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

Joining us again at the Bank of America Healthcare Conference. I'm Tazeen Ahmad, I am of the senior SMid biotech analysts here at the bank. It's my pleasure to introduce our next company, ACADIA Pharmaceuticals. Presenting for ACADIA is Steve Davis, who is, of course, Chief Executive Officer. Steve, good morning. Thanks for joining us here in Las Vegas.

Thanks much, Tazeen. Really pleased to be here. Also, I should mention I have with me this morning, Brendan Winslow, Brendan works in our finance group and has joined me today.

Okay. Great. Maybe Steve, just give us an overview of the company for those who aren't familiar, as familiar with ACADIA, just the platform, some of the important events that have occurred and then we can go into more specifics?

Yes, perfect. So we have 2 commercial products. So the core of our business rests on those 2 products. We recently reported first quarter sales of $205.8 million. That's a 74% increase from the first quarter of last year. Of course, the first quarter of this year, we had, for the first time, sales from DAYBUE, our recently launched drug for the treatment of Rett Syndrome. NUPLAZID, our other product, is for the treatment of Parkinson's disease psychosis. We are now in our eighth year since launching that product. And the primary objective with that franchise is to optimize cash flow, and it's generating well over $300 million a year in fully burdened free cash flow. So it's a great foundation upon which the rest of the business rests. DAYBUE, of course, is in high-growth mode. As we've launched a year ago, that launch has gone extremely well. We are continuing to build out that franchise. Today, 1 in 4 diagnosed Rett patients have initiated therapy with DAYBUE. So we have 3/4 of the diagnosed populations yet to go. There are about 5,000 diagnosed Rett patients in the United States. We believe the prevalence, the total prevalence is about 6,000 to 9,000. And what we often see in rare diseases when a new drug is launched, that gap between prevalent and diagnosed population tends to shrink and we're already seeing some of that. When we launched, we -- our estimate was that we have 4,500 diagnosed patients, in our way to 5,000. In addition, we have rights, global rights, to DAYBUE and are in the process of seeking approvals in Europe, Japan and other areas of the world will make the drug available as well. So a lot of growth opportunity with DAYBUE. I'm sure we're going to be spending a fair amount of time this morning talking about that. NUPLAZID continues to be a highly cash flow positive business. We're seeing some good growth there, by the way. Revenue is up about 10% in the first quarter of this year over the first quarter of last year. And then beyond those 2 commercial products, we have 2 late-stage assets in development. ACP-101 for Prader-Willi syndrome is in Phase III study, and we're very excited about that opportunity. We'll touch on that, I'm sure, more in this discussion. And then ACP-204 is our next-generation 5-HT2A blocking compound. So it's an improved version of NUPLAZID, and we feel like there's an opportunity to significantly expand and extend the franchise that we've established with NUPLAZID there. And that's in a seamless Phase II/Phase III program that we also initiated in the fourth quarter of last year. We have an early-stage portfolio, about half of which is disclosed, about half of which is not, that has -- presents additional opportunities to advance more compounds into late-stage development. We don't talk a lot about that, but I'll just simply say that there's an opportunity, we think, to 1, 2 or 3 of those programs into the clinic in the next 12 to 18 months. And then business development continues to be an important part of our business as well as we or a fully self-sustained cash flow positive company with a very strong balance sheet. We ended the first quarter with $470 million in cash and continue to add every quarter. We added about $30 million in cash in the first quarter. And we'll -- and with these 2 well-established franchises in neuropsychiatry and rare disease, again, we'll continue to look for opportunities to add to that. Our history in business development reflects the fact that we're pretty judicious, pretty careful about the investments we make. And so far -- and 2 examples of those investments are DAYBUE as an example of some of the success we've had in business development, and then our Prader-Willi program as well.

Okay. So there's a lot going on at the company. Maybe let's start off with DAYBUE because that's been the primary focus of investors for the past year or so. Specifically, maybe let's talk about the quarter that you just reported. You had guided to the first quarter sales range. DAYBUE did come in on the lower end of that. You've reiterated guidance for the full year. And so I think some investors would appreciate color on your confidence level of guidance for the year and what's giving you that confidence?

Yes. Let me kind of start at the end, the last part of the question you asked, and I'll backfill. So when we give guidance, of course, we run multiple scenarios, and we guided for the year, we went to annual guidance on our February 4th quarter call. And at that point in time, we recognized that we had some patient losses through that point of the first quarter. I'll get into more of that in a second. And we projected that, that would then reverse and we'd go back to adding patients, and that's exactly what's happened. And so for -- as we indicated on our first quarter call, for the last 6 weeks running, we had added net patient adds every week. And so we're back on that growth part of the curve now. Any time you have a loss of patients or patients that you don't gain, that you project to gain, in the early part of the year, it can have an outsized effect on where you come out for the full year. Having said that, we took a careful look at our guidance and feel like it is still the right guidance range for the year. Let me get back to the first quarter and just try to give a little bit more color on that. So when we launched, we had a large surge that came through. There were just a lot of families and physicians, particularly at COEs, that were poised and ready to go on therapy. And you don't always see that in rare disease. Many times, the demand is high, but it just takes a while to get patients on therapy. It takes time to get through access because payers are not familiar with the disorder many times, takes time for a patient to get them to see their physicians, et cetera. But in our case, we have this big bolus of patients that came through. And what we've seen now a year into the launch is very consistent rates of persistency when we look at persistency over time. And what I mean by that is we look at persistency at 3 months, all patients that have been on therapy 3 months, 4, 5, 6, now we're out 9. And what we've seen is a very steady and consistent rate of persistency from the time of launch now out through 9 months. We compare that to our to our clinical trial experience, the best data we have from our clinical trial experience to compare it to real world. And we've very consistently tracked about 10 percentage points above our clinical trial experience. That tells us that there is a very sizable enduring population that we expect to be on DAYBUE. And that's one of the most important elements of projecting the value of this franchise longer term. When you look at -- when you break it down to just a period of time, not longitudinally, but just a period of a month or a quarter, that rate of discontinuation, not the rate, but the number of discontinuations you have in that particular time frame, that varies from time to time. It's driven mostly by the number of patients that started in the preceding quarter or two. And so in our case, because we had this large surge, we had an increase in numerical discontinuations that came through in the first quarter as a result of that surge. And we believe that is largely, if not entirely, now digested. And so -- and that's a big contributor to us now going back to adding patients and adding growth, which we believe will continue throughout the remainder of the year and is embedded in our guidance.

Okay. So maybe a follow-up question about the time that you noticed a patient discontinued. I think you've said if they're going to discontinue, it's pretty early on in treatment within the first few months or so. We've been trying to do doctor checks as well to try to get a sense of how physicians are viewing this market. And some feedback that we've gotten from a few physicians is that usually, historically, for drug launches, you want to look at the 1-year point because patients and their families tend to really try hard for the first year. And then it's after the first year that you really see the level of persistence that's going to be steady state. Have you heard anything similar from feedback either from your field force or from physicians about this general idea, not necessarily related to DAYBUE, but just being compliant with drugs over time?

Yes. There are a couple of things I want to unpack there. Again, back to the longitudinal persistency that we're seeing. We have the benefit of having data from all the patients that started on DAYBUE in our Phase III program. And of every patient that started, in one of those studies, 40% remain on therapy today. That means those patients have been on therapy for generally over 3 years now, well over 2. And we know that 40% of those patients are on at that point in time. Again, if we continue to track 10 percentage points above our clinical trial experience, that would suggest half of patients will be enduring patients over time. Between the time that patients initiate therapy and then become enduring patients, some patients do discontinue. And with drugs that have subjective endpoints as we did in our clinical studies, you do tend to see more discontinuations early on. We see that regularly in neuropsychiatry. And so we do see that here, too. We do see a majority of discontinuations that happen happened within the first one or two fills of the drug, so within the first couple of 2 to 3 months. I do think we have an opportunity to improve on that. It is an area of focus for us now because a number of patients when they start therapy titrate. And so dose adjustment is reflected in the label and many physicians are choosing to titrate up. If they're titrating up, it just -- it does take sometimes more time to see benefits. Now we do have examples of patients seeing benefits very early and even at very low doses. But as a population, it takes more time. And so one of the areas of focus right now is to really make certain that we're effectively communicating that particularly titrating it can take more time. But today, the data we have tells us that the majority of the discontinuations we have are in that early time frame. And I think the take-home message here is I think we have an opportunity to improve on that.

Okay. That's good to know. On dosing and titration how consistent is the titration pattern that physicians are employing with patients to get them to their ideal dose?

I'm going to -- you asked a question in terms of titration, I'm going to expand that question just a little bit and talk about -- because titration is a tool for assisting with GI management regimen. And so I'm going to expand it to talk just a little bit more broadly about that. And so what we're seeing is -- let me back up for a second just to kind of take a little bit of a running start at it. Many times, you hear the phrase, neurology with neurologists. When a new drug is introduced, this has nothing to do with Rett, but we see this across that physician, the treating population, start low and go slow. We saw that with NUPLAZID. If there's only one approved dose of the drug with NUPLAZID. When we launched, there was really no reason to start at a lower dose and worked their way up but physicians did it. We said it was very common practice. Over time, that's kind of -- that worked its way out of the system. With DAYBUE, dose adjustment is reflected in the label. And so we do have many physicians that are that are starting low and building slowly over time titrating. It's a pretty wide range of regimens that they're employing to do that. Some of them started a quarter of the dose or half the dose, build up over a month or 2. But generally, most of the titration regimens that we're aware of fall somewhere in that general vicinity. As it relates to broader GI management regimen, we're seeing a pretty wide range of variability there, some even within COEs and then particularly outside of COEs as well. There are some COEs, Centers of Excellence, that I feel like they've got this really dialed in, and they're having great success in getting to benefits of the drug, patients staying on therapy, et cetera, and others are not there yet. And so with any drug launch, it's -- there's a series of pivots that you make, and this is an important one in the medical community. There will be established over time a best practice or best practices in terms of how to initiate therapy with DAYBUE and to get to the best results. Of course, our objective is to try to get that established as quickly as possible. So another area of focus for us is to, again, reduce that variability in the application of GI management regimen, all of which is embedded in the label, and we promote -- we can promote to those elements. But the application is still higher -- has a higher degree of variability than would be ideal. Again, it's an opportunity for us to improve even further on the persistence rates that we're seeing, rates of persistency we're seeing that even with this degree is tracking about 10 percentage points above our clinical trial experience.

Okay. So a few minutes ago, you said that about 25% of patients, of Rett patients, have tried DAYBUE. Is that right?

Correct.

What is -- is there a profile of patient that was an early onboarder?

No, there's really not. I mean we've seen -- Rett Syndrome is mostly a female disorder, but there are some males, and we're seeing good representation of males as well. It's not all females that are on therapy. Age range, we're seeing a good distribution there. The drug was studied in patients up to 20 years old, but we're seeing a significant number of patients that are older than 20 coming on therapy. By the way, this is a neurodevelopmental disorder, not a neurodegenerative disorder. So what that means is the neurons are still intact. They've lost some of the ability to communicate across the synapse. But because the neurons are still intact, we see response in 18-year-old patients that's similar response to what we see in an 8-year-old patient or a 3-year old patient. And so we don't have to catch them early in order for them to benefit from the drug. And so in terms of ages and that many times, translates into weight in terms of severity of the disease, it's a very severe disease in all patients, but there are some levels of severity beyond that. Again, seeing a very similar response in our clinical trial data and very evenly distributed when we look at the patients initiating therapy.

Okay. And so for the 3 quarters of patients that presumably you're still targeting to get onto therapy, what's the strategy on a go-forward basis that -- do you think there's anything that you need to change in order to get to that remaining group? And then related to that, I'll ask you a question about the doctor prescribing patterns as well.

Yes. So -- and I may touch on that as well in responding to your question. So in terms of where we stand today, 1 out of 4 diagnosed Rett patients have initiated therapy. COEs represent a little over 1/4 of the treating population. Now there's a little bit of blurred lines here because some patients are treated at COE and they also see a local physician. But about a little over 1/4 of patients -- the Rett population is treated at COE. There's a small component that's treated in individual practicing neurologists or pediatric neurologists. The majority of the population is what we would refer to as non-COE, high-volume institutions. These are either practices in large hospital change or academic centers that are not designated as a COE. And there's a little bit of a range of what those facilities look like. Some of them have all the trappings of the COE, their infrastructure established, some do not. But they have a high density of patients. And so today, we -- our penetration rate in COEs is about 50%. So 1 in 4 patients overall, but in the COEs, it's about half of the patients treated in COEs have initiated therapy. So there's a lot of room to continue to grow the drug in COEs and today, about 1 in 3 of our scripts that are coming in are coming in from COEs. About 1 and 3 today are coming in from these high-volume institutions where our penetration, overall penetration, is lower than it is. This is where the majority of patients are. And so this is really a significant growth opportunity for us as we continue to advance. And all this is tracking to the plan that we initially established. We'll start by focusing on COEs. They have the very highest density, and then we'll expand from there into the high-volume institutions, which we're doing now and also community practices.

Why do you think you don't have close to 100% penetration from COEs just because you know that location, your salesperson knows the location, presumably they know the physicians. For prescribing patterns, do doctors tend to prescribe to all of their Rett patients once they know DAYBUE? Or is it always just a subset?

Well, I think with any drug, you'd love to get 100% penetration, right? We don't see that typically. So -- but in COEs, there's a lot of room to continue to grow the drug. I think with -- there will be some physicians -- so it's multifaceted, in response to your question. There will be some physicians. And again, we see this in other areas, too, and we certainly hear this from neurologists, that they want to -- they'd like for the drug to be on the market for a year before they prescribe it. You do hear that. Again, that's not highly prevalent, but there are some that have that view. Rett patients tend to see their prescribing physician once every 6 months or 12 months. And so some patients, it just takes time for them to get in. These patients have highly, very highly complicated medical conditions. In some patients, it just may not be a good time to initiate therapy. And so again, it's multifaceted, but I'm highly confident we will get to a much higher -- we're continuing to pull a lot of patients from COEs, and I'm highly confident that will continue to be the case.