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

All right. Welcome back, everyone, to the final session of Guggenheim's I&I Conference. My name is Eddie Hickman. I'm one of the biotech analysts here. And I'm joined today by some of the ACADIA management team, CFO, Mark Schneyer; and Doug Williamson, the Head of R&D. Welcome, gentlemen. Mark, do you maybe want to give -- spend 5 minutes giving us a quick overview of the company? And maybe you just recently reported earnings. So maybe just give us a summary of what you saw on some of the programs that are going ahead.

Yes, happy to do it. Thank you for having us. So at ACADIA, we're developing and commercializing novel medicines in CNS disorders. We're a commercial-stage organization as well as we have a pipeline behind it. The 2 commercial stage assets. So you alluded to DAYBUE, which is the first and only approved product to treat Rett syndrome, which is a neurodevelopmental disorder. It was approved by the FDA in March. We launched it and it became commercially available in April. So we've been on the market for almost 2 quarters, and we just reported revenues for our first full quarter on the market of $66.9 million. Very pleased with the performance. Very pleased with the benefits that patients are receiving from DAYBUE. We can talk about all of this. So the launch is going exactly according to plan. It's either meeting or exceeding our expectations on virtually every metric. The second commercial asset in the portfolio, which is our first commercial asset, NUPLAZID is also the first and only approved medicine for its indication. It treats a disease called Parkinson's disease psychosis. We have well over $0.5 billion in revenue in this franchise on an annual basis. It is highly cash flow positive, and we generate on a fully allocated basis, approximately over $300 million in cash flow. Over the course of this year, we've been disseminating with the medical community, 3 real-world evidence studies that were published last year, demonstrating the benefits of using pimavanserin over off-label antipsychotics, which is the other medication that is prescribed for this indication. That's resonated in both segments of the market, the office space setting, where about 3/4 of our patients reside and the long-term care community, where it's about 25% of our patients. Behind that, we have a very exciting, interesting late-stage pipeline as well as an early stage pipeline. We're -- this month, we're going to initiate 2 trials, ACP-101. We're initiating a Phase III study for the treatment of Prader-Willi syndrome. Also this month, we expect to initiate our seamless Phase II, Phase III study for ACP-204, which are our next-generation 5-HT2A asset, the first indication we're going to study for that is for Alzheimer's disease psychosis. And then for pimavanserin, the active in NUPLAZID. We are finishing off our second Phase III study for treatment of negative symptoms of schizophrenia, and we expect top line results from that study to read out in the first quarter of next year. We already have one positive Phase III study for this indication. Behind that, we have kind of an early-stage portfolio of disclosed and undisclosed programs, and we continue to be active in business development to continue to expand our portfolio in both rare disease and more broad-based neuropsychiatric indications. And I think the last thing to just pillar to touch on, this summer, many investors know that we expanded our rights to trofinetide, which is the active in DAYBUE. Now we have worldwide rights to DAYBUE, and we look forward in the coming years to bringing this treatment to patients worldwide.

Awesome. Thanks for that update. That's a lot going on.

Thanks a lot. Thank you.

So yes, so I want to start with DAYBUE, obviously on a lot of people's minds. Congrats on the launch so far, about $67 million in the first full quarter on the market, which is obviously nice to see in terms of demand. Can you give us sort of a sense qualitatively on what you're seeing so far into the fourth quarter? And if that sort of same cadence is happening? Or are you starting to sort of reach that linear phase that you talked about what you're going to get...

Yes. I think we're very pleased with the performance thus far. We gave guidance for the fourth quarter to have revenue expectations in the range of $80 million to $87.5 million. We did -- I think what we described is we had a surge in patients in the early stage of launch, both because of the success of our commercial efforts, but also patients, 2 other things, patients really have very knowledgeable patient community of caregivers as well as just the patient advocacy groups associated with Rett. And then our payer coverage came faster, both in terms of former policies being developed, I would say, faster than expected, right? As well as patients gaining access through letters of medical necessity, which is the process that happens before a formal coverage plan is in place. And so what we've seen kind of in the first full plus partial quarter or most of a quarter is what we'd say team is a surge on acceleration of patients that started on DAYBUE therapy. And then we've talked about this linear phase. So where we are now is we're seeing, I would say, more a level of new patient demand that just would be consistent with what we would have expected to see in the launch. So that's kind of building off of kind of the higher revenue base from the early search. So from here on forward, we expect more of a linear growth trajectory going forward in the coming quarters and years.

Got it. Now does that take into account how you're modeling discontinuations and retention rates? And have those been similar to what you saw in the LILAC study?

Right. So 2 questions there. Thank you. So when we do guidance ranges for both NUPLAZID and DAYBUE, we consider all relevant factors and run a whole variety of series of scenarios and then the gestalt of that really informs our guidance that we share with the Street. So when you're thinking about DAYBUE, you're saying, "All right, well, what's the revenue from patients that are on therapy -- already on therapy, right? And what's the persistency? So how many of those will continue into the fourth quarter? And then how many new patients do we expect to get? What's the conversion rate or time to conversion? So we do have patients that had scripts prior to the fourth quarter that had yet to get through their access. So some of those will get access in the fourth quarter and...

And you recognize that.

Right, right. And then all of those, right, we only recognize -- we don't recognize revenue on scripts. We recommend -- we recognize revenue on when people actually delivered bottles for therapy. So once those approvals come through and the bottles are delivered and patients receive therapy, that's when we recognize revenue. So all of that -- and then like kind of the last factor is how much product -- what's their dose, right? We -- people are -- as we've talked about, maybe you'll have some more questions about it. And when they initially start, they're titrating and getting up to their -- the dose that's either the recommended dose or the dose that's best for an individual patient. So that's a usage of product. And since we recognize revenue on the use of product, that's all factored into the guidance that we gave for the quarter.

Got it. And we'll get into some of that titration in a little bit. But I do want to ask about -- like you've talked about sort of 3, sort of 3 buckets where you're getting patients from the sort of high-volume centers of excellence and then there are sort of other hospital centers that seem to have a lot of patients in a sort of more community setting. Can you sort of talk about how well you've penetrated each of those segments? And like what working still needs to be done to sort of penetrate more of those maybe community centers or less high-volume places?

Right. So the way we've described kind of the distribution of patients. There are only about 20 designated centers of excellence. Those 20 institutions have what we've identified about 25% of the Rett patients are treated there. And then what we said is there's about 300 kind of large academic institutions that -- many of which function like COEs, they just don't have a COE designation. They may get COE designations as the patient advocacy groups declare those. So another about 60% of the patients reside in those institutions. And then the remaining 15% are spread out over in community practices. And then as far as kind of our performance to date, we have patients in all settings, right? So it's not just, oh, we only touch the COEs and it's kind of like, all right, we finished that, and now we're going to go to the next one. We have patients that are in all 3 buckets. But you'd imagine kind of our penetration in the COEs is higher than it is in the large academic institutions, which is also higher than our penetration in the community.

Does -- I'm going to ask this in 2 different ways then because is the age depend on where they are. So like if you're penetrating high in the center of excellence, are those more younger patients? Or -- and then sort of the second question is how -- what is that split like in terms of ages and weights? And if you want to use that to sort of talk about the titration schedule as well?

Yes. So -- and Doug can add some more color if he wants. But just because of the nature of the disease being -- there's no point in time where it's like the therapy would work better for you if you're a younger or older. You may have -- parents may have a motivation if they have 8-year-old patients versus a 38-year-old patient in their family, there may be some higher level of motivation. But what we've seen kind of in the commercial setting is the patient population is really the distribution of the Rett patient population. So in our studies, we study -- this is a disease, unfortunately, most male patients die early on, right? So it's a disease where there's -- it's mostly female patients. And what we studied were only female patients through a variety of studies up through the -- our multiple studies from ages 2 to 20, right? But what we're seeing in the commercial setting is what our label is broad. It's rate -- our label is indicated for any patient with Rett syndrome ages 2 and above. And that's the patients that we're seeing. So we're seeing both male and female patients. There are many fewer male patients, but we are seeing male patients. And those male patients are receiving benefit from what the feedback that we get in the commercial setting. And then we're seeing patients over the age of 20. It's not that it's limited. And so that's the patient population we're serving, which is consistent with really the demographics of the overall patient population of Rett.

And you mentioned that some patients are still titrating or are titrating. Doug, do you want to talk about was that done in the clinical trials and sort of how is it being done in the real world differently? And then I guess, when do you expect of the patients that are currently on drug to reach the sort of maximum dose that they'd be on? Has that happened yet?

Yes. So in the trials, first of all, you have to understand these patients have a lot of problems with constipation as part of the disease. So 80% of them suffer from constipation and that can be a serious safety issue. So in the trials, a lot of these patients were on anti-constipation meds and stool softeners. And so we saw higher rates of diarrhea in the trials and discontinuations due to diarrhea than what we've seen in the real world. The other thing is in the trial, they are all started on the highest dose. Some of them titrated down. I think the average dose was about 80% and 90% in the trials. What we're seeing in the real world is -- and again, we can track when they refill a bottle, we can't -- the doctor writes a prescription for a dose based on their weight, but might tell them to start on half of the dose. So we can't track the exact dose, but we can track when they refill. And so we know from talking to doctors that typically, they revised them to start on about 50% of the dose and then work their way up over a period of a couple of months. And they're ending up, but based on the number of refills we're seeing, they're ending up at about 80% of the dose.

So what we said...

On that earning.

Yes. What we said with our earnings is that as you get out a number of months, kind of the average compliance rate is 75% to 80%. And so that's factoring in an early-stage titration, people getting up. People may be still working up to a higher dose. That's what we're seeing. That number could change over time. It's the data that we have today, and that compares, as Doug mentioned earlier, to the clinical trial setting where, on average, patients used about 90% of the recommended dose.

And it seems like that's working in terms of the tolerability. So like the tolerability seems to have been in terms of your discontinuation rates in the real world. So is that the major reason? Or are there other things that you recommend, I think, patients are doing to sort of make those...

No, I think the tolerability has generally been better in the real world. And another big reason for that is that the guidance that we're giving, and it's actually in the label about how to manage and minimize diarrhea. So it actually tells you in the label that you should discontinue anti-constipation meds before you start DAYBUE, then you should consider adding fiber to the diet, then you could consider an over-the-counter antidiarrheal measure like loperamide. And then if that doesn't work, you should consider reducing the dose or discontinuing the dose -- discontinuing the drug temporarily. So I think all of those measures and the fact that they're in the label have led to kind of doctors being more able to convey them to the patients. I think that's all helping.

Yes. Very helpful. So you did provide some guidance for the fourth quarter for sales. Can you maybe just like walk us through, there's some seasonality, obviously, in some of these rare diseases. And obviously, you have 2 holidays in the fourth quarter. Can you maybe just talk about what -- how you can come in on the higher or lower end of the guidance that you get?

I think as we talked about earlier, for the most part, right, and we don't look at the components, but it's really a combination of continuing patients what are a range of persistency expectations for the fourth quarter, how many new patients are going to start whether or not they are just converting from a script that they had in the third quarter that's going on therapy in the fourth quarter or having a script and converting and then what dose they're going to take? And then as we mentioned, that we alluded to on the call, which is we've not gone through, we obviously launched in April. So we've not gone through kind of an end-of-year holiday period. So that sometimes can have an impact on revenues at the end of December. So we've just taken that into consideration just as one of the assumptions that is within our guidance that may or may not impact revenues in the setting.

And as we think of quarter-over-quarter changes, like we -- you just talked about that a lot with NUPLAZID and sort of the seasonality of that. Like is that the same -- should we expect the same thing to happen for DAYBUE in terms of like 1Q and 3Q and things like that being...

I don't really know like, again, we're going to have to see how that plays out. There's seasonality in NUPLAZID because of, to some extent, with reimbursement as people go through kind of their own Medicare donut hole obligation that doesn't really exist from a DAYBUE standpoint, a very small portion of patients who are on traditional Medicare. Most patients are on Medicaid. And the second great percentage is on commercial. The out-of-pocket cost for these families is very limited. So that's not really going to and play into their decision-making to start therapy or continue therapy. And then there are other just seasonal aspects of NUPLAZID of just an elderly patient population. And when it may make sense for them to start therapy, will we -- what we didn't see this year and again, we've only been on the market for where are we going to see something like an August holiday period. I think within a new launch, there was just so much excitement about starting on therapy. It maybe, it could have impacted our ramp a little bit, but we couldn't really see that, right? We just saw what our success was and we're thrilled with the success of the coming months. So if we compare, say, July and August next year to what we experienced this year or 2 years from now, maybe we'll be able to play out some of that seasonality, and that may exist. But it's too early to tell. Right now, we really just see is we had very high interest -- so the surge that we talked about and now really on a weekly basis, just a more consistent level of new patient scripts that are coming in consistent with the levels that we would have expected. And that's what we expect going forward. Some of these, whether there is or is not seasonality, we'll see that over time.

And just last one, I think on this program before we move to some of the other ones, do you think you'll continue to give quarter-over-quarter guidance? And like what do you need to see before you're sort of comfortable giving a more sort of year longer...

So eventually, we'll give annual guidance.

Okay.

We're super early in the launch. So I think we're -- I'd expect at some point next year that will give annual guidance, whether I don't know yet, will we, on our fourth quarter earnings call, give annual guidance for 2024? Or will it take till the first or second quarter call for us to give remainder of 2024 guidance, but I expect we'll get to that at some point. And what we've committed to the Street is that until such time that we give annual or remainder of the year guidance, we'll give this one forward -- 1 quarter forward guidance until we get to that point.

Do you find this is like third-party trackable for easily, like the sort of IMS and Symphony data...

There's no third-party data.

Okay. I want to just move a little bit to the pipeline just because I know we get a lot of questions on that now. So starting with 101, can you maybe, Doug, maybe just talk about the sort of rationale behind ACADIA going into this indication with your expertise and sort of what you've seen so far in the data and then how you're confident moving to a Phase III already? Yes.

Sure. Sure. So I think strategically, we've shown ourselves to be effective in the rare disease space with DAYBUE and effective partner. And it's certainly an area that's attractive to us for a number of reasons. So ACP-101 is carbetocin. It's a synthetic analog of oxytocin, which plays a key role in the etiology of Prader-Willi syndrome. And in particular, the most common symptom and the most, I think, disruptive symptom is this hyperphagia, is this incredible appetite and lack of satiety that drives all kind of behaviors and it takes -- cause the family to have to take all kinds of measures to control the patient's appetite or their access to food. So we look -- when we acquired Levo had conducted a very nice Phase II/III study with 2 different doses, one of which was 3.2 milligram dose, which separated statistically from placebo, but was not the primary endpoint. So that would end up being the sticking point with the FDA. And so we acquired them. And essentially, we're just going to run that study again with the 3.2 milligram dose as the primary focusing on hyperphagia as the primary outcome. And that's where we get the optimism will be a successful program.

And then sort of have you had conversations with the FDA on sort of what the sort of pathway towards approval for this indication is? Is that steady enough? And yes.

Yes. Yes. We've agreed with the FDA that if successful, this study could form the basis for an NDA.

Are you -- do you have -- is there a competition in the space, like you don't hear a lot of Prader-Willi drugs out there? I'm curious like if you're sort of in the lead here or if is there sort of other competition going after Prader-Willi or hyperphagia in anyway.

I mean it's a target for a lot of companies. There's nothing approved yet. There's one other company has published or broadcast -- communicated some data they have about a randomized withdrawal trial they've done, but that data is a little bit unusual. And I think they're talking to -- they're planning to submit that to the FDA, but it's a very different mechanism of action.

The timing for data for the Phase III -- for our Phase III.

We don't know exactly how long it will take to enroll. We'll have a better idea once the study gets started.

Okay. I want to move to the ADVANCE-2 because I think that's coming next -- early next year. You are just trying to repeat what you saw on ADVANCE-1, but then in terms of an effect size, would this then form the basis for an SBLA or a new BLA and sort of how you're thinking about that?

Yes, it would be nice NDA. Yes. So yes, ADVANCE-1 was a positive study and so across all doses. But we saw a particularly strong efficacy in the 34 milligram dose and in the non-U.S. sites, we saw a better separation from placebo. They had a higher placebo rate in the U.S. sites. So in ADVANCE-2, we're just using the 34-milligram dose, and we're only conducting the study in European sites. And if you look at the 34-milligram dose in ADVANCE-1, we saw an effect size of 0.34. I always say coincidentally because 34 milligrams dose. But I think that's what we'd look to -- look -- point 3 is generally kind of regardless of a clinically significant effect size in psychiatry studies with subjective measures, outcome measures. And I think if we saw that again in ADVANCE-2, then we'd be very happy with that result.

Yes. And for the schizophrenia market, there isn't really much approved for negative symptoms. And I wonder if there's any sort of opportunity there beyond the standard of care for -- if this is approved beyond where the sort of atypicals and other ones are? Or do you consider yourself sort of within that same on class?

No, this would be unique. There's nothing approved for negative symptoms right now. There's one compound that has some wording in the European label. But nobody has studied in a population whose positive symptoms have been controlled adequately. And then those positive symptoms are maintained over a prolonged period to look at the persistent chronic -- negative symptoms. So this will be a first. And as an adjunctive treatment, it's not going to really compete with the atypicals or any of the new treatments that are coming out for schizophrenia with novel mechanism of action. It's going to be the only -- if it's successful, it will be the only drug approved for adjunctive use for the treatment of negative symptoms.

Now would you pursue any of these newer indications with the sort of next-gen compound to 4 that you have? Or you sort of have your own discrete development path for that molecule versus pimavanserin? Or do you think you'll eventually try to move if -- NUPLAZID has approved for negative symptoms, would you try to sort of shift into that as well?

Yes. So 204 is our next generation sort of speak 5-HT2A inverse agonist. And it's sort of it's a homegrown molecule. Our internal discovery group has an expertise in 5-HT2A inverse agonism. So pimavanserin, one of the unique properties about it is that as well as it having a very benign safety profile and a very benign drug-drug interaction profile, which lends itself to vulnerable populations like elderly populations or populations on multiple concomitant medications, as well as that, it has this unusual property where if you push up the exposure beyond where -- beyond the exposure that you see maximum occupancy at, you continue to see better efficacy. We haven't been able to push the dose of pimavanserin as high as we would have liked to, to explore that because of a QTC signal. So there's a couple of things we wanted to do with 204 was design a molecule, which didn't have the QTC signal. As a result of that, we were able to, in Phase I estimate that the doses we're going to be using in our Phase II/III program, our 30 milligrams, we grew roughly equivalent to 34 milligrams of pimavanserin and 60 milligrams, which we think will be roughly equivalent of double, 68 milligrams of pimavanserin. And then in addition, it has a shorter half-life and a faster -- a shorter time to steady state or 5 days instead of 12 days. So we think that might translate into a faster onset of action. In terms of indications, we're going for ADP first with this seamless Phase II, Phase III program, the Phase II study is about to start up. And in terms of other indications for 204, we're thinking a lot about that. And we're not ready to share any of our thinking yet on that, but we do think it has an exciting future.

Yes. And Mark, just maybe last, we talked about a lot of programs you've had a lot going on in the early and late-stage pipeline, now 2 commercial assets. Sort of how do you -- are you going to think about sort of prioritizing and deploying cash over the next year or so to prioritize those pipeline programs?

Yes. I think we're in a great position from a cash and balance sheet standpoint. And this year, I think in this quarter, if we excluded the upfront payment that we paid to Neuren to expand our collaboration on trofinetide, we would have been cash flow positive. So I think 3 quarters in, was kind of excluding the deal somewhat cash flow neutral. So I think on a long-term basis that we go forward and not we expect to be cash flow positive, maybe not each and every quarter, but over a long-term basis. And that puts us in a very good position to be able to continue to invest in the commercial stage assets, fund the pipeline, expand the pipeline through business development. And we're not -- we're really making choices on the merits of investments as opposed to needing to choose between A or B because there's some artificial financial constraint.

Thank you so much. Appreciate your time.

Thanks.

Thanks a lot.