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

I'm Charles Duncan. I'm a biotech analyst with Cantor, and it's a pleasure to introduce the next presenting company, ACADIA Pharmaceuticals for the Cantor Global Healthcare Conference in 2023. ACADIA is a company that I have covered for a long time, about a decade or more, and know it quite well. It's an interesting, what I consider, neuro innovator, which has long had a drug for the treatment, the only drug that's approved for the treatment of psychosis associated with Parkinson's disease. But it has seen a very interesting, I think interesting, evolution in its business with the approval of the first drug ever for the rare developmental neurological disease called the Rett syndrome. And so it's a pleasure to introduce Mark Schneyer, the company's Chief Financial Officer. Mark, thank you for joining.

Thanks for having us.

He's going to make a little bit of an overview, a few preparatory statements or prepared statements. And then we also have Dr. Doug Williamson, the company's EVP and Head of R&D. Doug, Nice to see you.

Good to see you again.

Thanks for joining. And we'll talk a little bit to Doug about the pipeline and the future. But with that, no further ado, Mark, why don't you join me to -- go ahead. If you are comfortable...

I'm comfortable here. That -- so listen, that was a great introduction. We'll just pick up from where you left off. So at ACADIA Pharmaceuticals, we're focused on developing and commercializing novel treatments for CNS disorders. As Charles mentioned, we have 2 commercial-stage assets in our portfolio today and then a pipeline behind that. We can highlight -- give some highlights on each of those. NUPLAZID, which is the first and still only approved treatment for Parkinson's disease psychosis. I think at this point, we look at this as the financial foundation of the company. We have well over $0.5 billion in sales, and this asset is [ throwing ] off more than $300 million in free cash flow. Our commercial initiatives really this year have been focused on disseminating 3 real-world evidence studies that were published last year that are resonating both with HCPs in the office space setting as well as the long-term care setting, which are 2 primary channels, and we can talk about that in the Q&A as we get there. The second asset, commercial-stage asset, we launched earlier this year for Rett syndrome. We're very excited about the launch it's going, continues to go exactly as planned and exceeding expectations in the first quarter on market. So about 5/5th of a quarter, the second fiscal quarter, we were generating sales. We had -- we posted $23.2 million of sales, and we've guided to $45 million to $55 million of sales for the upcoming third quarter. I think more importantly than financials is that we're very pleased and excited to hear preliminary feedback from caregivers who are treating their loved ones that are suffering from this unfortunate disease and really hearing early signs of efficacy and improvements in these patients, which is very encouraging in an early stage of launch. Our late-stage pipeline has 3 assets. We are -- so pimavanserin, which is the active ingredient in NUPLAZID, we've been studying for negative symptoms of schizophrenia. We have 1 positive pivotal study in this patient population, which is unusual because it's been a difficult patient population to study. For our second pivotal study, we completed enrollment this past summer and expect top line readout in the first quarter of next year. If positive, we should have sufficient data to file for an sNDA with the FDA for a label expansion in negative symptoms in schizophrenia. Then also, before the end of this year, we expect to start 2 additional late-stage trials with 2 different assets, ACP-101 for the treatment of Prader-Willi sydrome. We'll be starting a Phase III trial later this year. And then our next-generation 5-HT2A compound ACP-204, we'll be starting a Phase II trial in Alzheimer's disease psychosis. And considering we know this space very well with our -- all the work we've done developmentally and commercially for NUPLAZID, this can be an accelerated development plan that if continues to be successful, the Phase II sites can seamlessly roll patients into Phase III, which could save us about a year in the overall development timeline. In addition to that, I guess the other thing we did this summer is we expanded our rights to trofinetide, which is the active ingredient in DAYBUE. Initially, we had licensed the product from our partner, a public company called Neuren Pharmaceuticals that's based in Australia. Originally, we had North American rights. This summer, we expanded our rights worldwide to bridge upon the success that we've had in our early stage of launch, and we're very excited to bring trofinetide, see what the brand name will be DAYBUE or otherwise to patients worldwide. And then in addition to kind of the late-stage pipeline and commercial-stage assets, we have a portfolio, disclosed and undisclosed products in our early-stage pipeline, and we continue to be very active on the business development front to continue to expand the portfolio. So that's the brief snapshot. Charles, I will turn it back to you.

That was a nice overview. We're going to dive into some questions to unpack that. I appreciate you sharing that with us, Mark. Why don't we go back to the pima franchise, not the main focus of most investors right now, but I wanted to ask you a question about that because you mentioned that is a $500 million revenue generator...

More than that.

More than that. Spinning off $300 million in cash. That's pretty astonishing profitability that I think hasn't really been appreciated by investors. How do you do that? And where do you see the growth coming from for pima?

So I think where we are -- thanks for that. The -- I think -- so NUPLAZID is 7 years into its commercial life, right? And so when you launch a product as we're doing with DAYBUE today, you're really focused on establishing a brand, making sure you can reach as many patients as possible to really position yourself for future and long-term growth to maximize the value of the franchise. And so the investment is today and to building the future. When you get into kind of the mid-life cycle of an asset, you're really looking at both top line growth and current year profitability. And that's how we've looked at NUPLAZID in the environment that is in today, including the fact that we just lived through a couple of years of a global pandemic. And unfortunately, this is an elderly and frail patient population. And so there was mortality in this patient population, as you'd expect. So there was some reduction in patients, and that also influences kind of our investment decisions. So we're not dogmatic about it. We're looking to say, "All right, how do we continue to maximize the value of the franchise? And what's the right level of spend in light of where we are in the market, opportunity that we face as well as the life cycle of the asset?" And so what we have done, at least on the cost side, as we've transitioned more to this focus on near-term profitability, we've taken out and what we expect to spend this year will be more than $100 million, about $100 million less than we spent 2 years ago supporting the brand. But you're still focused on top line. So your current year profitability comes from both driving top line as well as being efficient on your spend base. And so on the top line, what the current focus is on is what I mentioned in the opening remarks, right, dissemination of the real-world evidence studies, 2 of which showed a reduced mortality when using pimavanserin as compared to off-label antipsychotics in this patient population, and the third showing lower health care utilization, hospitalizations, emergency room visits, et cetera, for patients that are on pimavanserin versus off-label antipsychotics. And those studies have resonated with our customer base, particularly the third one with the long-term care channel, which we -- you may want to get there. So I think that -- so our commercial efforts are focused on giving health care professionals the best information that they -- that we can give them to date to make the right choices for prescriptions for their patients. And then we benefit from -- we've been benefiting from a higher rate of new patient starts, which is leading to some modest volume growth in the franchise this year, and we'll continue to have this as our focus of kind of both top line growth but also near-term profitability.

So it sounds like the real-world evidence is particularly useful to the long-term care channel and that there are some synergies in your efforts to market to that. Yet, you've done something -- I mean, you mentioned these last 3 years have been very challenging for a lot of people, particularly elderly people and for the Parkinson's patient population, you've grown the drug in spite of many drugs in the class, not the class, but used in Parkinson's having not grown. So that's pretty interesting.

I mean we've been very proud of our efforts. I think when you look at kind of baseline Parkinson's medicines like carbidopa or levodopa, those are not medicines that patients come off of. And the volume of scripts in that market has essentially been flat, and it should have grown in a normal normal growth of patients, non-COVID patient environment. So we've certainly outpaced that. So what we can continue to do is recognize the environment that we're in, make the right investments to help our patients and grow our business, but being mindful that, again, there has been some reduction in patient population. And as I mentioned earlier, we're in the mid-stage of the asset. So at some point, you change your focus to the current -- the near term versus the long term.

Yes. So let's move on to DAYBUE or trofinetide, and then we'll get into the pipeline. So quickly, just any questions on pimavanserin for a PDP before I move forward? If you do have something, just yell at me and I'll get you. So let's talk about DAYBUE, pretty impressive launch, and I was like surprised, big-time surprised that the adoption, understanding the unmet need, understanding of the first-ever drug. But I was surprised that you gave guidance. And so what is the basis? What's the confidence in giving guidance just 2 quarters into the launch?

Right. Well, we -- I think we -- there's two ways that I guess we can approach to this. We can give a bunch of KPI data to the market so they can try to -- investors can try to piece together the picture themselves, or you can provide guidance and, I guess, essentially provide the output versus the input.

Makes it easier for...

And for us, when we -- this is a new launch, there are a lot of variables. This is a weight-based dosing product. Patients are titrating. We don't know what the ultimate compliance level to dose, what's the level of persistency continuation versus discontinuation. And only 1 quarter in, there are big, wide [ error ] bars on that. And then if you take it to the extreme, you can wind up with answers that are not particularly helpful to anybody. But there's certainly -- there are things we know. There's things that are still open to us, right? I mean we only launched in April. So it's not that people have been on therapy for a year yet, at least the naive patients aren't, it's only a number of months. So we thought it would be most helpful to provide a reasonable range of guidance only 1 quarter out. So I think for those of you that don't know our story, we gave guidance for the third quarter of this year, not the full year, not a peak sales guidance. And so what we'll continue to do as we report quarters is to give year -- sorry, quarter forward guidance until such time that we just give annual guidance and expect to give annual guidance sometime during next year. So maybe it's a quarter or so in, and we give a remainder of the year guidance. We'll see as the information plays out to us. And we'll continue to share [ top ] qualitative and quantitative information as we report our financial results to really give the right picture and understanding of our launch and our financial performance.

Well, the guidance certainly helps, but there were 3 key components of, call it, the revenue stream out of DAYBUE that you mentioned. One is weight-based dosing, which is a function of age, in part. And the second is titration and the third is persistence. So why don't we talk a little bit qualitatively about what your assumptions are or what you're seeing with regard to weight-based dosing, are you...

There's one other element to that, is ultimate compliance to dose. So while there is a recommended dose in the label, our expectation is not all patients will get up to that full recommended dose. So how are they at the full recommended or something less than that, and that obviously factors into their product utilization and [ our overall ] revenues.

A key consideration compliance and persistence is not only perceived efficacy but perceived tolerability or clinical benefit. So why don't we talk about, first of all, with regard to weight-based dosing or age? In general, are you treating the earlier patients? Or are you treating the much later patients because with Rett patients, they can be quite young, and then they can live a long time. They become larger and older, older or larger.

So commercially, we're -- the patient demographics that we're treating largely aligns with the patient population. So our label is broad, right? It's anyone who has diagnosed with Rett syndrome ages 2 and above. And the patient population that we're treating largely aligns with that. Maybe in the early days, it maybe skews a little younger because of -- you're a caregiver of a young patient, you might be more incentivized or at least motivated to seek treatment. Then if you have an adult loved one that you're treating or maybe its parents that are no longer around. So they're actually not being treated by a loved one. So there's a little of that. But I would say predominantly, the patient population that we're treating largely reflects the demographics of the Rett population.

And titration. Go ahead.

Well, just shut me down if you want to stick to the commercial stuff. But that makes sense -- makes a lot of sense, given what we know about the biology of the disease because it's important to understand that Rett is a neurodevelopmental disorder [ or a ] neurodegenerative disorder. So essentially, the pathophysiology of disease affects the structure and function of neurons, but they don't degenerate and they don't die. So theoretically, with the understanding we have about the biology of trofinetide and how in animal models improve structure and function and communication between neurons, you could see improvements, theoretically, at any age, and that's what we're seeing. And so that's what we saw in the trial. We saw consistent improvements across different age groups. And then what we're seeing in the market is clinicians aren't focusing on a particular age group. We're seeing them evaluating patients of all different ages as to the potential benefits that they might gain.

So Doug, you're seeing efficacy despite polypharmacy and a patient having endured the disease for a long time?

Yes. I mean, polypharmacy, there's nothing else approved for Rett, obviously, but there are a number of different medications for pain and for the other disabilities that they suffer as a result of the syndrome. But they're also receiving a lot of -- these patients get a lot of speech therapy, physical therapy. And as far as we understand, being treated with trofinetide would kind of facilitate those therapies.

Okay. And what about the safety side? There was much made or discussed about some of the safety challenges of Rett, generally, but of this particular therapy. I know it's too early to be able to speak rigorously about persistence, but -- sorry, someone's calling me. Sorry about that.

Thanks for not taking it.

Another important company. I'm talking to one right now. So...

No, it was Al, he didn't like the question.

Yes. Al just joined this company, and it's great to see him here. So talk to us about persistence. Probably too early to say, but are...

Well I think maybe Doug could talk about not safety but the tolerability, right, because that leads into persistency and what we're seeing from patients that are on therapy today.

Sure. Yes. I mean you used the term safety. We've never seen a safety issue with trofinetide.

Understood.

But I think what you're talking about mostly is the diarrhea, which, in the trials, was certainly a tolerability issue. And the [ dropout ] in the trials was -- in the 1-year open-label extension, I think we had about 40% of patients stayed in the study. That's not unusual for a 1-year study because in long studies, people are dropping out of the trial as much as they're dropping off the medication. But as well as that, they were sticking to the full dose, by and large. We didn't have any measures to manage the diarrhea built into the study. The -- some of the investigators introduced them later on in the study, but they were never [ perfect ], they were never consistent. And one of the nice things about the label is that we got the basics of the common sense diarrhea management steps actually described in the label. So the label says that before starting trofinetide, you should discontinue all anti-constipation meds, you should consider adding fiber to the diet. If it persists, you can use [indiscernible] counter antidiarrheal medication. And then if necessary, you can interrupt the therapy or discontinue therapy. So that's all in the label. And I think it's safe to say qualitatively that what we've seen in the real world is a far lower rate of discontinuations due to diarrhea than we saw in the trials, without getting into specific numbers. We do track those. We get those reported to us from the from the family access managers, who talk to the [ carers ]. So we know -- you can talk about this one...

Yes. We know who've discontinued. We -- one of the things which is helpful but also not abundantly clear is the one piece of data we get are refills, right? And so we can see who's refilled on time. But if a patient hasn't refilled on time, we don't necessarily know what the reason is, right? Are they titrating? Are they not taking the full dose? Are they taking a drug holiday? Or have they discontinued? Or will they discontinue? So I think a few months into the launch, especially as we're continuing to get lots of new patients on therapy, it's too early to tell what that data is telling us. So I think it will be a number of months, if not quarters, before we can say, "Here's a true level of persistency that we can help and communicate to the market." But I'd just add on what Doug said or may repeat what he said, we're certainly encouraged by what we've seen to date in the real world versus what we saw kind of several months into the Phase III and open-label extension trial.

And I have to tell you, I really appreciate you joining and talking about that generally with regard to the timing in the quarter. So I appreciate the observation. So why don't we talk a little bit about the 2-year observational study called Lotus? Help us understand that. And then why don't we -- and then we'll talk about ex U.S. initiatives.

So randomized controlled trials are obviously a very artificial environment, as I kind of alluding to earlier. So one of the things we wanted to do was as soon as DAYBUE became available, we'll study it in a naturalistic setting, in a real-world setting. So Lotus is a 2-year real-world evidence study. Every patient prescribed DAYBUE gets the opportunity to participate. And we've structured so that it captures -- it's a minimal burden for the carers, but it captures both care-rated and prescriber-rated measures and outcomes. But also, we'll collect data on the dose, the measures that they've used to manage any side effects that they're having, sort of diarrhea an example, and persistence. And the way we've structured it, we encourage and hope that patients who discontinue DAYBUE will also stay in the study, which would give us some kind of patients that we can compare between the patients who stay on it. So again, it's going to give us -- we'll be able to -- it's all open label, of course, so we'll be able to cut the data as often as we like. And it will give us over time a more realistic picture of how DAYBUE's being used and what the tolerability and benefit profile looks like in a real-world setting.

Do you anticipate doing a data cut in the next 6-ish months? I mean, could there be some data flow out of Lotus by that?

Yes. I think we're going to take a look at the data internally every 3 months. So once -- as soon as we see data that we think is meaningful and worth sharing, we'll certainly share it.

Okay. Why don't we -- we have just 5 minutes left. So I want to talk about the pipeline. Although I didn't hear an answer on ex U.S. initiatives for [ trofinetide ].

So I think briefly, we signed the deal in July to expand our rights worldwide. So Canada was already part of our territory in North America, so we expect to launch in Canada within the next 18 months. But for the larger markets around the world that are part of the new deal, we're at the stage of really first interacting with regulators to take scientific advice on how to move forward. So we think it's probably about a couple year time period to get on the market in Europe. We don't believe we need to run -- to generate any additional clinical data, but we need to confirm that for a market like Japan. The expectation is, as is typical with most pharmaceutical products, that we probably have to run some form of [indiscernible] study in Japanese patients. But we're very excited about the opportunity to serve Rett patients worldwide. I mean, when we launched in the U.S., we've certainly got many calls from KOLs and caregivers seeking treatment. So there is high interest. There is awareness. But now we just need to pick up from where Neuren had left off and take this to markets outside the U.S.

But that could also allow you to global -- become a global company and market ex U.S.?

Yes. I mean I think for us, we are today a U.S. company really due to the nature of the portfolio, and NUPLAZID is really a product that's valuable in the U.S. And while it can certainly treat patients ex U.S., it's certainly challenging to get pricing when you'll be forced to reference to generics. So that's challenging, and it's important for patients. So it's not -- we're not limited to the U.S. because of capabilities or ambitions, nor do we have -- nor is like we're looking to build the global empire. We're certainly looking to build a pharmaceutical company, invest in good science and deliver that to patients if we're successful in bringing them to market. And the capabilities of the people internally, many of us have worked at global companies and have experience getting products approved and commercialized ex U.S. So we're fully -- have the ability to do that and make incremental investments in people and infrastructure to be successful outside the U.S. It's just being the first opportunity for us to do that will be with trofinetide, DAYBUE, whatever we wind up calling it in the U.S.

Excellent. So in the last couple of minutes, let's just touch on the pipeline, but if -- are there any questions from the audience? Okay. Doug, why don't we give you a lot more airtime with regard to the pipeline. ADVANCE-2 is soon to readout. Third -- fourth quarter is what was last guided, as far as I know. Tell us about ADVANCE-2 and pimavanserin and its potential to treat negative symptoms in schizophrenia. It seems like a tough part to me.

Yes. So first of all, ADVANCE-2, we've completed enrollment sometime in the fourth quarter, but high-level results quarter 1 next year. So let's talk very briefly about negative symptoms, first of all, because there's a lot of confusion about negative symptoms, there always has been. So schizophrenia [ suffer ] from positive symptoms, negative symptoms, to bring you a little bit into the world of what we psychiatrists called descriptive psychopathology. Positive symptoms are things that you didn't have before that you have now. Negative symptoms are things that you had before that have been taken away. So positive symptoms in the psychosis and delusions, hallucinations, negative symptoms as lack of motivation, lack of energy, inability to experience emotion, lack of energy. And in many ways, those are the most disabling parts, over the long term, of having schizophrenia. People suffer their acute episodes. But between times, a proportion of these patients suffer from progressively worsening negative symptoms that rob them of their ability to have a normal family life, a normal work life and normal social life. And these are the people that you see living in their parents' basement or out on the street. You will see, if you use the [ PAMs ] during the acute phase, you will see an apparent improvement in negative symptoms on the subscale. Those are what we call secondary negative symptoms. It's kind of an artifact of improvements in positive symptoms. To study negative symptoms, you have to look at patients whose positive symptoms are controlled and then they remain controlled over a longer period of time, like 6 months. That's exactly what we've done in the ADVANCE studies. And the first one, as you mentioned, was positive. So there are around 700,000 patients in the U.S. who suffer from predominantly negative symptoms. And I think it's the largest unmet need in schizophrenia. So we have one positive study. We took the learnings from that study and incorporated them into the second study in terms of using the highest dose. And also in terms of -- we're not including any U.S. sites in ADVANCE-2 because this has been [ known ] about for decades, the placebo response in schizophrenia studies in the U.S. is very much higher than other up. And so I wouldn't say we were [indiscernible]. I've done neuroscience research too long to be confident about the outcome of the study. But I'm optimistic that, that study will be -- positive results.

Well, our fingers are crossed. That will be an interesting potential label expansion for pimavanserin. And other than that, unfortunately, we're out of time because there's a lot more going on, [ 204 ], et cetera, et cetera. So we'll be looking forward to talking to you for maybe during [ Brain Week ] 2, which is during December. We'll host you and talk more about the pipeline. Thank you very much for joining us. Thank you to the audience for your interest in ACADIA.

And thank you.

Thank you.

Thanks, Charles.