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

We're going to get going here with our next company presenter at the BofA Annual Healthcare Conference. Pleased to be introducing Axsome Therapeutics; and Mark Jacobson, Chief Operating Officer. My name is Jason Gerberry. I'm one of the mid-cap biotech analyst at BofA and Mark, thanks for joining us.

Thanks, Jason. Really glad to be here, and it's nice to be at the conference again and thanks for hosting us.

Yes. So I figured maybe we could kind of start the discussion with Auvelity, the kind of dynamics going on in the MDD market that we can pivot to ADA and then hodgepodge of other pipeline topics that are most relevant.

Sounds good.

All right. So yes, I guess, with Auvelity reported nice quarterly results, kind of annualizing at a run rate that I think you guys are happy with relative to expectations and all the hurdles you deal with nowadays launching a drug and building up coverage, maybe just -- and not looking for specific quarterly guidance, but just more of the kinetics, right, of where Auvelity is some of the 1Q drags and just kind of the outlook for the rest of the year conceptually. On the one hand, it does seem like there were some factors, typical 1Q seasonality that could be headwinds for volume, change health was flagged as sort of a minor thing, I think. And yes, I guess when you're building up coverage, maybe I don't know if the 1Q seasonality factors get a little more exacerbated from a volume drag perspective? And then as you kind of get into the remainder of the year, how that -- what that portends for just kind of the volume kinetics.

Sure. No, thanks. So Q1, I think we're pleased with kinetics and dynamics all around despite seasonality backdrop. And then as you mentioned, some environmental headwinds, so to speak, with change health care disruption and things like that. So $53 million in the first quarter for Auvelity, it's about 95,000 in scripts. And so really like that, the -- maybe the other element for Q1 was the expansion of the field force and added about 100 reps of total Auvelity field force is right around 260 right now. And what we shared is that we expected to see impact from the increased field force and starting in about a quarter. And I think we're starting to see that the last few weeks, we're starting to see nice movement or dynamics in NBRx, TRx so we like that, and we expect that to -- we expect to continue to drive that over the course of the year and beyond. And so I think that's one of the key elements. And another thing that we had just shared is that we've added another contract with a second GPO. And so that's essentially a leading indicator for other lives in the commercial channel to be covered. And so we expect that to start to develop further over the course of the year.

Yes. Okay. And the dynamic of how you're approaching kind of the contracting and not wanting to give away too much in building up volume and increasing your leverage. This is a strategy that's not unique to act so much in other companies that I cover employing this sort of strategy. So is sort of the thinking, hey, we can operate, broadly drive volume growth within our kind of gross to net outlook we've provided to the Street and then, over time, be it a year, 2 from now, we feel like we can get the broad coverage ultimately and that we're only growing in sort of the leverage and power you have with payers in the contracting discussion.

Yes, that's right. So we -- steady state, we think expect to be in line with what you typically see for branded CNS or neuro products. And so that's government channel, essentially 100% of lives are covered, and that's the case now. And then in commercial channel, you'd expect the majority of lives to be covered -- the overwhelming majority of lives to be covered. So right now, is that 48% at the end of the first quarter. And so we'd expect that to tick up and that corresponds to when, say, PBMs or plans access rebates or put the product on formulary. And generally, those are step functions, right? And they -- it's not gradual. It depends. And you're right, the plan is to drive volume and that corresponds to increase field force and things like that. And as we drive volume, then we'd expect to seize a commensurate uptake or placement on formulary for Auvelity. So that work is underway, and we're pleased with where things stand right now and how things are moving.

What would you say are the biggest risks to that strategy that could -- if you would say, hey, look, in a year or 2's time, if the gross to net was going to be worse, is it that you have a harder time pulling through -- patients through medical exceptions where you don't have the contract in place. I don't think there's an NMDA agent in the pipeline. So it seems like the payers would have a hard time going to exclusive contracting. So that seems like a positive. But how would you kind of frame risks if there are risks.

So it's a different approach than say, free goods program where you look to get as many patients on drug as quickly as possible and through free goods program. So it's different than that. So we do want to drive volume. I think maybe one of the -- one of the things you have to be mindful of is that you -- as you ramp up as more HCPs may write the product to have familiarity with it, you don't want it to take so long that a perception crystallizes that it's difficult to write. So you do want to make sure lives continue to be added and then that if an HCP writes the product that they'll feel good that it will get filled. And so while we're navigating, while we're coming out of or through the NDC block phase, we have a pretty robust patient support offering that will help patients get -- say, get the first script or early scripts while a PA maybe routing through submission and potential approval. And then should that process sort of PA result in approval then a payer would be covering the product for any given patient. So that's underway now. It takes time and it takes a lot of work to drive the volume. But if that continues to grow, then obviously that would -- that's what drives uptake or payers accessing the contracted rates for rebates?

So it sounds like you're acutely focused on minimizing friction for the prescriber such that there's not this ingrained bias that Auvelity is this hard drug to get. And thus, they kind of just don't think about it as like a go-to option for patient that might be a candidate. Is that [indiscernible]?

Yes. And I think that idea is, we're not seeing that now. But I think just in terms of your question of what are -- for an approach like this, what are the things you want to be mindful of. So that's something the team is mindful of and again, we like the current dynamics, though. So kind of where we are, say, launch to date and progress we're making on -- say, on the market access front and just the demand front. So I think we like where we are, so that's good. But I'd say that's probably the biggest potential kind of headwind for an approach like this.

And then in terms of like I wonder where you're winning share. You get questions a lot about early line versus kind of later line patients. And I'm wondering, I think there's something like 3 million treatment-resistant MDD unipolar depression-type patients. How would you define -- can you define the dynamic in-play market in a given year that you're fighting for in certain disease areas that have a lot of generics, have like adjunctives at the back end, right, like that maybe get used in. There is more severe patients. You play somewhere in the middle, I assume.

Yes. It's pretty interesting. So right now, there's not a specific, say, patient profile that's emerged where all the usage or where all the product is being written for instead it's across a variety of patient types. And so one of the things that we're seeing early trends is that we're seeing it prescribed for first line or first switch. And I think the latest numbers are more than 40% of the scripts are first or second line. So that's a great place to be. But then it's also to your point being used in very late line patients, which is what you often see that with new branded products, right? They're generally started later line because of NDC block and prior offs and things like that. So we're seeing it used kind of across spectrum of patient profiles, which is really good because then the feedback we're getting from the field or from clinicians is that the product is working in line with the label and kind of despite its utilization in a heterogeneous patient profile. So we like that setup. And so where it actually nets out or if there's, say, a specific or a few specific patient profiles, I think that's still, coming together. But right now, we like kind of the snapshot that we're seeing.

And so you have this peak sales guide of $1 billion to $3 billion for the drug. If I think about some of the variables, the impact of these upcoming marketing initiatives that how that alters the trajectory if you get an extra 6 to 9 years of IP beyond 2034 IP, that's obviously a big variable to where you end up from a peak sales perspective. So what's the biggest toggle if there is one you can -- or if you can rank order those elements?

We -- it's hard to know, and I think that's one reason for the range, but we feel really good about the potential for the product. And to your point, the runway, it's got a long runway. There's the Paragraph IV process underway now, but we feel really good about that and just the lifetime of the product. But that's a toggle, as you said, I think other things, one element is what we were just talking about, if it settles on a specific patient profile and that's an element that could impact that. Another is -- another topic we were on, which is basically coverage where steady-state coverage comes in at and say, you'll expect a variety of types of formulary placement, where these payers there they all have what's important to them in terms of coverage dynamics and market basket and things like that. So all of that has the potential to, I think, impact where we end up from a peak perspective. But I think in our minds, it's -- the opportunity is substantial. And I think as we go when things start to when we have a sense of maybe long-term trends, then I think we can hone that guidance potentially. But right now, we like the range of possibilities for peak.

And so you didn't mention sort of the synergism with an ADA indication, but is that a big swing factor to sort of MDD, maybe benefit you might get with the broadening of the label?

Sure. So -- right. So if Auvelity, so AXS-05, it's in clinical development right now for AD agitation, when we have the 2 positive Phase III studies, and there are others that are ongoing, and we can touch on that. But should the product be approved for Alzheimer's disease agitation that would potentially open up, say, other potential targets or so HCP targets or settings, for example. And I think what you're alluding to is long-term care facilities as one potential area and in that case, there are a lot of individuals who -- there's a high prevalence of depression in settings like that. And so that's a potential area that could come online, so to speak, with respect to the depression opportunity.

Okay. Last one on this topic and then we'd go to Alzheimer's, but a lot of us look at Rexulti as a launch comp, right? And we'll sort of track where you're at on a monthly basis -- sort of a like-for-like basis. I guess I'm just curious, your thoughts on that as a comp, on the one hand, I guess I could see the pushback being, hey, that typically gets used as an adjunctive. There are safety risks with that, that maybe could cap utilization, right, in terms of physician willingness to want to put someone on atypical antipsychotic movement disorder risk, that sort of thing. So do you view that as a comp? Do you look at that? Or do you say it's just massively inappropriate?

It's probably a combination of relevant and totally irrelevant. So the product is approved for Alzheimer's disease agitation now. It's about a year in to the approval and...

I was thinking about it from MDD perspective.

I'm sorry. So from an MDD perspective, it's an analog. I think it's a relevant analog, but the profiles are so different, right? To your point, the efficacy profile is different. The tolerability profile is different from -- and also the use case, as you mentioned, for adjunctive. And for Auvelity, we have distinct safety and tolerability profile, right, rapid acting, durable and so I think the analog is there in terms of the product is available and clinicians have experience using it for individuals with depression. It breaks down somewhat from a product profile perspective, right? They're not necessarily analogous. The only thing that's different to is just, I think, market dynamics for the products, the sales platform that's in place and so I think it's informative, but how much of a facsimile I don't know.

Let's move on to Alzheimer's. You announced the start of the ACCORD-2 trial. I guess the question is that we get a lot are why and why now?

Yes. I think why now is so we have the positive ADVANCE-1 and ACCORD-1 studies. And then we have the open-label extension study that's ongoing and the ADVANCE-2 parallel group study that's ongoing. So the 2 ongoing studies, those are about to enter, say, the home stretch of those studies. And so soon, it's going to be pencils down in terms of preparing an NDA. And the team is going through a process now to think about how can we build the strongest package that we can? How can we get as much FDA -- data to the FDA as possible. We really like the profile of the drug and the totality of the data we've generated to date. So what else can we do to bolster the program? And in a sense, there's this open window in terms of the number of patients in the OLE, in the open-label extension study. There are enough potential patients to explore doing something like this. And that was really the genesis. So timing of, hey, what else do we want to put into the package, patients are there to run a study like this. It's not -- I don't think we'd be doing this, if this were another stand-alone study that we'd have to recruit from scratch, right? But it's -- so no, we don't expect there to be a material impact to cost. We don't expect there to be a material impact of timing of the NDA. So to us, it just makes sense that all of a sudden, we can add even more randomized controlled data to the package, we think that's a good thing.