales, right? That's ultimately the question everybody wants to know, right? So part of that is, how aggressive are you going to be making noise? Part of it is, is the coverage there from the get-go? Or is that coverage going to take some time to kick in like a normal product would when you're first getting a product approved? Help us understand. I understand why you haven't given guidance because it's the beginning, whatever. But help us understand how to think about that.

Well, let me start with kind of the logistics mechanical elements of it. So we'll benefit from a lot of the infrastructure that we've built in PDP. So for example, when you launch a drug through specialty pharmacy channel, in particular, a drug where you have high government pay component, having a hub is a critical element. Where do you have a hub? Every time you set up a hub operation, it takes a while to optimize it. We've already optimized the hub operation. So we have a lot of foundational elements that are already in place that we'll leverage. As it -- every time you get a drug approved, you need to get on formulary. We're already on formulary. Now there will be -- need to be some work done to extend the formulary description to include DRP. But that's a lower administrative burden than just getting on formulary to start with. So there's a little bit of work that will need to be done there. But again, we'll leverage the fact that we are already on formulary everywhere. So I think we'll benefit from some of the types of things that just take a while to basically get in place. But we won't be on -- but on day 1, we won't have DRP added to the formulary description on every plan. So there will be some situations where payers will probably just cover it. That's what we experienced in PDP in the early days. There will be other situations where they'll require a letter of medical necessity. We're poised to make sure that physicians are aware of that and are equipped to do that. And my expectation is that access will not be a significant headwind for us other than just the normal mechanical things you need to go through any time you launch a drug. And because we're a protected class, whatever formulary adjustments need to be made for at least for all Medicare patients have to be made within 90 days of approval. So that's kind of the mechanical side where I think it's a net positive overall. Anytime you launch a drug in a new area where no drug has been approved, however, on the physician side, there's a lot of work to be done to educate the medical community along the lines I was describing earlier. Some physicians just don't write a drug for the first year of its approval or second year. Other physicians need to get a little bit of experience themselves, and they build on that over time. And so that's the reason that we described in -- before we launched in PDP that we -- you should expect a linear-shaped curve over time. And it's also -- the same dynamics apply in DRP, and the reason that we're saying you should expect something similar in DRP. So our view of the longer-term opportunity probably has smaller air bars than in the very early days, because you've just got a lot of things anytime you launch a drug that may impact the actual revenue number that you calculate in the first quarter, the second quarter, the third quarter. And you also recognize that you're doing a lot of things that will contribute to revenues, but may not produce a revenue yet, and just exactly where you are on that spectrum or that cadence may impact the precise number you report at the end of the quarter. So all things considered, as I mentioned before, we would expect in DRP, you should expect a very attractive revenue growth, linear-shaped curve through this launch.

And Elena, what's the investment into it? So how much of that is going to be -- we're seeing it already early in the year. How much is it going to be later in the year? And when do we start to see the leverage? Is this one of the things you got to keep investing in, in year 2 and year 3? And will you be doing DTC on both, both [ PRP ] and DRP.

Yes. So a bunch of questions in there. So maybe just to start with the SG&A cadence through the year. We would expect that -- I do expect the SG&A to ramp as we move through the year. And that will largely be a function of the investments beyond our field team that we're making. So our marketing investments, as Steve mentioned, a component of that will be our direct-to-consumer campaigns and -- in DRP. And we're planning to invest in both unbranded disease awareness as well as branded campaigns. And on the branded side, there's 6 months post approval where you can't run a campaign in the new indication. So that will come later in the year. And in addition, we'll be investing in Phase IV programs in DRP, and that spend will ramp through the year. So expect a ramp in SG&A as we move through 2021. With regards to leverage, there certainly will be leverage for DRP, maybe just to ground you. If we were a PDP alone company today, meaning we weren't investing in the DRP launch, in R&D and other indications and other programs, we would be profitable. And so when we think about the right level of investments for DRP and the opportunity ahead, it's a very attractive return. Of course, we're not guiding to when you'll start to see that leverage in our P&L yet. It's premature, but we're certainly thinking about that in our business planning.

And lastly, will you be doing DTC next year, for instance, on both?

In 2021?

In 2022? Because you said '21, 6 months post, so you got in April. So I guess in October, you start DTC on the DRP.

Yes. As we move beyond, we'll be thinking about a lot of these investments on a product basis. So really about NUPLAZID overall. So I want -- yes. So when we move beyond 2021. We think about this really. And there's a lot -- there is some overlap between Parkinson's patients with dementia as well as DRP patients. And so there's a lot of synergy as we think about our marketing strategy across the 2 indications.

Got it, got it. Let's switch gears. Serge, and maybe just give us a sense of why trofinetide has a great chance of working in the Phase III. So we're going to get the data, I believe, around the end of the year, right? So not that long from now really. What gives you confidence this is going to work? Such a tough space.

Yes. And I will start by saying that, yes, we have a good level of confidence that Phase III trial will repeat success of our Phase II study, even though we remain conscious that this is a very difficult area to work in. And obviously, clinical trials are [indiscernible] in itself and particularly in this particular area. What I would say, our confidence comes from 3 elements. One is obviously the Phase II data and success of the Phase II study in which we use the same outcome measures that we are using in this trial and observed significant and clinically meaningful separation from placebo in that trial. The trial we are doing right now is essentially in its design repeat of that. The second element is that we are using the same research centers or same core group of research centers that we have used in the Phase II trial. Just as a reminder, that trial was done in the United States as well. And there is a limited number of specialized centers that are treating patients with Rett syndrome. And we are using all of those same centers that have a familiarity and not only expertise in the disease, but also familiarity with trofinetide and familiarity with the trial which -- and the instrument, essentially, the Rett behavioral symptom questionnaire, that is one of the co-primary measures, is invented by the investigators that are in the trial. So that's a second element. And the third element is we also learn from the Phase II trial and made a certain adjustment in the design as well as in the dosing regimen that we are applying that we believe will even improve chances for the success in the trial.

And how does your product differ from all these other products that have just not worked in Rett before, which is why you chose this one in the first place, when you all licensed this in 2 years ago, whenever it was?