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

Hello, and thank you for standing by. Welcome to ACADIA Pharmaceuticals Conference Call. [Operator Instructions] I would now like to hand the conference over to Jessica Tieszen. Ma'am, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining us on today's call to discuss Acadia's expanded agreement with Neuren Pharmaceuticals. Joining me on the call today from Acadia are Steve Davis, our Chief Executive Officer, who will provide some opening remarks before turning it over to Brendan Teehan, our Chief Operating Officer, Head of Commercial, to discuss the debut launch. Mark Schneyer, our Chief Financial Officer, will discuss the financial terms of the Neuren agreement as well as review preliminary second quarter net sales and updated guidance. Steve will finish our prepared remarks with some closing thoughts before opening the call up for your questions. In addition, Doug Williamson, our Head of R&D; and Kathie Bishop, our Head of Rare Disease and external innovation, 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 will now turn the call over to Steve.

Thank you, Jess. Good afternoon, everyone, and thank you for joining us. Please turn to Slide 4. I'm pleased to announce today that Acadia has acquired exclusive worldwide rights to trofinetide as part of an expanded agreement with Neuren Pharmaceuticals. We've also acquired worldwide rights to Neuren's clinical stage development candidate, NNZ-2591, in Rett and Fragile X syndromes. Our expanded agreement follows our April 2023 launch of trofinetide, which is marketed as DAYBUE in the United States, as the first and only drug approved for the treatment of Rett syndrome. This worldwide expansion advances our rare disease strategy and highlights our commitment to pursuing innovative new products. The unmet need in Rett syndrome outside of the United States, is very similar to the dramatic unmet need that we see inside the United States, is a very debilitating disorder with no approved treatments outside of the U.S. Regarding potential addressable population, the worldwide instance rate of Rett syndrome is pretty constant. Therefore, for example, the prevalent population in Europe is somewhat larger than U.S. and in Japan it is somewhat smaller. Please turn to Slide 5. As Brendan will describe in greater detail in a moment, the debut launch is off to a great start. The Rett population is adopting faster than expected. Health care professionals and caregivers are reporting benefits. Approximately 20% of covered lives have a written policy in place. And our launch operational execution is going exactly according to plan. In our announcement today, we provided preliminary second quarter net sales of DAYBUE in the range of $21 million to $23 million. We also provided third quarter guidance on DAYBUE net sales in the range of $45 million to $55 million. While it's still very early days in the launch, at this point, the demand we're seeing for trofinetide in the Rett community has exceeded our plan. While it is premature to draw long-term conclusions on compliance and persistency, we're very encouraged that the hard work we put into educating the medical and caregiver communities appears to be making a difference. However, once again, I want to stress that it's still very early days. In addition, we've made very good progress in establishing access to trofinetide, most patients on therapy today have given access under a letter of medical necessity as most payers have not yet adopted a formal written policy. And with that, I'd like to pass the call over to Brendan to discuss the launch in more detail.

Thank you, Steve. As Steve noted, we're excited to have the opportunity to serve the Rett community worldwide as a function of this agreement. Today, I'd like to give you a little more insight into the early days of our launch of DAYBUE for the treatment of Rett syndrome here in the United States. As a reminder, DAYBUE received FDA approval in March 2023, and then we made the product commercially available in mid-April. So I'll be sharing insights from commercialization over the first 12 weeks of the launch. Let's start with the market demand dynamics. As we previously described, we expect the demand to be high and it has been in the early days of the launch. We also expected demand to be somewhat moderated by patients and caregivers gaining access to their Rett physicians who generally have small staff and are seeing patients largely through scheduled Rett Clinic days generally once or twice monthly depending on resourcing. Patients, caregivers and health care professionals are also working through the early prior authorization process with their payers to gain appropriate access to DAYBUE. Let me double-click on a couple of topics and provide a bit more insight. As we noted, our first focus was on assisting our clinical trial patients in converting over to commercial therapy once they completed their participation in the open-label extension portion of our Phase III studies. This conversion has continued to progress as expected. From here, we turned our attention to the broader Rett patient population, first focusing on the Rett centers of excellence and high-volume institutions where a disproportionate number of Rett patients are treated. As anticipated, we are seeing significant demand in all treatment settings. There were a few centers of excellence in particular, that contributed to our early strong uptake. That said, we are also encouraged by the breadth of prescribers we are seeing from not only centers of excellence but also high-volume institutions and smaller community-based practices. We will work diligently with these existing centers and new prescribers as they continue to see additional Rett patients many for the first time since the product's approval. Our sales team is gaining access to these Rett centers, and we are pleased by the reception we're receiving and the relationships we're establishing with these treatment teams. Next, as you know, we established a comprehensive support system for patients, caregivers and providers, comprised of our dedicated distribution and specialty pharmacy services, our patient HUB staffed by clinical nurse care coordinators, our clinical pharmacists and benefit services team as well as our field-based family access managers who are all specifically paired with each new DAYBUE patient and family as they initiate their treatment journey. The goal here is to set the appropriate clinical benefit and treatment management expectations with physicians and families to ensure the optimal initiation and treatment journey for the patient. We are pleased by all the feedback we have been receiving regarding the high quality of the personalized service our teams are providing. Most importantly, we are excited about the clear clinical benefits caregivers are sharing with us about the day-to-day meaningful improvements they are seeing in their loved ones who have started treatment with DAYBUE. Caregivers are readily reaching out to their family access managers to share these early success stories, often noting abilities their daughters or sons are demonstrating either for the first time in a long time or for the first time ever. Let me now turn to compliance and persistency. What we know from market research and discussions with our prescribing physicians is that the majority of health care professionals are titrating up on dose for DAYBUE with their patients to find the dose that works best for the individual patient. With that background, it will take some time for us to see what titration will mean to both the average dose per patient over time as well as the refill rate. As stated above, we have a highly valued proactive program to educate health care professionals and caregivers on the benefits of DAYBUE as well as GI management, which we believe is leading to thoughtful titration to find the best dose to provide long-term benefit for these patients. In addition, physicians and families have been very receptive to other elements of our GI management plan, including management of anti-constipation medications as described in our package insert. While it's very early, we are very encouraged that this titration regimen of the GI management plan that we've invested in heavily appeared to be showing benefits. Let me turn to payer policy and access. It's still early innings regarding access. However, patients covering approximately 20% of Rett patients have issued a written policy for DAYBUE. These formal plans generally have been consistent with our expectations. Where formal plans don't exist, which is the case for the vast majority of patients on therapy, access has been granted by medical exception. Of course, we work diligently with payers as they establish formal policies at the remaining plans. We continue to work very closely with plans to ensure broad access for DAYBUE to all appropriate patients. As a reminder, we are very pleased with the DAYBUE label, which has no restrictions on gender, no age restrictions over -- from 2 years or older and no requirement for MECP2 testing. Let me turn to our operational execution. Our sales teams have established very good access to centers of excellence, high-volume institutions and key community practices and we're seeing prescriptions coming from each of these treatment locations. Our HUB services and family access management teams are supporting successful patient onboarding and continued HCP patient and family engagement along the treatment journey. And finally, our treated patient population is very much in line with our age, weight and gender expectations for the patients being treated in the early post-launch phase. We look forward to sharing more insights as we progress through the -- into the launch of DAYBUE. I'd like to turn the call over to Mark starting on Slide 7.

Thank you, Brendan. Let me briefly describe the financial terms of the expanded agreement on Slide 7. As you can see on the left side, the financial terms for our existing rights to trofinetide in North America remain unchanged. Moving to the right side, the consideration for our expanded rights to trofinetide outside North America, and for global rights to NNZ-2591 in Rett syndrome and Fragile X include a $100 million upfront payment region-specific milestones for trofinetide in Europe, Japan and Rest of World as listed in the table. These milestones are awarded upon first commercial sale and the achievement of annual net sales thresholds. Region-specific tiered royalties for trofinetide ranging from the mid-teens to low 20s as a percentage of trofinetide net sales. And for NNZ-2591 global payments for this asset are identical to the global payments for trofinetide. The upfront consideration will be funded from cash on hand. Our cash balance continues to be strong as we are already close to cash flow breakeven and our results from DAYBUE will accelerate our pathway to becoming cash flow positive. We ended Q2 with a cash balance of approximately $375 million and we will have pro forma cash of approximately $275 million after completing the transaction. We do not require any additional financing to support our current business plan, which now includes: execution of the North American trofinetide opportunity and the continued advancement of our pipeline, including our Phase III program with pimavanserin and negative symptoms of schizophrenia; our Phase III program for Prader-Willi syndrome with ACP-101; our Alzheimer's disease psychosis program with ACP-204 in our early-stage portfolio. Please turn to Slide 8. Today, we are also announcing preliminary Q2 net sales ranges as well as forward-looking guidance for DAYBUE and NUPLAZID. Starting with DAYBUE, we expect to record Q2 net sales within the range of $21 million to $23 million and are providing a Q3 net sales guidance range of $45 million to $55 million. As discussed by Steve and Brendan, the launch is off to a great start, and we are highly encouraged at the level of demand we are seeing for DAYBUE. Our Q2 preliminary net sales benefited from the prevalent population adopting faster than expected, both from patients converting from our open-label extension trial as well as from naive patients starting therapy. As a reminder, our longer-term net sales trajectory will be influenced by patient compliance rates and levels of persistency. As most of our patients are titrating their initial doses and have only had 1 or 2 scripts filled, we are not yet at the stage where we have meaningful data on the go-forward rates of compliance and persistency. And finally, we continue to engage with payers as many of them are still working to formalize their reimbursement policies. Let me now turn to NUPLAZID. We expect to record NUPLAZID Q2 net sales within the range of $140 million to $144 million. This represents approximately 3% year-over-year of demand and selling growth. Our Q2 growth in NUPLAZID was driven by an increase in new patient starts across both office-based and long-term care channels with particularly strong performance in long-term care. Based on our year-on-year performance and now that we're halfway through the year, we are narrowing our full year net sales guidance range for NUPLAZID, we are increasing the bottom end of the range by $10 million to $530 million, and adjusting the top end by $5 million to $545 million. I'll now turn it over to Steve for closing remarks.

Thanks much, Mark. I'd like to end today's prepared remarks by highlighting our execution across our 4 strategic priorities on Slide 9. First, as we highlighted today, our execution of the DAYBUE launch is going extremely well, and we're seeing early uptake faster than planned. And today, we acquired worldwide rights to trofinetide. Second, NUPLAZID in PDP is delivering steady volume and increasing market share while increasing profitabilities. 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 the first quarter of 2024. Fourth, we plan to initiate a global Phase III study of ACP-101 for Prader-Willi syndrome in the fourth quarter of 2023. And finally, we plan to commence Phase II clinical studies of ACP-204 in the second half of this year. We look forward to providing additional updates on our second quarter earnings call. As always, I would like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate life. I'll now turn things back over to the operator.

[Operator Instructions] Our first question comes from the line of Neena Bitritto-Garg with Citi.

Congrats on the update. I'm just curious if you can give us some more details on the trofinetide launch, in particular, if there was any stocking or any inventory impact in the likely range that you provided? And then also if you could give us some details on the number of patients that you actually had on drug at the end of June, just so that we can get a sense of how the guidance quarter-over-quarter, what that implies about patient numbers in Q2 and Q3?

Yes. Brendan, I'm going to let you take the first question, Mark, I'll ask you to take the second.

Sure. Thanks for the question. As it relates to inventory, no, the inventory was not a component of our performance. The second question around patients, I think that we're more focused on, at this very early stage, trying to give you the right types of metrics that will avoid misinterpretation of the early kind of post launch dynamics, that's why we're giving guidance for the third quarter to give you a sense of progression from where we are today to where we think we'll be roughly 90 days from now.

I think you've answered both questions. That's all right. Mark, did you want to add something?

Yes. Just I think the revenue recognition model for DAYBUE will be different for NUPLAZID. So there's no kind of difference between selling and demand. We have a single specialty pharma distribution, we sell on a consignment model. And then it's only really right before a script is filled that this distributor takes possession in ownership and then we recognize revenue. So you can think of this as really a sell-through model for revenue purposes. So our revenue will very closely match demand for DAYBUE.

Okay. Got it. No, that makes sense. I guess, maybe if I can just ask the question on patient starts a little bit differently. I guess, then what are the assumptions that are going into the 3Q guidance range that you provided? And how should we think about the gross to net and, I guess, the net adds and how all those things should play into that number?

Sure, Mark, do you want to take that?

Yes. I mean as we think about, it's all of that, right? So it's assumptions on rates of continuations for existing patients, new patient adds, patients that are still working through the access program that have already submitted enrollment forms and just overall levels of compliance and persistency. So those are the assumptions that we're going forward. I think as just -- as Brendan mentioned, it is very early stage, we think providing kind of our guidance is more informative as any one of these variables is really very preliminary kind of the data that we have now, and we're certainly open to while -- wide bands of interpretation in and of themselves.

Our next question comes from the line of Ritu Baral with TD Cowen.

And thank you for not limiting me to one. You can't do this to guidance and make me ask just one question. So this patients -- the profile of the patients, you said that they're sort of along with your expectations. And I believe previously you had said that you would expect younger patients, smaller patients, given this is weight-based dosing to start earlier, is that still what you're seeing? Because in many other orphan launches, we've seen sort of the larger, older, bigger patients [ bit earlier ] or so? And then I've got a follow-up on Europe.

Yes. We'll take the first question. Brendan, do you want to take that?

Sure, Ritu, thanks so much for the question. And yes, I would say, in the very early days post-launch, we are seeing age, weight and gender very much in line with what we expected. So at age range towards the younger end, although we have been heartened by the number of prescriptions for patients over the age of 20, in line with our -- with a broad label. We've also been excited to see male enrollment forms at about the proportion that we would have expected for the patient population. So if that gives you some sense, I think we're largely on track with what we described.

Yes. As far as Europe goes, you -- well, first of all, where are you with discussions with your [indiscernible] Regulators like [ DMO ]? Has Neuren gone through scientific advice -- or is that something that you'll be embarking. I mean I think the bottom line is do you have an idea of path to approval in Europe right now?

We do. Kathie, do you want to take that?

Ritu, it's Kathie, and thanks for the question. So Neuren previously held this and now we're very excited to take it over. We've had a lot of interest from patients around the world since we had positive data. And so we're excited to take that forward. To answer your question, our first step will be to have those regulatory interactions. There has been some country level scientific advice. But now we want to sort of accelerate that and move into a full path to get to regulatory approval in Europe. And so we'll be starting with those appropriate regulatory interactions.

Got it. I'm going to sneak in one more that came in from a client. Can you give the rough breakout of patients between open-label patients that are converted to commercial just fundamental in new patients to DAYBUE for us?

Yes. Sure, Ritu. Thanks for the question. Just going back to previous statements, we had an expected number of patients that had been in the open-label extensions. They are, as you would expect, making an increasingly small proportion of our overall patient population. So de novo patients in the middle of the quarter certainly began to outpace the clinical trial conversion patients. And I would expect that as we move into future calls, there'll be an increasingly small minority of patients on DAYBUE.

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

This is [indiscernible] on for Charles at Cantor. Just wanted to ask a quick question on NNZ-2591, is it -- do you have an option to expand development into other rare disease indications?

We do not. We acquired rights to 2591 for Rett and Fragile X. Neuren is already developing the compound. It's in the clinic. They've already completed Phase I. They're working on studies in 4 different neurodevelopmental indications. We acquired rights for Rett and Fragile X.

Our next question comes from the line of Gregory Renza with RBC Capital Markets.

Steve and team, congratulations on the updates all around. Steve, just a follow-up on your commentary and Kathie's on the regulatory proceedings outside of the U.S. I'm just curious if you could comment on maybe the calculus involved with respect to the infrastructure and the resources required for you and the team to go ex U.S., I would imagine that there are some considerations on broadening that infrastructure given the sort of new grounds for Acadia. So any commentary you have on how that would look, would be great. And then secondly, just with respect to the priority review voucher, what are the latest plans there seeing 1 transaction more recently in this space. Just curious how you're handling of a sale versus a hold on what the latest is on the PRV. Congratulations again.

Yes, I'll take the second part first of PRV then I'll ask Brendan to respond to the infrastructure question. In terms of the PRV, we've not made a determination about whether we will use it ourselves or sell it. There obviously is an established market for selling these. And just as a reminder, if we sell it, Neuren is entitled to 1/3 of the proceeds and we're entitled to 2/3. If we use it, Neuren is entitled to a payment that would be equivalent to the market value excuse me, 1/3 of the market value at that point in time. Brendan, do you want to address the infrastructure question.

So a couple of things. Obviously, with the U.S. launch, we've leveraged a lot of our internal infrastructure and have added as appropriately for our target audience. In addition to that, at Acadia, there are a number of people who have both worked in rare disease in the U.S. and outside the United States. There are a number of us who have launched products internationally as well. We've done early diligence in the major markets to have an understanding of our options, and I'm sure we'll provide updates as we get closer to the commercialization process. But we will leverage those learnings to make the appropriate infrastructure decisions.

Our next question comes from the line of Yatin Suneja with Guggenheim.

And very nice transaction, congratulations. Just with regard to the estimates that you have provided, especially for DAYBUE. Can you just comment on how should we think about the net price now? I mean, obviously, there's a difference between the gross and the net. So when you talk about the guidance, what sort of a price you are assuming, that's one? And anything if you can comment on the compliance, I know it might be early discontinuation at or compliance that you might be seeing in the field.

Yes. I'll speak to the compliance issue, and then I'll ask Mark to answer the other question. So on compliance, of course, we see what the doctors write on the script. But based -- as Brendan mentioned, based upon our market research and just our very, very close interactions with the medical community, we know that a significant majority of doctors are having their patients titrate up, which we -- again, that's part of our GI management regimen that we recommend, and we think that is a good thing. But we don't know precisely what schedule they're on because they typically almost always right whatever the dose is for the drug on the script that tell the patient that I want you in the first week or 2 or a month or 2 to titrate up. And so we just don't have a -- we don't have visibility as to precisely how that titration is going on kind of a brand-wide basis. As we move forward, we'll get better information. We'll get a better lens on that as we go forward. But I think the right way to think about it is a significant majority of patients are titrating up for a relatively brief period of time. And again, at this point, we have some patients that have had 1 refill, some patients -- a few patients have had 2 refills. And I think by the time we get to the next quarterly call, not the call coming up a couple of weeks, but after that, we should have -- we have better information at that point. Okay, Mark, do you want to add?

Yes, I think just for follow-up on that, as we gave our guidance, we did think about a range of which Steve mentioned there, compliance because that really does impact the kind of net price for patients. And then obviously, as we've got on previous calls, we do have mandatory government disciplines that impact net pricing and that we're accounting for, both in our results and our forecast going forward. At this time that those numbers are variable. So we're not giving information on gross to net at this time.

Got it. One more, if I can. Can you maybe also articulate for us the market opportunity outside U.S., both in patient terms and maybe the dollar terms, again, doesn't have to be accurate, but just as a percentage of U.S., how should we think?

Yes. Thanks for the question. At this juncture, we're just going to really speak at very high levels. As I mentioned in my remarks, the incident rate worldwide is very consistent. So that would tell you that the prevalent population in Europe is somewhat larger than U.S., somewhat smaller in Japan. In terms of pricing, what we typically see with rare drugs is lower prices outside of the U.S. But for rare diseases, of course, they're significantly closer to U.S. price than for nonrare diseases -- most nonrare diseases, I guess, I would say. And so in terms of the overall population size, in terms of patients and revenues, we'll get back with more details as we get closer to a launch. But we'd simply say at this point that it's a very sizable opportunity and a very attractive opportunity outside of the current market were approved in the United States.

Our next question comes from the line of Tazeen Ahmad with Bank of America.

This is [ Jae Mylan ] on for Tazeen. Congratulations on the exciting news. We just have 2 quick ones. The first being how long you expect to take through to peak sales in both the U.S. and ex U.S. for DAYBUE given the strong early launch. And the second question being, if you think the space can support annual price raises in the future?