Alkermes plc (ALKS) Earnings Call Transcript & Summary

Good morning, everybody. Day 2 of our conference. Thank you very much for joining us again. I'm Marc Goodman, one of the biopharma analysts. And this morning, we're going to kick it up with Alkermes. So we have Blair Jackson, who leads corporate planning, and has been in various roles with the company since 1999, I looked up, wow. Holy cow.

Been a while, yes.

And Iain Brown, SVP of Finance and Chief Accounting Officer, who's been with the company since 2003, which is actually a pretty long time as well. So 2 people who've seen a lot of change at this company, certainly. So maybe, Iain, do you want to start and just kind of kick us off with how we're thinking about -- let's talk about some of the products. Let's start with VIVITROL.

Sure.

And how are we thinking about growth this year? What are kind of the key drivers? What are kind of the key push and pulls that you're thinking about that we want to be aware of?

Well, thanks, Marc. Good morning, everybody. Thanks for coming to hear about Alkermes today. During the course of the next few minutes, we will be making forward-looking statements. It's an inherently risky business that we operate in, so we always ask people to look at our SEC filings. We spend a lot of time putting together risk factors, et cetera. So anybody thinking about making an investment decision, we ask them to look at those SEC filings. So VIVITROL is one of 2 proprietary products that we have out on the market in the U.S. It's for alcohol use disorder and for the prevention of relapse to opioid dependence following opioid detoxification. It's been on market for a while. We had just over $335 million worth of net sales last year. So it's been growing very steadily, and we anticipate that growth continuing with the backdrop of the sort of raging opioid epidemic that we have in the country. It's very much dependent upon funding, both at the federal level and the state level. And it's a very complex sort of treatment setting that we have to operate in, so not just your traditional sales reps turning up at a doctor talking about the benefits of the product. I mean we have to have a very sophisticated infrastructure that starts at the federal level, at the state level. We have people working with governors, state legislatures, trying to pull funding down and then have that funding from the state level go down into the treatment centers. So we feel like we've built a strong organization in order to facilitate the sales of the product. And continued growth. In the past, we've had the top 5 states for the country representing about 50% of growth [ or ] 50% of the net sales of the product. What we're seeing now is some of the growth is now starting in some of the smaller states. So what we're really focusing on is continued awareness of the disease awareness of the product. And we have about 19 states which grew over 25% year-on-year. So we have the 5 big states, which still remain the largest portion of the sales, but we are seeing growth in those smaller states starting to happen. So as I say, it's a sophisticated market, and we're very much focused on trying to pull down the funding for VIVITROL, which is only 1 of 3 medication-assisted treatments approved by the FDA. You have methadone, you have SUBOXONE, which are sort of agonist treatments. VIVITROL is a once-a-month injectable antagonist. So it's very much focused on those people, those patients, who want the best chance to live an opioid-free life. We tend to find that there's a role to play for each of the 3 medication-assisted treatments. I think, certainly, methadone and SUBOXONE stabilize a patient once they come in for a treatment. And then when that patient makes that determination that they want to live an opioid-free life, then they send -- they get onto a sort of detoxification plan, and then they can get on to VIVITROL after that.

So when you're dependent on the government, that's always an issue in and of itself, right? I mean those bottlenecks with respect to moving money around from federal to state to local to -- what does the company do to help that out? I mean is there anything that you can do to kind of step in and help the bottlenecks?

Yes. So we have -- as I say, we have a federal policy team that works at the federal level to try and appropriate funds. We have people at the state level who are working with the governors and various people within various states in order to help them understand the funding that's available. We have the TBMs, our sales reps, who are calling on the doctors, the community mental health care centers, et cetera. And we also have field reimbursement specialists who work with those guys to try and help the prescribing process flow as easily as possible. So it's -- like I say, it's a sophisticated infrastructure that we've built in order to try and facilitate getting treatment to patients in what is a very complicated treatment environment.

And on the last conference call, it's interesting, because I think we've all thought about this as government-driven, government-driven, but you talked about the commercial opportunity a little bit. Really, I think it was kind of a wake-up call for us. I was, "Oh, okay. Wait." What's going on the commercial side? And there's an alcohol indication? And maybe you can talk a little bit about that and the initiatives because it sounds like that's a new initiative this year, a little more than in the past.

Certainly, I think VIVITROL was launched back in 2006 with the alcohol use indication. And then we got the opioid indication back in 2010 time frame. So we initially focused on the alcohol market, which is actually a bigger market. But certainly, with the raging opioid epidemic, that became more to the forefront. And I think in the past, we were able to track a certain amount of VIVITROL usage through what we call our hub internally. And the split between the 2 was sort of 70% opioid use, 30% alcohol use. We've seen that changing gradually. So I think it's closer now to 60% opioid, 40% alcohol. But in some states, it's much more 50-50. And actually in California, I think it's slightly more tilted towards the alcohol use disorder side of things. So that's a big focus for us in 2020, is getting VIVITROL sort of out there for the alcohol use indication, which tends to be a little bit more commercial pay than the opioid side of things. And VIVITROL is about 50% Medicaid. So we have to navigate those sort of big state payment systems. But certainly, for 2020, we want to make sure that we can maximize both those opportunities, both in the alcohol indication and the opioid indication.

And talk a little bit about the other product that's -- ARISTADA. What are kind of the push-pulls this year that we need to be worried about? Are there access changes? Things like that, that are important we know.

Yes. So ARISTADA's a long-acting injectable for schizophrenia. It launched in 2015. And I would say, since then, we've really been building out the product family. We now have 4 doses that cover 3 different durations: Once a month, once every 6 weeks, once every 2 months. And then recently, we launched ARISTADA INITIO, which gives us the opportunity -- it's only -- the only long-acting injectable in the market now, where on day 1, you can initiate a patient onto treatment. So with a 30-milligram tablet of aripiprazole, one injection of INITIO, you can then give somebody an injection of any of the dose strengths. And I think for us, the clear message is that to be able to initiate somebody on ARISTADA and give them the 1,064 dose, which covers 2 months, is hugely powerful. So you can get somebody in the treatment setting, and then you give them INITIO, you give them for 2-month, and then they can go out into the community and sort of find their next continuation of therapy. So we've rounded out the product family. And then during the course of last year, we ran what we call the ALPINE study -- or we had the results of the ALPINE study, which showed how ARISTADA compares against the market leader, INVEGA SUSTENNA. And the results were very favorable. So we're now able to leverage sort of incremental data to show the benefits of ARISTADA.

That's helped you with the payers?

I think the payers, we've actually got very good access. I know there are some thoughts out there that ARISTADA wasn't being as covered as well as some of the other products in the marketplace, but we feel like we're parity access with pretty much all the other products out there. So as we go into 2020, I think we have the full product family. We have good access. We have the ALPINE data. We had a win with the VA, so we're on parity access with the VA as from last year. So all the pieces are in place, and now it's all about commercial execution. And I'd say that's both for ARISTADA and for VIVITROL now. So one of the 3 key focuses for us in 2020 is really commercial execution on the proprietary products.

And so while that's going on, obviously, there's a lot of preparation and excitement around having a third product to launch for the company. Maybe you can talk about what's happening right now, what's the plans as the year progresses for 3831? And then maybe talk about, as we launch that product, your thoughts about just the strategy, the marketing hook, what should we expect? Because obviously, there's a lot of antipsychotics out there.

Sure. Do you want to?

Sure. So ALKS 3831 is actually a really exciting program for us because it really expands our footprint within the psychiatric community. So if you think of ARISTADA, where we have long-acting injectables, it's a more narrow target audience. With 3831, we have an opportunity both in broader schizophrenia offices as well as in bipolar disorder. And so with their PDUFA coming up in the fourth quarter of this year, we're really in the commercial preparation mode. So what that means really is that we're really out there talking to payers about how they would work with a new branded product, how they see the disease space. We're also out there in the community, really just talking about the benefits of enhanced efficacy within schizophrenia. I think one of the real interesting things about this market over the last decade is that there was really sort of a shift away from efficacy. There was sort of a drive in many, many products to go for things that were more tolerable. And most...

And why was that?

Well, it was more a function of the medicines that were being developed. So as the medicines came out, they had improved tolerability over some of the stronger, the olanzapines and the clozapines. And so physicians wanted to get into a broader patient audience. And in the process of doing that, efficacy's kind of been -- has fallen back. And what we see with ALKS 3831 is that we have an opportunity really now to really enhance that for physicians, provide them with a tool where a patient or a physician doesn't have to have a trade-off. So instead of -- we go out now. We're talking to lots of key opinion leaders. And we've heard from a few of them that when they have a group of patients in the room, in their waiting room, they can very readily pick out an olanzapine patient because the amount of weight they've gained while they've been on therapy. And that's a horrible trade-off for a patient to make, or a physician to have to make. So with 3831, we think that we can mitigate that. We can give that efficacy back to those patients. And so part of what we're doing this year is really talking to physicians about that, whether or not they resonate with that. I'm talking to payers about how we position the product. And then as we get towards the later half of the year, we'll start to prepare a commercial force and bring in a slight expansion of our commercial team so that we can get to that wider audience in bipolar and schizophrenia

And just so we understand the product and what you're talking about as far as weight gain. So give us a sense of a patient starts on olanzapine. 2 years later, how much weight have they gained? A patient starts on your product, where are they? So we have an understanding of the difference here.

Yes. So when you look at olanzapine, there's been a number of studies. And one of the largest ones was the CATIE study. And what you tend to see with patients on olanzapine is that they gain -- they can gain 10%, 20%, 30% of their body weight over a course of therapy, and it continues constantly. So it's from the first dose that they have, they start gaining weight. And as long as they stay on therapy, that continues unabated. What we were able to show in our ENLIGHTEN program is that when you are on ALKS 3831, once the patient stabilizes, there's a slight weight gain over a few-week period and then it's literally flat. We don't see any further weight gain on them. And we've continued that in some of our long-term studies...

So how long have we got? How long?

So over a year. And so we've been able to show in a controlled study over a year, you still maintain that weight mitigation. And what's also interesting is if you take patients who were on olanzapine previously, and they've gained weight, we can arrest that weight gain at that point. So it really shows that ALKS 3831 is really doing something different within that patient population. And it just takes that concern away from the physician that they have to deal with this, and more importantly, that they have to switch the patient.

So you mentioned payers. And that's kind of the key thing, because it's interesting, when you call physicians and you say, "Hey, here's this product, here's what the profile is." They're like, "Ooh, I love that. Who wouldn't want an olanzapine that didn't have a weight problem?" But I'm sure the payers are going to push back a little bit. So how is that going? And how do you anticipate this product being used out there? Like, second line? Third? What do we have to do to get there?

No, absolutely. I mean this is a pretty mature area of treatment. And so there's established plans that payers have. Always, you will -- the patient -- a new patient will step through an oral generic therapy...

So it will be 1 or 2, do you think?

It can be 1, 2, 3. I mean they tend to cycle through their medications. And then after that, then the patient can then start on a branded medication. And we really think that ALKS 3831 would be that one, especially for patients who need efficacy...

You're not fighting to change the paradigm, you're just fighting to go after the other brands at that point, second line or third line or wherever it is.

Yes, that's exactly it. That's exactly it. And I think the one thing to keep in mind is when you think of a payer situation, the most expensive thing for payer in this space is when these patients relapse. These patients relapse, they're rehospitalized. They have accidents. It's really a horrific pattern that happens. And to be able to mitigate that and to keep that at bay is much less expensive, even on a branded medication, than if they go down that path.