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

Good morning, and welcome to the Axsome Therapeutics Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Mark Jacobson, Chief Operating Officer at Axsome Therapeutics. Please go ahead.

Thank you, operator. Good morning, and thank you all for joining us on today's conference call. This morning, we issued our earnings press release providing a corporate update and details of the company's financial results for the full year and the fourth quarter of 2022. The release crossed the wire a short time ago and is available on our website at axsome.com. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding among other things, the efficacy, safety and intended utilization of our investigational agents, our clinical and nonclinical plans, our plans to present or report additional data, the anticipated conduct in the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity and our pipeline products, revenue projections and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on use forward-looking statements, which are only made as of today's date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; Lori Englebert, Executive Vice President of Commercial and Business Development. Herriot will first provide an overview of the company and then reveal progress made during 2022 and in the fourth quarter as well as upcoming milestones. Following Herriot, Nick will review our financial results, and then Lori will provide a commercial update, including details on the first quarter of Auvelity, sales and our second quarter with Sunosi. We'll then open the line for questions. Questions will be taken in order they are received. And with that, I will turn the call over to Herriot.

Well, thank you, Mark. Good morning, everyone, and thank you all for joining Axsome Therapeutics Year-end and Fourth Quarter 2022 Financial Results and Business Update Conference Call. 2022 was a transformative year for Axsome as we successfully transitioned to commercial stage and have delivered on our goal to become a leading CNS-focused biopharmaceutical company. Now with 2 differentiated products, Auvelity and Sunosi commercialized, encouraging early launch metrics of Auvelity, abroad and advancing late-stage pipeline and a strong financial position, Axsome is well positioned to continue to deliver significant value to patients and shareholders. The fourth quarter was an important milestone for Axsome, as it is the first quarter with sales for both Auvelity and Sunosi. Total net product sales in the quarter was strong at $24.4 million. Later, Nick and Lori will provide further details on our financial and commercial performance. To Auvelity updates, I'd like to start by taking -- by talking about the topic that brings us all here, which is making a difference for patients. In just more than a quarter, Auvelity has already been prescribed to thousands of patients and we have seen repeat prescribing by HCPs and refills by patients. Lori will provide additional perspective later. But the operations suggest that the unique mechanistic and clinical profile of Auvelity is having a positive impact on the treatment landscape for major depressive disorder and making a meaningful difference to the lives of MDD patients. Furthermore, with just half a year of Sunosi sales at the Axsome relaunch efforts, we've seen sale growth both in the U.S. and overseas. We view the potential fortunate in the current indication is largely contact leading room for significant potential for future growth. Just last week, we announced an important licensing deal providing our new partner commercial rights to Sunosi in Europe and certain countries in the Middle East and North Africa. [indiscernible] share our excitement and commitment to maximize the potential of Sunosi for patients worldwide. Their strong commercial platform is well suited to expand the availability of an access for this important treatment in the licensed region. In addition to our financial progress, our broad late-stage CNS pipeline continues to advance, positioning us to drive further significant value creation in 2023 and beyond. Our leading CNS pipeline includes AXS-07 for migraine, AXS-05 for agitation and for smoking cessation, AXS-12 for narcolepsy, AXS-14 for fibromyalgia and Solriamfetol for ADHD. In the fourth quarter and subsequently, we made significant progress in our disease agitation program AXS-05 including the announcement of positive top line results from the ACCORD trial, advanced on the ADVANCE-2 trial and obtaining FDA feedback on our development plan for AXS-05 in AD agitation. With regards to ADVANCE-2, our parallel group trial, based on current enrollment trends, we now anticipate completion of this trial in the first half of 2024 versus our prior guidance of mid-2025. Given all the progress in all times disease agitation program, we're recently sought and received feedback from the FDA on the registration plan. The FDA requested generation of additional safety experience with AXS-05 in the targeted population, including placebo-controlled safety information from the ongoing ADVANCE-2 trial as well as long-term safety data in the target patient population consistent with ICH E1 guidelines. Based on this feedback, the company intends to submit an NDA for AXS-05 after completion of the ongoing ADVANCE-2 and open-label safety extension trials. In parallel, we expect to initiate a Phase II/III trial of AXS-05 in smoking cessation in the fourth quarter of 2023. With regards to AXS-07 for the acute treatment of migraine, manufacturing activities related to the resubmission of the NDA for this product candidate are ongoing, and we expect the resubmission to occur in the second half of this year. AXS-12, our product candidate for the treatment of narcolepsy enrollment in the pivotal Phase III SYMPHONY trial is progressing, and top line results are expected in the first half of 2023. As a reminder, AXS-12 has been granted orphan drug designation by the FDA for the treatment of narcolepsy. Our AXS-14 product candidate for fibromyalgia is also progressing with manufacturing and other activities related to the preparation of planned NDA submission ongoing, and we expect to submit the NDA for product candidate in 2023. With regard for Sunosi for the treatment of ADHD, we are preparing to initiate a Phase III trial in this indication in the first half of 2023. In the fourth quarter, we also shared positive top line results from the SHARP trial, demonstrating improving the cognitive function with solid treatment and highlighted new mechanistic data for all the [indiscernible]. These results further highlight the clinical potential and differentiated pharmacology of this molecule. As you can see, the Axsome team is busy and continues to be excited as we prepare to deliver ongoing commercial success and potentially hit on multiple pipeline milestones, including clinical trial readouts and initiations and NDA filings in the next 12 to 18 months. I will now turn the call over to Nick, who will review our financial results.

Thank you, Herriot, and good morning, everyone. Today, I'll discuss our fourth quarter and full year results and provide some financial guidance. Total revenue in the fourth quarter of '22 was $24.4 million, consisting of net sales of our 2 commercialized products of Auvelity and Sunosi. There were no net sales in the comparable prior period. Auvelity was launched in the fourth quarter on October '19, and for the partial quarter generated net sales of $5.2 million. Sunosi generated total net sales to Axsome of $19.2 million in the fourth quarter, consisting of U.S. net sales of $18.3 million and international net sales of $900,000. Because the ex U.S. acquisition of Sunosi closed on November 14, the reported international net sales reflect the first quarter. Total revenue for the full year of 2020 was $50 million. Again, there were no reported sales for the prior year because of the acquisition of Sunosi and the launch of Auvelity both occurred in '22. For the full year of 2022, Auvelity net sales were $5.2 million. For the full year 2022, Sunosi generated total net sales to Axsome of $44.8 million, consisting of U.S. net sales of $43.9 million and international net sales of $900,000. As a reminder, the U.S. portion of the acquisition of Sunosi was completed on May 9. Cost of product sales were $2.3 million and $5.2 million for the fourth quarter and full year of 2022, respectively, compared to none in the prior year. Research and development expenses were $14.7 million and $57.9 million for the fourth quarter and full year 2022, respectively, and $13.8 million and $58.1 million for the comparable period in 2021. The increase for the fourth quarter was primarily related to higher costs associated with ongoing clinical trials including post-marketing commitments for Sunosi and Auvelity. Selling, general and administrative expenses were $61.5 million and $159.3 million for the fourth quarter and full year of 2022, respectively, and $18.8 million and $66.6 million for the comparable period in 2021. The increases for the fourth quarter and full year were primarily related to commercial activities for Sunosi and Auvelity, including sales force onboarding, marketing spend as well as higher noncash stock compensation expense. Net loss for the fourth quarter of 2022 was $61.2 million or $1.41 per share compared to a net loss of $34 million or $0.90 per share for the comparable period in 2021. The net loss for the fourth quarter included $10.8 million of noncash stock compensation expense compared to $5.9 million in the comparable period in 2021. Net loss was $187.1 million or $4.60 per share for the full year of 2022 compared to a net loss of $130.4 million or $3.47 per share for the comparable period in 2021. The net loss for the full year of 2022 included $37.7 million of noncash stock compensation expense compared to $20.8 million for the full year of 2021. We ended the year with $201 million in cash and equivalents compared to $86.5 million as of December 31, 2021. During the fourth quarter, we did not utilize our ATM facility. In January of 2023, we amended our loan agreement with Hercules Capital to increase the size of the facility to $350 million to reduce the interest rate and to extend the maturity and interest-only periods while accessing a $55 million tranche. Additionally, in February 2023, the company received approximately $66 million from the out-licensing of ex U.S. Sunosi rights. Inclusive of these events, our pro forma year-end cash balance now exceeds $300 million. We believe that our current cash balance, along with remaining committed capital from the $350 million term loan facility with Hercules Capital is sufficient to fund anticipated operations into cash flow positivity based on our current operating plan. I will now turn the call over to Lori, who will provide a commercial update.

Thank you, Nick. Q4 was certainly an exciting quarter for Axsome with the launch of Auvelity and the continued relaunch of Sunosi. Both of our commercial products address serious, highly prevalent conditions and bring meaningful innovation to millions with potential patients. We are pleased with our commercial progress on Sunosi. And although it is still early days, we are encouraged by Auvelity launch progress. I will share our key metrics from our commercial efforts for both brands, starting with Sunosi followed by Auvelity. As a reminder, Sunosi is the first and only the DNRI for excessive daytime sleepiness and obstructive sleep apnea and narcolepsy and the first and only weight-promoting agent driven to improve weight through 9 hours. In the fourth quarter, total prescriptions for Sunosi in the U.S. grew 11% year-over-year and 1% quarter-over-quarter. For the full year 2022, U.S. total Sunosi prescriptions showed strong growth with an increase of 21% versus 2021. The total prescription split by the diagnosed patient population for Sunosi is 70% for EDS due to and 30% for EDS due to narcolepsy. Payer coverage for Sunosi remains broad with 96% of commercial lives and 83% of total lives covered. The growth potential for Sunosi in the currently approved indication remains substantial. Sunosi currently has only a 2% share of drug-treated OSA patients and a 7% share in drug-treated narcolepsy patients. Sunosi is the only branded therapy available for patients who suffer from EDS and OSA and we expect increased and enhanced promotional and disease education efforts to drive market share growth for the product in 2023 in the U.S. With recently announced licensing of ex U.S. marketing rights for Sunosi to Pharmanovia, we are well positioned to increase the availability of the treatment to patients worldwide. Turning to Auvelity. We launched Auvelity on October 19 and despite launching in Q4, a traditionally challenging quarter due to multiple holidays. We saw early signs of encouraging uptake with our initial HCP adopters. With only 10 full weeks of promotion in Q4, 2,200 unique HCPs were prescriptions for over 6,000 new patients. Those metrics have grown to 4,300 unique HCP writers and over 13,700 new patients since launch. Importantly, HCPs who have written ability are gaining credible early clinical experience and are reporting promising patient response that is consistent with that with what we saw in clinical trials with many reportedly seen rapid onset of action and rapid achievement of our mission. With regard to payer coverage, the commercial channel is expected to be the primary channel for Auvelity as it accounts for more than 60% of antidepressive prescription volume. Interactions with commercial payers as it relates to Auvelity have been active and productive. Effective January 2023, we have contracted with one of the largest group purchasing organizations, or GPOs, for potential coverage of Auvelity. As a result, pharmacy benefit managers or PBMs and health plans under the GPO will now be able to make formulary coverage decisions for ability based on the contracted terms. These interactions with commercial payers are proceeding as expected during the standard 6- to 9-month period post launch when new drugs are blocked, while coverage decisions are being made. In the noncommercial channel, Medicaid coverage became effective in 49 states on January 1, and Medicare plans have up to 6 months post launch to determine coverage and ad ability to formulary. We expect additional formulary decisions over the next 6 months. I look forward to discussing more as the payer process progresses. We are extremely encouraged by the initial launch progress and remain committed to our launch focus of driving fast HCP adoption, empowering patients and enabling quality access. We are all aware that there is a mental health crisis happening in the U.S. and major depressive disorder, or MDD, is a major public health concern with 21 million U.S. adults diagnosed in 2020 and reported a significant increase in prevalence as a result of the pandemic. Mobility is an important new therapeutic option for patients living with this chronic and devastating condition and we are proud of our efforts to make ability available to patients living with MDD and their physicians. I will now turn the call back to Mark to lead the Q&A discussion.

Great. Thank you, Lori. Operator, may we please have our first question?

Yes. Our first question is from Charles Duncan with Cantor Fitzgerald.

Yes. Thanks, Herriot, and team for that great overview and congrats on the good quarter. I had a couple of questions on Auvelity. One is commercial. One is more development. And that is regarding the commercial question. I'm just kind of wondering, I think what Lori just said, addresses this question, but I'm wondering if you could drill down on any feedback she's getting from the market in terms of response rates and even persistence, and I know it's too long or too early to know a real persistence, but what are prescribers seeing in their patients with regard to comparison in patients who are experienced with SSRI-based therapy?

Charles, thanks for the question, and good morning. So again, you're right, very early days for us. And most of what we're receiving back from the field is purely anecdotal. So I hope you take for what it's worth. What we are hearing anecdotally is that patients are responding very consistent to label. So that rapid onset of action is happening. They are seeing very early achievement of remission. Again, it's a little bit too early to talk about their ability because we're just a few months into launch, but we've not seen anything that would suspect -- we expect would be different than what we see in the label or what we saw in the clinical trials.

And maybe to add to that, I think one of the things that we are seeing or repeat prescriptions. So patients are prescriptions they would have been switched off with those in persistence.

Exactly. And just to give you some additional color there, last week's reported data, about 50% of the scrips were for refills.

Okay. That's great to hear. Regarding TAM extension efforts for 005 in Alzheimer's agitation, Herriot you mentioned some feedback from agency, I wasn't completely clear on that in terms of timing. I think that you mentioned possibly completing the trial in '24 versus prior '25, if you could provide more color on that? And then explicitly, you thought an NDA would happen after advance to but then also after an open-label extension study. So could you give us a sense of timing on when an NDA could be filed?

Thanks a follow-up question, Charles. With regards to our disease of agitation trial, you're correct. So based on the fact that enrollment is going to be, frankly, faster than we had expected. We now expect for that study to read out first half of 2024. The open-label extension trial has been ongoing, and we would also expect that to read out in 2024. And with regards to filing, we would be in a position to file an NDA within 6 months after the readout of those studies.

Our next question comes from the line of Marc Goodman with SVB.

Herriot, just to continue on this agitation study. Can you confirm like your discussions with FDA? Have they signed off on both studies from an efficacy standpoint and all we're waiting for now is the safety data? Can you just confirm that? And second question is, if you all can help us with how to think about gross to nets for both products for this year?

Thanks for the question, Charles.

Marc.

I'm sorry, Marc. Oh my God, all these sell-side analysts are starting with blur into 1. No, of course not. All of you are very distinct. So Marc, the -- with regards to the interactions with FDA, we saw feedback on the trials. The feedback that we got from the agency is that in the elderly patient population, safety is really important, not just long-term safety data, but also the placebo-controlled safety data. So the ACCORD trial, it was a randomized controlled study. So it does not provide the randomized safety data, which the is really important in this patient population. And the other aspect of the study did highlight not necessarily show-stopper, is the fact that this was a truncated study. So -- and importantly though, the feedback with regards to exact patient numbers for database is that it must meet ICH E1 guidelines. So what's good is we're in a good position to provide actually all of those data points to the FDA, we do have the ADVANCE-1 trial, which is already ongoing, which is enrolling and so -- I'm sorry, the ADVANCE-2 trial, which is already enrolling. And so we're in a good position to provide all the safety data which would be required for the NDA filing.

Herriot, if ADVANCE-2 fails from an efficacy standpoint then what?

Well, that would be speculation. But we are encouraged that we currently have 2 positive trials in this indication.

Right. That's my question, did the FDA agree that you have 2 positive trials?

The FDA never read anything until you file an NDA and they review it. But it's very clear that we did have 2 positive trials very core buyback. And we track to reline safety information that will be needed for an NDA filing.

Okay. And then the gross to nets for both products for this year, how do we think about that?

Yes, sure. Marc, it's Nick. For gross to net, so for the quarter for Auvelity, I'll start with, gross net for the quarter was in the 60s. As of right now, we're not currently in a position to give specific guidance around GTN. However, we remind you that there's no reason to expect that's actually going to improve from this quarter and then obviously, could potentially worsen based on Q1 being typical -- the seasonality that you expect a typical headwinds of plant coverages resetting in year, inclusive of deductibles, coinsurance, PAs would need to be in some plans would need to be recreated again. So potential utilization, higher utilization of the co-pay card. And then obviously, mix and channel distribution always impacts GTN. So we would expect in Q1 and Q2 that we wouldn't expect anything better than where we were at today and potentially it could worsen. Specifically around Sunosi. Sunosi, we were in the low 50s. Again, for this quarter, we did have a favorable adjustment from the prior quarters of $1.8 million. The GTN adjustment as we received updated claims, which is typical that we received them in this quarter. Otherwise, for Sunosi, it's pretty much been stable in the low 50s.

Our next question is from the line of Vikram Purohit with Morgan Stanley.

So we had 2 on Auvelity. So first, just wondering if you could provide some color on kind of the typical profile of patients that are currently receiving Auvelity terms of the prior treatment history and the lines of therapy that have been on prior to being prescribed Auvelity? And then secondly, I just wanted to see if you could provide an update on ex U.S. commercialization and partnership discussions if those have been happening. And if so, what you'd be looking for in a potential partner for AXS-05 ex U.S.?

Vikram, I'll take that. So currently, as we've mentioned multiple in and as the standard, most of the commercial plans have ability in block as requires quite an effort to get patients online, which is why we're really excited about the demand that we're driving despite these challenges. However, due to that, therapy use has been relatively later line right now with about 28% sitting in second line and 61% sitting in third line-plus. The response has been, again, to the question I answered with Charles, the response has been very, very consistent with label. And to see that in later line patients is extremely encouraging.

Just with regards to the second part of your question as it relates to what we would be looking for with regards to a potential partner for Auvelity in ex U.S. I think one of the things that we would look for is a partner with proven capabilities but also a partner that has experienced with regards to navigating the pretty complex reimbursement landscape in certain geographies such as Europe.

The next question is from the line of Jason Gerberry with Bank of America.

Are you guys planning to increase enrollment of ADVANCE-2 to get to the 300 patients by 6 months? I was just doing the math on, I think, what, 50 patients from ACCORD went into randomized withdrawal, and then you have 175 under the current enrollment plan for ADVANCE-2. So just curious how you get to the 300? And then if you can comment on how we should be thinking about SG&A and OpEx ramp is 4Q 2022 on an annualized basis, sort of a good place to think about some growth off of that number or is there going to be any step-up from there? And then just last question? Any comments on any inventory launch stocking here on the fourth quarter number.

I'll take first question, and Nick will take the others. The answer is no, we do not anticipate having to increase enrollment in ADVANCE-2 to reach the required patient safety database. As a reminder, we do have patients from ADVANCE-1, in terms of general safety experience, but then we also have 170 patients, as a reminder, who were enrolled in pivot 1 of ACCORD trial and a lot of those patients and most of those patients went into open-label safety extension trial. So if you take the patients rolling over from forward as well as the expected patients going over from ADVANCE-2 that should put us in pretty good shape.

Sure. Jason, so related to OpEx guidance, I think like I think you mentioned using Q4 essentially as a proxy, I think that's a fair estimate. We stated in the press release that we expect expenses to increase year-over-year. Obviously, with the launch of Auvelity and Sunosi being acquired in the second quarter of this year, we'll have a full year of SG&A expenses and Q4 being almost a full quarter, I think you can expect you to use that as a proxy and potentially a modest growth from on the SG&A piece as it relates to thinking about 2023 on a quarterly basis. And then I think your other question broke up a little bit, but I think your question was related to inventory channel and where we were at the end of the year. For Auvelity, we have roughly 2.5 weeks of future demand in the channel. I think obviously, the growth brand, we just launched it, and we do expect inventory levels to fluctuate at our distributors as Auvelity builds additional momentum in the market. It's not unexpected, and we believe wearing patterns we really reflect the strong patient demand that we've seen. For Sunosi, we did have increased wholesale buying during -- due to the seasonality at the end of Q4. The inventory levels were somewhat elevated. However, we do see in Q1 that these inventory levels are coming down to approximately 2 to 2.5 weeks. And one note is that we are -- actually in Q1, we operationally for distribution, we changed our model from a Title Model to the traditional 3PL Model. That model was as it relates to -- as we launch and ensuring that we get licenses in every state. We changed to a traditional 3PL Model now and reduce the -- essentially the middle band distributor, so we will see an inventory reduction in the channel which will impact Q1 sales for Sunosi by roughly 2 weeks.

Our next question is from the line of David Amsellem with Piper Sandler.

So just had a couple. First on Sunosi. Just broadly, what do you think you can do differently from the predecessor company that control the asset in terms of driving an inflection in volumes? And is the focus going to be more on OSA versus narcolepsy? And just give us a sense of what you're prioritizing and how you believe the commercial landscape for Sunosi might prove to be different over time to the extent it is at all? So that's number one. And then number two, on Auvelity, how should we think about eventual expansion of the sales organization to the extent you need to and just talk about how that's going to evolve over time as the product gets more into its commercial life?

Yes, David, I'll take both of those. So first of all, I'll start with Sunosi and how do we think we'll have an inflection point with this relaunch that we've talked about of Sunosi. Really strong foundation for the launch for the -- the initial launch. The important thing to remember about the initial launch with was that Jazz they launched about 3 months prior to the potent shutdowns. And so the initial launch was heavily impacted for the majority of the first 18 months of the launch for that product. What we believe we are doing right now that will help provide an inflection point is that we have gotten really hyper focused on the highest potential prescribers. And our plan is to make sure that with our differentiated clinical profile that those 5 prescribers that we penetrate those prescribers and then start to expand out in terms of targets. Doing that will help us gain market share very quickly as we really get on the approach. In terms of OSA versus narcolepsy. OSA has a prevalence of about 22 million patients and narcolepsy is 200,000. So that start difference right there tells you that a much larger opportunity is in OSA. We will, right now, continue to focus on other things, but we're not letting our foot off the [indiscernible] on narcolepsy. So as there's still a lot of room for growth there as well. In terms of ability in the expanded sales organization, right now, we have about 165 reps coming on 25,000 HCPs. We are very, very confident in our -- using our DCC approach to make sure that our reps are able to have the tools that they need to make effective calls and be very efficient about doing it. And because of that, we are very focused on making sure the penetration in those original target list, which are the highest potential prescribers in the MDD space is really high before we comment any further on any additional plans.

Our next question is from the line of Joon Lee with Truist Securities.

In the press release, you mentioned potential for up to 4 NDAs over the next 12 to 18 months. I'm assuming that it also includes narcolepsy. And if so, is SYMPHONY and the Phase II sufficient to file? And I have a follow-up. .

Thank you for the question. Yes, we do believe that SYMPHONY and Phase II trial will be sufficient to file assuming that SYMPHONY is in progress stage.

Great. And regarding the Sunosi deal, at a high level, it looks like you were able to monetize the European rights at a very attractive valuation, possibly more than what you had at for the worldwide rights, what do you think teams that allowed you to attract that value?

Well, I think that we've felt strongly about the potential for Sunosi and the overall value of the product. This transaction, the ex U.S. licensing it reflects the value of the product. So it's consistent with our perspective. What I start to a spin and what we communicated with regards to the potential of the product.

Our next question is from the line of Joseph Thome with Cowen & Company.

Maybe the first one, just a clarification on the Auvelity number that you gave earlier, that 13,700 new patients was that as of last Friday or what was the cutoff date for that? And then second was the -- we did see the NDA for [indiscernible] on Auvelity. If you can just give us overall thoughts on your strength of the 2034 and 2040 patents I know they're only challenge 2040, but what are next steps here? And how does the company think about that? And then I'll have a more great quick follow-up.

Yes. Thanks for the question on the cutoff date. That would be as of the last reporting week, which is February 17.

And you cut-off, from the second part of the question.

Yes. So just in terms of -- we saw the NDA submission from challenging those 2040 patents. So what are sort of the next steps in terms of litigation or in terms of potential settlement? And maybe if you could just comment on your confidence in the strength of the 2040 and the 2034 patents for Auvelity?

Okay. So Hunter will take that.

I am Hunter Murdock, Company's General Counsel. So as we've previously announced earlier this month, we did receive the Paragraph IV Notice from Teva relating to Auvelity. The receipt of the letter was normal, was an expected part of the process. And to get to your question, it's no way indicative of the quality of our IP portfolio, which we're extremely proud of. Under the [indiscernible] Act, we have 45 days of final wall street against Teva, if we wish to invoke the 30-month regulatory stay, and we're carefully analyzing Paragraph IV Notice right now. We're carefully evaluating our next step. [indiscernible] able to provide much additional commentary regarding the notice or the steps you may be delighted data for future legal proceedings.

Great. And then just really quickly, I know you mentioned that for narcolepsy, the Phase II and the Phase III would be sufficient on an efficacy standpoint. Would you need an additional open-label safety experience? And will you have that necessary exposure once this trial reads out?

We do have the label safety extension trial in on. So that will be -- that safety experience will be part of the filing. As a reminder, in conjunction with our licensing deal with Pfizer did get the safety data, which is the same experience, which is extensive with the molecule, that will also be part, but I shouldn't get success.

Our next question is from the line of David Hoang with SBMC.

So I just had a quick question on gross to net for Auvelity in coming quarters. Can you give us any sense of how quickly we should expect the to improve over time? And would improvement correlate with the rate at which you can establish favorable coverage at major health insurance plans? I know you mentioned 6 to 9-month window for that to generally take place. Is that fair to assume GTN should also improve over that time?

Yes, David, thanks, it's Nick. I think that's the guidance that we previously gave and we're really staying to that. It's hard to give any further quantitative guidance on GTN until we start seeing broad payer coverage and then we'll be able to give a good sense of what the GTN and where the GTN will lie. So several quarters from now, I think we'll be able to give a better -- give you a better sense of where GTNs will be.

The next question is from the line of Yatin Suneja with Guggenheim Securities.

This is Eddie on for Yatin. Just a few from us. On AXS-12, can you just provide a little bit more detail on the timing of those data this year? And what you would need to see to give you confidence moving forward, especially with comparison to Sunosi? And then just a quick follow-up on the Auvelity inventory. How much of that 5.2 in reported revenue for the quarter was due to channel stocking?

You want to take the last question?

Yes. I haven't quantified the actual amount related to specifically the inventory. But as I mentioned earlier on the question, roughly 2.5 weeks of future demand. So you can kind of ballpark with that is that 2.5 weeks, we do take GTN deductions on that. So even though it hasn't been sold, it's been sold to our distributor have sold channel. So we are accruing based on the proceeds or what we expect January's GTN would we follow on that.

And with regards to the timing for AXS-12, we expect to have results from that trial in the first half of this year. So that's the guidance. And I think you can figure out what the first half is, so that would lead through the end of June. Then in terms of what we would want to see, we want to see a positive trial. And this is a placebo-controlled study. So I want to see a positive trial that would give us 2 studies that demonstrate efficacy of the product. And with regards to the comparison to Sunosi, the indications are different. So Sunosi approved to treat because of lead times in patients with narcolepsy and AXS-12 studying or a few of cataplexy in patients with narcolepsy.

And Eddie, if I could just add, Herriot, if you don't mind, just to help provide context there. For narcolepsy patients, 100% of all narcolepsy patients that were from excessive data sleepiness and it's only estimated that about 70% suffer from cataplexy, just going to give you context in terms of the patient.

Our next question comes from the line of Graig Suvannavejh with Mizuho Securities.

Congrats on the quarter and the year. Maybe my question is a bit bigger picture in perspective as it relates to your marketed products and Auvelity and Sunosi, I know you've just launched Auvelity and you've just gotten your hands on Sunosi, but do you have a sense of at what point you as a company might be in a position to provide financial guidance around what you see for sales for each of those products and maybe even from a bigger picture perspective, could you remind us as you think about the total revenue opportunity for Auvelity or AXS-05 either in depression and also in AD agitation and what you -- how you think about Sunosi in EDS, both in OSA and narcolepsy?

I'm sorry, Graig, can you repeat the first part of your question 1 more time for me?

Yes. It was really more a question around the timing of when as a company. You might feel that you're comfortable enough to buy financial guidance on forward-looking sales in any particular year for this? Is this a situation where perhaps maybe 3 years down the line or 2 years? Just how you're thinking about what might be comfortable?

Yes. I would say, obviously, the way you prefaced your question originally is we're in very early stages for Auvelity as well as Sunosi. So we haven't discussed when we would potentially give sales guidance as it relates to both products. One would though, with Sunosi being a somewhat more mature product that we would be able to give some guidance on that product first. Auvelity, we're looking at various models here and would fluctuate drastically. So we're -- it would be further along. I can't be as to the timing when we give sales guidance.

What we did -- second part of your question here, we have talked about the sales potential, the peak sales potentials or both Auvelity as well as Sunosi. Starting with the Sunosi, current indication, we expect the product -- we believe that the product that $300 million to $500 million. And we've also said that we believe the product has brought us a potential leading sales potential of at least $1 billion, if you take into account the potential new indications. And as we discussed, we are about to launch the pivotal trial And with regards to Auvelity, we think that Auvelity has $1 billion potential in both individual as well as in Alzheimer's disease agitation individually. Based upon the size of that market in terms of the number of patients who have in the treated, Alzheimer's disease based upon not just the prevalence of Alzheimer's disease and the percentage of patients who have agitation, which is about 70%, also make on the fact that there's nothing grid currently to treat those patients.

And then maybe one more follow-up for me. Just on Sunosi, where the split in its current use is, I believe, 70% in OSA and 30% currently in narcolepsy, I'm wondering if as you look out in the future with your current plans, whether that is a number that will evolve from there or if it will stay there. And if it does evolve, any sense on which direction it might evolve in terms of that split?

Yes. Thanks, Graig. I don't think -- or I don't foresee especially in this current indication, but that's gone to evolve much as I mentioned before, our focus is heavily on OSA, just given the sheer size of the prevalence of that position, but we're not taking our foot off the gas on a narcolepsy also it is a very, very efficacious product in from narcolepsy.

Next question comes from the line of Bert Hazlett with BTIG.

My question is on the smoking cessation program. Could you just frame some of the parameters and timing surrounding the Phase II/III there, size of trial, again, timing, endpoints, things like that? And then with regard to the administration dosing of AXS-05, would you expect it's it to be dosed in similar fashion titration to a top dose as it is in MDD and AD agitation?

Thanks, Bert, for the question. With regards to the timing. We do expect to initiate the Phase II/III trial in the fourth quarter of this year. The team is working very hard to get that done. And sort of the design of the trial, this will be a standard trial design. We will have more to say once we launch the trial as well always do, we'll provide details in terms of the endpoints that we're looking at. But rest assured that the endpoints will be registration endpoints. And we have gotten feedback from the FDA on exactly what that will look like, and will provide bit detail to those trials. And in terms of the dose recommended we'll also provide that information once we launch the study.

At this time, we have time for to take 2 more additional questions. The next question comes from Myles Minter with William Blair.

Just wondering how many or what percentage of [indiscernible] are actually represented through the plans that will use that GPO you bought online last month and when you anticipate those plans making those decisions?

Yes. Mike, I'll take that one. So as updated in the prepared remarks, it was 1 of the 3 GPOs that are currently operating right now. Each of the 3 have a fairly substantial amount of covered lives and the PBMs and plans that are underneath them now have the ability to access those contractor rates. Once they work through their standard and expect 6 to 9 months [indiscernible]. So discussions are active with other -- the other GPOs and payers, both from clinical reviews as well as discussions on formulary decisions. We do expect that to be made over the next 6 months.

Okay. And then just as a follow-up. Last year, when you met with the FDA and you decided to run advance to I think did they guide that they wanted to see an additional placebo-controlled study for AD agitation because they wanted to see additional placebo-controlled efficacy as well as safety data at that time and that time or commentary changed at the current meeting that you just had?

Sure. Thanks, Myles, for the question. When we made the decision to initiate the ADVANCE-2 trial, that was a decision that we made just from a business perspective. And so that is not based upon requirement or feedback from the FDA. However, once we didn't meet with safety data, in particular, placebo-controlled safety data as well as safety database based on ICH guidelines that less information that was provided to that will be a requirement for the filing.

Our final question is from the line of Matt Kaplan with Ladenburg Thalmann.

This is in for Matt. Congrats on the quarter. Just a quick one. I wanted to ask about Auvelity platform. You've had early success with I was wondering how DCC and your initial experience with Auvelity kind of driven sales? And any initial learnings that you'd hope to incorporate as the large progresses?

Yes, thanks for the questions, good one. So as you mention, we have talked about what we're seeing on Sunosi, so I won't rehash that. And on Auvelity, we're still very early. What we've done is we've established a platform, the same platform that Sunosi is operating off of. We are very confident in our sales force size as well as the tools that we've given them to reach the number of HCPs up that we believe will drive rapid growth. And so it's a bit too early to really comment on that. But we are very pleased with how the team is using the platform and how they are helping drive growth that way.

I will now turn the call back to Axsome's CEO for any concluding remarks.

Well, thank you again for joining us on the call today. We are proud of the hard work of the Axsome team which is now resulting in meaningful differences in patients' lives. This is only the start of more great things to come. 2022 was a pivotal year for Axsome. We are not the same company we were a year ago, and were wanting the same company next year with all the strategic growth we anticipate. We are aligned to report value-driving updates with multiple and state track candidates in multiple stage clinical trials in some of the most challenging to treat CNS disorders in the next 12 to 18 months. Axsome has 5 commercial products in the market by 2025, and we're hard at work to meet those goals. Thank you. Have a great rest of your day.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.