Axsome Therapeutics, Inc. (AXSM) Earnings Call Transcript & Summary

Thanks, everyone, for joining. This is a fireside chat with Axsome Therapeutics. Let me read a brief disclosure statement before we get started. So for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. My name is Vikram Purohit. I'm one of the biotech analysts with the research team. Happy to have with me Herriot Tabuteau, CEO; and Mark Jacobson, COO of Axsome. Thanks for joining us.

Thank you.

So before we get into any specifics around pipeline Auvelity et cetera. Herriot, do you want to just level set for the audience and just provide a recap of some of the key milestones Axsome through work to do -- through the course 2022?

Sure. First of all, thank you for having us at the conference. This is our first in-person conference since Covid a little bit of a transition, and it's appropriate since -- this is a transition year for Axsome also. We -- interestingly enough, we filed our NDA for Auvelity right around the beginning of COVID. And as you know, we recently got approved approval for Auvelity. And it's a historic approval because -- this is the first novel mechanism of action that's been approved in over 60 years for MDD. It's the first rapid acting antidepressant. And we're really excited about launching a new drug class. So that's one of the key events that occurred this year. Another key event that occurred this year for Axsome is the acquisition of Sunosi. And this is a drug which we acquired from Jazz Pharmaceutical and it is approved to treat excessive daytime sleep in patients who have narcolepsy or who have obstructive sleep apnea. This is a product that we think has a tremendous amount of potential, not just for the current indications, but also for future indications, some of which we disclosed, and we can talk more about that later. So those are the 2, I'd say, key milestones that have occurred thus far in 2022 for Axsome, and they're key because they transition us from being a developmental stage company to being a commercial entity. And we're really excited about that up about that transition. All the work that the Axsome team has been doing over the years, all that hard work is now had now a transition to being able to benefit the millions of patients that the company is really passionate about developing treatments for. The -- another important milestone in 2022 was us getting our first response from the FDA on AXS-07 for the acute treatment of migraine. So we got a complete response letter from the FDA, which importantly did not include any comments with regards to clinical, which is great, and it focused mostly on CMC. And we've announced that we would be meeting with the FDA to have a type A meeting to make sure that we understand what we need to do to resubmit. So what that means is we have 3 products that are either commercial stage right now or NDA stage. The -- and then lastly, just to kind of level set behind that, we have a number of pipeline initiatives, which include our AXS-12 product candidate for the treatment of narcolepsy, which is in Phase III trials. We have AXS-05 in the acute treatment of -- in the treatment of Alzheimer's disease agitation, which is in Phase III trials. And then we have AXS-14 for fibromyalgia, which we are working towards filing an NDA for next year. So a lot going on, and it's a very exciting time to be at Axsome and a very exciting time to also be launching not just one product, the two products. And part of the reason for that is we've talked about our digital center commercialization platform. So a different way of commercializing, which we've been innovating, we should have been working on since before COVID, and it's nice to finally set that loose and apply it to these new launches.

Great. So why don't we start by talking about the Auvelity launch? Obviously, a big area of focus for investors. So you talked about some of the work that you've done to kind of prepare the market. So at this point, given you guided to an early 4Q launch, what parts of the commercial infrastructure are in place and what's still kind of a work in progress over the next couple of weeks?

We're essentially ready. And so we've been doing a lot of work in terms of the actual infrastructure for DCC platform. And that work has been ongoing over the past year. So that's ready. And also, we've tested that already because we actually launched or took over the commercialization of Sunosi with the acquisition. And the other aspect, of course, of launching any product has to do with the leadership -- a commercial leadership, which has been in place for a while. And then upon approval, one of the things that you want to do is to bring on the sales force. So -- and that's essentially done. We're very proud to say that the letters that were extended to potential sales force members last year, and it was a highly selective process. And the vast majority, almost everyone of those reps actually converted. So -- and I think that speaks to their excitement around Auvelity, around the product. So that's done. And really, one of the questions that people have is, well, hey, why are you not launching tomorrow? And the reason for that is that there are some logistical issues, simple logistical issues with regards to printing labels for the product. Some companies -- it is possible to do that at risk. But we wanted to wait until we got the final label to start that process, and there's just a little bit of lead time for that. So we're ready.

Got it. And have you discussed how large of a sales force are you going to be assembling for the launch?

Yes. What we've said is that the sales force for Auvelity will be on the order of 165 sales reps. Importantly, with our DCC platform, that will allow us to have the equivalent reach of a roughly 250 person sales force -- traditional sales force.

On top of the 165.

No the 165 will be equivalent to a traditional 250-person sales.

Got it. Got it. Okay. And could you give us some more color on exactly what the DCC platform does and how it acts with your field force on the ground to reach the most likely prescribers?

So we does a couple of key things. One is target. So our DCC platform allows us to target the right physicians. So the physicians who are most likely to write for the product. And so that work has been ongoing. And the other thing that it does is it allows us to figure out exactly how -- how the HCPs want to be reached. So what channels do they want to reach? And also what is the most appropriate message for the HCPs? So that -- so the DCC platform is used to figure that out. And what it utilizes is complex data analytics and also artificial intelligence. So the output of that then to flow to our sales reps to make sure that they provide the right message to the right HCPs at the right time.

Got it. Got it. Okay. For the, I guess, initial couple of quarters of the launch, what metrics will you be looking at internally to gauge uptake? And what do you think would be appropriate to communicate out to the Street for assessing the launch of going?

So we'll be looking, obviously, at whether or not prescriptions are being written, right? So that's the key metric, and I think we'll all be able to track that and see how that is progressing. But the other side of it is who are the prescribers. So we'll want to have insight into that. So we'll be looking at the number of HCP writers. So to see that to be able to gauge is -- to be able to gauge not just what the current scripts are but also what they could be in the future. And when we look at prescriptions, we will be looking at not just the total TRx but also the new-to-brand prescriptions because that will also give us a sense of what is to come, sort of a leading indicator. The other thing that will be -- we'll be monitoring, which goes hand in hand with doctors writing scripts, whether or not those scripts that can actually translate to drug in the hands of patients. So another saying that is access. So what does access look like? And we'll be able to talk about the number of covered lives. And then what goes hand in hand with access and a number of covered lives is what formulary placement is like when that finally occurs to then give folks a sense of -- kind of what a baseline will be from which to be able to model and to look at the near term as well as the future potential of the product.

And how long do you think it takes for formulary positioning, gross to net to all kind of move out and get to a steady state?

If you look at the industry on the commercial payer side, that's most relevant for Auvelity since MDD is sold mostly through the commercial channel. It usually takes about from 6 to 12 months after launch of the product or to have full formulary placement and then you would expect for gross to net to normalize shortly thereafter.

Got it. Got it. Okay. And I know you get this question a lot a typical patient for Auvelity, who do you think is right up front with the launch? What's the typical patient profile with who's prescribed Auvelity? And how long do you think they stay on it? Like what do you think is the average course of duration throughout the course of the year?

So two questions there. With regards to who the patient is, let's look at the label. The label is major depressive disorder. So it's a broad label, which is nice. So we're not being niched into a particular line of treatment. And MDD, it accomplishes patients who are treated with various lines of treatment, including those who might formally meet the description, let's say, of treatment-resistant depression because they've been treated with two adequate of treatment for an adequate dose and duration. So it's nice to have that broad label. And what that does is it allows the clinician to decide who the most [ uprate ] patient is for the product? What we wanted to do at the time that we launched the product was to generate enough data to allow clinicians to be able to use the product, however they want to use it. So we've generated data and a long-term open label safety extension trial, various studies with numerous lines of treatment, various numbers of lines of treatment and even in the GEMINI trial, there were an ASCEND trial, which formed part of the label. There was a certain percentage of patients, about a quarter who had been on prior antidepressants. And all of those data sources show that the product works equally well in terms of onset of action -- rapid onset of action and durability and magnitude of effect, which is great. We've also looked at patients who have suicidal ideation. So all of that information is available or is being made available to clinicians. So that they can choose which patient is most appropriate. The other consideration in the minds of physicians will likely be the mechanism of action. And that speaks to the fact that most patients or most patients currently who are currently treated have experienced an inadequate response to current treatments. And drugs prior to Auvelity oral treatments, they all work via the monoamine mechanisms of action by the monoamine pathway. So it's nice for clinicians to have a drug, which works by a totally different pathway, the glutamatergic pathway that I would imagine might be a consideration for clinicians who have patients, who are not responding to current treatments.

Okay. Going back to the topic of pricing. We're still waiting on learning the right price per dose for the therapy. But in the meanwhile, what are some good bookends to keep in mind for what the range of pricing could be?

Yes. We haven't provided bookends. We've made observations of what is currently available in the marketplace for the treatment of MDD. So there are drugs which are currently approved just for MDD and those -- and then they are -- but the more recent entrants have been for, I'd say, flavors of MDD. So yes, for example, SPRAVATO, which is esketamine for treatment-resistant depression. You have other treatments that are for adjunctive treatment of MDD. And then you also have drugs for -- one drug for the treatment of postpartum depression, which is, again, let's say, flavor or subset of MDD. So there aren't analogs for Auvelity that are, I'd say, pure analogs. But in looking at the landscape, I think one can look at those treatments and what the WAKIX are? And another consideration for another set of data points or drugs in recent launches in neuropsychiatry in general.

Okay. All right. Another common topic of questions that comes up is around IP. Could you just recap for us what is the IP state for Auvelity currently cover? And what is the duration of that IP?

Mark, do you want to...

Sure. So Auvelity has -- it's a robust patent portfolio that's comprised of a number of patent families and clean strategies. And within those different families, those patents typically are to 2037. So they range from 2037 to 2040. The majority started at 2037. So we feel very good about that. The other thing that we had offered is obviously with the recent approval, the Orange Book listing process is currently underway. But if you take a look at the label now, you'll see that there are a number of patents that are listed, that will generally match what's finalized in the Orange Book, and we feel really good about that. So a couple of examples, you have pharmacokinetic claim sets, you have claim sets around dosage form, traditional method of use, so say use of Auvelity for the treatment of major depressive disorder. And we would characterize just a number of other kind of stand-alone or miscellaneous -- that's -- so we feel really good that there are a variety of wins that are a variety of issued patents that protect the product.

Across that entire estate, are there 1 or 2 claims that give you like a particular level of confidence that, what do you think its just the entire state itself ?

Yes. There's no keystone patent. So there's not a stand-alone claim set that everything else is predicated upon or ties to. So -- and that's been a strategy from the very beginning. So we really like the individual just the different approaches that have issued claims to protect the product. Yes. And said another way, each of the products protects the patent. -- predict each of the patents protect the product. And so that puts us, I think, in a very advantageous position.

Okay. All right. ex U.S. So you previously mentioned that you would look to partner ex U.S. Any updates on that process or thoughts around when that might start to crystallize. And I guess, what would you be looking for in a partner in terms of economics, areas of expertise, et cetera?

So we have said that we do intend to partner outside of the U.S. and that is still case. So we do intend to look for good partners, strong partners outside of the U.S. where we'd be looking for is to maximize the value of the product outside the U.S. And the way that you would recognize that value that we would recognize that value would be not just the upfront -- the typical upfront and milestone payments, but also what we would get on the back end. So royalty rates, that's an important consideration given the value of the product. We would want to select partners, as you can imagine, we have strong commercial capabilities. And who also have regulatory capabilities to help us to navigate regulatory situation in the various geographies.

Okay. All right. Got it. Why don't we move on to Alzheimer's disease agitation staying on to AXS-05. So just to level set, could you just kind of recap for us what is the design of the ACCORD study? And you mentioned here that the relapse criteria were amended recently. Could you just give us a background around what was going on with that program and why you decided to close it out?

So the ACCORD study, with the design of it, this is to randomize it for an old study design. So what that means is that patients come in. It's a 2-period study. So in the first period, patients come in and they're treated in an open-label fashion with AXS-05. And they're treated to see if they respond. And so those patients who actually do have a response, which is sustained. So they only do that to respond, but they also -- that response has to be confirmed because it's a sustained response. So those patients who have a sustained response are then randomized to treatment, with to either continue on AXS-05 or to be switched to placebo. And then you wait to see the rate of relapse and then you monitor for more relapses. And so that's the design, which is kind of a standard randomized withdrawal design. Now the challenge with AXS-05 is that no drug has been approved yet for Alzheimer's disease agitation. And so this is pioneering work in a way. So we are figuring out what are the right scales to use and then how -- and once you figure out the right scale, how does that scale perform under various scenarios? So we -- and the scale that we're talking about to measure treatment -- to measure the response of a patient to AXS-05 is the CMAI, the Cohen-Mansfield agitation inventory. So that -- we have a good experience with that in our ADVANCE-1 trial, which is a parallel group study. But in terms of a randomized withdrawal design, this was the first time that we've used it. So there isn't a ton of data out there. And so that's the basic design of the study. One of the benefits of having breakthrough therapy designation is being able to have more frequent communication and contact with the agency and feedback and which is I'd say, particularly useful in this situation where there is no product that's approved and the work is pioneering stage. And we amended a relapse criteria based on analysis of the ADVANCE-1 data that the FDA had recommended. And that analysis is to look at -- is to look at the benefit of the drug on this scale, in this patient population and using that information to make sure that we're using the right criteria to detect -- accurately detect worsening, which is what we're doing in the ACCORD trial. So we did that analysis and appropriately, I think, amended the criteria with the FDA feedback.

Okay. So that said then, for the ACCORD data expected by the close of the year, what can we expect to learn? And what are you looking to see from the data set?

We -- so we will have data in the fourth quarter. I do want to point out that the study is going to be fewer in terms of numbers of patients and shorter in duration than was initially planned. So we're looking forward to see what the data show, but one thing that we'd want to do is learn more about how the drug performs in this patient population and also in this setting. So you might tell us, for example, it might give us information about the durability of effect. And -- and it's -- so -- and it's hard also to know exactly what the learnings will be, but there should be. There should be, I would imagine, some insights potentially once we [ online ] the data.

Got it. And then you announced the initiation of another Phase III study, ADVANCE-2 pretty recently. What was the rationale for starting the study now? And just give us a quick overview of how that study is designed as well?

Yes. I think the rationale was risk mitigation. So this is a very important indication and a very important product, and the ADVANCE-1 trial showed a very clear effect. And that was a parallel group study. And so the ADVANCE-2 is the design of that replicates essentially the design of the ADVANCE-1 trial. It's another parallel group study. So we wanted to be able -- we wanted to make sure that we are able to have a robust data set once we submit an NDA for AXS-05 in Alzheimer's disease agitation. And taking into account also the time frame to conduct these studies. We wanted to initiate that study as quickly as possible. So that was the rationale behind launching the study now. And this is a difficult patient population in which to enroll clinical trials. So it's difficult to have competing studies. So more practical enrollment considerations with the initiation of the ADVANCE-2 trial, we also then concluded and are concluding the ACCORD trial.

Got it. Got it. So at this point, do you think there's any possibility of being able to file for ADA without the ADVANCE-2 data? Or do you think the base case expectation should be that this is going to be a post ADVANCE-2 readout situation?

So a lot of -- so that decision tree is just that. It's a tree, like there are several different assumptions that 1 has to make to -- and -- that decision tree would involve, obviously, the results of the ACCORD trial and also conversations with the FDA. Our base case assumption is that we would file with all 3 studies. That's the base case assumption. And -- but again, a lot depends on what the developments are.

Got it. Okay. We are around 3 or 4 minutes left. Any questions from the audience? No. All right. Well, I'll ask you a catch-all question because we're running a little short on time. We focus on Auvelity and AXS-05 for the discussion so far. But over the next 12 to 18 months for programs outside of MDD and ADA, what can we look forward to learning across the entire portfolio?

' So across the entire portfolio, it's going to be a very exciting time for us. So if you start with Auvelity apart from the launch. There's Alzheimer's disease agitation, which we just talked about. And we'll look forward to seeing what the ACCORD study show in the fourth quarter. So that's coming up. Then we have our AXS-07 product candidate for the acute treatment of migraine. We did disclose that we had submitted for Type A meeting, when we last reported results, which is August 9. Typically, that meeting is granted within 30 days. And that will provide us information or confirmation from the FDA in terms of exactly what is needed for a resubmission of that NDA. And then we would resubmit that NDA. Then with regards to Sunosi. So we are developing that drug for another indication, which is ADHD. We're very excited about that indication. And we're looking to launch a pivotal trial in ADHD in the fourth quarter. And assuming that enrollment goes as planned, potentially would have data for that next year. Then we are also progressing with our study for AXS-12 in narcolepsy, and that is in a Phase III trial, and we would look to have results for that in the first half of next year, and assuming that those results are positive, that will be followed by an NDA for AXS-12. And then lastly, we have AXS-14, which is -- which is for fibromyalgia. So that's completed the Phase II and Phase III trials, which were positive. And right now, CMC work is being conducted to enable an MDA filing in next year. So a lot going on, and there are a few other programs, too, which I did not mention, but we're still excited about, but I think those are the key major definitive milestones to look forward to.

Great. And with that, we're actually out of time, so it's a good place to close. Thank you, Herriot. Thank you, Mark, for joining. thanks everyone in the audience.

Thanks.