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

Good day, ladies and gentlemen. Thank you for standing by. Welcome to ACADIA Pharmaceuticals First Quarter 2023 Financial Results Conference Call. My name is Corey, and I will be your coordinator for today.[Operator Instructions] Please be advised today's conference call is being recorded. I would now like to turn the presentation over to Mark Johnson, Vice President of Investor Relations at ACADIA. Please proceed.

Thank you. Good afternoon, and thank you for joining us on today's call to discuss ACADIA's first quarter 2023 financial results. Joining me on the call today from ACADIA are Steve Davis, our Chief Executive Officer, who will provide an overview of our performance and review of our business; Brendan Teehan, our Chief Operating Officer, Head of Commercial, will provide updates on our recent launch of DAYBUE for the treatment of Rett syndrome followed by commercial updates on our NUPLAZID franchise; Doug Williamson, our Head of R&D, will provide an update of our pipeline programs, and Mark Schneyer, our Chief Financial Officer, will discuss our financial results before turning it back to Steve for final remarks and opening the call up for your questions. In addition, Kathie Bishop, our Chief Scientific Officer and Head of Rare Disease, will be on the call and available for the Q&A session. I would also like to point out that we are using supplemental slides, which are available on the Events and Presentations section of our website. Before we proceed, I would first like to remind you that during our call today, we will be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events or future results are based on current information, assumptions and expectations that are inherently subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date. I'll now turn the call over to Steve.

Thank you, Mark. Good afternoon, everyone, and thank you for joining us today. Please turn to Slide 5. 2023 is off to a great start with strong progress across our 4 strategic priorities: First, in March, DAYBUE received FDA approval as the first and only treatment for Rett syndrome. Our team moved quickly to make DAYBUE of commercially available by mid-April, and we will be sharing updates on our launch execution with you today. Second, we continue to deliver steady volumes in our NUPLAZID franchise in Parkinson's disease psychosis. Our PDP business has generated increasing cash flows year-over-year every year since turning profitable in 2019. Third, we expect to complete enrollment for our Phase III study, ADVANCE-2, evaluating pimavanserin as a treatment for the negative symptoms of schizophrenia around midyear, and we'll have top line results early in 2024. And fourth, we've completed Phase I development of ACP-204, part of our next-generation 5-HT2A program. Our next steps are to meet with the FDA to discuss the clinical development plan to evaluate ACP-204 as a treatment for Alzheimer's disease psychosis. Let's begin with a quick recap of our DAYBUE approval and subsequent launch on Slide 6. Since the approval of DAYBUE on March 10, we've been working around the clock to deliver this first-ever treatment for Rett syndrome to the patient community. Rett syndrome is an extremely debilitating rare genetic neurodevelopmental disorder that severely impacts the lives of patients and their families. We are beyond excited to be launching this first-in-class first-to-market drug for a disease with such a high unmet need. The treating community is also excited. They've been extremely receptive and HCPs are moving quickly to prescribe DAYBUE having waited a very long time for an FDA-approved therapy. In parallel, we are engaged with payers in our first post-approval discussion. As it's typical with rare disease launches, we anticipate it will take some time for payers to adjudicate the initial prescription requests. As you would expect, we are working diligently with plans to obtain insurance coverage for patients who have prescriptions submitted to our hub. Although we are only 3 weeks into the launch, we are highly encouraged with the response we've seen so far, and Brendan will provide additional color on our launch execution to date. Now let's turn to NUPLAZID on Slide 7. Our NUPLAZID franchise continues to deliver steady volumes and gained market share in a contracted PDP market. In parallel, we have optimized and reduced our NUPLAZID commercial expense base, which has resulted in a significant increase in profitability for the franchise, providing a meaningful contribution to our overall business. Our first quarter performance of $118.5 million in net sales was driven by a year-over-year increase in demand bottles of 2%. Selling volumes were down slightly year-over-year as a result of quarterly inventory fluctuations which Mark will describe further in this session. We're beginning to see early indicators that our discussions with healthcare providers on the real-world evidence publications are gaining initial traction. This is evidenced by an increase in our market share of new-to-therapy patients for PDP. As we've laid out previously, there are 2 catalysts, which we believe can contribute to top line growth for our NUPLAZID franchise: One, as I just mentioned, is the awareness and understanding by healthcare professionals of the 3 real-world studies that demonstrate the benefits of NUPLAZID relative to the off-label atypical antipsychotics. So far, the initial feedback has been very positive on these data sets; and two is a return to growth for Parkinson's medication prescriptions as well as in-person patient visits returning to pre-pandemic levels, which we've not yet observed. And now let's briefly review our clinical programs on Slide 8. Doug will provide more detail in his section, but beyond our 2 commercial programs NUPLAZID and DAYBUE. We're developing multiple programs all focused on treating significant needs in CNS. A couple of quick updates. One, as we've noted before, the negative symptoms of schizophrenia has been an exceedingly difficult area with lots of industry [ failures ] over multiple decades and still no drug approved to treat this condition. With pimavanserin, we've achieved something very rare in this population, a positive pivotal study ADVANCE-1. So if our ongoing ADVANCE-2 Phase III study results are positive, we would be in a position to submit a supplemental new drug application shortly thereafter. Again, we expect to have results of this study in early 2024. And two, as I mentioned, we've completed our Phase I development work for ACP-204 and the lead molecule in our next-generation 5-HT2A program. The key takeaway here is that the Phase I work continues to support our target product profile, and we plan to initiate Phase II studies in Alzheimer's disease psychosis later this year. I'll now turn it over to Brendan to provide additional insights on our DAYBUE launch execution and NUPLAZID's commercial performance.

Thank you, Steve. Please turn to Slide 10. We are thrilled to have launched our second commercial product, DAYBUE, the first and only medicine ever approved for the treatment of Rett syndrome. As we've discussed throughout the development program, Rett syndrome is a highly debilitating disease with patients requiring lifelong continuous care and assistance with all aspects of daily living. DAYBUE and patient enrollment forms became available on April 17, ahead of our initial expectations. As we are only 3 weeks into the launch, we will not provide any specific metrics today, but we will share initial insights and color on our launch execution and the positive feedback we've received from the broader Rett community. Let's turn to Slide 11. First, our launch execution is going very much according to plan. As expected, we are receiving enrollment forms representative of the broad FDA-approved label DAYBUE has received for the treatment of Rett syndrome. With the broad label received back in March, we are pleased to see patient enrollment forms for both male and female Rett patients, both clinical trial participants and de novo patients, patients from all ages above 2 to well above 20 years of age, patients from both clinical trial sites, centers of excellence, high-volume institutions and from stand-alone neurology practices of the identified 4,500 diagnosed and treated Rett patients. As of today, our outreach proactively spans physicians treating well over 50% of the diagnosed Rett population. This includes engagement with 100% of Rett centers of excellence and clinical trial sites, which treat about 25% of the total Rett population. In fact, over 90% of our patients remaining from our open-label extension studies have started the process of becoming paid patients. We also have engaged a large number of the 300 high-volume institutions, which represent 60% of the patient population. And we're starting to engage the over 2,700 stand-alone neurology offices in the community setting. In addition, our launch execution includes development of key marketing materials, both print and digital, standing up and activating a speakers bureau to further educate the Rett treating community, engaging the community at medical congresses, including branded DAYBUE booths. Since approval, we have been actively engaging in a robust and productive dialogue with the payer community and as the process takes time, it's too early to comment further today. In addition to these payer engagement activities, our ACADIA Connect Support Services hub, along with our field-based family access managers are already providing meaningful support to both HCPs and families to provide the best financial assistance options given the patient's coverage to ensure timely access to DAYBUE. And finally, following our approval, we hosted our first Rett community caregiver focused live webinar, sharing information about the product, how to enroll a loved one and obtain a prescription, the path to access and all of ACADIA's robust support services. The webinar was a big success with over 900 caregiver attendees, well above our internal targets. I'd like to reiterate that while we are only 3 weeks into the launch, we are highly encouraged with the response we've seen so far. We look forward to sharing more on our next quarterly call. Now let's discuss our NUPLAZID performance on Slide 12. In the first quarter of 2023, we grew demand bottles 2% compared to first quarter last year. Our performance was driven by an increase in new-to-brand prescription share and new patient starts across both the office space and long-term care channels. Beginning in fourth quarter and continuing now into the first, we have observed early indicators of growth in new patient starts for NUPLAZID. As you may recall, new patient growth was negatively impacted during the pandemic as a direct result of the reduction in the overall patient population, fewer patients coming into the office or being admitted to a long-term care facility and a decrease in prescriptions of foundational PD treatments like carbidopa and levodopa. Thus, by maintaining steady volumes for NUPLAZID, we are actually continuing to grow share in an otherwise contracted PDP market. Furthermore, we are encouraged by the high level of engagement we are seeing from HCPs when presented with the real-world evidence data highlighting the potential differences in treatment with NUPLAZID compared to off-label antipsychotics. These datasets on mortality, safety and healthcare resource utilization create an important ongoing dialogue with physicians to further differentiate NUPLAZID as the first and only treatment option for their PDP patients. We are pleased that our teams have grown market share and achieved early indicators of growth in new patient starts, all while continuing to optimize and reduce our NUPLAZID commercial expense base. With a focus on both top and bottom line, I'm proud to say that the NUPLAZID franchise has continued to grow profitability each year since turning cash flow positive in 2019. And with that, I'll turn it over to Doug Williamson to provide an update on our clinical programs.

Thank you, Brendan. Please turn to Slide 14. Firstly, to support the debut launch efforts. We continue to set up important opportunities for scientific exchange and sharing of medical information while also generating important new data for the Rett community. Our medical affairs team is off and running, including our medical science liaison team who have already delivered important scientific information and clinical education about DAYBUE to the Rett community. We continue to have a meaningful presence at the key medical congresses that are central to the Rett community, including the American Academy of Neurology Congress, or AAN, in April, and the upcoming International Rett Syndrome Foundation conference in June. At AAN, we presented several posters which included important clinical presentations and data as well as surveys on disease education. In addition, we're excited for 2 very important clinical publications, which should be available in the coming months. One is the publication of the Phase III LAVENDER results and the other is a white paper on the best approaches to GI management associated with trofinetide. Finally, in the next month or so, we'll be initiating a large-scale prospective naturalistic study to learn more about how DAYBUE is best used in a real-world setting. Let's move on to our clinical programs, starting with pimavanserin as a potential treatment for the negative symptoms of schizophrenia on Slide 15. Persistent negative symptoms remain one of the largest unmet needs in schizophrenia. And as of today, there are still no approved treatments for these symptoms. The negative symptoms of schizophrenia are characterized by social withdrawal, lack of emotion or flat affect. Our adjunctive pimavanserin program is designed to treat the approximately 700,000 patients in the U.S. whose positive symptoms, the hallucinations, delusions and other psychosis are adequately controlled, but who still suffer from persistent and uncontrolled negative symptoms, inhibiting their ability to lead a normal productive life. Our second pivotal study, ADVANCE-2, is almost identical to our positive ADVANCE-1 study, but with 2 key differences: First, a clear learning from the ADVANCE-1 trial was that the optimal therapeutic dose for further evaluation of pimavanserin in negative symptoms of schizophrenia was the 34-milligram dose. And this is indeed the dose we're evaluating in ADVANCE-2; and second, it's well understood in our industry as well as by the FDA that placebo responses have become less reliable in U.S. schizophrenia trials over the past couple of decades. We also observed this in our U.S. sites of our ADVANCE-1 trial. And so now that we have the U.S. exposures we need, ADVANCE-2 is being conducted solely in sites outside the U.S. ADVANCE-2 is close to completing enrollment, which should occur around midyear with top line results in early 2024. Please turn to Slide 16. I'd like to provide an update on our next-generation 5-HT2A program and specifically the lead molecule ACP-204, which we're developing as a potential treatment for Alzheimer's disease psychosis. Similar to pimavanserin, ACP-204 works primarily by blocking 5-HT2A. We believe this mechanism is ideally suited for elderly populations, and with ACP-204, we are seeking to build on our learnings from pimavanserin. As Steve mentioned, we have completed our Phase I work for ACP-204. In these studies, in both healthy adults and elderly volunteers, we've focused on characterizing receptor occupancy and exposure and optimizing the doses we plan to evaluate in Phase II development. ACP-204 continues to demonstrate a very favorable safety and tolerability profile. In addition, we have confirmed that ACP-204 reaches steady state in less than half the time so roughly 5 days compared to around 12 days of pimavanserin, and this could potentially translate into a faster onset of action. Our work completed to date also appears to support our target product profile of minimizing the risk of QT prolongation. Our next steps are to meet with the FDA and discuss the future clinical development plan for ACP-204. Now I'll turn it over to Mark for a financial update.

Thank you, Doug. Let's review our quarterly performance on Slide 18. In the first quarter, we recorded $118.5 million in net sales, up 3% from the first quarter of last year. Our gross-to-net adjustment for the quarter was 29.3%. Year-over-year demand growth was up approximately 2% in the quarter driven by an increase in new patient starts across both channels. As Steve mentioned, selling volume declined approximately 2% year-over-year as in-channel inventory declined in the first quarter of 2023 compared to an increase in in-channel inventory in the first quarter of 2022. R&D expenses decreased to $69.1 million in Q1 2023 from $128.9 million in Q1 of 2022. The decrease is related to a $60 million upfront payment for our Stoke collaboration, which we recorded in Q1 2022. SG&A expenses increased slightly to $101.2 million in Q1 2023 from $96.7 million in Q1 2022. We continue to expect SG&A expenses to be essentially flat for 2023 versus 2022. This is a result of: one, the optimization and reduction of our NUPLAZID commercial expense base; and two, making the right investments to execute a successful launch of DAYBUE. We ended the quarter with a cash balance of $402.9 million compared to $416.8 million at the end of 2022. Our balance sheet remains strong, and we are confident in our ability to execute on our current business plan with our existing cash resources. As you can see on Slide 19, we are reiterating all guidance measures for 2023, including net sales, gross-to-net and expense ranges. And now I'd like to turn the call over to Steve for closing remarks.

Thanks, Mark. Please turn to Slide 21. I'd like to end today's prepared remarks focused on our execution across our 4 strategic priorities: first, DAYBUE was recently approved and launched only 3 weeks ago, we look forward to providing our first quarter of net sales for DAYBUE and appropriate performance metrics on the next earnings call; second, in our PDP commercial franchise, we look forward to continuing to driving share growth and profitability of NUPLAZID; third, we plan to complete enrollment in our Phase III ADVANCE-2 study for the negative symptoms of schizophrenia midyear with top line results expected in early 2024; and finally, we plan to meet soon with the FDA to discuss the clinical development plan for ACP-204. As always, I'd like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate life.

[Operator Instructions] Our first call comes from Ritu Baral of TD Cowen.

I will just ask one. It's on your new payer discussions for DAYBUE, can you give us any more color on what those are focusing on? Specifically, are you seeing any unexpected prior-authorization requirements or, I guess, restrictions to a certain patient population, patient age, patient size, say, to the Phase III requirements? Or are they open to prescribing per label?

Thanks much for the question, Ritu. Brendan, do you want to take that?

Sure. Ritu, thanks for the question. And yes, we have been engaging payers ever since we got our final label. They've been very good and constructive encouraging discussions with payers. I think that they've largely demonstrated that they're following the process we would have expected for rare disease -- for rare disease products. We are working with them logistically to get early patients access through what would be considered a medical exception or a letter of medical necessity process, that is precisely what we expected and is going according to plan. We have not yet seen policy decisions. Those do happen -- can happen in a relatively short period of time, as you know. Some can take 30 to 60 days, more will take in the 60- to 90-day range and some can take up to 180 days. But as of now, we're really working in that interim period to get those first identified patients put on therapy while those policy decisions are being made.

And is there openness to reimburse, I guess, to the label versus clinical trial admission -- I'm sorry, inclusion criteria.

Yes. Thanks again for the question. We are -- I guess, I'll say we're very pleased by, first of all, the breadth of the label that we've received -- we are encouraged by the breadth of enrollment forms that we've gotten from clinicians, from the youngest of patients to patients well over the age of 20, and we've also seen enrollment forms that have come from each of the different types of treatment settings from clinical trial sites all the way through to standalone neurology practices. And thus far, I think payers are working closely with us to gain -- to provide access to those early patients. We have not seen a meaningful restriction in these early days.

Our next question comes from the line of Charles Duncan at Cantor Fitzgerald.

Hopefully, you can hear me...

Charles, you are very low, sir.

Okay, I'll try to speak up. I had a question on the [indiscernible] registry and for Rett. And I'm wondering what you think that will enable in terms of the production as well as the 2 [indiscernible] here you mentioned particularly [indiscernible] publication you see.

Charles, I'm sorry. On our end, we can't hear you. We can hear you talking, but we can't make out your question.

Can you hear now?

Yes, much better. Yes, please continue. Go ahead, Charles.

Sorry about that. Sorry for taking in from the call. In terms of the Rett registry, how will that help you to drive adoption for DAYBUE as well with the 2 upcoming publications, has there been a pushback on the use of DAYBUE and management of diarrhea.

Thanks much for the question, Charles. We've heard it this time. Brendan. I'll let you take that.

Sure, Charles. Thanks so much for the question. So in the real-world setting, we've been in the privileged position of being able to proactively communicate the benefits and tolerability profile of DAYBUE. We've been able to do that with clinicians and we've been able to do that with families as well. So I would say with the appropriate GI management plan, it's been very well received. In fact, I would say that the feedback has been very positive, especially when we can reference the label itself that shows the clarity on discontinuing anti-constipation medicines as the FDA saw fit to put in the label. And then I guess beyond that, we learned so much from the Phase III program that we're able to surround both clinicians and families with the type of support they need. We have our field-based family access managers, 18 of them that are paired specifically with the caregivers and patients and HCPs to make sure that we've set the right expectations for the best of treatment plans. And I don't know if Doug or Kathie wanted to speak about the real-world evidence piece -- real-world study.

Yes. Kathie, you want to comment on that.

Yes, I'll take this, and Doug, you can chime in if I miss something. So Charles, as I mentioned on the call, as we roll out the launch. In parallel with that, we're offering patients the option and it's just an option if they want to. Caregivers can choose to enroll their Rett patient into a real-world evidence study. Just as Brendan mentioned that we learned a great deal through conducting the clinical trials. We are launching this study to learn additional information about how DAYBUE would be used in the real world both in terms of what efficacy it [ will ] affect over the long term and as well how clinicians and caregivers choose to manage the diarrhea in the real world, which I think is a lot easier to do outside the confines of the clinical trial where you're maybe on placebo, you also are confined to study budgets and things like that. So that's really the purpose of the study. It's sort of an optional add-on for patients who will go on commercial drug.

Our next question comes from Tess Romero of JPMorgan.

So beyond net revenues from sales of DAYBUE, what are the key metrics you will be providing the Street to gouge the health of the launch? And if you cannot provide those metrics to us today, qualitatively, how should we think about kind of what the key buckets or areas that you see as most valuable.

Yes. Thanks much for the question, Tess. Mark, do you want to take that?

Yes. Thanks Tess. As we mentioned, we're only 3 weeks into launch. And at this stage, we just don't think it's constructive to share metrics today or even -- or just to sharing specifically what we will share on the next call. What we can commit to you and the investment community is that we not only will provide net revenue on our next call, but we will provide a reasonable set of metrics that we find will be meaningful at the time and going forward to give you insight in our progress on launch.

Our next question comes from Tazeen Ahmad at Bank of America.

Can you hear me?

Yes. We can, Tazeen.

Just wanted to ask you about ACP-204. As far as the Phase I data, when exactly should we be expecting to see that? And what level of data should we expect to see.

Great. Thanks much for the question. Doug, do you want to take that?

Sure. So in Phase I, we explored and characterize the receptor occupancy and exposure and basically use that data internally to optimize the doses that we plan to evaluate in Phase II. So we don't plan to share details of the Phase I data, and it's really more important for those internal decisions and for the Phase II plan going beyond that. So we'll release more information once we've agreed on a development plan with the FDA and probably issue a press release after that meeting.

Have you requested a meeting yet?

We have.

Our next question comes from Neena Bitritto-Garg from Citi.