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

Hi, everybody. My name is Ash Verma. I'm a SMid cap biotech and spec pharma analyst at UBS. Welcome to UBS Virtual CNS Day. And with us, we have ACADIA Pharma as our next company and Stephen Davis, who is President and CEO, is with us today. Hi, Steve.

Good morning, how are you?

I'm good. doing well. This is a back-to-back CNS -- Zoom Marathon, so trying to survive that. But I think there is a lot of interest in your story recently. And I will say that DAYBUE has been a topic of conversation amongst many investors, and I think we'd love to pass through some of the discussion points around like the growth opportunity that is represented by DAYBUE. So that's the plan for the call. Maybe I think it will be helpful if there are some investors that are not as familiar with the story, if you can give like a quick 1-minute overview about the platform, and then we can dive right into the questions.

Yes, that sounds great. So we're a CNS company. We have 2 approved products, DAYBUE for Rett syndrome and NUPLAZID for Parkinson's disease psychosis. We're a cash flow positive company. We have a robust pipeline, I'll speak to in a second. Let me just give a very, very high-level overview of the 2 commercial products first. DAYBUE is the first and only drug approved for the treatment of Rett syndrome. That's a very rare highly debilitating disorder. And we launched that drug in April of last year. We had a very, very highly successful launch. We'll speak more to some of the metrics as we go forward in this call. NUPLAZID, our other approved product for Parkinson's disease psychosis was approved in April of 2016. So we're approaching 8 years on the market now. And that product is the -- our primary objective of that product is to maximize cash flow. And of course, we do that 2 ways, growing the top line and carefully managing the bottom line. That franchise on a stand-alone, fully burdened basis is throwing off well over $300 million a year in free cash flow. And then in terms of our pipeline, we have a Phase III rare disease program in Prader-Willi syndrome. We just initiated that Phase III program in the fourth quarter of last year. It will take a couple of years to run that study, but we're very excited about the prospects there. And then we have an asset that we also started in late-stage development in the fourth quarter of last year. This is ACP-204,a next-generation 5-HT2A blocker. So it's a next-generation version of NUPLAZID that we put into a seamless Phase II, Phase III program in Alzheimer's disease psychosis, which is a very, very vast market. And then we have a number of disclosed and undisclosed programs that are in preclinical development that are veining. Business development continues to be a very important part of our business. DAYBUE is kind of an example of some of the success we've had there. I should also mention last year, we expanded our rights with DAYBUE to be on North America we had -- when we originally licensed the product, we just had North America rights, now we have global rights as well as additional rights to another molecule that the party that we license this from has as well. So BD, again, will continue to be a very important part of our business, and I look forward to getting into more detail on all these fronts on this call.

SP1 Great. All right. So I think, look, I mean, yes, like you said, the launch was pretty strong out of case like for DAYBUE and this is something that has a pretty high unmet need. So I think this DAYBUE presents a good opportunity. I wanted to like go in and ask some specific questions around like the discussion that came out from the fourth quarter call that you had. So like one of the aspects that you outlined was that more than 50% of Center of Excellence did not have any Rett's therapy days in January. And then you saw like a good comeback on metrics in February. So what I wanted to ask is, I mean, we've talked to some these centers of excellence, and I have not heard that particularly on this like no Rett therapy days in January. Can you can you elaborate on that? Like how -- what are you seeing? I mean you obviously have a much better advantage point to look at these things and trying to understand like what is exactly happening. Why was there this sort of a lapse in terms of -- there's been no Rett's days available? And then what has caused that to now kind of reverse and now you have presumably more stronger metrics on the launch in February and March and was [ January ]?

Yes. No, thanks for the question. So what we said is between 25% and 30% of them had no Rett clinic days in January and another 25% to 30% had half the number of days that they have. A component of that, particularly the reduced Rett days or Rett clinic days was part of that was due to some severe weather in the middle of the country that caused them to reduce the number of Rett clinic days they did. I think otherwise, the centers that did not have Rett clinic days. What we hear from them is that that's just typical in January. And so we just -- and it's probably multifaceted. Some of it probably has to do with just the timing for families. There's a little bit of a holiday impact and getting -- they typically have other kids to getting kids back in school, et cetera. So it's not the best time for them. So it's something that we experienced. We don't know that we'll see that every year going forward, but we're assuming that we'll have some kind of -- that type of impact. It may be to a greater or lesser extent than we saw this year, but we're anticipating in future years, we'll see that. Now we did see, as we mentioned, a significant rebound in new patient prescriptions in February. So we saw a meaningful reduction in January and then a significant rebound. And we're back to kind of a similar demand curve that we had been on and just continuing to track consistently with what we typically see in rare disease drugs. So there's a -- the prevalent population in the U.S. is 6,000 to 9,000. 5,000 diagnosed patients. We've seen that increase somewhat since we launched the tally when we launched was 4,500. And we often see that gap between diagnosed and prevalent populations narrow once a product is on the market. And so we'll continue to moving through that prevalent population. We still have a lot of patients to get on therapy and continuing to see strong demand across all sectors. But again, it's been tracking for the last several months, along the lines of what we expect in rare disease. What we saw in our case was -- so if rare disease growth tends to be kind of linear growth curve like that, we've seen the same thing except we just stepped up based upon this large surge that we had in the first few months after launch. And it's almost as if we leapfrogged into year 2 of the launch. And so -- and there's some real benefits that come with that. We get to the point where there's a critical mass of experience and understanding of the drug in the medical community and the caregiver communities much faster.

Yes. That's great. And I think the commentary that you provided like on the persistence rate for where things are for 4 months or 6 months, that has been slightly different versus what we have talked about earlier. Like what do you think is leading to this improvement in the monthly persistency rates for DAYBUE? And where do you think it eventually shakes out? Like what is kind of like the tail opportunity for these patients? And how confident are you about that?

Yes. So what we said is we've seen some incremental improvement on those parameters from when we initially reported to what we reported on the earnings call. And there -- I think probably a number of -- again, I think it's probably multi facet -- probably one of the more relevant factors that we monitor is what dose are patients starting on. And we have seen some modest reduction in the starting dose. And we would have expected that, right out of the gates, almost all prescriptions were written at the top dose, but most doctors said, I don't want you to take that. I want you to titrate. So they titrated up over a month or 2, sometimes even a little bit longer, but usually within a the first couple of months they were titrated up to whatever they felt the physician and family thought was the optimal dose. And so we expected that with more experience of the drug, as I was referring to or are getting kind of that critical mass that physicians would probably start writing lower than the label dose for patients to start with, and we have seen some of that. And so I think between better consistency on titration, which a lot of physicians are doing and just gaining more experience with the drug in terms of what dose to even start patients at, those are the kinds of things that can contribute to improved -- improvements in persistency. I will say on all these parameters, they do move around a little bit. But we think the undercurrents that I described will continue to be beneficial. And where it settles out, it's hard to say. But we're very pleased with where we are at this point in time, we continue to track about 10 percentage points above our clinical trial experience in terms of the real-world persistency that we're seeing.

Yes. I mean in terms of like the real-world persistency, right, like this has been kind of like an eye-opening metric to look at your 10 percentage points above like the clinical trial experience. I mean like if you fundamentally think about like what would happen in a clinical trial, right, as long as the patients are able to, let's say, tolerate the drug. And they -- I'm assuming that they would continue to take the treatment whereas in the real world, they might also discontinue if they are not seeing any kind of a benefit of that, right? So there would be more of an inclination, let's say, for patients to discontinue in a real-world setting versus in a clinical trial setting. But -- so that's just something that I've been trying to understand like if that will be the case, if you agree with that, then how come there is such a big step up in terms of where we are seeing the persistency? Like do you think that this is primarily being driven off the titration and how physicians are able to handle this better in a real-world scenario?

Yes. So there's a number of branches on the tree there. Let me make sure -- I'll try to make sure I hit them all. I think we expected to be able to establish persistency that is greater than our clinical trial experience. Because in the clinical trial, titration was not prescribed. In the clinical trial, we had not established a GI management plan until very late. And then it wasn't implemented consistently, primarily because families have a high concern typically with constipation, and they were reticent to withdraw the constipation medications when they started on DAYBUE, which is now a clear description of the GI plan that's in the label and that we make sure that we message them. And so we expected to -- that would be able to have an impact -- a positive impact on that, and that's what we've seen. We do also track data in terms of reasons that patients give for discontinuing. And not surprisingly, the most common reason is tolerability. We do see some patients that don't respond to therapy. That's very common in drugs where you have subjective endpoints or subjective benefits that you're measuring. We see this all the time in neuropsychiatry, where it's very common to see about 3 out of 4 patients respond to therapy and 1 out of 4 don't. And then the magnitude of the response can differ, of course, as well. And so we do track patients that don't show a benefit, but it's significantly less. It's further down. And so -- but we're going to have some of that. We're going to have patients that don't respond to therapy. Again, when you have subjective endpoints, we do have some of that. But the most common reason is tolerability. And many times, when patients discontinue, they say, we're interested in trying again, please stay in touch with us. We may come back. And so -- but it's just not the right time. So we monitor all of these things. And I would say the rate of discontinuation, we continue to be very optimistic about and the rationale reasons people give are what we would have expected.

Yes. Yes. Okay. All right. So now...

Steve, can I just add one thing to do that, Ash, for -- I think look, I think you're right, right? If you compare how patients are being treated in the clinical trial setting versus the commercial, there are differences. And so we can't get a pure apples-to-apples comparison. But for the persistency data that we shared, we're looking in comparison to placebo patients in the double blind that rolled over into the open-label extension trial. So it's -- at that point, it really is a voluntary participation for the medicine. And again, while it's not pure apples-to-apples, we think it's the best comparison to make to try to monitor what the commercial setting is versus patients that were part of the clinical trial experience.

Yes. Thanks for that additional detail, Mark. Mark's right.

Yes. Thanks for jumping in there, Mark. So I guess like the question that I was going to ask next, just around the competitive landscape. I mean there are 2 companies that we are following, [indiscernible] and Neurogene. They both have these gene therapy programs that are reading out this year. So just curious what are you expecting to learn from that? And how do you think this can potentially impact DAYBUE in the long run?

Yes. Thanks, Ash. So let me speak broadly and then I'll narrow the aperture quickly. So with gene therapy, I mean, the promise of gene therapy is really very intriguing across our entire industry. It's going to be a bumpy ride. I think determining precisely how to optimize. And in the case of Rett, it's -- there's an additional challenge to finding just the right level of protein expression for these patients. Because if you overexpress you get just basically the same symptoms you get by the deficit that Rett patients have today. So it's a Goldilocks type of kind of window of expression. And so one -- while gene therapy in general, and in Rett has great promise. It also had some challenges and some challenges that are unique to Rett. Now having said that, we're the first therapy to get to the market in Rett. But we certainly -- you can't talk to these families and physicians on a daily basis as we do. And not just really appreciate the gravity of their situation and how challenging this disorder is. So we'll be thrilled if there are additional therapies that can benefit this population. I think as it relates to gene therapy, we see -- if gene therapy -- we don't typically see absolute cures with gene therapy. And so if -- but with gene therapy, if you -- these patients are so highly symptomatic, if you reduce the symptom burden by 50% or even 75%, they would still be highly symptomatic. And so we think that when we look into our -- we project the future and we run multiple stairs, but under a scenario where there are gene therapies that get to the market and it will still be several years before that happens. But if that were to happen, we believe that DAYBUE would be very complementary -- likely be very complementary to gene therapy approaches as well.

Yes. Yes. Okay. I'll just take a minute here to see if there are any questions from investors on the line. If not, then we have a few follow-ups on the pipeline.

[Operator Instructions] There are currently no questions on the line.

Okay. All right. So I guess maybe just another one, another question that I had was just around NUPLAZID. Yes, I mean it was kind of disappointing to see that the -- we didn't get the intended result on a negative symptoms. Did you try to do any sort of like -- I mean, I know that it's only like a week has passed, but have you learned anything like was the benefit not accrued from like recruiting the patients in presumably less of a placebo effect population? Or was there just no like activity of NUPLAZID in negative symptoms at that dose?

So you're right. We still have a lot more data that we need to process. But at the top line results data that we have now, we did see a drug response that in this study that was equivalent to the drug-treated response in our ADVANCE-1 study. The difference between the 2 studies is we saw much higher placebo response in ADVANCE-2 than we saw in ADVANCE-1. So it's -- when that happens, it's always hard to say with 100% certainty, well, how much of the response is due to placebo versus how much of it is due to drug. But in this case, because we have the earlier study, that was almost identical other than the dose where we ran only the 34-milligram dose in this study, and we ran the vast majority of patients, who were on 34 in the previous. Other than that, this study was almost identical. So it's a situation that we sometimes see in neuropsychiatry that is part of the nature of our industry, it's sometimes difficult to predict placebo response in these studies. It's something that we take a lot of steps to try to mitigate this, contain it. It's not always possible. And it doesn't necessarily make patients feel any better nor us feel any better to know that many times we're in this industry and particularly in neuropsych, sometimes even when drugs work. So even for drugs that are approved, they have many times pivotal studies that fail along the way, and there are a number of examples there. And unfortunately, in this situation, we -- I can't fully explain the placebo response. There are some theories that we're following up on. But unfortunately, that's the result of this study.

Yes, yes. And maybe like looking at some of the other like upcoming pipeline opportunities for you. So ACP-101, like you mentioned, like for Prader-Willi. So yes, I know there are lots of different companies pursuing this indication, just like how do you think that ACP-101 is differentiated in the competitive landscape?

Yes. So the hallmark symptom of Prader-Willi is hyperphagia. And so we're trying to get right at the core of the issue on hyperphagia. And the earlier study done, there was a previous Phase III study done by the company that we acquired and by which we acquired this program that showed at the dose that we're testing 3.2 milligram, that showed a response on hyperphagia. So we're zeroing in right on what we think is the core of the issue in these patients. And by the way, I should just be really briefly mention, also highly, highly debilitating disorder. These patients have just this constant hunger they can get satiated. And just to cut to the chase, the bottom line is their average life span is 30 years. So it's a very, very significant disorder. And if we can get right to the heart of the issue, and mitigate this unrelenting hunger that they have that we think we can get very significant benefit. Here, too, there are other people working in the space. And if we -- and a lot of kind of where this shakes out will depend on, our trial results, of course, as well as others, but we feel very excited about this program and are eager to open the envelope on our own results.

Yes, yes. Okay. And then like just like the last one, the ACP-204, so for this Alzheimer’'s disease psychosis. Yes. I mean, I guess, like the question that I had here was just what should we assume about like the [indiscernible] or exclusivity on this? And are there -- do you see this as an extension of the NUPLAZID that you can try to build on the same set of like indication that NUPLAZID has had? Or is this like are you going to pursue this as like a totally novel indications?

Yes. Thanks for the question. I think there were 2 parts. I'll try to cover them both really quickly. Just in terms of exclusivity, we're going through the typical [indiscernible] litigation, in our case, actually 2 sets of litigation, one on composition matter patent and the other on multiple formulation patents that we have issued. On the composition matter patent, we wanted to trial court level, won decisively. We put 4 -- 3 arguments. The court only got to 2 of them. We won on both of them. We only need to win on one. That's being appealed. That appeal process will play out over about the course of the next year or thereabout. And again, we feel like the law is on our side, and we'll continue to very vigorously defend our position there. On the formulation patents that has not yet come to trial at the trial court level. That will -- that is scheduled to come trial in December of this year. And we did win a Markman hearing that's a hearing that's set up to try to kind of narrow the range of issues that are then litigated at the trial. And we won decisively on that. That doesn't mean we necessarily win at the trial court decision, but it certainly puts us in a stronger position, at least as it relates to the issue of infringement. And so it kind of narrows the issues to the other side, probably focusing primarily on trying to invalidate the patent. And we feel very good about that as well. We feel like our patents are very strong, and again, we'll continue to vigorously defend them. Composition matter patent is scheduled to expire in 2030 and the formulation patents effectively in 2037. So in terms of indications for 204, our target indication -- our initial indication is Alzheimer's disease psychosis, where again, there's no drug approved, super high unmet need is a very, very large population. But in addition, there are other indications that we're interested in, including Parkinson's disease psychosis, including Lewy body dementia and others as well. We haven't announced precise plans in terms of what we expect to do there, but there are some additional indications that we're interested in, and we feel like this next-generation compound 204 has meaningful -- we've made meaningful improvements over NUPLAZID.

Yes. Great. With that, we are out of time. So thank you so much, Stephen and Mark, for taking part in our conference. And yes, we look forward to learning about the programs as we go along.

Thanks so much.

Good luck to everything.

Thank you.

Take care, everybody.