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

Good morning. Welcome to the Bank of America Healthcare Conference. I'm Tazeen Ahmad. I'm one of the senior SMID biotech analyst here. It's my pleasure to have our next presenting company, Acadia Pharmaceuticals with me up here on stage. To my right is Steve Davis, who is, of course, CEO of the company. And to my left is Mark Schneyer, who is CFO. Steve and Mark, good morning. Thanks for coming to Vegas. So maybe we could start off, Steve, with a quick overview of Acadia, a 2-minute elevator pitch on the company, its background and then we can go straight into Q&A.

Perfect. So I'll try to keep it in 2 minutes and then we can spend a productive time in Q&A. So 4 things I'll touch on this morning. We have 2 commercial products today, NUPLAZID for Parkinson's disease psychosis and Daybue for Rett syndrome. So I'll give you just a brief snippet on each of those, and I'll talk about a couple of our pipeline programs. With NUPLAZID, we have the first and only drug approved to treat Parkinson's disease psychosis. We'll do well over $0.5 billion in sales this year. This is a franchise that has become increasingly profitable for us year-over-year since turning profitable this franchise that is in 2019. We've guided $520 million to $550 million in net sales this year. And we're very excited about 2 aspects for potential catalysts for additional growth here. One is just recognizing that in Parkinson's disease, we're operating in a smaller market than we were prior to the pandemic. So it's constrained. We've had steady volumes there, continue to increase our market share and continue to become more and more profitable during this time frame. And second, there were 3 real-world evidence studies that came out in the second half of last year or early this year, that all illustrate the benefits of pimavanserin over off-label use of atypical antipsychotics to of the study is focused on mortality rates, showing a statistically significant benefit to NUPLAZID. The third study focused on health care resource utilization that's been particularly relevant in the long-term care setting, also showing a statistically significant benefit to NUPLAZID, fewer hospitalizations, et cetera. So we're very excited about that franchise. We're beyond excited to be launching a drug to treat Rett syndrome. This is a highly, highly debilitating disease. There's no -- prior to the approval of Daybue, there was no drug approved to treat this disorder. And we're super excited about that. We're 3 weeks into the line. So I'm sure we'll spend a lot of time talking about that. But I'll just suffice to say at this point, and I probably won't be able to say this next time we -- you hear me talk -- but at this point, everything is going exactly according to plan. Now in launches, that's never the case all the way through the entire launch. So I'm sure there'll be things that come up. But so far, everything has gone extremely well. We're very excited about the launch and everything we're seeing to date. In addition to our 2 commercial products, we have a Phase III program that's about to ramp up for the negative symptoms of schizophrenia. I'm sure we'll talk more about that. We'll have results of that in early 2024. And then we have a program that's transitioning, we've completed Phase I, transitioning into Phase II for Alzheimer's disease psychosis. This is our next-generation 5-HT2A blocker. So in the same family as NUPLAZID or [indiscernible] approved for Parkinson's disease psychosis. This drug we're targeting Alzheimer's disease psychosis, which is dramatically larger. It's a BaaS market with a high unmet need of drugs approved to treat it. So we're very excited about that. Business development continues to be a very important part of our business as well. And I'm sure we'll touch on that, too.

Okay. Perfect. Thanks for that overview. So let's talk about NUPLAZID. It's now becoming a more mature launch in your original indication, PDP. We've talked about the areas you've talked about the areas of potential additional growth on several earnings calls. But maybe we could drill a little bit further into one particular aspect, which is long-term care LTC. It's something that you've spent time on already was negatively impacted for obvious reasons during the pandemic. I think initially, you had said that the climb back to normal was taking a little bit longer, but perhaps you're seeing some signs of normalization after the first quarter. Can you talk to us exactly about how much resourcing you've devoted to LTC and why you thought that was worth the investment and on a go-forward basis, like what percent of your growth do you think could come from there?

Yes, yes, happy to. So long-term care today represents about 25% of our business in Parkinson's disease psychosis. So the 2 channels, long-term care and then what we refer to as the office-based channel. So these are patients that don't live in a long-term care facility that travel is see their doctor. Both channels were significantly impacted by the pandemic. Initially, of course, very high mortality rate in this population, so the population just got smaller. Now over time, that will correct itself. But in addition, just much more reduced access, both to their doctors in person, this is particularly in the office-based channel, where patients just still have not got back anywhere close to the rate at which they were visiting physicians in person. That's important because when physicians are tend to be reticent to prescribe a new drug unless they're seeing in person. And then in the long-term care channel, we also just had a reduction in terms of the ability for us to get into a lot of those facilities. So both of those have improved some, but they're not back to pre-pandemic levels. So as a consequence of that, we, as I mentioned in my opening remarks, we've continued to have steady volumes in a smaller market and spending much less so much more profitable product. As we look forward in terms of where we stand today and looking forward, in the office-based channel, we're not seeing a lot of change there yet in terms of new growth with one exception, I'll come back to in a second. In the long-term care channel, we are beginning to see occupancy rates begin to rise. We are seeing our ability to get into some of these facilities improve. And most importantly, the real-world evidence study I referred to in my opening remarks regarding health care resource utilization has really begun to resonate in the channel. So we are seeing some signs of growth there that are more -- that are larger than the indications of the growth that we're seeing early indications of the growth in the office space channel. So let me switch there now. So in the office-based channel, again, pandemic conditions pretty much unchanged, slightly improved. But the real-world evidence studies, 2 studies there, both focused on mortality have been resonating in the medical community. And so we're seeing some early signs of traction there. I think that I would encourage you to -- as we're very, very focused on, to continue to keep an eye on this. I think it has the potential to be the sales curve and provide a source of new growth. And of course, in addition to just pandemic conditions, ultimately, we will, at some point in time, get back to getting into doctors' office in the manner that we were performing.

And so how do you think the trend for sales will continue for the rest of the year directionally just given the early signs of recovery that you've noticed here?

So in the guidance that we provide, of course, we have a range of outcomes. And so at the midpoint of the guidance, we have very modest growth in demand reflected and that reflects kind of the steady volumes that we've been experiencing a slight uptick versus a slight downtick that we had been seeing, but pretty steady, again, with the caveat that we have these 2 potential catalysts for growth going forward.

What about gross to net? That's a question that we tend to get asked pretty often. Has that stayed relatively stable? Or do you see seasonality quarter-to-quarter?

I'm going to let Mark speak to this. We do see seasonality. And of course, we see an impact from that. So Mark, do you want to give more detail?

Yes. So I think the main change year-over-year has been the impact of the inflation reduction. So through our kind of last pricing action on NUPLAZID going back into last year, we're about 6.5% over the inflation adjusted cap for NUPLAZID. So when we translate that to gross to net, it's about a 4% to 5% increase on gross to net quarter over -- if you're looking for -- certainly, if we look at the first quarter this year, we had a 29.3% gross to net, it was a little over 25% last year. Almost all of that is reflective of an impact from the inflation Reduction Act. We still have seasonality in the business, right? One of the -- we're at least in the gross net aspect, mostly as it relates to our obligation for as patients go through the doing for the Medicare deep patients. So we see the highest in gross in the first quarter, lower in the second and third and a little higher in the fourth. So we'll still see that dynamic plus the impact of the inflation Reduction Act through the first 3 quarters of this year and next -- in the fourth quarter, we already had impact last year.

So on a go-forward basis, should that be our going assumption of what gross to net is going to look like for the company?

Depending upon where we are with the inflation reduction we're continuing to maintain to be over a little bit based upon future pricing actions, then you'll see it where it is or plus or minus. And if we go down, it can go back to more historical.

Okay. So let's maybe discuss additional indications. So maybe let's start with the ADVANCE-2 trial design. Where are you in pursuing that next indication? And can you give us a sense of how big the negative symptoms of schizophrenia market actually is?

Yes. Thanks for the question. I'm going to take a little bit of a running start at it. First, I want to just make sure we're all level set in terms of what negative symptoms schizophrenia represents. So schizophrenia patients have both typically both positive and negative symptoms, positive symptoms are the psychosis, hallucinations and delusions, paranoia, et cetera, that they experience. The negative symptoms are represented by the social withdrawal aspects of the disease. The negative we have drugs that treat the positive symptoms, there is no drug approved today to treat the negative symptoms. Now every antipsychotic that's approved typically will have a knock-through benefit on negative symptoms when you reduce the positive symptoms. Down the hallucinations, delusions, patients feel a little bit better. And you see a -- usually, it's a temporal benefit on negative symptoms. Sometimes it's longer term. But almost half of schizophrenia patients, once you reduce those positive symptoms, which again we see in almost all of these studies studying antipsychotics for 6 or 8 weeks, about half of patients if you go longer term have predominant negative symptoms that still dramatically impact their line. That's the type of negative symptoms that we're seeking to treat. So our study is 6 months, not 6 weeks, where the primary important study is NS-16 so the negative symptom assessment score on 16 different aspects of the disease, and it's the same endpoint we had in our first negative symptoms of schizophrenia study where we saw something that you don't often see in negative symptoms. It's been a graveyard of attempts to develop drugs nothing's been approved so far despite decades of attempts. And what we saw in our ADVANCE-1 study was a positive pivotal study, you just don't see that very often. So we're very excited, very encouraged. Our current study for negative symptoms of schizophrenia ADVANCE-2 is virtual identical to are the first study with 2 exceptions. One, we allowed for some dose ranging. So dosing below the dose that were approved in Parkinson's disease psychosis as well as at that dose. We saw that clearly, we saw more of a benefit at the top dose, 34-milligram dose. This study is only 34 milligram dose, so that we won't have any dilutive effect from having lower doses. And then secondly, this study is being conducted entirely outside of the United States. And in schizophrenia, that's a good thing. The FDA has even commented on the fact that it's becoming just more and more challenging to separate from placebo and schizophrenia studies in the United States. It's a topic of a separate discussion, but it has a lot of the way schizophrenia is treated here versus Europe and other geographies. And so we have enough patients from ADVANCE-1 in the U.S., we don't need more. So this study is being entirely run outside of the U.S. In terms of the size of the population, I mentioned, it's 40% to 50% of patients have these predominant negative symptoms. Numerically, that translates into about 700,000 patients with negative symptoms that continue to need a treatment after they have a drug that controls as best as they can that position. So it's a very sizable population. It's multiple times larger than the PDP population. And we're eager to complete enrollment, which we will around the middle of this year get results early next year.

Okay. So what would good data be when you report that data next year?

Would good data be? Yes. So given the very high unmet need, nothing approved. If we have a positive study here, we will absolutely follow that at that point, we'll have 2 pivotal studies, demonstrating benefits of the drug that obviously meets the typical standard by the FDA, and we're prepared to submit very quickly after getting results of the study.

Okay. If you were to commercialize there, what kind of impact do you think or what kind of changes do you think you would need to your commercial sales team?

So it would require an extension of our sales team. So today, our sales footprint for NUPLAZID is in Parkinson's disease psychosis. Although it's a psychiatric symptom, it is treated almost exclusively by neurologists. So we're -- which has been a nice advantage to leverage with Daybue, which is also, of course, treated by neurologists. So we have a significant presence in neurology. But again, NUPLAZID is a drug that treats a psychiatric symptom. We do have some psychiatrists that treat PDP, mostly geriatric psychiatry is focused on long-term care. But the larger population there would really be treated primarily by standard psychiatrists, and we would need an additional footprint in order to cover that.

Okay. And you haven't talked about what size that might be?

No, we haven't. But I would just say that in today's environment, the way we detail drugs, it doesn't require nearly the footprint that would have been required a decade ago when the largest drugs in the industry were neuropsychiatric drugs for antidepressants and antipsychotics. So it's a much smaller footprint today, a very manageable extension from where we stand.

Okay. So maybe lets -- you mentioned Daybue, so let's go ahead and talk about that. No pun intended, but how's the debut of Daybue.

Thank you. It's going really well. As I mentioned, we're very, very excited about this launch. It would be impossible not to get emotionally vested in this community after you talk to caregivers and you talk to medical professionals. even KOLs that have been treating this for decades, many times get choked up when they talk about this disorder. And both the burden of this stabilitating disease, but also just how inspiring these families are and the patients are. And so we're experiencing that and it just -- it's obviously highly motivating to us. To get more to the matter at hand for this audience, as I mentioned, we launched 3 weeks and 2 days ago. So there's not much I can share in terms of metrics or quantitatively, but qualitatively, I would just say everything has gone precisely according to plan. That applies to the medical community, patient advocacy, payers, distribution of product, et cetera. So everything so far is going really well. When we get to our next earnings call, we'll have a little bit more data to speak to.

And yes, on that point, what kind of color should we expect on the early metrics for Daybue, like patient numbers, scripts written, number of doctors that have prescribed -- just give us a sense of what to expect.

So I appreciate -- I'm going to apologize in advance for probably the less than satisfactory answer. I'll give. We understand the desire, and we will be sharing KPI information on the next earnings call. We haven't specified what we -- we know are everything that we're monitoring and measuring, but specific yet exactly what that will be. And the reason is in early days of launch, sometimes these things move around quite a bit. And we'll -- it's in our best interest to provide just as much information as we can to help you think about the business the way we think are thinking about it. But sometimes early days of the launch, information just has more potential for misinterpretation than not. And so we'll provide everything we possibly can. We haven't specified yet exactly what that will be.

Are you able to share, Steve, if in the 3 weeks and 2 days that you've been launched, whether you've had a patient go from being prescribed to actually on commercial reimbursement for the drug?