Alkermes plc (ALKS) Earnings Call Transcript & Summary

All right. Good morning, everybody, and welcome to the SVB Leerink Global Healthcare Conference. This is my first session of the day, and we're really pleased to have Alkermes, one of the companies that has been around a long time, and it's one of the really great companies in the [indiscernible]. We're lucky enough to have Blair Jackson, who've joined the company in 1999, and moved around different roles, and now is the Chief Operating Officer. And we have Iain Brown as well. He joined the company in 2003 and recently became CFO. So thank you so much, both of you for joining. So Blair is going to make some opening comments, and then we're going to move into questions. So Blair, I'll turn it over to you.

Great. Thanks a lot, Marc. It's really nice to see you. I will remind everyone that I will be making forward-looking statements during today's presentation, and I encourage everyone to review our regulatory filings for full disclosure. This year is a really exciting year for the company. We're really looking to really reveal and elaborate more the value that's inherent in many of the products that we have existing in the company today. And we're really doing it in 3 key areas. First, we want to grow and diversify our commercial revenues. So with ARISTADA, we exited last year with really strong momentum, and we really want to continue that as we move into 2021. And with ARISTADA, we have the INITIO dosage form and the 1064 dose in 2-month dosage form, which really position the product in a strong place when you think about detailing and working with physicians in this difficult COVID environment that we're trying to market in. With VIVITROL, we've been adapting well to some of the disruptions that we saw with regards to the pandemic. And what we're looking to do this year is really intensify our efforts in alcohol dependence. And really, we've seen some really interesting growth in that area over the last year, and we want to expand upon that and look to grow that opportunity through 2021. Our new product that we hope to have launched this year, EVOLVE, fits perfectly within our portfolio. This product is a psychiatric product that really fits on top of our existing sales footprint and really will demonstrate the leverage that exists within our commercial business. And so our focus this year is to continue the disease awareness work that we've been doing as we progress towards PDUFA and also getting ready to launch the product post our PDUFA date, which is in June 1 of this year. The other thing I'd highlight is we don't want to forget about VUMERITY. So VUMERITY is a product that we developed. It's the next-generation TECFIDERA. We partnered this with Biogen, it's happening really -- starting to launch really well. This is a 100% margin product for our company, and we're really excited to see how that can contribute to the growing revenues over the next few years. The other area that we want to focus on this year is our pipeline. And we really want to demonstrate the value of some of the investments that we've been making in the pipeline over the last few years, both in oncology as well as in neuroscience. And if we start with oncology, our nemvaleukin program is advancing rapidly towards the registration phase. And so that's on the back of data that we've generated in monotherapy, both in melanoma and renal cell carcinoma as well as in combination therapy. And so this year, we want -- we'll be meeting with the FDA to talk about potential registration strategies and also hope to be in registration studies in mucosal melanoma and platinum-resistant ovarian cancer by the end of the year. So a very exciting program for us and something where we have a lot of data that we expect over the course of this year. Additionally, as that program moves forward, we anticipate more data coming in from our ARTISTRY-1 and ARTISTRY-2 programs. These are our IV and subcutaneous forms of the nemvaleukin program and data in the expansion cohorts will allow us to advance some of our potential collaborations further as we identify areas of opportunity within those treatment paradigms. If we turn to neuroscience, our program, ALKS 1140, is the first product that's coming out of our selective HDAC modulation platform, and we've nominated this product earlier last year, late last year, and we anticipate being in first-in-man later on this year. Now this is an interesting program in that it has applicability across a number of different neurodegenerative and neurodevelopment areas. We haven't talked a lot about that, and we will be doing more of that -- more disclosure on that later this year. So if you look at both nemvaleukin and ALKS 1140, these are products that really drive from years of activity and capabilities on platforms that we've developed over a number of years. And these are things that we haven't talked about as a company over the last little while, and we want to disclose a lot more. So we do have an investor meeting that's coming up at the end of the first quarter. Where we'll talk more about these platforms and more details of these products so that investors can get a better sense of what we're doing on the R&D side. So in addition to our commercial revenue and our pipeline programs, the other area of focus for us is on profitability and execution of the value enhancement plan. So this is a plan that is designed to really drive growth and to improve our operational and financial capabilities. And really, the goal here is to drive shareholder value. So we're doing this in multiple fronts where we've put a multiyear profitability targets. We're looking carefully at some of our non-core assets and some of the strategic directions that we can take with regards to existing programs and partnerships. And we're looking to enhance the governance of the company as we look to refresh our Board over the course of this year. So we have pretty strong targets. We're committed to meeting them. And so across these 3 dynamics and initiatives that we have, it's going to be a pretty busy year for the company, but one that we're really excited to kick off.

Okay. Terrific. Thank you. So Blair, maybe we could start with LYBALVI. Just give us a sense of what you mean by a stage launch, just so we can understand the investment at the beginning, how that investment is going to go? How you're thinking about what a stage launch really means? Because from our standpoint, you'll launch a drug once, it's kind of always a big deal. You'll launch with a lot of flash. So how are you thinking about this?

Yes. Maybe I'll start operationally, and then I'll let Iain comment financially and how we're staging our investment. So I think when you look at launching a pharmaceutical, one of the challenges is that you have this PDUFA date that's in front of you. In our case, we had some additional questions from the FDA, which pushed out our PDUFA date from his original time to June 1. And any time you have a moving PDUFA date, what we want to make sure we're doing is we're staging our investment in our operation elements so that we're doing it after approval. And we're not over investing at the front end and burning a bunch of costs while we're waiting for approval. So what we've done is we've positioned our commercial organization to be ready to launch, to handle the initial deployment and then look to expand the sales force after PDUFA. Similarly, a lot of our external vendor and work that we do with the big splash, the marketing and things like that. We're kicking that off as soon as we know, we have approval from the FDA, and our team is ready to go. So we're just -- we're in that stage now where we're doing that disease awareness and really getting the sales force ready for when they could start to get out there and talk to physicians. And then importantly, getting the commercial team ready to make sure that they're talking to payers so that we can initiate access to the drug as soon as possible. So I don't know, Iain, if you want to talk about finances a bit.

Sure. Thanks, Blair. So I think the key concept for the launch of LYBALVI is really leverage. If you think about Alkermes up to this point in time, we have 2 stand-alone sales organizations, one in support of VIVITROL, one in support of ARISTADA. So now ARISTADA and LYBALVI with -- between those 2 products. We currently have 220 people in the field in support of ARISTADA, and they're currently calling on about 60% of the doctors that we believe an expanded ARISTADA and LYBALVI sales force will be calling on. The healthcare provider universe is expanding because ARISTADA is among active injectable, like LYBALVI being an oral medication. There's just more oral prescribers out there. So when you think about the launch, we're going to be hitting the ground running with sales reps who know their territories, who know the doctors and are currently calling on, as I say, 60% of the expanded core universe. Now this time last year, we were talking about adding potentially 200 new sales reps to the organization to support the launch of the product. Subsequent to that, we've had COVID and this sort of increase in the advent of telehealth, which we think is here to stay. So between adapting the sales model from more of a telehealth-based approach, and also, we've also been doing work internally around operational efficiencies. And we talked at the end of last year about reorganizing some of the commercial organizations. We took about 80 roles that were previously supporting VIVITROL and ARISTADA and made them more forward-facing on LYBALVI. And on top of that, we'll probably add somewhere between 40 to 50 reps in support of the launch, to Blair's point, on a staged basis to some closer to PDUFA date and then some additional ones maybe later in the year depending on how access goes. So I think what we've been able to do in the last year is really adapt to the new sales environment and also look internally at operational efficiencies and we believe we now have a model that can support the launch of the product in the second half that is much more efficient than what we are originally anticipating.

So 130-ish reps will be basically the number that we'll have on this drug eventually, right? That's what you're saying?

350, because you got the 220 are currently on ARISTADA, who will also be selling LYBALVI. So you now have 2 products in the bag. So...

And that's -- that 220, those are second detail. The ARISTADA people, that will be a second detail, right?

It's actually a mix. So as you look at these physicians, they're going to go -- they'll have both products in their bag. But in any given territory, you might have a physician where you lead with LYBALVI because they're more of an oral prescriber or you might have a physician where you lead with ARISTADA.

Right. And when you think about the prescribers for this type of product. I mean, obviously, usually, it's 80%, right? Most of them. So let's just -- whatever that ever is, what's your kind of goal to hit like most of the prescriber? What is that number and just take you 6 months to kind of get there? How do we think about that?

Yes. When we look at the coverage, we think we'll get the vast majority of the prescribers. And you're exactly right. If you look at kind of overall sales of any drug. It's kind of like the 80-20 rule. It's kind of what works. I think what's really interesting for this drug is that there's both the oral component. So a very big difference of oral treatment versus LAI treatment. That's a bigger universe of physicians. The other piece is bipolar. So you have bipolar patients in addition to the schizophrenia patients. We anticipate our label will have both indications. And so we want to be able to cover each of those. And our coverage across each of those is going to very differently depending on our deployment and how that goes. But it will cover the majority of the prescribers.

Yes. And just remind us what is the marketing message, right? And who is the right patient?

Yes. So this is all about efficacy. So we've been able to demonstrate through our clinical trials that LYBALVI mitigates the weight gain associated with olanzapine therapy. I think what people have recognized for years is that olanzapine is one of the more effective atypical antipsychotics. And what's been plaguing the treatment provider is that they don't want to keep patients on olanzapine. Oftentimes, they'll stabilize patients on olanzapine, but they quickly move them off because they're worried about some of the downstream consequences and moving them off a therapy that stabilize them, leave them exposed to potential breakthroughs. And so we think that the best treatment paradigm is to keep people on olanzapine, treat them with the olanzapine and generate the best efficacy you can with that patient. And we think olanzapine, and, specifically, LYBALVI can do that. And without having to -- while mitigating some of that weight gain.

So it's really every patient, right? I mean there's not a subset of patients here. It's -- this is first line, use this drug, you love olanzapine, why not just use our product first.

That's exactly right. And I think there's different ways that patients flow into the treatment paradigm as you know with schizophrenia, it's a really difficult group to treat, and there's a lot of relapse on that disease. Our data suggests that in any given month, there's 70,000 patients that are so switching between medications for various reasons. Those are obviously very important. It's a very important group of patients to understand as you're launching a new product. Interestingly of that 70,000 patients 15,000 are transitioning on branded therapies. So despite the fact that there is a lot of generic treatment in the market you're still seeing this big churn and I think that's indicative of a market that needs efficacious products that needs products that patients can be maintained on, and we think we're offering that with LYBALVI.

Any learnings that you've gotten from intracellular [indiscernible], they launched roughly a year ago. And so anything that you've learned from what they've done to copy or not copy?

Yes. I mean it's tough. They unfortunately launched at a period of time where the whole market was in upheaval. And you think of physicians who are at the time, limiting their patients, limiting their interactions, hard to launch a new drug into that environment, especially last year when it was brand-new to everybody. So I think they've done well to get the story out on their drug. I think what we have been doing and used our time last year to do is really evolve our commercial model and evolved it in a way where we can interact a little more digitally with these physicians to provide information that is relevant to the physicians that they'll engage with. And so as we look to launch this year, even though we are in a COVID situation, we feel that we're going to get a reasonable amount of attention and engagement. And we also at this year that as we move into the second half of the year, that the market will start to -- at least the treatment market will start to evolve into a more of a normal situation. So that's our strategy moving forward.

And last question on this topic. Is there anything that you feel like is misunderstood in the investment community relative to this product? I mean, are people missing anything? Are you frustrated, like, wow, I just can't believe they keep asking that question over and over. They don't understand this.

Yes. I mean, I think there's a group of people who are focused on the payer environment and are overly negative on that area. And I think the one thing I'd recognize, as you look at this market, I talked about it earlier, is there is a lot of treatment with generic medicines within the market. And it's been that way for years, and it's going to be that way for years to come. These -- as I said, these patients churn through these medications and ultimately move to brands as they need more, whether it's a better safety profile or better efficacy. I think that's what some people are missing is that this branded market that exists today does exist on top of a very large generic market. It's the way the payers handle this market, the way physicians view this market is very -- it's very predictable. It's something that we interact with as we think about our long-acting drug ARISTADA, and it's something that we're ready to address as we move into launch of the product. So I would encourage those investors to take a careful look at some of the successful products in this area. And we don't see why we would be any different than those.