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

Okay. We'll go ahead and get started with the next one. I'm Ben Burnett, biotech analyst at Wells Fargo. Please to here with the Axsome management team. We have Nick Pizzie, CFO. And then to his right, we have Mark Jacobson, COO. Thank you, all.

Thanks for having us. Great to be here.

I think just to kick it off, maybe we could just start by -- if you could just give us kind of a quick overview of Axsome and just kind of frame in near term at list that we should focus on?

Sure. I'd be happy to and maybe I'll start and then hand it over to Nick. But Axsome CNS-focused biopharma, we have key products that are commercial products, those are valid for a major depression agitation associated with Alzheimer's disease. There's SYMBRAVO for migraine and SUNOSI for excessive daytime sleepiness and obstructive sleep apnea and narcolepsy. All products are growing robustly. Nick can share some of those numbers. And of course, for AUVELITY, we have recently expanded that team, so we are seeing robust growth beginning in major depressive disorder or I should say, continuing. And then the launch effort around the newest indication, Alzheimer's disease agitation is underway. And so both of those efforts are -- have started to come online this summer. We can get into the details, but that's the commercial business. So the company is the foundation and growth is better than it's ever been, and we're very excited about the opportunity moving forward for the on-market products. And behind those, we have a very late-stage and deep pipeline. We can cover those. But very quickly, that covers a number of indications and states of development. We have AXS-12 for narcolepsy that is under NDA review with the FDA. We have a PDUFA date of May 1. And then multiple Phase III trials underway in indications from binge eating disorder, ADHD, smoking cessation. So a lot of additional ways to deliver value to patients with potential label expansion efforts for the products that are on market now and new entrants. So we're happy to cover those. But the pipeline is also more robust and late stage than it's ever been. So the foundation is great, and we're really excited about where we are today, about 3/4 of the way through the year, and I'll turn it to Nick in case you want to review some of the financials.

Yes, sure. As Mark said, it's a unique and exciting time now at Axsome. It's really like the next chapter of Axsome story. And I say that because we have the approval and the launch in ADA. And secondly, we've more than doubled the sales team for AUVELITY. So super exciting about the back half of the year. We're seeing already impacts from both the expansion, significant impacts on the expansion, which we could talk about little bit more later on the NBRxs. And also, as it relates to the indication and taking a look at subpopulations and seeing that dynamic growth that we have. So we're really pleased with that. And just from a financial perspective, balance sheet, we're in the best situation that we've been since really since inception of the company, right around $330 million as of the end of Q2 takes us to cash flow positivity, which we have shared in the past. That being said, we are also seeing in the P&L significant operating leverage in the back half of the year, where we really feel we're setting ourselves up in the first half of the year with the SG&A with the expansion -- the P&L has already been impacted on where we expect to be for the back half of the year. So really plateauing out from an OpEx and seeing a nice growth on the top line. So seeing the operating leverage in getting to eventually getting to profitability.

That's a fantastic overview. I want to start with AUVELITY in agitation. So it's obviously early days, and you've been on the market only for a few months. But what's been the early kind of dock feedback there?

The early feedback is -- obviously, it's very early, but we're very excited about the feedback we're getting, which is in line and matches this profile that we saw in the clinic and then the data that are on the label. So robust efficacy. It's working quickly. And the safety and tolerability profile is very compelling, especially in this patient population that is considered a frail or at higher risk patient population. So that's great. It's still very early, and we want to -- the effort here and a key focus for us is driving trial and educating, ensuring we're educating potential prescribers about the product profile and then ensuring that if they have a potentially appropriate patient that they were interested in trying the product in that they can do so. And that can vary depending on the setting long-term care or community setting. We have a sampling program in place to facilitate that. The majority of patients are coming have Medicare or -- and so that's a different type of -- there's no co-pay assistance program in place for those patients. So there are other ways to support potential trial primarily through sampling to others.

Yes. And then quantitatively, what we're seeing with the launch is prior to launch, LTC, Medicare 65-plus was less than 20% of our total NBRxs. Most recently, we're now north of 30% of our NBRxs is that significant -- or sorry, specific subpopulation. So really seeing the growth there as it relates specifically for the indication.

Very cool. And actually, so I want to ask about the script data. And I think maybe this kind of feeds into sort of what you're just kind of mentioning there. I think a lot of us are -- there's a long history of script data because ability has been around for depression. And so we've kind of seen kind of that historical reference point. What are some of the considerations that we should have when we look at third-party script data?

The -- so with -- just in general, moving forward with respect to AD agitation, there are the folks tend to look at IQVIA and Symphony Scripts. The -- and both capture Alzheimer's disease agitation scripts. So we're not blocking scripts. Scripts are available. sampling is not captured in scripts. So those are true samples. -- sampling is not available or in the long-term care setting. And so one area to look at, and this is both for long-term key area and the community setting is the titration pack. So there are sample titration packs. Again, those do not show up in weekly scripts. But then there is also trade titration packs where someone can just start a patient with a script on the titration pack, we'd expect that to increase in both the community setting once trial is underway through samples. But also as a reflection of long-term care uptake. And so we're just starting long-term care uptake with respect to long-term care. The data providers project long-term care scripts differently. Symphony, I believe, captures both new-to-brand scripts and total scripts or that it includes long-term care estimates in both of those segments where, I believe, IQVIA is only capturing new-to-brand scripts -- or I'm sorry, long-term care scripts in the total scripts, not new to brand. So -- those are some considerations. Any you would add...

Yes. And I would just say, I think your question was how should Discreet interpret the scripts and how you gauge success, and one of the things that we looked at and we've always shared is NBRx is NBRxs lead to the TRx. So when you look at the evolution just this year alone in Q1 on average, through Symphony data, we are averaging around 2,400 NBRxs per week. That number grew to 3,000 NBRxs in Q2, so roughly, what, 25%, 26% from Q2 to Q1. And Q3, we're seeing continued growth in that most recent NBRx week was over 3,700. Last couple of weeks have been on average around 3,700. So we are now starting to see that impact from the expansion. As we've shared, it takes typically 3 to 6 months from the time when you do an expansion to when you start seeing that impact. And we expanded the team, the community setting team in Q1 and Q2. So now is the time that we should see it, which we are and even in, I would say, probably a more difficult month in the month of August, where typically things start to simmer down a little bit before September and October, but we're seeing that increase during that. So why is that important? The NBRxs will ultimately lead to the TRX so these NBRxs are filling essentially the pipeline that we will see in the TRxs in the months to come.

Okay. That's very helpful. And maybe just kind of one other question on this front. So in agitation, when someone gets a sample titration pack, how long does it take them to kind of go through that to where they may then convert onto a full script?

The titration according to the label is a 3-week titration. And so the sample of titration pack matches that. The -- and so when that converts to a script is we're monitoring that now because in a real-world setting, when someone fills a script, that's more than just, "Hey, are they following the label titration." It can be earlier or it can be later. So we're monitoring to see what it nets out on average. And -- but the point is we've been sampling since the summer since we launched the product in mid-June. And the -- so we are seeing, and we expect to continue to see conversion from those samples into scripts for the maintenance stores. Okay.

And just to maybe double back on what Mark shared earlier. We are -- the demand that we are seeing for ADA is through the titration pack scripts as well as the samples that our reps are providing to the doctors. We haven't shared specifically the samples, the amount of samples, but those samples are robust. The majority of the demand is coming from samples. They are not reported in the script numbers. The titration pack prescriptions, obviously, are reported. And -- so we would anticipate that there will be eventually a transition from those samples to -- potentially the maintenance dose, they will likely not go on a titration pack script, they'll go directly to the maintenance news.

Okay. That's fantastic. And I guess, I know it's -- again, it's early days, but do you have a sense for kind of the phenotype of patient that is in agitation that's taking ability? Are they often switch patients from REXULTI? Are they...

It's very early, and -- it's very early. So we're watching that. We are seeing, though, frontline utilization. But again, it's very early. So exactly how this evolves, we'll see. But what we are -- it's very exciting where it's rare these days where companies have the opportunity to provide -- to really address an unmet need. And so now you have 2 companies doing that. And there are 2 products that are now labeled. In AD agitation, there's was wide and still is off-label prescribing for this indication due to the lack of approved medicines. And so now what we're seeing is just growth overall and as opposed to, say, one eating, another launch, we are seeing on brand growth, which is great, but it's still so early to actually say, "Hey, the specific type of patient profile that we expect to continue or change, it's hard to say", but right now, we like the starts of the trends that we're seeing.

And if doctors want to write it first line, they have the ability to because we have the coverage. Every Medicare participant has elite coverage. And north of 85% of them have coverage with no PA and first line or potentially 1 step edit. So coverage is fully available for Part D patients if the HCP decides to write it.

Excellent. And you mentioned earlier about the long-term care facilities and kind of the growth you're seeing in that segment. I would assume that that's -- it's a pretty wide net and it's going to take some time to kind of get to all those touch points and sort of put that under the commercial umbrella. When do you expect to kind of be there in full force selling to the long-term care facilities?

The -- one of the main differences for these facilities, the jargon is that they're activated or you bring them online, right? So you're engaging with potential prescribers there, so the doctors who are seeing patients, diagnosing them who may be prescribing. But you have additional stakeholders in long-term care that lead to ultimate prescribing. And oftentimes, there are depending on the type of facility, if it's a part of a network, those stakeholders include Director of Nursing, pharmacy, if the pharmacy is on site or if it's part of a network that may be an umbrella over different facilities. So there are steps and activities that occur in that network of stakeholders to bring a facility online. So that way, a new product and be written within those facilities. Now you can see certain kind of PRN or ad hoc riding here and there by certain prescribers in long-term care. But that's different from what you're talking about, where you're really bringing long-term care facilities online so they can write for patients that have of agitation or now major depressive disorder in those facilities. And the reason I mentioned that, just to pause on that quickly is we were not engaging with long-term care facilities at all prior to the approval of this new indication, AD agitation. And so now we can actually detail on both indications in long-term care. So we'd expect to see growth in the long-term care setting from both indications. And the process that I was talking about with different stakeholder engagement, getting the product or the different NDC codes or trade configurations into those systems, it takes about a minimum of 1 month for -- on any given facility. So we're just now starting to see the impact. We touched on that with looking at the weekly scripts the trade titration pack NDC code that gives you a sense. So it's just starting to come online. But really, it's not going to be steady state or fully online for some time. And -- we're excited about the opportunity there. It's -- the product profile, for sure, but then also how patients have been treated historically off-label antipsychotics. There are dynamics at play with respect to how these facilities are monitored and then rated according to how many typical antipsychotics they prescribe. And AUVELITY does not atypical antipsychotics. So there is -- there are dynamics at play there and considerations for from, say, a governance and buffering perspective that AUVELITY fits into nicely.

Great. And you said previously, there's sort of peak sales guidance around this or expectations, $4 billion a piece for MDD and agitation which is great. I wonder if you could maybe articulate what does that kind of imply in terms of market penetration in those 2 categories?

I think if you just take a look at where we are today and MDD specifically, right? We are 26 bps of the total depressive market. So that's 0.26% of 1%, and we're annualizing as of the end of Q2, somewhere around $0.75 billion. So you can kind of do the math where if we just get to 1% of the antidepressant market, we're north of $3 billion already. So one of the leading indicators on where we are going right now, we actually are 0.26 in TRxs we're -- 0.42, sorry, for all the numbers, but we're 0.42 in NBRx is that's a leading indicator of where the teas are eventually going to go. And that point for 2 is continuing to grow as well. we're just -- like I said, we're just starting to see the impact of the field force. And as that continues to grow, we'll see the entities continue to grow.