Alkermes plc (ALKS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the 2020 Cantor Fitzgerald Virtual Health Care Conference this year. Thank you very much for joining us. I am Brandon Folkes, one of the biopharma analysts here at Cantor. And next up on the schedule, we have a fireside chat with Alkermes. And joining us from Alkermes is CEO, Richard Pops; and Iain Brown, SVP of Finance. Just a word to those who are joining us, we will likely run short of time for Q&A on this fireside chat. So if you do have any questions, please e-mail them directly to me. I'll get them across to the company, and the company will get back to you.

Maybe just bringing in, Rich, thank you very much for joining us. Can you just give us a brief overview of where Alkermes is currently? I think most people are familiar with the company. But just in terms of how has COVID continued to impact the business post the second quarter.

Well, good morning, Brandon, it's good to see you. And like I said before, it's good to see you wearing a tie. Upgrade these Zoom chats for once now. Yes, it's a really important time in the history of Alkermes now because if you think about the company in 2 or 3 discrete buckets, the first being the current commercial business, which is anchored with VIVITROL and ARISTADA; the second bucket being the later stage pipeline, which is notably filled with 3831 for schizophrenia and bipolar disease; and I think increasingly 4230 in cancer. And then the third bucket would be everything else, including our earlier-stage research that things are happening in the lab that have continued throughout COVID. In that first bucket is where your question is directed. And I think that we've shown a really remarkable resiliency coming out of what, in March and April was a really scary moment, I think, for patients with serious mental illness and addiction, where access to care really dried up. These types of providers really didn't want to see their patients, and these types of patients really didn't want to see their providers. And with our medicines, which are injectable medicines, typically administered in a physician's office or in that setting, we saw an immediate impact, particularly in our VIVITROL business. So it was amazing to see how quickly our commercial teams adapted to this became -- what became a virtual environment, but not just digitizing and being able to work on different platforms. It was engaging with the care providers to figure out ways of reestablishing care with these patients. Interestingly, despite the fact that both medicines, VIVITROL and ARISTADA were given by injections, there was different responses in the 2 different clinical settings. Schizophrenia, those patients were less affected. Our ARISTADA business was not as affected as our VIVITROL business. And I think that underscores the fact that the treatment system for addiction is even more fragmented and less robust than the treatment for serious mental illness is that one as well. So I think that we were pleased to be able to reestablish guidance at the end of the Q2 call. I think because we have a good sense now barring any unforeseen changes in the world of how the business re-equilibrates. And so we're back at it, and we're getting our medicines to patients. And I think the higher level message is that Alkermes provides a really important service in the community at large at a time like this, during a pandemic. These patients with serious mental illness and addiction get left behind. And it's more than just making a medicine available, which is hard enough, manufacturing it, distributing it, keeping it available. But also reinforcing on the policy side and making sure that the systems continue to accommodate care for patients, many of whom are on the fringes of society. So long answer to a simple question, but I think that we feel comfortable that we have visibility into the business now for the end of the year, and we've reestablished the guidance, and we're comfortable with that.

Great. And I do want to come back to the commercial business. But I guess I'm going to dive in straight into 3831 just because of the timeliness around AdCom, right? So we have the AdCom, I think, it's scheduled for October 9. Maybe just from your side, can you talk a little bit about the aspects you expect the committee will really drill down into? And then maybe on the attenuation of weight gain, can you talk a little bit about how you see the data? There was some misinterpretation from the investment community. Any insights in terms of how you think the FDA is going to interpret that data?

3831 is a [indiscernible] [ samidorphan ], new molecular entity [indiscernible] antagonist. And the inclusion of the samidorphan is to -- anyway the -- so commonly lack in treatment. There's a couple of [indiscernible] to how it does that. The original one was driven by reward mechanisms in the brain associated primarily with consumption of fat. But the interesting thing about modeling that, unlike modeling schizophrenia itself, you can model weight gain in animals of various species to look at weight gain driven by olanzapine and attenuation of that weight gain by olanzapine. And so it's been a long, scientifically rigorous program. And the -- when we filed the NDA, we expected that to enter at AdCom, they would focus exactly on what you mentioned, which is the clinical significance of weight mitigation because FDA has not approved weight mitigation agents before. There are guidances and drugs have been developed as weight loss agents, but particularly for the division of psychiatry to have a weight mitigation aspect of an antipsychotic, that was new. And we thought that was a reasonable basis for a discussion in an AdCom. So at our mid-cycle meeting and the associated minutes from that, we were told that the -- there were no safety issues at the time. There are no efficacy issues at the time. It was really going to be focused on the clinical significance of weight medication. Subsequent to that meeting, we were notified that they want to also include some questions about the presence of an opioid receptor antagonist in this patient population. Now that's entirely reasonable. That's something we actually flag in the NDA ourselves, we -- and in our clinical trials because samidorphan is an antagonist. We don't want 3831 used in people who are actively using opioids, unless that they were [indiscernible]. I think that's always been part of our labeling recommendation. So we had raised this as a potential issue. We have a lot of experience with this because, of course, we market an injectable once-monthly for opioid antagonist in an overlapping patient population. Now we know that labeling is adequate, and we know from real world experience that there's very little evidence of people trying to overcome that blockade or precipitating withdrawal or not being able to get an effective analgesic. So we'll be prepared to talk about that at the AdCom as well.

Maybe just staying on that point, the opioid question that was raised. Is this patient population that -- I mean, to me, it doesn't seem like one that would be on a lot of opioids, but -- sorry, let me rephrase it. That would be -- have any opioid usage different to the general population? Is that right? Or is this a population where we do see a higher usage of opioids that with that label claim, it may be something that prescribers need to just be a little bit more aware of?

I think that the point estimate for opioid use or abuse in the schizophrenia population is still very low, 5% or less, which is higher than the general population, but still absolutely low. The bipolar is slightly higher. But as a general matter, as we talk to clinicians, these are things that they're investigating, interrogating at all times because we the administration of a psychoactive compound against the backdrop of the illicit drug use is problematic. It could be alcohol. It could be opioids. When we talk to the patient advocacy groups, I actually think there's a bit of embedded stigma in this, suggesting these patients are more prone to become opioid addicts and also more prone to not tell their doctor if they're using an opioid. Recall that compared to VIVITROL, VIVITROL is irretrievable once-monthly blockade. These are once-daily oral tablets with 10 mg of samidorphan on it. They're not -- it's not a persistent blockade. So if someone decides that they don't want to take their antipsychotic with the antagonist anymore, they're not going to take it. But that's not the patient population this drug is designed for. And I think it's one of the most interesting things about the analysis that I read from analysts on this market because they tend to talk about all the impediments that patients are going to face to get access to 3831 or any other medication. And what's interesting is that, that's all true. You can stipulate, that's absolutely true. But single market share points because there are so many patients are worth hundreds of millions of dollars. So when you talk to thought leaders, and they say, well, only 20% of my patients might be candidates for this. Well, we had 20% of the patients. This will be a multibillion-dollar drug. We're hoping for single-digit percentages and then building from there. So I think there's a mismatch in many people's minds, particularly who've been familiar with dealing with oncology drugs or rare disease drugs, where they feel like they can capture large shares of the market. We know that with 3831 and any other branded agents, they're going to be forced to go through multiple hoops many times, and this is incredibly unfortunate and inappropriate, but it's the current state of affairs. And we understand that quite well because we happen to sell a brand in antipsychotic right now in the form of ARISTADA. And you've heard me say before, no patient goes on ARISTADA who hasn't failed on multiple cheap oral generics. Yet INVEGA SUSTENNA, the product that J&J sells based on our technology, it's a $2 billion drug in the U.S. So it's just an overwhelming number of patients with serious medical need. 1% incidence in prevalence of schizophrenia has 3 million people in the country with serious chronic lifelong disease who need better care. So we completely understand that what we're focusing on is the tip of a very broad-based pyramid, but there's still a lot of room for helping people in that space.

Great. And then just switching back to the weight part of the question, right, because I think that's something that people have focused on. As we've -- as you've had more time to really be out then educate KOLs or physicians who present the data, can you just talk about that newest or what is the reception you're getting from the actual prescribing community, right, in terms of mitigating that weight gain versus the limitations around a trial where you're shifting a population and you may have people dropping out who do gain significant weight?

Yes. It's a good question because the actual prespecified primary analysis of the weight study is so bit esoteric because it's co-primary endpoints have shift in the mean plus these categorical cuts at 10% and 7%, which are both highly statistically significant. But to a practicing clinician, they have no reference because no other drug has ever been tested in that way. So what we find actually is that the flatness of the curve, which is not part of the primary analysis per se, but it's representative of the data, not just within the 24-week period, but the year plus follow-up, that's what is also really striking to the clinician. So they'll say, okay, we get that you achieved the primary endpoint. So there's clearly an effect on weight. We then show the cumulative distribution plot, which shows that it's not just driven by 1 or 2 weight categories. It's across the whole spectrum. And then the flatness and people who use olanzapine is they recognize that flat is now what you see clinically with olanzapine at all. So I think that's coupled with -- for many clinicians, just a deep understanding and regular use of olanzapine, they know [ the answer ]. So what we're finding is that there's a significant amount of receptivity to the idea of making olanzapine into a maintenance drug. They often use it now in the acute setting, in exacerbation of schizophrenia. But the idea of being able to keep patients on olanzapine, capturing that efficacy, while not worrying about accumulation of weight over time is attractive. So we don't find that people really spend a lot of time in statistical manipulations of looking what the data means in that regard. There's clearly a shift, and the rate profile looks flat. And I think physicians are going to try it and see in their own hands, if it's different than olanzapine.

Okay. And then maybe in terms of launch preparations, where are you with that? Or when should we expect launch preparations to ramp up?

I lost a little bit of audio there, Brandon. You asked the question, when do we expect launch preparations sort to ramp?

To begin to ramp up. Yes.

Yes. Well, that's happening now. It's one of the great advantages of having a presence in that market right now is that we have the engine not launching from a standing start. We have medical affairs. We have national accounts, we have payer relationships. We have -- we reckon based on our calculation that -- of the target audience at launch, we currently have relationships with about 60% of those physicians.

And maybe if I can just bring you in here quickly. Can we talk a little bit about, obviously, there's been a lot of discussion about Alkermes and what they may look to buy in terms of business development. Obviously, you have a very sound company. How should we think about the liquidity of the company? And where you think about investing that liquidity over the next few years, given that you have the 3831 launch coming up as well as -- and I'm going to get to that next. But you do have this 4230 program that you have the option to invest behind as well or partner.