Axsome Therapeutics, Inc. ($AXSM)

Good afternoon. Welcome to our next session. It is my pleasure to be hosting Axsome Therapeutics with Nick and Mark, CFO and COO of the company. Nick and Mark, welcome. Great to host you guys. This is the first time that I'm hosting you guys at the GS Conference. So very excited to have this conversation with you. So before we go through all the questions, I'm going to turn it to you guys for opening remarks.

Sure. No. Great. And thanks for having us, Richard. It's really good to be here, and it's so far a really, really productive day for us. So appreciate the opportunity to chat with you. And just to get things started, Axsome, we are a CNS-focused biopharma. We have 3 products that are currently on market. With our recent approval for Auvelity, this is our product for -- it targets NMDA in sigma-1. It was previously approved for major depressive disorder. It's been on the market for about 4 years and was recently approved for Alzheimer's disease agitation. We're very, very excited about this as a treatment option for patients. Substantial area of unmet need, and we're launching that this month. So we're really excited to be here and talk about that. We have 2 other products, one is SYMBRAVO for migraine and the other is Sunosi for excessive daytime sleepiness and obstructive sleep apnea and narcolepsy. And then we have a very broad and deep pipeline from early stage to multiple late-stage programs, multiple positive Phase III trials, NDA stage, submission programs. So we can run through all of that, but it's great to be here and happy to be chatting with you.

Fantastic. So when you think about the company 10 years into the future, okay, as you're -- with the ambition to build a large cap company, is it realistic to only focus in neuroscience, given the high risks associated with -- in development? Or should you also expand into other areas [indiscernible]?

The -- it's a great question. And obviously, we have our annual planning process and quarterly and tactical planning process and then our long-term strategy process. And the company was started to focus on CNS. And the reason for that was -- the industry had really moved away -- and this is 14 years ago, right? The industry had really moved away from neuroscience, psychiatry, neurology. And you alluded to a key reason for that, which is studying -- do you have an active molecule and can you detect a signal? And can you design a study to detect the signal? Are there accepted instruments from a regulatory perspective that you can use to develop products for areas of unmet need that was -- at that point in time, due to those -- those are a few of the considerations, industry had moved away. And that's why the company was started. Herriot Tabuteau, our CEO, he founded the company to work on some of those challenges. And over that -- since then, we've gotten really good at building a pipeline of active molecules, designing studies to detect signal, and then taking those programs engaging with FDA and developing viable regulatory pathways and then launching them. So that's our sweet spot now, and there are still numerous areas that are underserved in CNS. So that will continue to be our North Star. But then at the same time, we're very much data-driven and value-driven. So if there are programs or opportunities that in the future for some reason or another makes sense,or synergistic with our future commercial infrastructure, whatever it may be, I don't think that should be so surprising. But I think as we look ahead, the North Star for our [indiscernible].

Yes. And I think maybe just one thing to [indiscernible] growth over the last 5 years, right? Since 5 years ago, we looked completely different than where we are today, but I would venture to say 5 years from today, into 2031, we will look even that much more different than where we were 5 years ago. We had -- 5 years ago, we were roughly probably less than 100 employees. We're north of 1,000 now. No revenue, clinical stage company back then. Obviously, tracking really well now with the growth that we've had with the 3 products that we have and now 4 indications. So -- and you look 5 years ahead, and you take a look at -- the story right now is all about Auvelity and in ADA as well as MDD, but there is a robust pipeline behind Auvelity with up to 10 indications that we've disclosed already, upwards of close to $20 billion in total peak sales. So we're super excited about it. And as Mark was saying, like I think the DNA within the Axsome team is an ownership mentality and really focusing on what makes sense from an investment perspective.

I say, okay, got it. First of all, I mean, congratulations on that recent approval in ADA for Auvelity. Can you talk about just kind of based on the label, what are sort of you think are the advantages in that label that you want to draw out that lead you to increase that peak sale guidance to $8 billion? I think previously, it was lower for the 2 different indications. Even when you combine, it was lower. So what drove that rationale? And what -- anything that you want to try from that from the label?

Sure. Yes. So I'll start with the label, and then maybe Nick can talk about how that percolated into the data and our calculations. But the label, so if you start with the product itself, I touched on very quickly, the mechanism of action. So it targets NMDA and sigma-1. So mechanistically, it's differentiated from -- in the indication, the products are primarily used off-label, 99% of products that are prescribed for AD Agitation are used off-label. Mechanistically, it's -- and there is 1 approved product, of course. So mechanistically, it's distinct from what's been used historically. And then that flows into efficacy and tolerability. So the risk-benefit profile from an efficacy perspective, we have different trial paradigms that are in the label in the clinical trial section. So you have a "typical" longitudinal study where we see very rapid separation and onset of action. So starting at week 2, [ stating ] at week 3, carrying through to the endpoint. So that differentiating is the rapidity of treatment effect. And then we have a long-term efficacy trial in the label, and that speaks to the duration of treatment, right? So we actually treated patients for up to a year. And in certain cases, some patients were treated longer. And you saw a very, very durable treatment effect. You did not see increasing rates of adverse reactions over time, very, very low dropout rates. And so that shows up in the label in a nutshell from an efficacy perspective. And then with that strong efficacy is a very tolerable or a very clean safety profile. The only most common adverse reactions were dizziness and dyspepsia. So just very, very clean. We didn't see sedation. We didn't see a fall signal. We didn't see mortality signal. We didn't see a tardive dyskinesia signal. And that, of course, all makes sense mechanistically. But the -- so it's very clean with that strong efficacy, which makes for a very important treatment option for patients and caregivers and potential prescribers. And then that has been translated into, okay, with that approval, it's time to reassess our expectations for the product.

Yes. So some of the things that went into the $8 billion was just, I think, first and foremost, just the current trajectory that we've been with MDD. Right now, we're at 22 basis points of the entire antidepressant market, so less than 1/4 of the total antidepressant market. However, we are seeing early signs as it relates to the NBRx, we're at 0.4%. So essentially, doubling in market share on the NBRx versus the NTRx. And what does that mean? That's just a leading indicator where we expect [ NTRxs ] to go. So very nice trajectory. And one thing that we've also seen secondly is with our expansion, we expanded from just under 300 reps to just north of 600 reps most recently. And if you just take a look at since May when these reps have been on board, so since May 1 through today, we've seen a significant increase in our NBRxs is going from roughly 2,700 to upwards of 3,200 NBRxs per week. Another way to look at that is just 14% growth over that time versus some of our branded competitors at 4%. So 3x the growth of what our brands are with the expansion solely on MDD by itself. And then the other thing, one of the reasons why we've also increased the peak sales is our payer coverage is now at 86% total covered lives, 100% in the government channel and 78% in the commercial channel. So robust covered lives with good formulary access. And seeing where our net price is currently, we're very pleased with how that product is doing in total in MDD.

What I'd maybe add to that is you layer in what we're seeing from an uptake perspective, over the past year, uptake from a trialist to, say, adopter. And so when what we're seeing is when clinicians try the product in a handful of patients, there is noteworthy and substantial adoption of the brand. And that lines up with the different elements that Nick was talking about us going further into primary care, coverage being at a point that if it's being written kind of regardless of the line of therapy, it's being written for it. It will generally be filled, and there's room for even additional improvements in the quality of coverage. So it's kind of all the different elements when you think of market access, sales, marketing, clinical activity, it's all very consistent, robust growth.

Yes, maybe one last thing, Richard, even in MDD. So we have not -- we've invested very minimally in marketing and advertising. We just started investing in Q4 and a bit in Q1. So what we've been able to achieve with north of $600 million in annualized sales is with very minimal DTC with a scale, a small -- compared to our peers, field force and with market access coverage as coverage come in over line. We haven't spoken about ADA necessarily, but there is 20 million, 21 million scripts written annually for Alzheimer's disease agitation. And when we looked at our model, we looked at very conservative peak -- I'm sorry, very conservative market share for Alzheimer's disease agitation as well as we took conservative views of what compliance and persistence would look like. And we're -- we felt very comfortable sharing that $8 billion peak sales.

I see, guys. So I want to dive deeper into some of these details. And I think you guys mentioned like payers and so forth. So based on some of the discussions that you guys have been having with payers, I mean, how do you -- I think you guys mentioned Auvelity will be mostly covered under Medicare Part B, and I assume the rest is split between commercial and Medicaid. Maybe just talk a little bit about what for that Medicare Part D, what is the effect of the PBM reform in that segment of patients? What is the GTN expectation for now, Auvelity compared to before ADA? Is that going to change the GTN?

Understood. Yes. So currently, for MDD, so our -- the original indication, our split between -- for our scripts was 70% commercial, 15% in Medicare, 15% Medicaid. We would -- we're assuming that for ADA, that we would have north of 80% in Medicare Part D, and the remaining would be mostly commercial and some Medicaid. So again, 100% total covered lives. We would anticipate that our GTN for this year to be in the same trajectory as we had in previous years. So worse in Q1 but slightly improving throughout the year. This year, we actually started off at a better starting point. We were in the low 50s versus mid-50s in the previous year, and we would expect a similar trajectory for 2026.

I see. So does it imply that the rebate that you give to payers would not change the amount of rebate? With the addition of ADA?

Sure. The main difference between Medicare Part D and commercial coverage, there's no co-pay assistance, but there's additional rebates as well. So it remains to be seen where GTN is, but we don't think it will have a negative impact. At a minimum, we believe that it will further strengthen the improvement in GTN in the next couple of years.

Got it. So you mentioned that the commercial launch is on track for this month and the extension with the sales force with that as well. Can you just go over that commercial strategy? And how do you expect to get that updated peak sales? And then what sort of like activity that you have to or investment you have to put into the commercial launch?

Sure. Yes. The commercial strategy overall is -- the product is highly distinct and an important treatment option for both indications. So the strategy is to attend to both indications and ensure both continue to grow robustly. And when you think about pulling that through to, say, different commercial functions, sales, you touched on the expansion. So the expansion to 630 sales reps, that's substantially complete and has been substantially complete for a few weeks now. And those folks, those team members have been in the field for the past few weeks and actively detailing depression. And the -- we're starting to see some of that translate into new-to-brand scripts. So we've seen new-to-brand scripts start to tick up. Usually, that takes 1 to 2 quarters, but we're seeing that already. That's just detailing efforts around depression. The -- since the approval at the end of April, we have been working on ensuring the sales team is adequately trained and robustly trained on AD Agitation. So when we say the launch is on track, that's -- primarily, what we're talking about is sales reps in the field, educating and detail [indiscernible] and that is commencing or beginning to [indiscernible] now starting to talk about both indications, that's underway. From an access perspective, I think the strategy at a high level is secure as many -- it's, I think, the same as it always is, which is secure as many lives as possible with your kind of guiding objective as unrestricted access. And of course, it's heterogeneous, what you have, but the quality of coverage, we want it to be such that if a clinician wants to write it first line, that it should generally be filled. So that's in a very, very good place, but the strategy is to get that in an even better place depending on the payer or GPO or PBM or regional plan, however you want to do that assessment. So market action strategy remains the same, facilitate writing for both brands, and you want that to line up with how the team is detailing. So I talked about how the sales team is detailing. And feel free to jump in.

And maybe, Richard, a little bit more around our expansion, how we're thinking about deploying the team or how the team is deployed is, as we mentioned, we have north of 600 reps. So essentially, taking a step back, we started with 160 reps back in 2022. We had these huge geographies for reps where they spend a lot of time -- a lot of windshield time going from doctor to doctor. What we're able to do now is make these territories smaller, and we're actually duplicating effort there. So we essentially have 2 reps that are focused on 1 geo. The geo is actually smaller, but now we're actually able to see higher decile doctors, so call it decile 6, 7 doctors up to 10, where we're able to see them more frequently. So once or twice a week, but then the team also has individual HCPs that they can reach out to. So essentially, we're getting better breadth. We're getting better depth with each of these doctors. And then from a target list perspective, the team goes out and is prepared to either speak as a first call point or second call point depending on what that doctor typically writes for us. So if they have a patient base that maybe is more elderly, perhaps they'll speak more on the ADA indication and then support it with MDD and vice versa. And then we also have a smaller team that is focused solely on long-term care facilities. And essentially, that's more like a key account manager. These are facilities that it's not a -- you go in and spend 30 minutes and go out the door. It's more of a investment in time and understanding all the key players within the long-term care facility. So that team is well -- is also going to be deployed. We're expecting from a long-term care facility later this month. They will be detailing specifically on those facilities. And I think one last key point. We've never called on long-term care. This is the first time that the team -- that the Axsome team has called on long-term care, and it's not just going to be for Alzheimer's disease agitation, but it will also be for MDD. There is a significant comorbidity between ADA and MDD and a significant prevalence just in MDD alone. So the team will be calling on LTC for both indications.

Got it. And then when you look at MDD and ADA, these are two very different conditions. And then the patients, there's some overlap in patients, patients who don't overlap. Maybe just kind of looking at that, what are some synergies in that launch that you can apply from MDD into ADA? I think you guys mentioned earlier that you just kicked off the DTC for MDD. Is that necessary for ADA, maybe just a little bit about the learning that you can use across these two very different indications? And where are sort of the areas that are very different, maybe to kind of learn as you go?

Sure. I mean, I'll take that second question first. So we as I said earlier, from an MDD perspective, we did just start doing DTC in Q4 of last year. We did do a bit also in Q1, but not to the level in Q4. I think there's a lot of learnings that we had as it relates to DTC in -- when I say DTC, I'm speaking mass media, TV commercials. We've always done DTC since launch, more digitally, more social media, more direct to potential target populations. From a DTC and a mass audience or from a TV perspective, our focus was both linear TV and connected TV. There's been some learnings there where we think that may be spending more investment in connected TV, your YouTubes, your Hulus and so forth of the world, that there's more of an ROI from that perspective. And as we think about ADA, probably not going to see a TV ad this year. The idea is to educate doctors first. You don't want a patient going into a doctor and the doctor not being aware of the product or the indication. So the thinking is, let's have the reps go out in the field, educate the reps. And then as -- you then potentially think about DTC in '27, '28, where patients could come in to doctors who are already aware of it.

Take -- and to work backwards. So the first question, just when you think about from a marketing perspective and targeting potential consumers the MDD and AD Agitation, it's very different, right? So MDD, you're working to educate the potential patients themselves or provide access to information for them. For AD Agitation, it's the caregiver that you're looking to educate and provide information for it. So those are different. However, that's maybe one of the areas where there are -- where it's very distinct in terms of the patient populations. There are synergies or high overlap in a variety of elements of the 2 indications. So prescribers, you have high overlap from a prescriber perspective, upwards of 3/4 or even higher of potential prescribers or HCPs that we're targeting write scripts for both MDD and AD Agitation. in the community setting. And then in the long-term care setting, there are very high rates of major depressive disorder. And not just comorbid with Alzheimer's Agitation, but just in general. And Nick touched on that, that we had intentionally and historically not had efforts to long-term care facilities. So that's changing. So that will -- there's synergy for -- just for example, by going into long-term care, where we can begin to educate for both indications. And in the community setting, as we go further into primary care, again, Nick touched on that, we're increasing our breadth and also depth to target HCPs. That allows us to see new targets or engage with existing targets more frequently who may write scripts for both indications. And then that translates into the sales team. Nick talked about the mirroring that we have and the territories, how we're matching reps up within a territory. And so there will be a weighting for each team member who may skew a little more heavily towards MDD potential targets or AD Agitation potential targets or those who are potential targets for both. Well, those are a couple of examples of the synergy between the indications.

I see. Okay. Got it. And then when you think about -- I think for MDD, you guys gave the split between like primary care and neurologists in the past. How are you guys thinking about here in terms of primary care versus neurologists? And then the implement effort perspective, how much are you guys putting into that long-term care facility? Because that's a whole different targeting, too.

Do you want to touch on long-term care? Or do you want me to? From a targeting perspective, the -- we're increasing more and more, the efforts in primary care. But historically, the primary targets and [ riders ] [indiscernible] for both MDD and [ fairly ] psychiatrists and primary care. The riders to primary care today makes up a bit north of 1/3 of the riders. And what -- another way to think about that is a little bit adjacent. But as of today, the -- it's about 56% of scripts are first line or second line. And that lets you know they're earlier in their treatment journey, right? So they're starting with primary care or, say, the next potential specialist. And so that lines up with primary care and psychiatric. It's true for both indications, that can depend geographically, right. In urban centers, there are specialists, psychiatry, neurologists, geriatrics, psychiatrists, they're more ubiquitous than in rural areas where your primary care doctor is all of the above. So it does depend, and that all translates in the sales operations team does all of that work, those analyses and then pulls it through to how the folks actually approach their territories tactically. But the -- that is the main focus in terms of -- from targets.

Okay. Got it. And then I think for MDD use, there's a lot more shift to an earlier line. How do you guys -- I mean, in terms of like the first line and then the first line switch to Auvelity. How do you guys expect that? What is the peak that you guys would expect in that first-line use for MDD? And then how do you think about that line of therapy used for ADA?

Yes. It's been trending nicely. So we're -- as Mark mentioned, we're -- first-line first switch is 56%. That number has grown in sequential quarters, really since launch. It's roughly 15% first line. And then payer coverage and our strategy. Our strategy is [indiscernible] primary care, our focus early on was high decile sites. We're now pivoting to primary care because there's a huge unmet need there for both indications. What is nice about it is our payer access allows for primary care to be able to write for it and for it to essentially be a covered script. And what do I mean by that, the PAs that were originally embedded within a lot of the formularies have been removed or the formulary coverage has improved to that first line or first switch. So essentially primary care not necessarily -- does not necessarily have the infrastructure to be creating to be starting these PAs, initiating and then submitting and getting these PAs approved. So without the PAs, primary care is more likely to be able to write that script for a patient that they find that it has an indication of MDD or ADA. As it relates to, hey, where do we expect first line for a switch to go to, we haven't necessarily guided to that. But I think the -- as Mark mentioned, unrestricted and getting to 100% is the ideal solution. But the team is working to continue to improve formulary coverage and total covered lags.

I see, okay. And then the ex U.S., what are the plans there? Is it time to find a partner? How do you guys think about ex U.S.?

We said that outside the U.S., that's an area of interest for us where the programs -- and obviously, there are high -- there's a high need outside the U.S. from a prevalence perspective for all these indications that we're working on. So we've been focused on the U.S. historically, and we're mindful and consider different avenues to getting the products to other geographies and patients. And so historically, we've considered potential partnerships if it makes sense. And we've done that. There's a partner for Sunosi outside the U.S., and we can talk about that. And the way we approach the program, so as we work on some of the development activities kind of in the background behind the scenes because there are different regulatory requirements in different geographies. So we kind of chip away or whittle away at those over time while we consider potential partnerships. And in the meantime, we focus on the U.S. business.

I see. Got it. So almost out of time, I have so many more questions on your other products that we have. We can go [indiscernible]. So maybe I'll just leave it to you guys for final remarks on any other key products that I know we didn't talk about the migraine, that -- not a launch. Anything that you want to draw out from some of the products that we haven't talked about that you think could be worth mentioning?

Sure. I mean, you touched on migraine. So that product is launching. We're almost on the first anniversary of that launch, and that's going well. We continue to invest in that, and we continue to expect to see growth with SYMBRAVO. Sunosi, that business is growing very steadily. It's a very healthy business. We continue to expect healthy growth moving forward. The next potential commercial asset is AXS-12 in narcolepsy. We've submitted an NDA for that program, and we're waiting to hear back from FDA on their potential acceptance decisions. So that, stay tuned for that. And then behind that, there's a whole host and choreography of upcoming clinical trial initiations and readouts, starting with solriamfetol in binging disorder later this year. And then we'll keep it going. We'll be starting trials in ADHD shortly. We have ongoing studies in MDD, precision MDD, MDD with symptoms of excessive sleepiness. So there's a ton going on at the company. It's an incredibly exciting time, and we'll look forward to keeping you updated.

Fantastic. Well, Mark, Nick, it's been a pleasure hosting you guys. Thank you so much for the insightful discussion.

Thank you.

Thank you.