Alpha Cognition Inc. - Special Call (ACOG) Earnings Call Transcript & Summary

Perfect. Maybe I'll just kick this off in the sake of time. Appreciate everyone joining for this fireside chat with Alpha Cognition. We have Michael McFadden, the CEO of Alpha Cognition, ACOG, on the line here today along with Boris Peaker, who is our Head of Research and Managing Director here at Titan Partners. This is a fireside chat format. So Boris has some pre-canned questions that he'll go through with Michael, but with all the attendees on the line, please feel free to put any chat questions in the chat below. We want to make this as conversational as possible throughout the time here today. So Boris, maybe with that floor is yours and Michael and all the investors on the line here, thanks for the time.

Great. Thanks, Jason and Michael, thanks for joining us.

Happy to be here.

So let's set right in. So obviously, the investor focus is on ZUNVEYL commercial adoption, and you've reported $2.3 million in sales in the third quarter. Can you remind us again on the key performance metrics that you're monitoring the commercial launch? And what these metrics suggest about the total addressable market size?

Yes. So we look at -- we're in the long-term care market. As a reminder to everyone, long-term care is defined as nursing home or full care entities that manage Alzheimer's patients, that market size is about a $2.2 billion market size. As we focus on the market, the KPIs that we look at are physician prescribing and repeat orders. We look at nursing home orders and nursing home repeat orders. Both KPIs are important for breadth and depth of the market. We also look at adherence rates, utilization of 10-milligram versus 5, which is an indication of efficacy and tolerability. And then we look at payer metrics, plans covered and all lives covered without restriction. Those are the primary KPIs that we're following and managing to at this point in time.

Great. So let's dive into those just to kind of understand how those are evolving. We'll just take them in the order that you outlined and maybe let's start with the physician prescribing and repeat orders and the same kind of question on nursing homes and repeat orders. Where are we right now on those KPIs? Where do you see the target market is? And how do we get from here to there?

Yes. Let me start with the nursing home. So we target about 5,000 nursing homes. They are about 15,000 in the United States. 5,000 specialize in Alzheimer's, and they're outsized in the number of patients that reside in those entities. We have about 600 homes that -- cumulatively, that have written prescriptions to date. Of note, about 550 homes wrote orders in Q3. And we're seeing a 60% refill or reorder rate in the homes that we're calling on. We're going to see those numbers exponentially grow over the coming quarters as we reach more homes, homes feel comfortable with ZUNVEYL and begin to utilize ZUNVEYL on its own. On HCP writers, we have about 3,000 medical directors, about 1,000 psychiatrists that we target, total about 4,000. We have about 576 writers in Q3. And cumulatively, we're approaching 700 writers since launch, about what we expected, but we'll see those numbers move into the 4-digit numbers in 2026. We're also seeing with the prescribers about 2/3 are repeating orders. To date, that number is a little bit lower than we'll see at steady state because many doctors are writing it for the first time in the quarter. So they haven't had a chance to write a second prescription. But we'll see those numbers grow also over the coming quarters. From a payer perspective, payers, we have a single payer contract right now, about 15% of their covered lives have come online. With that contract, we anticipate a second contract this month from another PBM, and we'll see the lives from that PBM manage come online in the first 2 quarters of next year.

Got you. What about the utilization you mentioned about 10 mg versus 5 mg dose. Where are we at between those 2 doses? And how does you see that going forward?

It's about 50-50 now. About 50% of patients are on a 5 milligram, 50% are on 10 milligram. It's about what we expected with the growth in prescriptions month-over-month. We should see ultimately at steady state, about 75% of patients on a 10 milligram and the remaining patients on either a 5 or 15. So it's an indication that the drug is really well tolerated, and that doctors are able to titrate it to an efficacious dose.

Got you. And in terms of pricing, remind us how the different pricing works for different doses?

So we have flat line pricing across all doses. And as a reminder, we took price in September. So our WACC price for all 3 doses is $820 WACC per month.

Got you. So with that WACC, how does the gross to net change?

Gross to net this quarter will be about $600. And then at steady state, we anticipate gross to net to be about $500.

When you say steady state, what is that 2 or 3 years out number?

Yes, about 3 years out. Yes, as we have a cohort of the payers that come online where we have contracts that have been initiated, and that will take about 3 years total. We'll see that gross to net be about $500.

Now is there -- I guess the question, why the specific timing of a price increase now? And do you see the opportunity for price increases kind of on an annual basis going forward or some other schedule that makes the most sense?

We felt like we had price increase opportunity here because they had, one, no impact on the payer contracts that we are about to bring forward. So we could be a little more aggressive on price. Number two, we had some market intel that basically said we could take price, and we've seen no impact from that price increase thus far. Third, there were -- we will encounter some impact from Medicaid, federal pricing, et cetera, in 2026. So we felt like it was -- it behooved us to take that price a bit earlier than we other normalize -- normally would have. On a go-forward basis, we anticipate a 3% price increase on a yearly basis year forward.

Got you. And do you think all of that is going to eventually work its -- that 3% is going to work its way into the net price or you think [ we lost them ]?

Yes. Probably 2/3 of it will work its way into net price.

Got you. Okay. That's helpful. Maybe let's talk a little more broader about the -- who are the key stakeholders in the prescribing decision? And what is the key message resonating with these stakeholders specifically?

So there are 4 key stakeholders. The first is a medical director. Medical directors are assigned care, full care for the patients in a nursing home. And so they are the -- they're usually an internal medicine doctor, a primary care doctor, and they treat full patient care. They also treat Alzheimer's, most specifically the cognitive aspects of Alzheimer's for patients. So they're our primary customer, and we call on these doctors every week, every day in the nursing home. Number two customer for us is the psychiatrists. They are consultant psychiatrists. Psychiatrists are called upon to treat the behaviors that manifest themselves as a symptom of Alzheimer's disease. These behaviors are things like aberrant motor behavior, agitation, anxiety, apathy. They're very common in Alzheimer's patients. In fact, 90% of Alzheimer's patients would have some behavior exhibit itself on a year-over-year basis, and the psychiatrists treat the behavior. So we call them the psychiatrists because we've observed that our product has very robust effects on the behaviors that are most common in Alzheimer's patients, and it falls in line with our indication. The third customer group that we call under the home itself, and that's typically Director of Nursing, they manage the care for the patients, and they're often the first to observe symptomatology in the home. So we educate the nurses on our product. And then last but not least is the pharmacy and specifically the consultant pharmacists because they make treatment recommendations for Alzheimer's patients on a monthly basis. They review charts for every single patient and every home in the United States every month. And they are looking to make treatment recommendations to aid the doctors in their treatment of these patients. So we call them the consultant pharmacists as well.

Got you. And so who are the kind of the initial adopters and who are kind of the more difficult group to reach over time or required a little more effort among these 4 stakeholders?

I'll speak to two of the stakeholders. The medical directors that treat cognition, they have a very broad view of the Alzheimer's patient. The message aspects from the ZUNVEYL message have resonated with them are lower GI incidents with ZUNVEYL, no insomnia with ZUNVEYL versus other drugs in the category, which commonly have a 20% to 30% incident rate of either of those side effects. So that message resonates with them because they want patients to be able to tolerate their med well if they're going to use a drug to treat these types of patients. I think the other area of messaging that resonates with them is the cognitive effects and the dual MOA that ZUNVEYL has because often patients that are treated typically with ARICEPT or donepezil as their primary drug lose efficacy or seem to lose efficacy, the doctors tell us over a matter of 2 to 3 quarters after initiation. So they're looking for a drug that they can put the patient on that will have robust efficacy that they can dose to a therapeutic effect. So they're our first customer, those are the area of messaging that resonate with them. What we've discovered over the summer months with the impact on behaviors with ZUNVEYL is the psychiatrists are going to be a key customer for the company as we move forward. They are called in to treat the behaviors. There's high need to treat and high urgency to treat patients that are exhibiting these behaviors because the behaviors are so disruptive to the nursing home environment in the home and often to the patient and/or their family. So the psychiatrist respond really well to the behavioral impact for ZUNVEYL and its effect on -- we use the scale NPI. It's a measurement that looks at behavior and drug response and behaviors with Alzheimer's disease. They have been very responsive to that behavioral element of ZUNVEYL therapy. The pharmacists looked more at polypharmacy and the impact of all drugs that may be used to treat an Alzheimer's patient and how can they lower drug use. And so they respond really well to a drug that has no insomnia because they can remove potentially sleep meds from the patient's treatment protocol. They respond well to a drug that has low GI incidence because they can remove adjunct therapies that may be used to manage nausea, diarrhea for a patient. And then they also are most interested in the behavioral treatment, just like the psychiatrists would be because they are looking to reduce antipsychotic and psychotropic use, which is very common for other drugs in the category to try to treat the behaviors because those drugs have limited effect. So slightly different messaging with each of the customer groups, but those are the messages we've seen resonate really well.

And if we look at these patients, assuming that the patients that started on treatment in '25 are the initial adopters, what fraction of them are just totally new patients to this drug class versus maybe switching from ARICEPT?

I would say almost all patients have been tried, 90%-plus patients have been tried on another therapy in this class, a very, very few new to treatment in the nursing home market. And almost all patients are on donepezil or ARICEPT. So it has 70% plus of the market and most doctors use it as a first-line drug. And we will often see patients being switched from ARICEPT to ZUNVEYL. And we anticipate that will continue over the next few years that we're in the market.

And is that primarily cost-driven just because ARICEPT is so much cheaper?

It's primary -- well, definitely, there's a cost element. So all drugs in the class are generic except ZUNVEYL. So doctors will use generic drugs, but they used ARICEPT as a mainstay product for 20 years. So some of it's historical. And number two, it's deemed the lesser of the problematic drugs in the class. They -- the doctors will say it has less side effects than the other choices that they may have. So they'll try to use the drug with the least amount of side effects. That said, they'll acknowledge that 1/3 of patients have GI side effects on ARICEPT, 20% to 30% have sleep difficulties or insomnia with ARICEPT, and a large number of patients will lose efficacy over time. So it's not a drug without issues. It's just it has less issues than the other choices that doctors may have.

Got it. Let's maybe talk a little bit about distribution. How many distributors do you currently have? How many do you think you need to really penetrate this market? And also, as we think about these distributors coming online, how much of the sales is going into inventory build?

Yes. So there are 3 primary distributors that have 90% of this market, Cencora, Cardinal and McKesson are the 3 primaries. We have contracts with all, and they distribute our products. So every pharmacy in the country, every nursing home in the country has a way to get drug next day or even same day if they so choose. We will potentially add additional distributors next year. These would be specialty distributors that specialize in long-term care distribution or distributors that have a niche market for which we may have a robust presence in. So we intend to add 3 to 5 additional distributors next year, and that will give us 100% of market. Now from an inventory build standpoint, the data is very, very choppy, and it probably will be for another 2 quarters, the next 2 quarters of our launch. Because the wholesalers are trying to assess how much inventory they need, and we're growing at a rapid clip. So it becomes difficult for them to make those assessments. And they figure out how much inventory they need to stock. So we do see adjustments in inventory both high and low and have seen that over the last 2 quarters. We'll continue to see that over the next 2 quarters as well until we hit more of a normal predictable state for ZUNVEYL.

Got it. And is there significant use outside of nursing homes? Just curious if some of the distributors are seeing use there and then what that process of getting drugs there? Is it available at some pharmacies?

Yes. ZUNVEYL is available at any pharmacy in the country, but we see a very small minority of our use outside of long-term care. And that's primarily because we -- our salespeople are spending 100% of their time in the long-term care channel. We do have inbound requests for drug or requests on how to get ZUNVEYL. And if the doctor chooses to do that, we help them, and the patient -- any patient could pick the drug up at any pharmacy in the country. But we would anticipate that will remain fairly small until we shift our sales force attention to neurology, which would be our next submarket that we would enter.

Got it. And as we think about inventory build, just circling back on the prior question, if we look at, let's say, specifically in the 3Q numbers, do you have a sense out of the $2.3 million reported in ZUNVEYL sales in 3Q, what of that may be just inventory build from new distributors?

Yes. I don't think it was new distributors. I think it was existing distributors, and there was probably a 2- to 3-week inventory build with one of those distributors. We anticipate that has washed through the channel as of this month and inventory levels appear to be very normal. But the caveat is it's still very choppy. And as we accelerate in some markets, we see inventory numbers go up and down, and we'll continue to see that over the next 2 quarters.

Got it. But in terms of dollar terms, what is a 2- to 3-week inventory build?

I don't have a number on that, but I would say it was not material to the $2.3 million.

Got it. Do you expect them to build some inventory before price increases going forward?

If they can anticipate price increases, and that's what happened in September. They anticipated we were going to do something with price. So they built some inventory ahead of that pricing increase. I think they will make -- they'll be -- they'll make speculative decisions on how they adjust their inventory on a go-forward basis, which is not unusual in the wholesaler channel.

Got it. Let's talk a little bit about payer contract. I mean we touched on it a little bit, but I want to expand on it. Maybe how many covered lives do you have today? And how should -- how is that expected to increase over the next, let's say, 12 to 18 months?

So the Medicare D market, we're in the Part D, D as in dog, Part D coverage for ZUNVEYL. It's managed by 4 primary PBMs. So there's Humana, CVS, ESI, Optum. They manage plus or minus 25% of the market. So it's almost equal amounts of the market that each manages. We have one of those PBMs under contract today and 15% of their lives have come online. We anticipate a second contract this month with a second PBM. And then we anticipate 25% to 50% of that PBM's lives will come online within the first 6 months of next year. In 2026, we would anticipate a third contract with the same corresponding percentages of lives coming online. And that will give us critical mass in the market, allow the launch to inflect based on ease of use for physicians who want to prescribe ZUNVEYL.

Got it. And is there a significant value in adding a fourth at that point? Or 3 is...

Three gives us critical mass, 4 just adds to that. So we'll see what happens with the fourth PBM. It's not unusual to have 3 or 4 in the Med D marketplace, but we certainly will put a competitive offer in front of all the PBMs, and we hope to get -- 3 or 4 would allow the company to achieve what we've communicated which is cash flow breakeven in 2027 with relative ease.

Got it. Okay. That's helpful. Maybe let's talk a little about clinical development. So let's maybe start with the CONVERGE and BEACON trial. What is -- remind us what these trials are and what the objective is.

Yes. So CONVERGE is really interesting trial. It's a retrospective data analysis of ZUNVEYL in the long-term care Alzheimer's market. It's an analysis of ZUNVEYL in this market to determine tolerability, dosing, polypharmacy impact and efficacy. The reason this trial is important is it will give us about 400 patients data in the trial. And the data set is used to publish in long-term care channels to long-term care audiences and will be used with payers to position ZUNVEYL appropriately in an area where there's very limited data, meaning long-term care, is very limited data sets in long-term care. So we're really excited about CONVERGE and what that data could show us. BEACON is a real world evidence...

Let's just close a loop on CONVERGE and maybe I asked too broader question initially. So on CONVERGE, yes, specifically who is conducting this study? And what's the time line for seeing the results?

Yes. We'll initiate the study in Q1. We're partnering with the teaching institution for the study. They have a pharmacoeconomic group that will manage the study data for the company in concert with our medical team here at Alpha Cognition. The study will initiate in Q1. We anticipate the study results will be completed in Q3, and top line data will be provided in Q3 by the company. And then correspondingly, after that, we'll publish multiple data sets from that study that will enter the public domain and long-term care markets for multiple quarters after.

And what's the primary endpoints that you're looking at? We just want to understand what we should look at, at some point once the data is published from our perspective, how do you see that resonate with the key stakeholders?

Yes, we'll look at tolerability as a primary endpoint. We'll look at polypharmacy impact as a secondary endpoint, and we'll look at dosing and adherence rates also as a primary. All of which are really important for the long-term care marketplace, especially in the Alzheimer's class, where adherence is an issue, polypharmacy is a significant issue, and there's not been a lot of data on tolerability for this patient population.

Got it. And is that something that's going to -- I'm assuming will become the promotional literature going forward for you guys?

We'll see what the data set results in, but we anticipate this will be used both in promotion with payers, with long-term care entities, and then from a medical-to-medical standpoint by our medical team.

Got it. Let's maybe go on to the BEACON trial.

Yes. So BEACON is a real-world evidence study to determine the impact of ZUNVEYL in a long-term care setting. We'll be looking at cognition as a primary, behavioral results as a primary and tolerability data in 200 patients in the long-term care setting. We had planned to initiate that trial in Q1, and we'll complete the trial end of 2026. The significance of this data set, it provides 200 patients of data with behavioral results and cognition results in the long-term care patient. And for those of you who may not be as familiar with long-term care marketplace, there's a dearth of data and data sets in the long-term care market. So this will be one of the only data sets that will be published in the last few years in long-term care in the Alzheimer's space. We will use the data as a company promotionally to communicate ZUNVEYL tolerabilities, ZUNVEYL behavioral impacts, ZUNVEYL cognition, and we'll use it with payers, PBMs and health plans for positioning of ZUNVEYL and why it should be considered a good formulary choice for their patient populations.

So if we contrast the 2 studies, CONVERGE and BEACON. So are they going to be largely similar? One is just retrospective. The other one is prospective. Or is there -- because both are in the long-term care setting.

CONVERGE retrospective, BEACON prospective. BEACON providing behavioral assessment for patients by providers and treaters of drug. CONVERGE, simply looking at retrospective data analysis in the long-term care setting across a variety of stakeholders and providers.

Got it. And is there other studies to potentially benchmark the results of these trials in? Is there an ARICEPT equivalent to us -- for us to keep in mind?

There's not really. There's been a dearth of data in the long-term care market over the last decade. So there have been some study data looking at the meta-analysis data looking at behaviors, but it's all been in outpatient settings. So -- and that has been across multiple continents in the globe. There's not been really long-term care data to assess this particular patient population that we have seen.

And how do you see data being significantly different in the long-term care setting, let's say, outside versus the more traditional setting?

The patients are comorbid in long-term care setting. They're a sicker patient type. The institutional setting itself provides some uniqueness. And these patients are also on a higher number of medicines that impact polypharmacy and the utilization of how physicians do and can treat the patient versus an outpatient setting, you'd have an earlier disease and a more healthy patient.

Got it. And is compliance much higher in the nursing home setting than, let's say, in the home?

Compliance is higher in the nursing home setting because medications are administered to the patient by a med tech on a daily basis. So yes, the adherence rate should be higher if the patient could tolerate the medicine. The issues in the nursing home market that would affect adherence to the patients just can't tolerate the medicine and they can't tolerate the medicine either because the medication has side effects or it's interfering with other medications they may be on, so the doctors have to adjust those medicines.

Got it. And is there an opportunity to potentially work some of this data into the product label?

Not from CONVERGE or BEACON. Those are not label-enabling studies. A third study we're doing called RESOLVE, we anticipate will be label enabling.

Yes. We'll get to RESOLVE in a second. But what about any kind of industry treatment guidelines or recommendations? What would BEACON and CONVERGE be able to help with that?

I think BEACON could be helpful in that in terms of guidelines because this is a therapeutic area where the drugs that exist outside of ZUNVEYL, have very limited effectiveness in treatment of behaviors in the Alzheimer's patients. So most of the meta-analysis data that has been published indicates that donepezil and rivastigmine have modest to no effect in the treatment of behaviors with the Alzheimer's patient. If we can demonstrate and we will demonstrate with BEACON, we believe that ZUNVEYL has a robust effect in the treatment of behaviors. That will be helpful, we believe, to psychiatrists who are treating and managing these behaviors and adjusting how they think about ZUNVEYL relative to donepezil or rivastigmine for a patient with Alzheimer's disease who may be manifesting apathy, aberrant motor behavior or agitation or anxiety.

And which group sets these guidelines?

There's multiple groups that set guidelines. So the PALTmed has guidelines for treatment of Alzheimer's disease, the Alzheimer's Association has guidelines for the treatment of Alzheimer's disease and then the Neurologic -- or Neurology Association also has treatment guidelines. So 3 major groups.

Got it. And any of them are specifically focused on the nursing home settings or they are more general?

PALTmed is specifically focused on nursing home setting and assisted living.

Got it. And how long does it take to revise those guidelines if you have data in the hand?

They're revised routinely, but there's not a -- for PALTmed, there's not a specific time line that is set where they update the guidelines on a routine basis.

Got it. So once you have data in hand, the plan is to meet with these groups and see how to work forward?

Yes. And more importantly, I think there's a plan for -- from a company perspective to also talk with the health plans and the physicians that are using these treatments to justify the use of ZUNVEYL and the treatment of these behaviors that are -- that manifest themselves commonly with Alzheimer's patients and would allow the physicians to justify whether using ZUNVEYL versus other treatment options that they may have.

Got it. Okay. That's helpful. So let's move on to the RESOLVE study. You briefly touched on it. Can you give us an overview of that trial?

Yes. So RESOLVE is a Phase IV observational trial in Alzheimer's patients in an outpatient setting that will evaluate ZUNVEYL efficacy and tolerability and treating behaviors associated with mild-to-moderate Alzheimer's disease. It will also assess caregiver burden in the outpatient setting, and we'll assess multiple aspects of tolerability with these patients. The trial will enroll about 100 patients across the country and will initiate in Q1 of 2026. And we think the trial will take about a year to enroll. The impact of this trial is it will give us outpatient data and caregiver burden and ZUNVEYL impact on behaviors in the outpatient setting, which will be able to correspond compared to BEACON in the long-term care setting. We also believe the data for tolerability could be label-enabling from this trial. And certainly, RESOLVE will be promotional for our sales team.

Got you. And this is a single arm study, right?

Single arm, yes.

Got it. And have you had any discussion with the FDA, what it would take to incorporate that into the label?

We've had discussions with FDA when our NDA was approved. So we have some guidance, but not specifically to RESOLVE itself.

Got it. So should we assume that if the data looks encouraging, there's a reasonable chance that it will be in the label? Or I don't know what the precedent is in this situation?

Yes. There's precedent for other Phase IV observational studies to have data that is label-enabling. And certainly, this fits within the FDA guidelines for promotion that we can -- our sales team could use this data for promotion with physicians that we call on. So we -- our assumption is that we will be able to add the tolerability data into label, and we will be able to promote -- our sales team will be able to promote data from RESOLVE and our sales efforts with practitioners.

Got it. That's helpful. Maybe let's talk a little about the sublingual formulation. What is the objective of creating that formulation and where you are in that development?

The sublingual is important because in the Alzheimer's category, about 20% of patients have aphagia or dysphagia meaning they have difficulty or inability to swallow a tablet or capsule. Today, those patients would be either given a patch formulation of rivastigmine that is a patch that goes on the torso arm of their body because they have difficulty swallowing or cannot swallow or the medication that they have is ground if it's a tablet or opened if it's a capsule and mix with applesauce or some similar food, and they're given the product, their medicine that way. We believe a sublingual that dissolves on the tongue within seconds is much easier to deliver medication for this patient population. So we -- it's about a $200 million opportunity for our -- based on our assessment in the market, and it's highly prevalent in the long-term care area of the market. We are undergoing and involved right now in formulation and tasting work for the formulation. That will take place through Q1. And then we plan to run a pharmacokinetic study versus our tablet. And a third formulation, which is an intranasal formulation on a pharmacokinetic basis. We believe that the pharmacokinetics will be similar, and we would be able to file an IND for Alzheimer's disease for the sublingual based on that PK study. Our precedent is our tablet formulation, use similar PK data to file IND versus intranasal. And so we're taking that as that path forward with the sublingual.

Got it. And what would it take to actually get the sublingual approved?

We believe the FDA will -- based on feedback that we've had from the agency, the agency will allow the company to receive credit for previous Phase I data that the company has completed, and we would be able to move to a pivotal trial versus the tablet with our sublingual. So we would move to a pivotal trial, we believe, in early 2027.

And a pivotal trial, what would a pivotal trial look like?

It'll probably be a bioequivalence trial with a tolerability assessment for the sublingual, but TBD based on FDA feedback on how we'll proceed with that formulation.

Got it. Okay. So that's something for 2027 for us to think about. Got it. And you think it's a $200 million opportunity that right now is not being served in any way with the current formulation. So they're not grounding -- grinding up right now and putting it with applesauce?

They are doing that. It's just most difficult to do that on an everyday basis for a patient. It's challenging to get them to take the medicine or swallow the applesauce, it's often better, and the patients don't like it. So they resist. And the patch version of rivastigmine, which is the primary patch version that's used in this market is very challenging to take as well. It has to be put on a new area of the torso or arm each day, and it has to be rotated over the course of about 30 days. So patients end up with these red dots all over their torso and their arms. It looks like a rash, and the patch often is irritating or agitating to the patient, so they'll pull it off in the middle of the day. So adherence is an issue, and administration of the patch is also an issue. So we believe a sublingual that one would give to the patient, they put it on their tongue, and it dissolves almost instantly. It's in a matter of seconds would be highly preferable to the other alternatives that they have today.

Has anybody tried to develop a sublingual donepezil? I mean is there a history of that?

Almost every -- no, almost everyone has taken the path of a patch. So rivastigmine actually had great success with their patch. They initiated the patch not necessarily for patients with aphagia or dysphagia, but to try to bypass the GI tract and minimize GI side effects. That was the rationale. And Novartis created at peak a $600 million brand with their patch by bringing that product to market. To my knowledge, I've not seen the sublingual or a film strip utilized in this category, which is surprising based on the large number of patients that can't swallow.

And the sublingual film strip, is that using existing technology? Or is this some kind of a new formulation that you guys came up with on your own?

No. We're using existing formulation with an entity that has multiple products that they have taken through R&D with their technology. And we'll release the technology at a later date.

I'm just trying to think also that if this is approved, the sublingual, would it create a new chemical entity in some way or a new intellectual property protection?

We believe it will create new IP, but that will be dependent on the data that we generate from the work that we're doing over the first 2 quarters of next year. It could be a new chemical entity, but that will depend on benzgalantamine circulation in the system, not to get too technical here, but it could, but we don't believe that will be the case. We believe that it will not be a new chemical entity. TBD, the pharmacokinetic data will tell us that.

Got it. And so speaking of different formulation, you're also working on a NAMENDA combo. Can you talk about that and the strategy around that and the development timing?

Yes. So a lower priority for the company. This would be a combination for severe Alzheimer's disease. Severe Alzheimer's disease is about 10% of the market. These are defined as patients who have no ADLs. They can't assist themselves in any way and often for moderate-to-severe patients, NAMENDA is used as a combination drug to increase the MOA or added as a second mechanism for the drug, in our case, the third mechanism for the drug, primarily to try to get some additional cognitive improvement. We will -- we're not doing -- moving this program forward at the moment. We'll assess and move that program forward after we have an inflection point with the sublingual.

Got you. And lastly, in terms of various unusual studies that you guys are doing. You're also doing a Bomb Blast study with Department of Defense. Can you speak on that or the relationship with the Department of Defense over the time?

Yes. So we've completed the study. We released data on the study. We hit all primary endpoints of the study. This is a Bomb Blast small mammal study where they administer a bomb blast to the animal, the animal is treated with drug. An assessment is made for behavior, cognitive effects for the animal through a series of tests. And then we autopsy the animal after study and look at -- we analyze the brain in this study to look at impact on pTau and amyloid and other impacts to the brain post drug use and without drug use to see if there was a difference. And what we saw was what we expected to see, impact on pTau, multiple pTau, no toxicity with drug, improvement in cognition and cognitive effects of drug. And a drug that's safe and well tolerated, which is determined by body weight of the animal. So all good endpoints achieved by the data set that we generated with DoD. We plan to meet with Department of Defense on next steps in the next 2 months, and that will determine what path we have or what interest there is to potentially take the product forward with the Department of Defense.

But how would this be even developed for human use? Or is it going to be some kind of an animal rule development process?

No, because it's the same compound we have -- it's ALPHA-1062. We already have a huge body of evidence, toxicity studies, pharmacovigilance studies, ADME studies, human studies on the compound itself. So we already have a breadth of data that demonstrates the product safe. The question for Department of Defense will be is the product and can the product be effective and is it effective at what dose. And can the product be administered in a way that aligns with the needs of the soldier in theater who could be bomb blasted or who could be given a moderate or mild concussion, that would preclude them from performing on battlefield or performing in theater. So there are some questions from an administration standpoint that Department of Defense will need to answer, we'll need to answer as a company. But next steps are likely. We met with FDA on the program. Next steps are likely for this program, a 12-week tox study. We have 2 28-day studies. We would run a 12-week tox study to demonstrate no toxicity in large mammal. And then we believe we have the data package to submit an IND for cognitive impairment with mild traumatic brain injury with that compound, and we believe the FDA will give us credit for the 2 Phase I studies we have with a different formulation, allow us to move to a Phase II efficacy trial. So we've completed Phase I studies with an intranasal version of this compound. it demonstrated no toxicity, demonstrated effective dose. So we believe we'll be able to do that with our sublingual formulation based on feedback that we've already had with the agency and a pre-IND meeting.

And the goal is to develop it for patients with traumatic brain injury for recovery or...

The goal would be the regulatory path forward that we believe is the path that we want to take for the compound is for cognitive impairment with mild traumatic brain injury. And that is assessed 3 months post-concussion. So it's not acute, but it's assessed 3 months post-concussion. Why? Most patients with concussion or about half of patients with concussion, it resolves on its own. So at 3 months, the placebo effect has washed out, and the data clearly shows what a patient has, they are stuck with, that remains with the patient over the next year of time. So we would be looking at patients who have not resolved on their own, administering drug and determining if the cognitive impairment symptomatology resolves with active drug treatment.

Got it. Let's switch back to some commercial discussions. Maybe let's talk a little bit about ex U.S. strategy, please discuss your partnership and strategy in Asia. How should we be thinking about pricing and just commercial value in China and market size there?

Yes. So the market size in China is about 10 million patients, about 8 million of those patients have mild-to-moderate Alzheimer's disease, so it's a large market. They have an intensifying aging trend, so those numbers of patients are expected to grow significantly over the coming decade. The pricing has not been determined in China, but as one could expect the pricing in China would be similar to other Asian and European countries, which would be a lower price point than the United States, but it's still to be determined on what the pricing is going to be for ZUNVEYL, if approved by the Chinese regulatory authorities. We submitted in China, and it was -- our file was accepted in July, and that triggered an 18-month clock which would correspond with a late 2026 approval.

Got you. And what should we expect in terms of the economics to you guys versus your partner?

Yes. So we have milestone payments based on approval and sales milestones that would occur in all Asian countries where the product would be commercialized, and then we have a high single-digit royalty from that agreement. We don't know what the economics are yet and won't know that until price is determined in each of the markets in which the product is approved. We expect 3 of those in 2026, 3 small markets followed by China, which is the large market opportunity for the company.

And you don't have any cost in terms of marketing and launching the drug in China, you're just collecting milestones and royalties. Is that correct?

You're correct.

Got it. Okay. So we should start to see some potentially milestones and royalties start coming in, in '26.

In 2026, correct.

2026. Okay. Let's talk a little bit about your financials. So you guided to operating profitability in 2027. Can you explain what does that mean? What's included in this? What's excluded? Does that mean you're going to have a GAAP profitable 4Q '27? Or help us understand what that means?

Yes. So it includes SG&A and R&D for operating profitability. We exclude noncash items like depreciation, amortization. Those are not included in our calculation. So operating profitability in 2027.

So that's for the entire year, not just hitting it in 1 quarter?

Correct.

Got you. And can you share with us what revenue needs to be in '27 in order to do that? Or maybe flipping that around is how we should be thinking about SG&A and R&D?

Yes. I'll share on the expense side because we're not providing revenue guidance. In 2026, we anticipate we'll spend in the range of $50 million to $55 million for the year. We think that will be consistent, but maybe a little bit lower in 2027 because we won't have the clinical studies that will be ongoing in 2027, that will be ongoing in 2026. By that, I mean, BEACON, RESOLVE and CONVERGE.

Got it. Okay. Well, that's helpful to think about exactly. Should we see a significant increase in your sales and marketing spend going up next year? Or is that where the most investment is going to be?

Yes, it's where most investment is going to be. We have -- I think we stated publicly that we are increasing our sales force size in 2026. That's well underway. We'll have a sales force of 50. We've increased our reimbursement team to manage the payer issues, and we're exploiting the psychiatry opportunity for symptomatology with behaviors that occurs in Alzheimer's patients by increasing our marketing spend to the psychiatrists, increasing our meeting presence where psychiatrists often meet and increasing our publication strategy geared toward the psychiatry community because we believe it's such a great opportunity for the company. So you'll see some expenditure increases in all those areas in 2026 to take advantage of the opportunity.

Got it. And 2026 is going to be kind of a peak year you said for R&D and the decline just because a number of your studies are going to be winding down?

It will decline on the basis of RESOLVE, CONVERGE and BEACON. We don't know yet what the FDA is going to allow us to do or what the path on the pipeline assets will be. So TBD on what the spend is going to be for the R&D program for Alzheimer's disease for sublingual and the R&D program will be for mild traumatic brain injury. Those are not included in our calculation on R&D spend for 2027.

Got it. So if those move into further development, so that could then increase R&D spend in '27?

You're correct, yes.

We're assuming that's going to have a positive ROI going forward. So...

Yes. Yes.

Makes sense. Let's also real quickly, in terms of the second tranche payment from your partner, CMS, when should we be expecting to see that, both on cash and accrual basis?

Yes. So we expect to see that this year, we're at the mercy of Chinese regulatory authorities for that payment to be submitted to the company. If the Chinese regulatory authorities don't meet their own time line, that could delay into Q1 of next year. So we're at the mercy of the regulatory authorities for that payment to be received by the company.

So the difference is really just either this quarter or the next quarter?

Yes. Based on the feedback we've had with the Chinese regulatory authorities, yes.

And how good are they generally at keeping that time line? They do have an official PDUFA like we do, right? So I don't know exactly how to think about that.

Yes. They provide guidance. I won't comment on whether they meet their time lines routinely or not because this is our first entree with regulatory authorities. So they have a time line. It's -- we're well within that time line at the end of the year. Sometimes regulatory authorities need additional time to assess, and they could certainly take that. It's their privilege to take that if they so choose.

Got it. Okay. That's helpful. I guess maybe in the last couple of minutes, we've kind of gone through the key questions I wanted to ask. Maybe you could summarize the key catalysts from the clinical development and anything else kind of relevant to the investor perspective over the next 12 to 18 months?

Well, I think this is a commercialization story. I hear this often from our investment community. And everyone wants to see the inflection point from ZUNVEYL commercialization in the U.S. So I think that's the thing to be looking for in 2026, and we should see inflection in 2026 from our commercialization activity. So that will be something that I think carries the company forward as we execute. From a data perspective...

Which quarter, do you want to point a finger at?

I think it will be the first half of the year, and that will be in the market that year in the second quarter. We should have some of the payer friction points removed in the second quarter, so we anticipate we're going to see some inflection in that -- in the second quarter of next year. And that's -- that would make sense with the payer contracts that we have going into place in Q4 of this year and the one that we had in place in July of 2025. So I think that's something to watch. I think the BEACON study provides a great moat for the company and treatment of behaviors. It will certainly strengthen our positioning with payers and then RESOLVE could be label-enabling data for the company. So we won't have that data until 2027, but we will have an interim analysis in the third quarter of 2026. So that's something that investors should look for. We're making great progress with our Asian partners, so we should see multiple country approvals in 2026, and those will begin to add some revenues to the company. And then it's -- the other thing is the IND for Alzheimer's disease with our sublingual. We should have feedback from the agency in 2026 on that program. And that could be significant because the opportunity is significant at a $200 million-plus opportunity with sublingual.

Great. Well, that's a lot of things to look forward to over the next year. So Michael, I appreciate your time. This was an interesting discussion, and we look forward to seeing your progress.

Thank you, Boris. I appreciate the time, and thanks all for everyone for listening and your interest in the company.