Yahoo Finance ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q3 2023 Earnings Call Transcript
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q3 2023 Earnings Call Transcript November 3, 2023
Operator: Good day ladies and gentlemen and welcome to ACADIA Pharmaceuticals Third Quarter 2023 Financial Results Conference Call. My name is Kathy and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. I would now like to turn the presentation over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications at ACADIA. Please proceed.
Albert Kildani: Thank you, Kathy. Good afternoon and thank you for joining us on today's call to discuss ACADIA’s third quarter 2023 earnings. Joining me on the call today from ACADIA are Steve Davis, our President and Chief Executive Officer, who will provide some opening remarks followed by Brendan Teehan, our Chief Operating Officer and Head of Commercial, who will discuss the DAYBUE launch and NUPLAZID execution. Doug Williamson, our Head of Research and Development will provide an update on our pipeline programs; and Mark Schneyer, our Chief Financial Officer will review the financial results. Steve will then provide some closing thoughts before we open the call up for your questions. In addition, both Kathie Bishop, our Head of Rare Diseases and External Innovation, and Parag Meswani, Senior Vice President: Trofinetide, Rare Diseases Franchise, will be available for the Q&A session.
We are using supplemental slides which are available on the website's Events and Presentations section. Before proceeding, I would like to remind you that during our call today we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements including goals, expectations, plans, prospects, growth potential, timing of events or future results are based on current information, assumptions, and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements which are made only as of today's date.
I'll now turn the call over to Steve.
Steve Davis: Thank you, Al. Good afternoon, everyone and thank you for joining us. Please turn to Slide 5. ACADIA is entering a transformational period of growth delivering record revenue in the third quarter. Our rapidly growing franchise and DAYBUE complements our highly profitable NUPLAZID business, and our robust R&D pipeline provides rich opportunities to fuel growth to even higher levels in the years ahead. We’re trying to capitalize on this opportunity set by executing on our strategic priorities. Let me touch briefly on them [ph]. First, we are extraordinarily pleased with the success of DAYBUE. We generated $66.9 million of net sales in the third quarter, our first full quarter since launch, demonstrating a high level of excitement in the Rett Community as soon as DAYBUE became available.
As we'll discuss today, we're seeing strong indicators across all launch metrics underlying these results, including demand, persistency, and access. Second, our NUPLAZID franchise continues to be highly profitable and strongly cash flow positive. NUPLAZID revenues for the quarter were $144.8 million. These results reflect our ability to continue to gain market share and grow the revenue base. Third, in addition to these successful marketed products, we have a deep and growing pipeline including our Phase 3 ADVANCE-2 study of Pimavanserin and negative symptoms of schizophrenia, where we expect to have a top line results in the first quarter of 2024, our Phase 3 study evaluating ACP101 in Prader-Willi syndrome where we expect to commence enrollment later this month.
And leveraging our learnings from NUPLAZID we've developed ACP204, next-generation 5-HT2A blocker. Here too, later this month we will commence enrollment of patients in our seamless Phase 2, Phase 3 program studying ACP204 in Alzheimer's disease psychosis. Fourth, the success of DAYBUE’s U.S. launch underscores the opportunity we have to expand in the global markets following our expanded license agreement for DAYBUE announced in July, which granted us worldwide rights to the asset. Our early U.S. experience serves as an important reminder of the significant unmet medical need worldwide with no approved treatments for Rett syndrome outside the United States. We’re meeting with Health Canada this month to discuss a planned new drug submission for [indiscernible] in Canada.
In addition, were engaging with European regulators in advancing plans in other geographies. Fifth, we have a deep early stage portfolio that includes disclosed and undisclosed programs focused on neuropsychiatric and rare disease disorders that represents significant opportunities to continue to build on our current growth. In addition, we continue to remain very active in business development to further expand our portfolio and build on our success with DAYBUE and NUPLAZID in CNS and rare disease. Let's discuss our DAYBUE launch and some of the launch dynamics on Slide 6. Five and a half months into the launch, we've provided hope to a community that has never had an approved treatment for Rett syndrome. We've seen Rett patients respond in amazing and inspiring ways to DAYBUE therapy.
We've established critical relationships in the medical and caregiver communities, and we provided a strong base for future continued success. During this time, from mid-April through September, we booked approximately $90 million in revenue. In preparing for the approval and launch, we made significant investments in both, the medical and caregiver communities, in medical education, and launch preparations. And the result, everything about the launch thus far has gone either according to plan or exceeded our plans; and in some measures, greatly exceeded our pre-launch expectations. Prior to launch, we expected demand to be high; it has been. In fact, one area where we significantly exceeded our pre-launch plans is just how fast the demand came immediately upon launch, particularly from centers of excellence.
Another area where we have exceeded pre-launch expectations is the speed at which we've established access with payers. As Brendan will speak to shortly, this access has come faster, both in terms of the pace at which payers have adopted formal coverage plans, and the pace at which they have approved treatment under letters of medical necessity prior to the adoption of written plans. These two dynamics, pent-up demand from centers of excellence, and more rapid access than anticipated, coupled with high levels of patient persistence on therapy have resulted in just over 800 patients on DAYBUE as of September 30. Importantly, these dynamics have produced a substantial foundation that will continue to benefit our launch as we move forward. We've established significant breadth and depth of physician experience with DAYBUE in a short amount of time.
A high number of patients and families are sharing their positive experiences at this early stage, enabling us to gain momentum sooner. In establishing access well ahead of plan enables us to further build on that momentum. Turning to persistence; we previously reported that we're very encouraged by what we're seeing, and that continues to be the case. As Brendan will discuss shortly, our real world evidence to-date indicates 81% of patients starting DAYBUE remain on therapy four months after treatment initiation, and only an additional 6% are beyond 60 days since their last scheduled refill. In comparison, in our LILAC-1 open label extension study, 65% of patients who started DAYBUE treatment after rolling over from placebo remained on therapy four months after initiation.
To sum up, we continue to operate at or ahead of plan. Prior to launch, we projected a linear growth curve producing attractive revenue growth year-after-year; this is what we typically see in rare disease launches. Of course, what we didn't anticipate with the DAYBUE launch is the surge in demand that accelerated our penetration and the associated contributions to revenues in these early quarters. As we move forward, we'll continue to leverage this strong foundation as we increase breadth and depth in all sectors of the Rett Community. Let's turn to a snapshot of our current products and pipeline on Slide 7. What we see is an overview of our two successful commercial products and our pipeline of late and early stage programs that represent substantial long-term growth opportunities for ACADIA.
As we've noted, NUPLAZID continues to be a highly successful franchise generating significant cash flow. In Parkinson's disease psychosis, we continue to gain market share in both, our office-based and long-term care channels, and we booked another record quarter in the long-term care channel. Our commercial team is continuing to successfully leverage the real world evidence studies rolled out earlier this year, and the impact is becoming increasingly evident each month and quarter. Building on this, DAYBUE provides dramatic growth potential to our business, and we have a robust pipeline behind that where will be commencing late stage studies in two programs later this year. In our negative symptom schizophrenia program, we have something rarely seen in this indication, i.e. a positive pivotal study.
There are no FDA approved treatments to treat the negative symptoms of schizophrenia, the unmet need is high and we look forward to having results from our second pivotal study in the first quarter of next year. Later this month, we will commence our Phase 3 study with ACP101 in Prader-Willi syndrome. Prader-Willi is a rare and debilitating genetic disease for patients have an unrelenting drive to eat. Here too, there are no FDA approved treatments. November will be a busy month for us as we also commence our seamless Phase 2, Phase 3 program with ACP204 in Alzheimer's disease psychosis patients. And behind that, as I’ve mentioned we have a rich pipeline of early stage disclosed and undisclosed programs that position us for long-term growth.
I'll now turn it over to Brendan to provide additional insights on our DAYBUE launch execution and NUPLAZID’s commercial performance on Slide 8.
Brendan Teehan: Thank you, Steve. Let me provide additional commentary on our two commercial franchises; DAYBUE and NUPLAZID, and the terrific performance both delivered in the quarter. Let's begin with DAYBUE on Slide 9. We have three commercial execution priorities I'd like to discuss today; demand, persistency and conversion to paid treatment. DAYBUE’s launch has outperformed across each parameter since approval. As Steve noted, we have seen a surge in demand for DAYBUE since the launch in mid-April, resulting in just over 800 patients on DAYBUE as of September 30. This initial wave of demand for us was a bit unique, likely due to several factors including a very strong patient advocacy community. 800 patients on therapy is a great start but we still have a lot of Rett patients who can benefit from DAYBUE, many of whom have fewer interactions with centers of actual excellence and with patient advocacy organizations.
This segment represents the majority of patients who have not yet been prescribed DAYBUE. As we previously described, approximately 25% of Rett patients are treated in centers of excellence, another 60% are treated in high volume institutions, and the remainder in community practices. As we look to engage this next significantly larger segment of the Rett market, we expect a more linear adoption curve as we've seen with other orphan rare disease, genetic -- rare disease launches. New patient requests are coming in at the rate we expected at this point in the launch and will support the continued attractive growth of DAYBUE. Our experience so far with new starts, coverage, efficacy and persistency reinforce our conviction that DAYBUE will achieve a high degree of penetration in the Rett market.
To penetrate this larger segment of the market we are now employing a number of initiatives including delivering HCP and caregiver webinars which bring together experienced HCP treaters and caregivers with loved ones already on therapy to speak about their successful experience starting and staying on DAYBUE. We're participating in local Rett events, especially during Rett Awareness month in October that provides an opportunity to bring together patients and families already on DAYBUE treatment with those that are still looking to learn more. In addition, we're delivering HCP peer-to-peer programs to have experienced treaters help newer to brand HCPs with best practices on getting started and remaining on DAYBUE to realize long-term benefit.
Let's next turn to a discussion of persistency on DAYBUE on Slide 10. Real world persistency thus far is meaningfully better than we saw in our clinical trials. When we measure persistency based on confirmed discontinuations, 81% of patients who started DAYBUE remain on therapy at four months since treatment initiation. When we measure persistency based on confirmed discontinuations plus any other patients who are more than 60 days past their last scheduled refill, the real world persistence is 75%. In comparison, in our LILAC-1 open label extension study, 65% of patients who rolled over to drug from placebo remained on therapy at the end of four months. This is important because we believe high levels of persistence early on translates into a higher number of patients staying on therapy long-term.
Further supporting this outlook is the extremely high level of persistency we've seen from patients that transitioned from the open label extension to commercial therapy. This stronger than -- the stronger than -- the stronger early persistency does not surprise us. We expect the real world experience to be different from what we observed in our clinical trials where caregivers and patients did not have all the information we now have about proven clinical benefits, as well as proper GI management, including specific language in our label that instructs HCPs and caregivers to discontinue anti-constipation medications prior to initiating DAYBUE, further supporting a better initial clinical experience. I'd now like to turn to a discussion of conversion and dose compliance on Slide 11.
In addition to outperforming on demand, we executed well ahead of plan on access. This is what enabled us to take that surge of demand and quickly convert it to paid therapy. A significant proportion of this surge converted to paid in the second quarter, but most converted in the third quarter; this leaves a smaller number of yet to convert patients carrying over into the fourth quarter as we continue shortening the time between a script being written and converting to paid treatment. To quantify our progress with payers, our early foundational work has resulted in payers adopting formal plans covering almost 80% of lives to date. Now, let me turn to titration and compliance to dose; two factors that have been helpful in starting and keeping patients on therapy.
Compliance to dose through three months is in the range of 75% to 80% of the labelled dose. As we expected, the majority of patients begin DAYBUE treating -- treatment by titrating up from a lower dose to determine their optimal long-term dose. Most patients typically start at approximately 50% of their prescribed dose, and titrate up over a period of four to six weeks. We believe this compliance range provides insight into using titration to find the most appropriate dose so caregivers and patients can benefit long-term. Finally, I'd like to turn to what matters most; the real world benefits caregivers are sharing with us about the improvements they're seeing in their loved ones being treated with DAYBUE. Please turn to Slide 12. We are excited and gratified to see the real world daily stories of the impact DAYBUE is having on the lives of Rett syndrome patients through the caregiver testimonials you see on this slide.
A few representative examples of the day-to-day important benefits families are describing include improvement in speech or even speaking for the first time in years, broadening vocabulary and improved engagement and conversations, improved gait and feet placement, purposeful eye contact and improved communication through the patient's eyes, decreased hand wringing and stereotypies coupled with more purposeful use of hands. We also regularly hear feedback about the loved ones increased alertness, with patients now being able to better follow conversations or complete activities they were previously unable to complete. These testimonials all speak to the promise of treatment with DAYBUE and we'll continue to monitor experiences [ph] as patients continue treatment.
I'd now like to move to Slide 13 for a discussion of the great progress we're seeing in our NUPLAZID franchise. As Steve noted, the NUPLAZID franchise is increasingly cash flow positive, and continues to provide a strong foundation for our overall business. Leveraging the emerging real world evidence data, we continue to increase our PDP market share versus off-label atypical anti-psychotics in a contracted overall Parkinson's disease market. Product sales of NUPLAZID in the third quarter were $144.8 million. The broad educational campaign we started at the beginning of the year, leveraging the real world evidence studies continues to deliver increasing value. The more often we are able to speak with customers about these important observations regarding NUPLAZID and off-label anti-psychotics, the greater their competence in choosing NUPLAZID over other alternatives.
These results reinforce the impact these datasets have on our efforts to drive new patients starts. Looking at the broader market dynamics, we see that carbidova and levodopa prescriptions remain essentially flat over the first three quarters of 2023 versus the first three quarters of 2022 while NUPLAZID continues to grow, outpacing the market by a wide margin. As you can see on this slide; in the office space channel during this timeframe, we've grown new patient starts 9% while all other PDP products have increased only 1%. Turning to the LTC channel where we delivered a record bottle [ph] quarter for NUPLAZID, we also continue seeing improvement in new resident admissions indicating some degree of market recovery. In this channel, NUPLAZID has substantially outpaced the class [ph]; growing 16% during this time period, while all other products used to treat PDP in the long-term care setting have grown just 7%.
Understanding that the large majority of revenues re-record during any given quarter are the result of refills by continuing patients; these significant increases in NUPLAZID new patient starts in both market segments are encouraging. I'll now turn it over to Doug Williamson, our Head of Research and Development to provide an update on our pipeline programs starting on Slide 14.
Doug Williamson: Thank you, Brendan. In addition to our two commercial products, we have a strong pipeline of clinical programs providing us with several opportunities to further expand our growth. Let's start with Pimavanserin as a potential treatment for the negative symptoms of schizophrenia on Slide 15. Predominant negative symptoms remain one of the largest unmet needs in schizophrenia, and as of today, there are still no approved treatments for these symptoms. Our adjunctive Pimavanserin program is designed to treat patients whose positive psychotic symptoms are adequately controlled but who still suffer from persistent and uncontrolled negative symptoms, inhibiting their ability to lead a normal productive life. As we stated last quarter, we have completed enrollment in advance too our second study of Pimavanserin in negative symptoms of schizophrenia.
We look forward to sharing top line results in the first quarter of 2024. Please turn to Slide 16. We also have two pipeline programs with entirely new compounds in development; ACP101, and ACP204. I'll begin with ACP101. We have completed all the necessary steps to initiate the Phase 3 study evaluating ACP101 for the treatment of Hyperphagia in Prader-Willi syndrome. This is a program we're very excited about. Prader-Willi syndrome is a rare genetic neurobehavioral syndrome that affects approximately 8,000 to 10,000 patients in the United States and represents a significant unmet need. There are currently no therapies approved to treat the characteristic hyperphagia in patients with PWS. On this Slide, we've laid out the design of the Phase 3 global multi-center, randomized, double-blind 12-week placebo-controlled study evaluating the efficacy and safety of ACP101 in approximately 170 Prader-Willi patients.
The primary efficacy endpoint is improvement of hyperphagia as measured by the hyperphagia questionnaire for clinical trials, or HQCT scale. Those patients who completed the study will be eligible to enroll in an open-label long-term extension study. If data from this Phase 3 study is positive, we plan to submit a new drug application for the treatment of hyperphagia in PWS to the FDA. We look forward to working with the Prader-Willi community and clinical experts as we continue to advance development of this program. Please turn to Slide 17. We continue to advance ACP204, our next-generation 5-HT2A compound which we're developing as a potential treatment for Alzheimer's disease psychosis. As we previously described, ACP204 works primarily as the inverse agonist of the 5-HT2A receptor.
Our experience with Pimavanserin suggests that this mechanism is very well suited for elderly populations with multiple comorbidities and concomitant medications providing anti-psychotic efficacy with a very attractive tolerability profile and low drug-drug interaction liability. With ACP204, we're seeking to build on those learnings and believe it has an exciting future. Our work completed to-date includes a comprehensive Phase 1 program and supports our target product profile for ACP204. As you can see on the Slide, ACP204’s profile could represent a significant improvement over an already strong product profile for Pimavanserin. Please turn to Slide 18. Armed with this strong data from Phase 1, we're preparing to start our seamless Phase 2, Phase 3 program for ACP204 in the coming weeks.
Our plan includes an initial Phase 2 study with over 300 patients, which is designed to roll seamlessly into two Phase 3 studies. This Phase 2 study has been designed and sized in such a way that if successful, it could be considered a pivotal registration study. As a reminder, with this accelerated development plan, we can eliminate those finding and move from Phase 2 directly into two Phase 3 studies with the same sites continuously enrolling patients. As each site completes their Phase 2 site allocation, they will move directly into recruiting patients for one of the Phase 3 studies. Once the full study allocation of patients for Phase 2 is complete, we will analyze and report Phase 2 results, by which time the two Phase 3 studies will already be underway.
This plan, which we've aligned on with the FDA, will ultimately provide three potential pivotal studies for a submission. Overall, we're very excited that the progress of this program. It represents an important component of our strategy to continue to provide attractive opportunities to grow our business. And now, I'll turn it over to Mark for our financial update on Slide 19.
Mark Schneyer: Thank you, Doug. Let's review our quarterly performance on Slide 20. In the third quarter, we recorded $211.7 million of total revenues. NUPLAZID net product sales were $144.8 million in the quarter compared to $130.7 million in the prior year; a $14.1 million increase year-over-year is comprised of a $7 million in shadow inventory reduction in the prior year that did not recur this year. $4 million is attributable to lower 340B [ph] volumes, and $3 million as a result of 2% demand growth. Our gross and net adjustment for NUPLAZID was 19.9% for the quarter as compared to 18.6% in the third quarter of last year. The increase to growth was primarily attributable to increase rebates associated with the Inflation Reduction Act, partially offset by the reduction in 340B volumes I just mentioned.
Turning to DAYBUE; net product sales were $66.9 million in the first full quarter of commercialization, reflecting the significant early demand and strong commercial performance described earlier by Steve and Brendan. R&D expenses increased to $157 million in Q3 2023 from any $81.3 million in Q3 2022. The increase was mainly due to the $100 million upfront payment to Neuron [ph] Pharmaceuticals for the worldwide rights to Trofinetide, partially offset by reduction and other R&D expenses. SGA expenses increased to $97.9 million in Q3 2023 from $78.1 million in Q3 2022. The increase was driven by commercial costs associated with our stronger than expected DAYBUE launch, partially offset by reductions in our spend on NUPLAZID. We ended the quarter with a cash balance of $345.9 million.
On a year-to-date basis, excluding the upfront payment for worldwide rights to Trofinetide, we were cash flow neutral as a company. With our successful launch of DAYBUE, we were cash flow positive in the third quarter, also when excluding the recent Trofinetide upfront payment. Going forward, we expect to be cash flow positive over the long-term subject to the size and scope of future business development. Turning to Slide 21; we are raising the bottom-end of our full year NUPLAZID net sales guidance, and our new range is $537.5 million to $545 million. We are also raising the bottom-end of our full year NUPLAZID gross-to-net guidance, and our new range is 24.5% to 25%. Additionally, we are providing fourth quarter DAYBUE net sales guidance of $80 million to $87.5 million.
On the expense side, we are narrowing our guidance ranges as we near the close of the year. Our full year R&D guidance of $340 million to $350 million narrows to the middle of our prior range, our full year SG&A guidance of $390 million to $400 million narrows to the upper half of our prior range. And now, I'd like to turn the call over to Steve for closing remarks on Slide 22.
Steve Davis: Thanks, Mark. ACADIA is entering a transformational period of growth as we continue to execute across all our strategic priorities. And we would like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate life [ph]. Operator, I'll turn it over to you to start the Q&A.
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