Alkermes Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2023

There are 15 speakers on the call.

Operator

Greetings, and welcome to the Alkermes Third Quarter 2023 Financial Results Conference Call. My name is Donna, and I will be your operator for today's call. All participant lines will be placed on mute to prevent background noise. Please note that this conference is being recorded. I'll now turn the call over to Sandy Coombs, Senior Vice President of Investor Relations and Corporate Affairs.

Operator

Thank you, Sandy. You may now begin.

Speaker 1

Good morning. Welcome to the Alkermes PLC conference call to discuss Our financial results and business update for the quarter ended September 30, 2023, as well as initial clinical data related to ALKS26 Katie presented during this week's World's Week meeting. With me today are Richard Topps, our CEO Ian Brown, our CFO Todd Nichols, our Chief Commercial Officer and Doctor. Craig Hopkinson, our Chief Medical Officer. During today's call, we will be referencing slides, which are available on the Investor Events section of our website.

Speaker 1

Additionally, I encourage everyone to go to the Investors section of the alkermes.com to find our press release, Related financial tables and reconciliations of the GAAP to non GAAP financial measures that we'll discuss today. We believe the non GAAP financial results in conjunction GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward looking statements. Actual results could differ materially from these forward looking statements. Please read Slide 2 of the accompanying presentation, our press release issued this Good morning, and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those or in the accompanying presentation as a result of new information or future results or developments.

Speaker 1

Our prepared remarks today will include initial patient data from our Phase 1 clinical After our prepared remarks, we will open the call for Q and A. And now I'll turn the call over to Ian.

Speaker 2

Thank you, Sandy, and hello, everyone. I'm pleased to report solid results for the Q3 that demonstrate the financial strength of the business. The quarter was highlighted By year on year growth across our proprietary commercial products, solid contributions from manufacturing and royalty revenue streams, Disciplined expense management and strong GAAP and non GAAP profitability. With the favorable outcome of the Janssen arbitration earlier this year, The successful settlement of the VIVITROL patent litigation and the expected completion of the separation of the oncology business in the coming weeks, The potential of the business to deliver enhanced profitability has come more clearly into focus. This has been our plan And it's gratifying to see it taking shape.

Speaker 2

For the Q3, we generated total revenues of $380,900,000 Compared to $252,400,000 in the same period in the prior year. This reflects the reinstatement of royalties on U. S. Sales The long acting INVEGA products and solid performance across our proprietary product portfolio, which grew 16% year over year. Starting with VIVITROL, net sales in the quarter were $99,300,000 reflecting 3% growth year over year Driven by the alcohol dependence indication.

Speaker 2

Inventory in the channel was stable and growth to net deductions were consistent and within normal ranges for the quarter. Moving on to the ARISTADA product family. For the quarter ARISTADA net sales increased 8% year over year to $81,800,000 Primarily driven by underlying demand. Inventory in the channel was stable and growth to net adjustments were unchanged sequentially. Libolbi net sales for the quarter were $50,700,000 up 8% sequentially.

Speaker 2

Underlying prescription growth was 10% on a months of therapy basis. During the quarter, inventory in the channel decreased by to the continuation of our contracting strategy in the commercial space and a one time favorable Medicaid adjustment. Moving on to our manufacturing and royalty business. In the Q3, we recorded manufacturing and royalty revenues $149,100,000 compared to $52,900,000 in the same period in the prior year. Revenues from the long acting Invega products were $76,100,000 compared to $26,700,000 in the same period in the prior year, Reflecting the favorable resolution of the arbitration related to these products earlier this year.

Speaker 2

Revenues from VUMERITY were $34,600,000 Compared to $26,300,000 in the same period in the prior year. Turning to expenses. Total operating expenses were $337,100,000 for the 3rd quarter compared to $313,000,000 in the same period in the prior R and D expenses for the Q3 decreased to $97,100,000 Compared to $100,400,000 for the same period in the prior year. This reflects lower spending across the nembleukin and lebovii clinical programs, partially offset by increased investment in the ALKS 2,680 clinical program. SG G and A expenses increased to $169,400,000 from $152,800,000 for the same period in the prior year, Reflecting continued investment in the launch of Libolvii, particularly the DTC campaign and certain non recurring expenses related to the separation of the oncology business.

Speaker 2

I'm pleased to report that our top line results combined with our continued focus on disciplined operating Management delivered GAAP net income of $47,800,000 and non GAAP net income of $109,500,000 for the Today, we are reiterating our financial expectations for 2023 that we provided on our press release On June 6, 2023. As a reminder, our financial expectations reflect the combined neuroscience and oncology business for the full year. Turning to our balance sheet. We're in a strong financial position as we ended the Q3 with approximately $996,000,000 in cash and total investments And total debt outstanding of approximately $291,000,000 We currently expect that upon separation, Alkermes will provide $275,000,000 of cash to Mural Oncology, which we believe will enable Mural to fund its operations through Top line data readouts for Artistry 6 and Artistry 7 and into the Q4 of 2025. In the coming weeks, we'll provide additional information regarding the separation and distribution of Muural shares to our shareholders.

Speaker 2

Post separation, Alkermes will emerge as a pure play neuroscience business with enhanced profitability and a strong balance sheet. Our focus will remain on the execution of our strategic priorities and disciplined management of our cost structure as we invest in those opportunities We believe will drive future growth, including the ALKS 2,680 development program and the continued launch of Libolvi. And with that, I'll hand the call over to Todd for a review of the proprietary commercial products.

Speaker 3

Thank you, Ian, and good morning, everyone. I'm pleased to share that we delivered solid year over year growth of 16% across our proprietary commercial portfolio in the 3rd quarter. Our performance during the quarter reflects continued execution of our commercial strategy against the backdrop of some summer seasonality In the psychiatry and addiction treatment markets, we expect growth to accelerate in the 4th quarter and reiterated our expectations

Speaker 4

$50,700,000

Speaker 3

Prescriptions grew to approximately 42,000 TRxs for the 3rd quarter, Reflecting 10% sequential growth, which was ahead of other entrants in the branded oral antipsychotic market. We expect that growth will accelerate as we head into the 4th quarter, driven by a strong focus on execution, our direct consumer campaign and underlying seasonal trends and we are encouraged by prescription trends over the past several weeks. During the quarter, prescriber breadth continued to expand. In our recent market research, healthcare providers cited Libavie's efficacy, Weight gain profile and patient outcomes as key drivers for their increased prescribing, which is encouraging feedback as we think about Brand awareness and potential future prescribing patterns. In terms of market access, in Medicare and Medicaid, there is a pathway to access for all patients.

Speaker 3

In the commercial channel, there were no changes to our commercial access profile during the quarter and we expect the access profile to remain unchanged for the remainder of 2023. We have ongoing discussions with the commercial payers and have designed our commercial access strategy To best support the long term growth of the brand, balancing volume growth and the profitability of each unit. As we advance our efforts to drive awareness, our direct to consumer campaign is ongoing with increased ad placement in the fall months, in line with TV viewership trends. While it will take time to see the full impact, leading indicators on the effectiveness of the DTC campaign are encouraging. Specifically, we are monitoring the impact of our DTC campaign on Internet search metrics, website visits, provider and patient awareness levels and patient requests.

Speaker 3

We are excited by the opportunity for Libolivy and are laying the foundation for long term growth. Turning to the ARISTADA product family. Net sales in the 3rd quarter grew 8% year over year to $81,800,000 Driven primarily by demand growth of approximately 8% on a months of therapy basis. We expect this market will continue to be dynamic and our team will continue to focused on highlighting ARISTADA's differentiated value proposition, including its once every 2 month dosing option and ARISTADA INITIO initiation regimen, both of which are supported by clinical data from our ALPINE study. Turning to VIVITROL.

Speaker 3

Net sales in the 3rd quarter increased Approximately 3% year over year to $99,300,000 The alcohol dependence indication was VIVITROL's primary growth driver And accounted for approximately 2 thirds of the VIVITROL volume. Importantly, against the backdrop of growth in the alcohol dependence treatment market, Prescriber breadth for VIVITROL has continued to expand in that indication, which has driven new patient starts over recent quarters. As we think about the long term opportunity for the brand, during the quarter, we were pleased to come to a settlement agreement with Teva to resolve our patent litigation related to VIVITROL. Under the terms of the agreement, Teva will be able to market a generic version in the U. S.

Speaker 3

Beginning in January 2027 or earlier Under certain customary circumstances. With this agreement, we were able to appropriately plan for the continued commercialization of VIVITROL and believe that the product will continue to be an important element of our growth and profitability for the next several years. Taking a step back, we are focused on executing our brand strategies for all three products and on delivering our net sales expectations for 2023 across the portfolio. Serious mental illness and addiction are complex conditions with unique and often challenging treatment paradigms that require well resourced Our commercial infrastructure is a strategic asset, One that can be leveraged in additional opportunities in these disease spaces as well as in other therapeutic categories, including those that may emerge from our development pipeline or future business development opportunities. With that, I'll pass the call to Craig to discuss our ALKS 2,680 development program.

Speaker 4

Thank you, Donna. I'm pleased to be joining me this morning from the World Health Meeting, where earlier this week we presented our first clinical data For ALKS2680, a novel investigational olexin-two group exter agonist for the treatment of mycolepsy. The orexin pathway has been established to be closely linked to the pathology of myopathy. Orectin will neuropeptide that In particular, Lactosec Type 1 or MT1 is associated with the absence or significant deficiency Inorexum concentration and the presence of cataplexy. People with narcolepsy who do not experience cataplexy Have what is called RafaleptiTel2 or MT2.

Speaker 4

Our study was designed to be an RNA bioavailable orexin 2 receptor agonists with potency 10x greater than the natural orexin A peptide and greater than 5,000 volt connectivity The molecule is designed to address the underlying pathology of narcolepsy And to deliver durable and quality based on weight loss and cataplexy control, an acceptable safety and tolerability profile and a wide therapeutic range It will accommodate different doses potentially needed for MT1 and MT2. The molecule is also designed with its pharmacokinetic And dynamic profile that mirrors the national sleep wake cycle with a low therapeutic dose and once daily oral dosing. The clinical investigation of ARS Peniclib follows encouraging preclinical data. These Pneumonia data of ALKS 2680 in healthy volunteers and share initial safety and efficacy findings from patients with LYFALEX C Type 1. It is gratifying that in our clinical experience today, our 2680 has behaved as we would have expected based on our extensive preclinical work.

Speaker 4

We are pleased with the clinical profile that is emerging, both in terms of safety and tolerability as well as therapeutic activity of working patients. The study design is outlined on Slide 16. The Phase 1 study began with single and multiple ascending dose evaluations In A. C. Healthy volunteers to assess safety and tolerability as well as to follow the kinetic and dynamic profile of ALKS3680.

Speaker 4

This study is double blind and placebo controlled. The single ascending dose of SAD tested single doses of ASC six eighty up to 50 milligrams. In the multiple ascending dose of nAb, subjects should be 10 days of dose daily doses up to 25 milligrams. Moving on to Slide 16. From a safety and tolerability perspective, I'm key to the profile that we observed for our 7,680 We're healthy volunteers.

Speaker 4

ALKS2680 is generally well tolerated across all doses tested, and there were no serious or severe adverse events. Most adverse events of mild occur early with transient and result without medical intervention or treatment interruption. In the SAD, the most common ADs need to be regulated with dizziness, posterior, which means increased frequency in urge to urinate, nausea and visual disturbances and most of us asked for about the 50 milligram dose. In the lab, the most common AEs were insomnia, Busyness, porphyria and visual disturbance improved and muscle observed at or above the 8 milligram dose. The visual disturbances we describe is blurred vision and increased life sensitivity.

Speaker 4

As I mentioned, these AEs were transient, Results of continued dosing of R7-680 in the multiple ascending dose studies and did not prevent continued dose escalation. There were no safety signals identified in vital signs, laboratory parameters or ECG. Novus had a toxicity treatment was at any dose level. We will continue to accumulate safety data over the 4th of the development program. This will include continuing dose escalation of FAD and the MAB in order to fully characterize the safety and tolerability profile of ALKS 2,680 As the maximum tolerated dose has not yet been identified.

Speaker 4

In terms of the pharmacokinase profile on Slide 17, We achieved a key design objective supporting 1 study dose in our ARPU 2,680 and a profile that mimics the natural sleep break cycle In the top panel, you can see that systemic exposures increased proportionally with dose. However, with the blended CMAPS profile, as depicted in the lower graph, both of the new features were explicit design intentions. The metabolic profile was consistent with our design objectives. In the study, 2 metabolites were observed. These metabolites were consistent with both observed in preclinical studies.

Speaker 4

Neither contributed to pharmacologic activity

Speaker 1

Great. One moment. I think our audio is not coming in. Grace, I'm going to just switch the line to see if we can get a better connection. Donna, can you mute the other line please?

Operator

The other line is muted.

Speaker 1

Okay. Thank you.

Speaker 4

Collectively, data from the evaluation supported the dose mettleflexis to move forward into the Phase 1b evaluations in patients. This part of the study is enrolling patients with narcolepsy Type 1, narcolepsy Type 2 or idiopathic hypersomnia With up to 8 patients per group. Earlier this week, we shared data from the first cohort of 4 narcolepsy COP1 patients, Which was specified and powered to detect any significant effects and dose responses at this interim analysis. Starting with the study design on Slide 18, following a 2 week washout period of existing medications, patients were randomized to a crossover design, We each received placebo 1, 3 and 8 milligrams of ALKS 2,680 with a one day washout period in between each dosing day. We finally have endpoints of safety and tolerability.

Speaker 4

However, the Phase 1b offers the first opportunity to assess proof of concept efficacy Our single doses of ALKS 2,680 compared to placebo and baseline within the same subjects by the maintenance of Wake Forest test. In terms of baseline characteristics outlined on Slide 19, the patient study demonstrated severe narcolepsy symptoms. Next on Slide 20, ALKS 2,680 was generally well tolerated across all doses tested in the MT1 patients. All AEs who are mild only occurred at the 8 milligram dose and were largely on target. Note that the most common AD was insomnia, which is directly related to the drug's activity.

Speaker 4

This is what we were looking for. The occurrence of insomnia at the 8 milligram dose was helpful in helping us narrow the planned dose range for future clinical development at MT-one. Oniguria and salivary hyper secretion occurred in 2 of the subjects, and these AEs are expected on target effects of the Oraxol pathway. There were no serious adverse events nor any adverse events leading to this continuation. Additionally, there were no clinically meaningful treatment emerge The 40 minute maintenance of Wait For Mist Pass or NWT It is administered every 2 hours post dosing.

Speaker 4

The mean score is calculated by averaging the results of the tests conducted at hours 2, 4, 6 and 8 post dose. Prior to dosing, patients demonstrated a mean NWT baseline score of 3 minutes, Meaning that they fell asleep within 3 minutes. At all doses tested and in all patients ALKS 2,680 significantly improved immune For the time that these patients were able to remain awake compared to baseline, there was a clear dose response With mean MWC improvements compared to baseline of 18, 30 and 37 milligrams At 1, 3 and 8 milligrams, respectively. Treatment with placebo was associated with a 1 minute reduction Due to the magnitude and consistency of the fact that each dose level of ARS 2,680, The improvement compared to placebo was highly statistically significant despite the relatively small number of patients. Slide 22 shows the time course.

Speaker 4

ALKS 2,680 showed clinically meaningful improvements in NWT From baseline, all doses tested and in all patients. At the 8 milligram dose, patients maintaining wait for this For the full 40 minute NWT duration up to 10 hour post dose. NWT scores at 3 milligrams were comparable 8 milligrams for the first 6 hours and both 1 and 3 milligrams of our 7,680 showed improved wakefulness up to 8 hours post dose. The tolerability and efficacy profile of ALKS 2,680 shown to date in MT-one is encouraging And it falls our approach around dose selection and our expectations as to the tolerability and efficacy in NT2. We've received some questions from investors regarding therapeutic index and potential dosing in MT2.

Speaker 4

Based on the pathology of MT2 and previous clinical data, we expect these patients to be less sensitive to the rhexone requiring higher doses for efficacy And tolerating higher doses before observing limiting side effects. Based on our observed activity to date in NT1 and our modeling, We now believe that MT2 patients may only require a 2 to 3 fold increase in the ALKS 2680 MT1 dose. With a clear dose response and indication of therapeutic benefit at doses from 1 to 8 milligrams in MT1 and not having reached the maximum tolerated dose in patients or healthy volunteers, We are confident in the dosing flexibility that we are currently enrolling NT2 patients and we're currently enrolling NT2 patients in the study. Concluding on Slide 23, I'm pleased with the initial data generated from this innovative and efficiently designed Phase 1 study, We support the key design objectives of the molecule. In less than a year, we've been able to establish a preliminary safety and tolerability profile of ARX-two thousand six hundred and eighty In healthy volunteers, demonstrate target engagement through EEG evaluations, establish a PK profile that supports one study administration With a target dose well below 10 milligrams of MTY patients and demonstrate significant wakefulness throughout the day.

Speaker 4

We will continue to enroll the Phase 1b study in narcolepsy in IH patients and look forward to sharing those data. We are also in the process of finalizing the design of a Phase 2 study, which is planned to begin in the first half of twenty twenty four. And now I will hand the call over to Rich.

Speaker 5

That's great. Thank you, Craig. So Craig and his teams have accomplished a great deal in the last year to efficiently advance It's the product of expertise that Alkermes has accumulated in molecular design, medicinal chemistry, pharmacokinetic modeling And neuroscience drug development. If the pharmacology of OX2680 continues to be validated in the clinic, We believe it has the opportunity to be an important new mechanism in the treatment paradigm for patients with narcolepsy. And beyond that, it may provide the foundation to As well as others.

Speaker 5

To date that Craig summarized, advanced the 2,680 development program passed 2 important stage gates. 1st, establishment of an initial safety and tolerability profile that supports further clinical development. And second, Demonstration of proof of concept through initial evaluations of efficacy using validated measures. An important characteristic relating to both points is potency, Expressed in the form of expected dose, our modeling suggested the initial human data supported a dose range for MT1 patients Between 18 milligrams. We believe that potency at these dose levels reduces the potential for off target adverse events and Together with the tolerability profile observed to date, provide the wide potential therapeutic index to accommodate dosing in NT1 and NT2.

Speaker 5

With this initial data set, we believe we have adequate information to complete the design of our Phase 2 program. As we move into later stage development, We'll further establish the safety, tolerability and efficacy profile of 2,680 through established regulatory endpoints as well as patient reported outcomes as we further explore the effects of modulating the erection system. So that's the ALKS 2,680 program. Shifting gears, we expect another transformational event to occur in the coming weeks with the planned separation of our oncology business into an independent publicly traded company called Muirral Oncology. We're now in the final stages of implementing separation, Which has been a significant undertaking from an operational, logistical, legal and accounting perspective.

Speaker 5

As we prepare for the launch of Murow, It's important to us that Meural begins its journey as an independent company in a position of strength in terms of its leadership, the ongoing clinical studies and financial resources. Doctor. Caroline Lowe, the CEO designate of Meural has recruited a talented management team and Board of Directors. I'm confident their leadership will be a strategic asset. The potential registration enabling studies for nimoleukin in We believe that separation provides an opportunity to unlock value for both companies, Create more optionality for shareholders and position both companies for success.

Speaker 5

Post separation, Alkermes will emerge as a more profitable pure play neuroscience company with a clear strategy and well defined opportunities for value creation. Taking a look back, 2023 has been a very productive year, highlighted by the ongoing launch of Levolving, Including initiation of the DTC campaign, strong enrollment and execution of our ongoing clinical studies in oncology and in neuroscience, completion of the many work streams to support the separation of the Oncology business and the successful outcomes, the Janssen arbitration and the VIVITROL settlement. Each of these represents an important accomplishment in its own right. Collectively, it transforms the financial and growth profile of the company. We believe we're in a position to drive significant value for shareholders to look forward to sharing our progress with you.

Speaker 5

So with that, I'll turn it back to Sandy to manage the Q and A.

Speaker 1

All right. Thanks, Rich. Apologies for the audio quality during some of Craig's remarks. I hope that this line is working better for you. Donna, we'll open the call now for Q and A.

Speaker 1

And in the meantime, we'll also work on posting the prepared remarks to our website, So that any pieces that were missed can be reviewed on the website.

Operator

Thank you. The floor is now open for questions. Today's first question is coming from Akash Tewari of Jefferies. Please go ahead.

Speaker 6

Everyone, this is Amy on for Akash. Thanks so much for taking our questions. So a couple from us on the Oraxin program. We've seen that with TAK-nine twenty five and NT1 that the 11 milligram dose also maxed out on MWP initially, but MWP dropped from 5 plus to 20 on day 7. On the other hand, we're seeing pretty durable effects on the 44 milligram dose at day 7.

Speaker 6

How do you plan to factor in this long term durability aspect when selecting the go forward dose from the 3 to 8 milligram dose range going forward? And then what dose do you expect in NT2 patient? Is it fair to say that your dose could be more in the range of 10 to 12 milligrams rather than 4 to 5x NQ1? And then finally, do you expect some of these on target AEs to attenuate over Fine. Thanks so much.

Speaker 4

Good. Let me address that each component on its own. So In terms of our dose range for the NT1 population, obviously, we have very clear dose response exactly what we expected to And I think this puts us in a position to be able to model out appropriate doses For our Phase 2 study, we are also looking at the tactical access that was observed with The TAC program and obviously this is something that we are going to be modeling into our doses for Phase 2 as well. In terms of the let me take the safety question next, Investigators at the meeting this week is that they really are impressed with the safety profile generated range where We haven't shown side effects at the lower doses. And the side effects that we're seeing at the 8 milligram dose are largely on target Side effects, these are mild.

Speaker 4

They resolved spontaneously. We saw no serious or severe adverse events and Essentially, obviously no discontinuations. And I think importantly, the Insomnia is almost viewed to be a biomarker response by our potential investigators for Phase 2. Their belief is that with this mechanism that will attenuate over time as you've asked, And it will probably over the 1st couple of days normalize. So we're impressed The safety the EncoSwan safety profile to date and once again believe that, that really sets us up to Choose the appropriate doses for Phase 2.

Speaker 4

In terms of the NT2 question, We've seen data from the TAC program where the NT2 population is less sensitive To orexone indicating that higher doses will be needed. At this point in time, given our dose response We've seen at below 10 milligrams for NT1. We think that this sets us up to sort of narrow the range NT2 to about 2 to 3 fold where previously we may need up to 5 fold the dose. We're obviously Seeing a separate cohort of patients for MT2 at a different dose range And those data will obviously also be incredibly important to inform that dose range for the MT2 dose for Phase 2.

Speaker 1

Great. Thank you so much.

Operator

Thank you. The next question is coming from David Amsellem of Piper Sandler. Please go ahead.

Speaker 7

Just a couple. So first on idiopathic hypersomnia, Can you talk to dosing there? And what is your plan for IH regarding further development? Is that going to be a backup So help us talk through your IH thinking. And then secondly on a different topic, you Talked about the commercial organization being a leverageable asset makes sense, but does that mean that you're open to Prioritizing the addition of commercial stage or market ready assets to the portfolio.

Speaker 7

Thank you.

Speaker 8

Rick, do

Speaker 1

you want to take the first one and then Rich can take the second question?

Speaker 4

Yes. So we are collecting data on IH patients. We've got a separate cohorts in our Phase Ib program. That cohort of patients is currently enrolling. And then based on those data that once again will inform appropriate doses for IH in our Phase 2 program, we haven't disclosed the dose for our MT2 dose range in the current 1b study and nor have we The dose range that we are exploring for IH at this point in time.

Speaker 5

With respect to the Question about commercial, yes. I think that the point Todd has made and we've lived through is building a commercial presence in order to be able to sell products like The Volvi, ARISTADA and VIVITROL requires far more than just a field force. It requires a lot of infrastructure. And now that we've built Demonstrating its efficacy through the launch of Involving, we do think that that's an asset that we can leverage with additional products from the outside.

Speaker 7

Thank you.

Speaker 1

All right. Thanks, David.

Operator

Thank you. The next question is coming from Umer Raffat of Evercore ISI. Please go ahead.

Speaker 9

And not showing full safety table for the multi ascending dose At the conference. So, that's one. And then also, as we think about the narcolepsy type 1 and the declaration of Dose being somewhere between 38 milligrams. Are we fully confident that we can make that determination based on single dose data or Because there's been data from other orexin suggesting a fading in efficacy beyond the first dose effect. I'd be curious how you think about that.

Speaker 9

And finally, if you could just elaborate on Caplata trends sorry, on Live Valley trends into next year, Especially as it relates to where some of the consensus estimates stand versus how you're thinking about it in light of DTC? Thank you.

Speaker 1

Thanks, Esther. We missed the beginning part of your first question on the FAD table.

Speaker 9

I was just asking thought process and how you have the safety table for single dose

Speaker 4

For the World Sleep Conference, it was really just economy of trying to pack a lot of information into a short presentation. In terms of the single ascending dose table, obviously, we explored 6 separate doses there and 4 separate doses in terms of In terms of the math, and so it just didn't make sense to really sort of try and compress that into The presentation, but rather just focus on the most common adverse events greater than 5% as you saw. These were largely sort of mild to moderate They were largely sort of self resolving and we only had the one treatment discontinuation. So the summary is really reflective of our experience across And

Speaker 8

the

Speaker 1

single the confidence around the strength of Phase 2 based Yes.

Speaker 4

So this is one of those indications where translatability It's extremely high. One of the aspects of our confidence in is the potency of this compound where we have greater than sort of tenfold Potency to taurexin A. We also are cognizant, as I said previously, of the tachyphylaxis that Takeda has seen. As such, we believe given the clear dose response as well as the durability of response that we've seen with single dosing In a 1b study, this really sets us up well to embark upon our Phase 2 program, which obviously will explore Dose is in Phase 2 for each of these indications.

Speaker 1

And then Todd, did you want to comment on the LOVALVI trends for next year and expectations around that?

Speaker 3

Yes. Absolutely. I'll take that one. So in Q3, the broader category, the branded oral anti seg category did experience some seasonality. We saw that.

Speaker 3

We believe this is going to rebound in Q4. And as I said earlier, we are actually already seeing that. We started seeing an uptick in TRx prescriptions And MBRx new patient starts at the end of Q3 and that's continuing into Q4, which is encouraging. Going into next year, We are extremely confident about the growth prospects and outlook for Libavie for several reasons. Breadth of prescribing continues to expand.

Speaker 3

Our market research, when we talk to HCPs, they tell us their intent to prescribe continues to expand. We are investing as you know in a very broad direct to consumer campaign. It's still early, but the trends and the metrics are encouraging there. And also we always come back to LYVOLVI has a very broad differentiated label and is considered one of the most Effective agents in the category. So we have a lot of confidence that we're going to see growth into Q4 and into next year.

Speaker 1

Thanks, guys. Donna, we'll take the next question please.

Operator

Thank you. Next question is coming from Paul Matteis of Stifel. Please go ahead.

Speaker 10

Hey, thanks so much for taking my questions. I appreciate it. I had one on Orexin and then just one business question. On Orexin, can you talk about the multi dose pharmacokinetic You generated. And I guess when you look at the exposure levels over time in the evening, how low do drug levels And are you comfortable that they get low enough where you're going to avoid an insomnia or sleep latency signal?

Speaker 10

And then second, just on business development, it was interesting to kind of hear Tom, if they slipped in. I know it's something you probably said before, but what's your current thinking on BD? And if you think about a deal, what's your scope right now on deal size And also whether it would or wouldn't be important for a deal to be accretive or dilutive? Thanks so much.

Speaker 4

So I'll take the PK question first. Obviously, for competitive reasons, we haven't disclosed too much in terms of our profile. The profile that we set out to achieve was achieved in our Phase 1 study. It's So, Provol, obviously supports once daily dosing. And importantly, one of the most important aspects that we were focused on It was really a profile that mimics the natural sleep wake cycle.

Speaker 4

We achieved that. We've got a half life of 8 to 10 hours, which I think is ideal For once daily dosing and to achieve that sort of natural sleep wake cycle. And essentially, This has been borne out in our Phase Ib, as you can see with our dose response and as well as the durability As you've seen at the 3 and 8 milligram doses.

Speaker 5

And Paul, it's Rich on the deal side. I think if you think deals in terms of pure pipeline expanders on the R and D side, Our long range forecast with our profitability target accommodates expansion of R and D spend to some extent, I mean, not heroically, We could pick up something in development stage and feather it into our existing R and D activities and still hit our profitability targets, which are critical On the commercial side, you said that we acquired something on the residential commercial side. We would want and expect that or very quickly to go to a previous transaction.

Speaker 4

Thank you.

Speaker 1

All right. Thanks, Paul.

Operator

Thank you. The next question is coming from Chris Shibutani of Goldman Sachs. Please go ahead.

Speaker 11

Great. Thank you very much. Two questions on the Orexin and just thinking about the difference Between NT Type 1 patients and NT Type 2, would you expect that the perhaps Lesser sensitivity that's requiring higher doses to also manifest on the

Speaker 5

safety side as well

Speaker 11

In terms of lesser likelihood of being exposed to some of the AE aspects that we're seeing, Are they correlated in other words? And then secondly with NT Type 1, can you comment about your thinking about cataplexy In particular, what do you perceive as the potential there to influence that profile as we think about Differentiating the different treatment options going forward, any learnings you've had thus far would be helpful.

Speaker 4

Thanks, Chris. So, In terms of the read through on doses for NT2, patients obviously are far less sensitive Torexin with MT2, I think that's based off of some of the Takeda data already published. Our Originally was that there may be up to a 3 to 5 fold increase in dose needed to cover that population. I think given the potency that we now have established with the compound and are very clear dose response, we believe we can narrow that down to 2 to Threefold increase in dose in that population to see the required efficacy. I read through on the safety side is exactly as you stated and that is basically that because of the decreased sensitivity, You will probably only see sort of dose limiting side effects at much higher exposures as well In that population.

Speaker 4

So I think they will be pulled through there as well in terms of the dose. In terms of your question on cataplexy, while we didn't collect data or analyze data On cataplexy, in our Phase 1b, we did collect sleep diaries. The sleep diaries were really intended to help us in form and our powering for Phase 2 As well as eventually for Phase 3. And essentially, what I can tell you there is That anecdotally patients that see a trend towards Decrease in cataplexy in terms of single dosing, some anecdotal information from our investigators was that In some of the patients they're able to watch a 2 hour comedy movie without seeing sort of an event. We believe it's encouraging and once again we will be fully evaluating cataplexy in The design of our Phase 2 study, but this was not analyzed as an endpoint, so it's just more just for planning purposes

Operator

Thank you. The next question is coming from Jason Gerberry of Bank of America. Please go ahead.

Speaker 12

Hey guys, thanks for taking my question. Just wanted to Follow-up on Umer's question. So, can you share the rate of 8 milligram healthy volunteer MAD, Especially for visual disturbance and insomnia, it seems like a potentially relevant dose in all these settings that you'd study Your OX2R and given an NC1, I think the insomnia rate on the small end is 75%, visual disturbances in AE of interest. I think this is important and if you can't share with that, I imagine you have all 8 patients of NC1 data in house. Any observation that The AE profile is consistent with what's been shared so far.

Speaker 12

And then lastly, just a competitor Wakeix Missed NIH, wondering how you think about NIH now. I guess I wonder, WATIX is more of an alerting agent, orexin deficiency is not an issue in Is this disease more druggable with something that helps with consolidation like a XYOSTED? So just wondering how you're thinking about IH mechanistically in lieu of the Wakeix Thanks.

Speaker 4

Yes. In terms of our experience in the sad and mad, we only saw the 4 visual disturbances, 2 in the sad, 2 in the mad. These were largely sort of mild events, were Transient self resolving, all patients had all healthy volunteers had normal neurologic exams. And so I wouldn't read too much through into the actual doses of the MAD. We've got an acceptable safety profile and Maximum tolerated dose is not being reached.

Speaker 4

That's why we're moving to even higher exposures in both the SAD and the NAND program. Bear in mind that these are non sleep deprived healthy volunteers. So they are not sensitive to Oraxol. In terms of our actual patient experience to date, we haven't seen any visual disturbances in our MT1 cohort today. In terms of your question around WakeMed and IH, obviously, we're In the very early stages of collecting data in idiopathic hypersomnia and I think the profile that emerges from our 1b will inform us As to where 2,680 falls in terms of addressing that particular Indication, I think once again mechanistically, we're pretty excited about the potential for orexin agonists IH, but I will need to be informed by the

Speaker 5

data as those data come in.

Speaker 12

Got it. Thanks, guys.

Operator

Thank you. The next question is coming from Marc Goodman of Leerink SVB. Please go ahead.

Speaker 5

Yes, good morning. Can you comment on the Orexin, the blood pressure increase that we saw in that patient? How much Increase in blood pressure did we see and is this something that we should be watching for and are you planning to do A blood pressure monitoring study. And then secondly, just on Libavvy, can you just comment on gross to nets going forward and Whether this is the thought process that you had last quarter? Thanks.

Speaker 4

Sure. So I think it's supposed to be important to note that We did hourly blood pressure measurements throughout our SAD, MAD and NT1 patient experience, so we were measuring blood pressure really frequently. We only saw one increase in diastolic blood pressure Sure. In the NT1 cohort, this was an increase to 96 So, diastolic and normalized within 2 hours of the blood pressure increasing. Once again, it was a very transient increase in 1 or 2 reads.

Speaker 4

Similarity, we saw a Single blood pressure increase in the single ascending dose and once again within A couple of measurements that have returned back to baseline as well. So really not seeing Any sequence there at this point in time? These are just 2 individuals with 1 or 2 individual readings that were in the Elevated

Speaker 2

Range. And then let me take a crack at the gross to net question. So I think for Libolvii gross to net, as I said in the prepared remarks, slightly lower in Q3, 25.1%, Really driven by a one time favorable Medicaid adjustment to about $800,000 I think gross to net has been really consistent over the Last few quarters. I think the second half of twenty twenty two, we were around 26%, First half of twenty twenty three percent, twenty six percent, and that's the expectation through the remainder of the year. We're not providing guidance specifically for 2024 today, but I think the one thing that would potentially change gross to nets would be more on the commercial contracting side.

Speaker 2

To this up to now, we've been very much focused on profitability of Lebovia units And we've had a pretty disciplined approach to the contracting strategy. So that's maintained growth to net at a relatively consistent 26% level. I think ultimately gross to net sold trend towards that 35% to 40%. It's just a question of timing. So for The remainder of the year, we would expect to continue around the 26% level and then we'll provide more information specifically to 2024 on our year end earnings call in

Operator

Thank you. The next question is coming from Yui Er of Mizuho. Please go ahead.

Speaker 13

Hey guys, thanks for taking my question. So could you share what the dose was In the MAD study where you saw insomnia and on slides not listed Insomnia is not listed for as part of the SAD study. I'm just wondering like why is that the case? That's my first question. And I guess my second question is, so we often get this question over and over.

Speaker 13

With the current script trend for Libality and like what are the avenues Would allow you essentially to hit your 2024 profitability guidance. Thanks.

Speaker 4

So in terms of our SAD and MAD experience, essentially the most common AdversaVent, we saw was more hyper vigilance that was equally distributed across placebo and active. So 2 a piece there that was more Denoted as increased alertness in these patients, but once again, Equally matched active versus placebo. And I think the single case of insomnia It was seen in the 1 disc continuation pension of the 25 milligram dose.

Speaker 13

Okay. Thanks.

Speaker 3

Yes. Let me start with just the seasonal trends or the trends in general with Libavie, which Coming through Q3 are solid relative to the seasonal dip. Again, TRxs grew quarter over quarter by 10% year over year by over 80%. So we're really encouraged by that and that's really being driven by all three parts Our marketing mix, which is our sales force promotion, which is driving intent to prescribe increases. Secondly, our disciplined market access Strategy, as Ian mentioned earlier, we're seeing utilization across all three channels within market access.

Speaker 3

And again, we're at the very beginning of our Our DTC campaign and all of the metrics are heading in the right direction. So we have a lot of confidence in our strategy. Execution Is improving quarter over quarter and utilization in the perception of the brand is improving quarter over quarter. So we have a lot of confidence in what the long term outlook looks like for Libavie.

Speaker 2

And then just to add to that, in other aspects of the business, Lebovia is a key growth driver for us. We anticipate continued growth of VIVITROL, ARISTADA, VUMERITY should continue to grow as well. I think with the spin off Of the oncology business, that's going to take a significant amount of spend out of the R and D line. Our gross margins should improve as the volumes of all our proprietary products continue to grow. And as you saw, we delivered GAAP and non GAAP this quarter.

Speaker 2

So hopefully that gives you a path to us being able to achieve the profitability targets next year.

Speaker 13

Thank you.

Operator

Thank you. The next question is coming from Douglas Tsao of H. C. Wainwright. Please go ahead.

Speaker 5

Hi, good morning. Just really quickly on the Orexin, I was just curious if you were seeing any evidence of impact on sleep quality. Obviously, you saw some Insomnia. So were there any other impacts on sort

Speaker 4

of sleep consolidation? Thank you. Yes. Essentially, street quality is going to be a really important endpoint for us moving forward. This wasn't specifically measured given the nature Of the design of a single dose full weight crossover study and Anecdotally, the patient experience was positive, but obviously this will be built into our polysomography assessments in our Phase

Speaker 5

And from a tolerability standpoint, would you anticipate this being You in conjunction with 1 of the fleet promoting agents?

Speaker 4

Yes. At this point in time, we're studying 2,680 as a monotherapy and our entire program is Brezitis As such, so I think what will be really important is to really assess sleep Policy of 2,680 as we get those polysomography assessments done In the Phase 2, we are also building a number of TROs into our Phase 2 program and that will get a better handle on that as well.

Speaker 5

Okay, great. Thank you so much and congrats on the data.

Speaker 1

Thanks Doug.

Operator

Thank you. The next question is coming from Ash Verma of UBS. Please go ahead.

Speaker 14

Hi, good morning. Thanks for squeezing me in here. So For LIBORVI commercial payer discussions, has the aggressive contracting by Latura over the years or some inching up on gross to net for this category in general Broadly change the expectations for payers on how much volume they are willing to give in return for a wider gross to net? And then second on the Oraxane, so just wanted to get your initial reaction on competitor, Contessa. We just saw the preclinical data, ORX750 showing significant activity at lower doses.

Speaker 14

Granted this is preclinical, but just seems to be getting crowded So any thoughts there would be helpful. Thanks.

Speaker 8

Yes, I'll start with Yes.

Speaker 3

I'll start with the market access question. So I think the key elements to keep in mind here is, there's 3 channels Medicaid, Medicare and commercial. There's relatively an equal split across the category depending upon what the indications are for these brands. We have a pathway of access and really clear line of sight across Medicaid and Medicare and we see good utilization. Within the commercial space, we do have agreements in place with commercial payers where we are constantly in ongoing discussions.

Speaker 3

But we know from our history, specifically with ARISTADA that we launched several years ago that once you start Going into contracts with large rebates, it's very difficult or virtually impossible to pull those rebates back. So Our plan right now is to continue to drive volume through intent of prescribing, which is increasing through patient activation, again, which we're We're seeing good activation levels with our consumer campaign. And then over time, our belief and our plan is to expand access within the commercial space. But we're doing that in a very measured approach to make sure that we're maximizing the profitability of each unit.

Speaker 4

And then with regards to the question on the SYMPAZA data, I think those data were being presented in parallel with this meeting. So we haven't actually seen those data at this

Operator

Thank you. The last question for today is coming from Charles Duncan of Cantor Fitzgerald. Please go ahead.

Speaker 8

Hey, good morning, everyone. So thanks for taking my questions. I have just a couple of quick ones. For 2,680, if you think about the future for NDA enabling purposes And given the potential safety and waning activity of another agent in the class, what is the length of exposure that you are Expecting to be a minimum, is it 3, 6 or 12 months or some other period to rule out safety and rule in durable efficacy?

Speaker 4

Yes. Obviously, as we move forward and plan our Phase 2 program, will be meeting with the agency to discuss those plans and our belief is that those discussions will inform The length of both our Phase II as well as our Phase III program as we move forward.

Speaker 8

That makes sense. Last question. Regarding visual disturbances in the human volunteers and I know it's very small sample, but I guess I'm wondering if you would speculate on there being a pharmacological target or is that just really a sporadic observation? And how Normal humans could be different than NT1 patients if there is a target or some reason to wonder about that. Thanks.

Speaker 4

Yes. Interestingly, we've only seen the visual disturbances in healthy volunteers. Once again, we've only seen before out of a denominator of 80 healthy volunteers. These were sort of mild adverse events of Transient's largely just bird vision and increased light sensitivity. In terms of mechanism, I think at this point in time, it's obviously something that We're evaluating and monitoring for and we haven't seen any visual disturbances in patients

Speaker 8

Got it. Thanks for taking the questions.

Operator

Thank you. At this time, I'd like to turn the floor back over to Ms. Coombs closing comments.

Speaker 1

Thanks, Donna. Thanks, everyone, for joining us on the call today. A copy of the prepared remarks is now posted On our website, in case any portions were inaudible and you'd like to reference that, it's on the Events section of the website. And please don't hesitate to reach out to us at the company, if we could be helpful. Thank you very much.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast and enjoy the rest of your day.

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Earnings Conference Call
Alkermes Q3 2023
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