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

UBS, virtual event. I would now like to pass the call over to Ash Verma.

Thanks. Good day, everybody. My name is Ash Verma. I cover SMID cap biotech & spec pharma here at UBS, and welcome to UBS Virtual CNS Day. Next company with us, ACADIA Pharmaceuticals. And I'm really delighted, we have the management team here, Catherine Owen Adams, who is the CEO; and Mark Schneyer, who is the CFO; Liz Thompson, who is the Executive Vice President for R&D. How is everybody doing?

Great. Thanks.

Thanks for having us.

Great.

So yes, I mean, Liz was smart enough to wear green, except for all 3 of us. So kudos to her. I'll try to remember that next time.

But yes, thanks. Look, I mean, this is a 25-minute fireside chat. So we go over the questions on the products that you have and kind of the -- like the pipeline starting to get more and more questions about that from investors. But maybe I think like it will be beneficial like Catherine, if you can just kind of provide a brief update on the business. So you recently reported the fourth quarter earnings where you guided to more than $1 billion in revenue for 2025. Just talk about just the 2 products, NUPLAZID and DAYBUE, what are you seeing? And how confident are you in terms of achieving that goal?

Yes, thanks. So we're excited to be guiding to deliver over $1 billion this year for ACADIA, it's a milestone for us. And that is consistent of our 2 brands, as you described, NUPLAZID and DAYBUE. We've guided NUPLAZID between $650 million and $690 million. And that growth is built on an uptick of volume that we're seeing due to a number of things around consolidation around our label, doctors understanding where they can use it in terms of the patient population and also a very successful direct-to-consumer campaign that has been raising the awareness of the symptoms of hallucinations and delusions for NUPLAZID. And both of those things combined gives us a solid base for growth in 2025. With DAYBUE, we guided between $380 million and $405 million. As you know, we've seen a stable patient base for the last few quarters, and we've made some changes to our marketing strategy and go-to-market strategy that I can talk about later. But based on those changes and based on the steady state that we're seeing right now, we're forecasting a strong patient base in 2025 with some growth through the latter half of the year and we feel very confident about both brands.

That's great. Good start. So maybe just like talking about DAYBUE. So yes, as a new leader of the company, just kind of taking over the business, what is your approach as you bring in a fresh perspective on how to rekindle the growth of the brand here?

Yes. So the way I thought about DAYBUE when I came in was first of all, look at it through the context of a rare disease launch. And I'm experienced in that space and looking at DAYBUE, it behaved classically, just like many, many rare launches, very strong out of the gate, a lot of patients waiting to use it in centers of excellence. And then like many others, it hit a steady state plateau and the patients sort of have been steady for the last 3 quarters. So in terms of then the potential for future growth, the way I think about it is really in 2 ways. First of all, where is a source of future growth and where is the potential volume. And that became very clear that actually outside the centers of excellence, where over 65% of patients are treated, there's a lot more potential. And so as we shared on our call, we are over 50% penetrated in the centers of excellence where 35% of patients are treated. But outside in the remaining 65%, we're only around 20% to 25% penetrated. So that's where the volume of patients sit. Then when I look at how do we get to those customers, we were undersized in terms of our sales force. So we've really added to that, and we're adding to it now. We're increasing our sales force by about 30% or our customer-facing field team. And with that increase, we're now able to get to the rest of those customers with a reach and frequency that will help to drive the incremental volume that we're looking for. And then the final thing for me was looking at the story we're telling. How is it resonating, how is it really ensuring that customers understand why to use DAYBUE. And I think historically, we skewed a little bit towards the side effect profile. Understandably, we needed to have doctors understand how to use it, but we're really pushing now on efficacy and the why behind the why. And so what you'll see this year is a lot more around efficacy, a lot more about what patients should expect. And so we're excited that all of those coming together will help us drive growth into DAYBUE.

Yes. That's great. Thanks for sharing some of those metrics. And you've also noted just like the expansion of the total addressable market in terms of like the clinically diagnosed Rett's patients. If you can expand on that a little bit?

Yes. So I think -- if we just look at prevalence in the U.S., 6,000 to 9,000 patients, about 1 in 10,000 to 15,000 live female births. So that's the prevalence. When we launched DAYBUE, we've looked at the data and saw there are about 4,500 patients diagnosed for ICD-10 codes. What we're seeing now is that through the launch that those diagnosis rates are increasing, and that's again pretty normal for a rare disease launch because payers require patients to be confirmed and certified as having a specific disease. So we are seeing that increase. We believe now that's around 5,500 patients after 2 years. So again, we expect that to increase a little bit more through to the prevalence, but I think we sort of reached that sort of next wave of peak. And so not a whole lot more, but probably up to about 6,000 over the next year or two.

And I think you've mentioned some metrics around how many patients have already tried DAYBUE, right? Can you remind me what that number is?

So around 35% of all rare patients have tried DAYBUE already.

Yes. Okay. So yes, like in terms of the -- I know like persistency has been a big focus. And like more recently, you've been starting to note that you sort of like stabilized this persistency at 12 months I think like even -- when you reported like 4Q, you're seeing like an improvement in the discontinuation rate. Just like where are we in that process? Like do you think there is more of a room to improve the persistency? What are some of the things that you're doing to address that?

Yes. So let me break that down a little bit. So what we're seeing right now at 12 months is over 50% of patients that start DAYBUE are still on DAYBUE. So the persistency at 12 months is over 50% and that's higher than our clinical trials. So again, I think for me, looking at this from an outside in, that's still a very strong persistency rate for any chronic disease at 12 months. And at now at a point in time where we're sort of 2 years into launch, if we look at our patient population now, over 60% of them have been on DAYBUE for longer than a year. So we're seeing a steadying of our patient base. We're seeing a steadying in our persistency and more patients now have been on DAYBUE for longer. With all of those dynamics together, we are seeing sort of a relatively steady state of discontinuations quarter-over-quarter, and we're hoping for that to improve over time. We're focusing on it with our field teams with our family access managers. And we really concentrate on the first 3 months where patients really are trying to understand how to use DAYBUE and ensure that they understand all the processes and procedures that help them get through those first few months of side effect management. And then we continue that patient support right the way through their journey. So even after a year or 1.5 years, those family access managers are still with them. So we continue to invest in that. We're continuing to share more real-world evidence, which Liz can share about how to manage patients more specifically, share centers of excellence and what they're doing. So we really feel like we know a lot more now than we did at launch, and that steady state and persistency will continue out over time.

Yes. Is there like the discontinuation that was happening before, right? Is the bulk of that was happening in the first 3 months?

And it still is after. I mean it really hasn't shifted in terms of when it's happening. It's those first few months when patients really start to understand how to use DAYBUE. And again, it's helping them through that using antidiarrheal medicines, fiber, fluids and making sure that they really are understanding how to get through those first few months. And again, some patients don't experience diarrhea at all, some have mild, moderate and then a few severe. So again, it's very different for every patient and every family, which is why we have that one-on-one support.

I mean when you talk about like some of the measures that you're doing, right, like how much -- how frequently is the kind of the solution that you're like ending up like lowering the dose as opposed to like trying antidiarrheal therapies or other factors to consider.

I am actually going to ask Liz to jump in here. She manages as well as our R&D. She manages our medical affairs team. And we have a big real-world evidence study going right now where we're collecting a lot of data on not only management but titration. So Liz, do you want to just jump in maybe with both of those aspects?

Yes, absolutely. I'll comment on a few things there. I'd say that, first, it really isn't a one size fits all approach in terms of what tool in the toolbox helps physicians help their patients and the families through the diarrhea management. Certainly, we do see some evidence in LOTUS and that's our real-world evidence study that lowered doses can have, if not an impact on the overall likelihood of having diarrhea in the longer term, lower doses initially can delay the onset of diarrhea. And that makes that a useful tool for physicians to use. So there is a proportion of our physicians who do use that to help manage patients through the initial phase and give them the opportunity to get used to DAYBUE. We do, however, also see a pretty significant range in the degree of utilization of what I call some of these practical matters. So I think there's really an opportunity to continue to improve on things like use of antidiarrheals, use of fluids, use of fiber, cutting down on the anti-constipation medicines, the things that Catherine also just alluded to. We see, for example, as little as 5% of caregivers, noting that they've used -- that they have used anti-diarrheal medications. So there's real potential to continue to improve from that perspective. But I'd say it's not one size fits all very much as Catherine just articulated.

Yes. Yes. Okay. That's great. And then in terms of like the split of like where the patients reside in these systems, right, so the -- I mean, COE's a big part of like where your focus has been, but so -- I guess just like how do you make sure that you don't lose the focus there as you're also trying to like double down on outside the COEs maybe if you can...

Yes. So I think it's -- I would describe it, Ash, as an and strategy. So yes, we've definitely focused on the centers of excellence. There are 22 of those now in the U.S. where 35% of the patients are treated. So the -- and strategy is we need to also, in addition, focus on the other centers where the patients are treated. So those 65% who are in smaller institutions, high-volume institutions sort of an inch deep and a mile wide in the U.S. But we need to get to those physicians and help them understand DAYBUE. So that's why this increase in the field force and in our customer-facing model will allow us together with the right reach and frequency. As I know -- as I said, the potential is there because our penetration is so much lower outside the centers of excellence.

Yes. So you said the COE is a 50% penetrated in the...

Roughly, yes.

And outside COEs, like what is the...

About 20% to 25%.

Okay. Got it. And then does that vary between like high-volume institutions or like the standalone like neurologists?

We haven't really splitted it out like that because it's so difficult to really differentiate between the different institutions where people go and see a physician. And the other thing about Rett's patients is they tend to see more than 1 physician. So they're seeing a neurologist. They're seeing a pediatrician, they're seeing a gastroenterologist. So again, we're sort of looking at everybody outside there. And again, there's about 7,000 doctors that treat all Rett patients and about 5,000 of them are really in our focus right now in terms of this extra sizing of the field force.

Got it. I mean, like do you think that outside the COE, patient and physician distribution is kind of more fragmented as opposed to COEs that you would require bigger sales effort there for patients?

Yes. Yes. No, it really is much more fragmented. And again, because there's been no treatment for Rett patients, there's been no need for them to go to a center of excellence and also they're quite geographically specific. So if you live somewhere that's away from it for about 50 or so miles or 100 miles, you're not going to drive to see the center of excellence. So again, we need to ensure that we are able to visit doctors all over the U.S. that treat these patients.

Got it. Okay. All right. That's great. Do you have any kind of like a goalpost for yourself on like where do you want to be in COEs or outside the COEs from a penetration standpoint, like, I don't know, maybe 1 year out, a few years out, anything of that sort?

I think we have a penetration goal for us, but all I want to say is that I want to have Rett patients able to go and visit a doctor and have that doctor aware of DAYBUE and have a good conversation with that family about whether it's the right choice for them. So I want to ensure we're seeing every where a Rett patient might come and get treated.

Yes. Yes, I think that makes sense. Okay. So yes, just talking specifically about like the financial year 2025. So this guidance of $380 million to $405 million. Just maybe if you can mention like what are some of the assumptions that go in there, do you think that there is room for beat and raise here? And just like in terms of the cadence of revenue, I know like last year was sort of like a few up and down quarters, kind of noisy, but like are you more likely to see like more steady growth quarter-over-quarter this year.

Do you want to take that one?

Yes, I'll take that. Thanks, Ash. So I'd say on the range, we're confident in the range. As I shared on our last earnings call, really, the main driver across the range is how many patients are going to get new scripts for DAYBUE at the top of the funnel. Two years into launch, while all the other metrics matter, time to conversion, compliance to dose, persistency, those error bars have narrowed such that the real variability is new patients at the top of funnel. And it's really a volume-driven play across the range just due to the number of dynamics which we can get into, if interesting. Our pricing at the midpoint of our range is expected to be up modestly about 0.5 percentage point. So it's really the full range of guidance is volume and depending upon kind of where we sit with patients over the course of the year will drive that. I think what I would say there is a -- on your revenue cadence or on the -- there's kind of an operational cadence and a financial cadence. I think as we've talked about on our last call, we're making investments, and Catherine mentioned earlier, in expanding kind of our commercial-facing footprint. That's expected to come -- to start to come in early in the second quarter. And so with that investment and that timing, you'd expect kind of the operational metrics that tick up more toward the second half of the year as opposed to evenly spread throughout the year. But from a financial standpoint, we do expect a sequential down -- revenue down Q4 to Q1, primarily due to a pull forward of revenue as families got in front of the holiday period and in front of their insurance reauthorization process and then just normal Q1 seasonality as we experience in NUPLAZID and you experience kind of with every drug. What we don't expect to see this year is a reduction in patients with really a stable patient base as Catherine mentioned earlier on the call. So with the sequential decline in revenue, we think there's probably more of a steady state in revenue growth quarter-over-quarter, Q2 through Q4, underlying that kind of normal Q2 and then the operational metrics that I mentioned early.

Yes. Okay. Perfectly clear. So yes, I think this is great. Maybe just switching gears to the European market and just Canada as well. Like what are your expectations for the launch there? Anything that you can comment on like what pricing might be in these markets?

Yes. I mean as we stated, we've submitted to the EU and the EMA, and we're expecting to get a normal clock kind of dynamic. So we would expect to get European approval sometime in Q1 next year. As you know, each different country has a different approach to pricing, and we're putting together all of our dossiers right now to ensure that we have the right value exchange with each of the national health care systems. So expect European pricing to fall out probably similar analogues to other areas in terms of U.S. versus EU, but each country will be taken individually. And then in Canada, we're in the middle of negotiating right now. So all of those countries will come online sort of middle of next year onwards. And so as soon as we start to get out of U.S. revenue, we will give some more specifics on that.

Yes. Okay. All right. That's great. And just on NUPLAZID. So just moving on the conversation to other parts of your business. So what you mentioned earlier around like the uptick in volume and you're doing the DTC like how much of the growth room is there in this market? Or do you think that there is some level of saturation in this marketplace that you're facing with NUPLAZID?

I think what we've realized with the direct-to-consumer, which we learned prior with other campaigns, this is a very sensitive market for promotion in terms of raising awareness of hallucinations and delusions. So in terms of that growth, we expect that to continue in 2025. Just in terms of opportunity, we're about 25% market share with NUPLAZID in a very large generic market. And so we believe there's a lot of room to grow the NUPLAZID share with the real-world evidence, the clinical evidence that we have to support it as well as raising the awareness of hallucinations and delusions. So I feel very confident we can continue to grow NUPLAZID and there's a lot of room to grow that brand beyond where we are now.

Yes. Yes. All right. That's great. So I know there is a fair bit of focus from investors on the IP situation like that you have some like trial that was there with the Aurobindo in December. So yes, I mean I really wanted to understand, just like to the extent that you can comment on your position on the 721 pattern. And it seems that this generic company, they are doing invalidity on obviousness. I'm very surprised to hear that they would like keep that -- bring that out at this point when you -- that is something that would come at the Markman hearings day. So yes, anything that you can just share on what is your level of confidence on the validity of the pattern? Maybe let's start there.

Yes, I can touch on that. I think for maybe just the level set, we say the book ends for loss of exclusivity for NUPLAZID is between October 2030 and February 2038. Your questions are more on kind of the formulation trial, which happened in February, which if we're ultimately victorious when that will take us out to that February 2038 time frame. For us, on formulation, it's different than composition of matter, but there are a number of arguments both to support the validity of our patents and our position that the generic challengers are infringing upon our patents. We think we have the winning argument in both sides of that case. Obviously, we'll wait to see the ruling from the judge, which is expected out sometime in the first half of this year. On the Markman hearing, I think it's a little bit the opposite. We were -- the ruling went in our favor and the Markman hearing and if you look at the details of that, it's really the language of the patents themselves. There are actually 2 generic challengers in the case Aurobindo and MSN. Obviously, you need to ask them about their strategy. But I think one of the challengers, MSN dropped there non-infringement position after the Markman hearing because I think from our standpoint, it was clear with the ruling in our favor, they probably were infringing on our patents. So what's left to them if they want to continue pursuing against us is to try to validate the patents, not make a claim that they're not infringing on our patents. So we'll see how it plays out. As I said, I think we have the winning argument in both cases and -- or both sides of the argument, we'll see what the results are.

Yes. Yes. I mean at this point, possibility of a settlement, it seems like it is becoming more commonplace in the CNS drug landscape and there have been a lot of different announcements like this in the past few months.

Yes. Yes. I mean, there's always -- I mean every case and situation is specific to itself where it takes 2 parties to get to or in this case, 3 parties because there are 2 remaining, generic calendar -- challengers to get to a settlement. So that's always possible. But at the moment, we're in the middle of litigation and we don't really comment beyond that.

Right. Okay. All right. That's fair. I mean I have started to get more questions from like investors more recently around like potential that, let's say, if you get to 2030 and in the scenario that you don't get the extension, right, would the non-AB-rated pimavanserin tablet, let's say, if that were to enter the market. So just bear with me here, while I play out this scenario. But I guess in this type of a market, right, like is there a precedent for non-AB-rated generics to be successful versus the brand.

I would say there's more analogs to say that they struggle to be successful. So if you're not AB-rated there's no natural switch to the pharmacy, there's no automatic use of the product. And so you have to go out there and really market the product yourself. You have to get it listed on all the EHRs, et cetera. So it's an uphill battle. You have to put all the patient support services in place. So it's a difficult hill to climb. And I'm used to playing in those spaces. So we will continue to compete with whatever is thrown our way, but I would think that's a pretty difficult situation to be in. But they are able to do whatever they would like to do when we will continue to compete and win.

Yes. Yes. Okay. All right. Just maybe in the interest of time, like moving on to some of the pipeline questions. So maybe Liz or anyone really. So yes, ACP-204, so you have this like Alzheimer's disease psychosis. Just conceptually, like what are you aiming for this molecule versus what you tried previously with the pimavanserin.

Thank you. So NUPLAZID is a great drug and has done helpful things for many patients. But there were some areas that we saw as potential areas for improvement when we were looking to come up with a new 5-HT2A inverse agonist. And so really, what we were looking for was a few things: first of these was NUPLAZID does have a QT prolongation signal, it's not but in an elderly and frail patient population, it's important in and of itself, but it's especially important because it limited our ability to dose range. We really sort of capped at the currently marketed dose of NUPLAZID in terms of what we could look at clinically. And we saw some suggestion in our prior data that indicated that higher exposures could be related with higher potential for efficacy. So it was desirable to get rid of the minimize or eliminate the QT prolongation and have the ability to further dose range. And then finally, we were hoping for a quicker time to steady state, which at least has the potential of getting improved time to onset of action. And I'll say that so far between our nonclinical and Phase I and current ongoing trial experience to date. The data do support that ACP-204 is accomplishing all of these. We're starting to get that data into the scientific literature, and I'm looking forward to sharing a little bit more of it in the middle of the year on June 25 at our R&D day.

That's great, okay. So there's something exciting coming so I look forward to that. And then maybe just on the ACP-101 for Prader-Willi. So here, just -- I mean there are a few other companies that are trying for that. Just like how do you consider your approach to be different versus like a potassium channel or a histamine receptor type of approach?

I guess I'll make a couple of comments there. First, this is a disease that is complex in its presentation. Certainly, hyperphagia is the driving symptom for these patients, but there are a number of other things that go on with them. daytime sleepiness, behavioral challenges, muscle tone consideration. So this is a complex patient population with complex needs. And I think going along with that, you really do see a diversity of molecular targets and even development approaches in terms of what people are looking to demonstrate in their trials. I think that we fully anticipate that there can be and will likely be a future where there will be room for more than 1 treatment option that's going to be used by physicians based on the needs of the individual patient in front of them. And with 101, if we see a positive result in our ongoing trial, we think that it is going to be a relevant and important option for patients.

Yes. Yes. That's great. Yes. I'm looking forward to what you share at the R&D Day. I think we are out of time. I can't believe 28 minutes just flew by. But thank you so much for taking out the time today and for participating in our conference.

Thanks, Ash.

Thanks a lot.

Have a good one, everybody. Take care.

Thank you.