Alkermes Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 26, 2023

There are 14 speakers on the call.

Operator

Greetings, and welcome to the Alkermes First Quarter 2023 Financial Results Conference Call. My name is Rob, and I'll 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 Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs.

Operator

Sandy, you may begin.

Speaker 1

Thank you. Good morning. Welcome to the Alkermes' PLC conference call to discuss our financial results and business update for the quarter ended March 31, 2023. With me today are Richard Pops, our CEO Ian Brown, our CFO and Todd Nichols, our Chief Commercial Officer. Before we begin, I encourage everyone to go to the Investors We believe the non GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business.

Speaker 1

Our discussions during this conference call will include forward looking statements. Actual results could differ materially from these forward looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this 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 expressed or implied in the forward looking statements. We undertake no obligation to After our prepared remarks, we'll open the call for Q and A. And now I'll turn the call over to Rich.

Speaker 2

Thank you, Sandy. Good morning, everyone. We have a number of Important and positive updates to go through today, so I'm going to get right into it. I'm going to start with a brief update on the announcement we made yesterday related to our arbitration with Janssen. I'm then going to hand it to Ian for a review of the financial results for the quarter and then to Todd for an overview of our commercial products.

Speaker 2

I'll come back then and close with an update on the progress we're making on the separation of the oncology business and our ALKS 2,680 So regarding the arbitration with Janssen, recall that this pertains to royalties in the U. S. Sales Of 3 long acting INVEGA franchise products INVEGA SUSTENNA, INVEGA TRINZA and INVEGA HAPYRA, which are antipsychotic medications as well as CapaNuva, which is an HIV product. In January, we announced the tribunal, which is a panel of 3 experienced arbitrators, Issued an interim award in which it agreed unanimously with Alkermes on the central issue of the arbitration, which is That while Janssen had the right to terminate the license agreements, it may not continue to sell the products developed under those agreements without paying royalties to Alkermes. Last week, we received the 2nd favorable interim award from the panel, which addressed the outstanding economic issues.

Speaker 2

First, for 2022, we are due back royalties of approximately $194,000,000 2nd, related to 2023 and beyond, the award provides that a separate royalty term applies for each of INVEGA SUSTENNA, INVEGA TRINZA, INVEGA HAPIRA. For INVEGA SUSTENNA, we would be owed royalties through August 20, 24, which is consistent with our previous expectations. However, for both INVEGA TRINZA and INVEGA HAPYRA, the panel agreed with our position that the royalty term extends beyond 2024 Through the Q2 of 2030, this would represent an additional 6 years of royalty revenues for these two medicines. In addition, the award provides that royalties for Cabanuba in the U. S.

Speaker 2

Are owed through the end of 2,036. So to summarize, Once final, this would result in payment for back royalties due, reinstatement of royalties going forward and royalty terms for INVEGA TRINZA, INVEGA Halfura and Cabanuva into the 2030s. This represents significant potential economic upside and provides strategic capital to the balance sheet and additional long term contributors to our P and L. In terms of the next steps, the panel directed the parties to confer and advise within 21 days by this latest interim award in support of our position and we look forward to the final award and resolution of this matter. So with that, I'm going to pass it to Ian for an overview of the quarter And then to Todd.

Speaker 2

Go ahead, Ian.

Speaker 3

Great. Thank you, Rich, and hello, everyone. I'm happy to report solid financial results for the Q1, driven by the strength of our proprietary commercial product portfolio, our continued focus on operating efficiency and the commercial leverage we have built into our business. We are confident that we can continue to build on this momentum as we look ahead through the remainder of 2023. As Rich mentioned, The outcome of the Janssen arbitration, once final, represents significant potential upside to our current financial expectations for 2023 and our long term profitability targets for 2024 2025.

Speaker 3

However, we will wait until we have further resolution of the dispute before revising any current or future financial expectations. In the meantime, today, Based on the performance of our core business and as we continue to execute across our strategic priorities, we are reiterating our Now for the Q1, we generated total revenues of $287,600,000 driven primarily by our proprietary product portfolio, which grew 25% year over year. Starting with VIVITROL, net sales in the quarter were $96,700,000 reflecting 14% growth year over year, driven primarily by the alcohol dependence indication. Inventory in the channel was fairly stable and gross to net deductions were within normal ranges for the quarter. For the full year, we continue to expect VIVITROL net sales in the range of $380,000,000 to $410,000,000 Moving on to the ARISTADA product family.

Speaker 3

For the quarter, ARISTADA net sales increased 10% year over year to $80,100,000 primarily driven by underlying growth of 10% on a months of therapy basis. Inventory in the channel and gross to net adjustments were relatively stable for the quarter. And for the full year, we continue to expect ARISTADA net sales in the range of $315,000,000 to $345,000,000 LYVOLVI net sales for the quarter were $38,000,000 up 9% sequentially. Underlying prescription growth was 16%. End market demand grew at a faster pace than inventory in the channel, which explains the difference between these two growth rates.

Speaker 3

Gross to net adjustments in Q1 were 26.4%, primarily reflecting a continuation of disciplined contracting strategy in the commercial space. We continue to anticipate that gross to net adjustments will remain fairly stable In the high 20% range during the first half of the year and then may increase in the second half if we determine there's a benefit to contracting For the full year, we continue to expect LIBORVI net sales in the range of $180,000,000 to $205,000,000 driven primarily by strong underlying demand. Moving on to our manufacturing and royalty business. In the Q1, we recorded manufacturing and royalty revenues of $72,900,000 compared to $105,200,000 in the same period in the prior year. Royalties from sales of the long acting INVEGA products were $13,600,000 compared to $37,100,000 for the Q1 of 2022.

Speaker 3

This decrease was driven primarily by Janssen's partial The termination of the agreement related to royalties on sales of these products in the United States, which is a subject of our ongoing arbitration with Janssen. Revenues from VUMERITY were $28,900,000 compared to $30,600,000 in the same period in the prior And this decrease reflects the reduction in Biogen's end market net sales of the product. Turning to expenses. Total operating expenses were $335,100,000 for the Q1 compared to $305,100,000 in the same period in the prior year. R and D expenses for the Q1 decreased to $93,600,000 compared to $96,000,000 for the same period in the prior year, reflecting focused investments in the nembalukin clinical program, Lebolbi lifecycle management studies and our Orexin II receptor agonist program.

Speaker 3

SG and A expenses increased to 170 $4,500,000 from $145,100,000 for the same period in the prior year, Reflecting continued investment in the launch of Libolvi, including the start of the digital direct to consumer campaign, In addition to certain expenses related to the separation of the oncology business, our top line results Combined with our continued focus on disciplined operating expense management resulted in a GAAP net loss of approximately $41,800,000 and non GAAP net income of approximately $2,400,000 for the quarter. Turning to our balance sheet. We ended the Q1 with approximately $692,500,000 in cash and total investments And with total debt outstanding of approximately $292,600,000 we had a positive net cash position of approximately $400,000,000 As Rich noted earlier, a favorable resolution of the Janssen arbitration would further strengthen our balance sheet. Now today, we're reiterating our financial expectations for 2023 based on the solid performance of our commercial products and our continued focus on operational efficiencies. As a reminder, our financial expectations reflect the combined neuroscience and oncology business for the Full year as we work toward the planned separation, which we currently expect to complete in the second half of the year.

Speaker 3

And as I mentioned earlier, our financial expectations for 2023 do not yet reflect the potential upside that Favorable resolution of the Janssen arbitration is expected to provide. By way of a framework, we would to record the back royalties related to 2022 of $194,000,000 inclusive of interest as a lump sum, which would be adjusted out of our non GAAP net income measure due to the one time nature of that anticipated payment. Separately, For royalties earned related to 2023 net sales of the long acting Invega products, we would expect to record these as royalty revenues in the normal course. We estimate that this could be in the ballpark of approximately $250,000,000 of incremental royalty revenue worldwide over and above our current financial expectations for 2023 and would flow through to both the GAAP and non GAAP bottom line. So taking a step back, over the past several years, the company has done significant work to drive operational efficiency And calibrate our cost structure to appropriately support the company's strategic priorities and growth opportunities.

Speaker 3

Looking ahead, we believe that our core business is well positioned to achieve our current full year 2023 guidance, as well as the accelerated profitability targets we announced earlier this year. As we plan for the separation of the oncology business, We will maintain our focus on the strength and potential of the neuroscience business, which is characterized by its financial profile, the quality of its commercial portfolio and its potential for enhanced profitability and long term growth. And with that, I'll hand the call over to Todd.

Speaker 4

Great. Thank you, Ian, and good morning, everyone. I'm pleased to share that we delivered strong growth Net sales from the portfolio increased 25% year over year and were driven by double digit growth for each of our 3 brands, VIVITROL, ARISTADA We are particularly pleased with the strong continued uptake of Libolvi into oral antipsychotic market. So let's start there. During the quarter, Libolvi net sales were $38,000,000 Total prescriptions grew 16% sequentially to 33,000 TRxs for the Q1.

Speaker 4

As of the end of the Q1, nearly 24,000 patients have been treated with Libolvii since launch. At this stage of the launch, our focus continues to be on expanding prescriber breadth, which grew by 1700 prescribers to approximately 9,300 healthcare providers who had written a prescription since launch. As we outlined earlier this year, our Strategy for Libolvi in 2023 is focused on 3 key initiatives: growing prescriber breadth, further leveraging our access profile and building awareness for Libolvi. Our direct to consumer campaign will be a key factor in accomplishing these goals. DTC campaigns have been shown to be highly effective in driving brand growth in many therapeutic areas, particularly in psychiatry, where market research and prescribing patterns suggest that when patients request a specific brand from their healthcare provider, There is a high likelihood they will be prescribed the brand requested.

Speaker 4

Our DTC strategy is grounded in deep patient and healthcare provider insights, including immediate consumption habits as well as the significant opportunity of unmet need in schizophrenia and bipolar 1 disorder. Our goal is to drive awareness and uptake for Libolvi through execution of a broad differentiated campaign across multiple media channels, including digital and TV. The digital portion of the campaign was initiated earlier this year and is highly targeted Based on the media consumption patterns of people with bipolar 1 disorder and schizophrenia, early returns from our digital campaign have been encouraging as evidenced by The TV component of our DTC program will launch next week and will be focused on bipolar 1 disorder. The campaign is designed to drive high levels of awareness among patients, caregivers and healthcare providers. Market access continues to play an important role for Libolvia like all brands in the space.

Speaker 4

In Medicare and Medicaid, we currently have a pathway to access for all patients. On the commercial side, we have established a solid foundation. Looking ahead, we may look to strategically contract in the commercial space, Balancing volume and the profitability of each unit. We believe Libolvi is on a strong trajectory and look forward to sharing our progress with you. Turning to the ARISTADA product family.

Speaker 4

Net sales in the Q1 were $80,100,000 driven by TRx growth of approximately 10% year over year on a month of therapy basis. This performance was driven by ARISTADA's differentiated value proposition, including its once every 2 month dosing And ARISTADA INITIO initiation regimen, both of which are supported by clinical data from our ALPINE study. We are seeing encouraging signs of a continued market recovery for LAIs and believe that we are well positioned to continue to drive growth for the brand. ARISTADA and Libawi represent important treatment options designed to address the real world challenges patients face and supported by proven clinical efficacy. We believe this differentiated psychiatric portfolio together with our specialized commercial capabilities distinguishes Alkermes among healthcare providers, Treatment Systems and Payers offers a platform for potential future growth.

Speaker 4

Turning to VIVITROL, Net sales in the Q1 increased 14% year over year to $96,700,000 The alcohol dependence indication continues to be an important driver of growth and accounts for approximately 65% of the VIVITROL volume. Importantly, prescriber breadth for VIVITROL has continued to expand within the alco dependent indication, which has driven new patient starts over recent quarters. The trial in our VIVITROL and the litigation with TAVA took place in February Regardless of the outcome of this litigation, we believe the nature of the product and the complexities and dynamics of the market in which it is commercialized make Overall, we are very pleased with the performance of our commercial product portfolio in the Q1 and believe we are well positioned to achieve the goals we outlined for the year ahead. We look forward to updating you on our progress throughout the year. And with that, I'll hand the call over to Rich.

Speaker 2

That's great. Thank you, Todd. So at the beginning of the year, we outlined 3 strategic priorities, driving the ongoing launch of Libolvi, Advancing our Orexin program in narcolepsy and other hypersomnia conditions and executing on the planned separation of our oncology business. 4 months in, we're advancing on all three and believe that we can drive significant value for shareholders. As you just heard from Todd, we're executing our strategy for We've established a strong platform for growth.

Speaker 2

VIVOVI clearly demonstrates the power of Alkermes' science and the opportunity to leverage our commercial capabilities. I'm going to focus now on where we stand with the separation of the oncology business and the ALKS 2,680 orexin program. We believe the separation of the oncology business will reveal the value of our neuroscience business, which has come more clearly The separation is expected to yield a number of benefits for each business, including driving a sharp strategic focus, Simplifying capital allocation decision making and increasing each business' flexibility to pursue growth and investment strategies More directly aligned with their respective goals. We've made significant progress in the quarter toward launching what would become a new independent public company named Muirral Oncology Plc. Last week, we announced that we submitted a confidential draft Form 10 registration statement with the SEC.

Speaker 2

In addition, we recently submitted a request for a private letter ruling to the IRS to support the separation as a tax Free distribution to Alkermes' shareholders for U. S. Federal income tax purposes. Submission of the Form 10 and the PLR request represent 2 labor intensive and long lead time work streams in support of the separation. With these two initial submissions now in the review phase, we believe we'll be well positioned to We're also advanced in our process to identify and recruit senior management to lead Muero Oncology.

Speaker 2

We're pleased with the high caliber of candidates interested in the opportunity And we look forward to sharing updates with you about the CEO role and other key leadership positions as they develop. As a standalone company, we expect Miro Oncology will be an Investment anchored by the potential of nimvelukin, our novel investigational engineered IL-two variant that is a potential first in class cancer immunotherapy. Nemvelukin is the most advanced IL-two variant in development and is distinguished by data generated in the clinic showing antitumor activity as single agent monotherapy and in combination with checkpoint inhibitors. In addition, Muero Oncology would have a pipeline of preclinical immunotherapy candidates, Our engineered tumor target IL-twelve and the engineered IL-eighteen programs, both of which have been advancing preclinical development and represent attractive oncology targets. With a late stage asset and the potential to be the 1st in class medicine, preclinical pipeline assets and clear developmental milestones ahead, we believe the separation in the oncology business represents an attractive opportunity for oncology focused investors.

Speaker 2

So shifting the focus back to Alkermes. Following the planned separation, we expect Alkermes to become a leverage our commercial capabilities in complex addiction and psychiatry markets with strong top line Driven by the growth of our proprietary products, a specialized commercial infrastructure and proven drug development capabilities, the standalone neuroscience business We represent a significant opportunity to capture operating leverage, drive growth and profitability and advance new potential medicines for neurological disorders. So on that final point, let's spend some time on the Oraxin program. We're certainly aware of the intense investor interest in this area. So I'm going to give you a bit more detail than we might usually for a Phase 1 program.

Speaker 2

Our lead molecule is called ALKS2680. It's a small molecule orexin 2 receptor agonist Designed as a once daily oral tablet for the treatment of narcolepsy. During the quarter, our team made important progress in the ongoing Phase 1 clinical trial. With compounds of this type, early clinical data is highly informative, which is why we've structured the Phase 1 program with several components. A single ascending dose study followed by multiple ascending dose study in healthy volunteers and a Phase 1 proof of Phase 1b proof of concept study in patients.

Speaker 2

Structured this way, we can expeditiously cross multiple stage gates related to single and multiple dose safety and tolerability, pharmacokinetics and pharmacodynamics early in the program. To date, we've successfully advanced our single ascending dose study to doses that exceed our expected therapeutic dose range. In the multiple ascending dose study, we've now cleared sufficient dose levels, which we believed will be therapeutically relevant in narcolepsy to trigger the initiation of the Phase 1b proof of concept cohort in patients. In our single ascending dose work, All doses were well tolerated and we did not observe any dose limiting toxicities. In addition to these early indicators of tolerability, The pharmacokinetic profile of ALKS 2,680 has been consistent with our modeling, which is encouraging and important given the desired time course of therapeutic effect with a goal of promoting wakefulness during the day and sleep consolidation at night.

Speaker 2

In the multiple ascending dose study, Tolerability of profile of 2,680 as well as to collect additional pharmacokinetic and pharmacodynamic data and this study is proceeding as planned. Taken together, data from the single and multiple ascending dose cohorts have provided initial confirmation of ALKS 2,680's PK profile, dose response and potency and provide encouraging signals that is driving central activity based on EEG and other clinical signs. These data are highly informative and allow us to streamline the design of the next critical phase of the development program, which is getting The endpoints, including EEG based maintenance of wakefulness tests in patients with narcolepsy type 1, narcolepsy type 2 and idiopathic hypersomnia. In a crossover design, subjects will act as their own control and receive single doses of multiple dose levels as well as a placebo with a washout period in between. With a small number of subjects per cohort, we believe this approach will allow us to efficiently assess We're poised to commence subject enrollment in this cohort in the coming weeks, Following clearance from ethics committee and continue to expect data from this Phase 1b later this year.

Speaker 2

The market opportunity, The strong biological relevance of the orexin pathway, the early target validation work done across the space, all these underpin the high level of excitement While expeditiously advancing this program, I'm going to end there. This is an exciting time at the company. We believe that the business is on the right track to create significant value We're confident in our strategy and we'll remain sharply focused on executing on our strategic priorities. I look forward to sharing continued progress with you over the course of the year. With that, I'll turn it back to Sandy to run the Q and A.

Speaker 1

Thank you. We'll open the call for Q and A now, please.

Operator

Thank you, Sandy. At this time, we'll now be conducting a question and answer session. We ask you please limit yourself to one question and one follow-up. One moment please while we poll for questions. Thank you.

Operator

Thank you. And our first question is from the line of Akash Tewari with Jefferies. Please proceed with your question.

Speaker 5

Hey, thanks so much. So on the Orexin, your math study started in Feb. Can you go over how many dosing cohorts you've tested at this point from an exposure perspective? And if you've crossed levels that you think are therapeutically efficacious in narcolepsy and IH and have you seen any evidence of metabolite Accumulation at this point. And just on Libolvi, you grew 16% quarter over quarter on TRx, but sales grew 9% Heading into Q2, consensus is baking in 19% sales growth.

Speaker 5

Does that seem doable given gross to nets are likely set to worsen as we get deeper into Q into 2023? Thank you.

Speaker 2

Good morning, Akash. It's Rich. I'll start then I'll hand it to Todd. The Orexin program, as you can tell from my earlier remarks, is really rolling now. I'm not going to give specific information on the varistose levels other than to say I think the program now encompasses over 60 subjects and between the SAD and the MAD and we are Above doses that we think are therapeutically relevant for narcolepsy.

Speaker 2

And that's encouraging. That's why We're really pleased to see the PK disproportionality, tolerability, all those things. With respect to metabolite profile, it says as we would have anticipated, we've been able to The principal metabolites and we feel comfortable with where we are with that.

Speaker 4

Yes. And I'll just pick up on LYVOLVE The first thing is we're not going to guide on the quarter for Q2.

Speaker 6

But what I would say

Speaker 4

is that we are really pleased with the uptake of Libavvy. New patient starts, new prescriptions, TRxs. As we said on the call, TRxs grew 16% Quarter over quarter, we really believe that's a result of strong demand growth based on our expanding prescriber universe, which is growing quarter over quarter, and it's very supportive of the market research that we hear from ACPs as well. So we expect that to continue.

Operator

Thank you. Our next question is from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your questions.

Speaker 7

Hi, thanks for taking my questions and congratulations on the progress. Maybe firstly for me, DTC TV campaign ahead of contracting. And how should we think about the initial effectiveness of it and the interplay between

Speaker 4

Yes, absolutely. So as I said, we're really excited about the launch of our the TV portion of the consumer campaign, which will actually kick off next week. It's a broad campaign, the TV portion. It's meant to be supportive of the earlier launch we did with our digital component. We've been planning for this For a number of years, we've got deep patient insights, HCP insights.

Speaker 4

We really understand what patients are looking for and we've tested this with an enormous amount of actual patients and they responded very well to them. Market access is in a good position at this point. Medicare, Medicaid, there is a pathway to access for the majority of patients in the commercial space. We're seeing encouraging trends across all three segments. So we have utilization across all three segments and Market access in today's U.

Speaker 4

S. Healthcare environment is broader than just contracting. It's providing a pathway to access. It's Providing support services, it's pushing through access, it's also pulling through access and we're seeing good utilization. As you know, as we've talked, we have a lot of support services available.

Speaker 4

We're seeing a very high utilization of our prior of our PA program. We're seeing a high utilization of our co pay program. And physicians and HCPs in this space are used to navigating complexities of market access. They know how to get these products and all of the products are somewhat treated very similarly. So we think we're in a good spot With where market access is, patients can get access to the product.

Speaker 4

Our strategy, as we've been planning for a number of years, as I said earlier, Seize our campaign. They like the campaign. They will ask HCPs about the campaign. And there's a very high likelihood that their request be granted, so we're excited about that.

Speaker 7

Great. Thanks so much. And just on the follow-up, just given the news on the Spin, can you just update us on the latest on the alternative dosing for Nembilukin alfaD? Do you expect to make that data public ahead of the spin? Thank you.

Speaker 2

Hey, Brandon, it's Rich on that. That's happening primarily in a study called ARTISTRY 3, which is looking at less frequent IV dosing regimens, Including once every 3 week cycle and twice in a 3 week cycle. We're accumulating data in those cohorts right now. We will present those data as they mature. And I don't have a specific sense right now of what that looks like over the course of the year, but we can get back to you on that.

Speaker 7

And the subcu dosing, Rich?

Speaker 2

Subcu is still underway. I think the team's belief right now is that the less frequent IV We'll probably be a preferred route versus the subcu, but we can't say that definitively. I think for some of these cytokines and you've seen from the previous data, we've seen Original response data with subcu presentation, we see pharmacodynamics through subcu presentation. The question with subcu presentation would be durability of that Because one of the hallmarks of the IL-two pathway has been when people respond, we get these nice durable responses. For Proleukin originally, Same story.

Speaker 2

It was active subcu, but it wasn't as durable. So that's what we're testing in the clinic as well.

Speaker 7

Great. Thank you very much and congratulations on all the progress.

Speaker 2

Thank you.

Operator

Our next question comes from Umer Raffat with Evercore ISI. Please proceed with your question.

Speaker 8

Good morning, guys. Thanks for taking my question. I have 2 here, if I may. First, Richard, can you remind us what's the key clinical readout you guys will get visibility on in your Ovarian study for nembleukin as well as for the melanoma study, this Phase 3 trial I'm sorry, the Phase 2 trials. And to what extent would those readouts determine whether or not you are absolutely moving forward with the spend?

Speaker 8

Point number 1. The second one is, can you speak to the e flux ratio on your orexin molecule and how that compares versus

Speaker 2

Recognize that the so the punch line to your question on the clinical trial is that we're going to spin While both Artistry VI and Artistry VII are still underway and blinded. So the key variable for us Prior to spin is enrollment rate. As we determined where we stand in the overall enrollment, that will help us measure the amount of time we think We will need before we get to turn those cards over to inform how we capitalize the spin. But spin should happen in the Q3 timeframe. Enrollment in ARTISTRY seven and ARTISTRY six will be underway.

Speaker 2

ARTISTRY seven, the ovarian study is a multi arm study That has all the appropriate controls that you would expect in a registration enabling study. So it's a very well designed Appropriately controlled study that will lead. That's why we described it as a registration enabling study. I won't comment on the numerical e flux ratio with respect Obviously, it raises a really important point though with respect to these molecules and why I think all of them each of them are going to be different. It's not just about potency as an irrefin-two receptor agonist, it's about its effective half life and its effective target engagement In the human body over time over the course of a day.

Speaker 2

That's what happens as you take the tablet orally, how it gets into the bloodstream, how it crosses Blood brain barrier, how it gets into the brain, how it reaches the target concentrations at the target neurons and then how long it stays there and whether It's a substrate for any other types of pumps or other eFlex mechanisms. All of that stuff has been taken into consideration as we design 2,680. But as I always say, none of it matters until you get into the species of interest, which is humans. And now with the Phase 1 work as well along as it is now, we're excited to actually get into MT1 patients, which is the next step and All systems are go leading into that.

Speaker 8

Richard, if I may clarify, I'm thinking back and maybe I'm not recollecting properly. I recall we had discussed there will be potential interim looks ahead of the spin on the oncology side. Are you saying there's a I just want to make sure I understand it the right way because I thought that was a trigger to move forward with the spin.

Speaker 2

We have an ongoing data safety monitoring board with respect to Onoma study that looks at futility and risk benefit and we continue to pass those hurdles.

Speaker 9

Got it. Thank you.

Speaker 2

You're welcome. I'm looking to Sandy to make sure that's an accurate statement.

Speaker 1

Yes, that's right.

Speaker 2

Okay, good.

Operator

Our next question is from the line of Chris Shibutani with Goldman Sachs. Please proceed with your question.

Speaker 10

Thank you very much. Good morning. On 2,680, As I think about how we should be interpreting the data that you'll have Phase 1b proof of contact across the different subtypes of patients in T1, I think the expectation is that potentially the potency or dosing level would be different for ND2 and IH. It seems perhaps that Can you help us understand how you're thinking about your positioning of your development plan and whether ultimately next steps may be to pursue

Speaker 2

Because please don't misinterpret any of our comments that we're emphasizing IH over narcolepsy, if anything is the other direction, particularly in the wake The IRA, I think that this orphan indication has a single indication. Narcolepsy is really attractive because it's an orphan indication, but it's a Orphan indications spanning NT1 and NT2. So if anything, I think that our focus is more likely to cone down into the narcolepsy indications rather Then the IH and excessive daytime sleepiness indications, which we will pursue as this biology gets more clearly elaborated with additional I mean, we're not done here by any stretch of imagination in the lab. We see 2,680 as the first embodiment focused on narcolepsy given a certain PKPD potency profile, but if this is really central to the sleep wake access and that circuitry is more elaborated, there's other drugs to be developed here. But for the purposes of 2,680, the Phase 1b proof of concept study is going to focus first on NT1 That's the core of the bullseye, then we'll enroll the NT2 patients and the IH patients.

Speaker 2

You're right, we expect dosing differential based on previous clinical work that's been done by others between NT1 and NT2, but that's why potency is such an important variable. If you think that you could go as high as Several fold higher into NT2 versus NT1, you want to start with as low a potent as high a potency Drug in NT1 as you can get. And so far based on the modeling and the work we've seen in the clinic so far, the data are consistent with our hypothesis going in. That makes

Speaker 4

sense. Great.

Speaker 10

And then yes, no, that makes sense. And then as a follow-up, a broader strategic question, given all the progress that you're making with separating the company, Alkermes is domiciled in Ireland and the revenue in the commercial footprint has always been significantly, if not entirely in the U. S. As you think about the neuroscience business portfolio and particularly with the potential to expand with 2,680, which has certainly vast potential market opportunity, Can you talk through the pros and cons and how you and the management team and the Board are thinking about ultimately aspiring to be more on the global commercial presence? And if so, how might you do that?

Speaker 2

Yes, it's another good question, Chris. So Alkermes Plc will remain an Irish top coat company with significant operations in the U. S. And in Ireland, but we have a really strong foundation for expansion ex U. S.

Speaker 2

Interestingly, our psychiatry portfolio ARISTADA, VIVITROL And Livalve to some extent really didn't have great opportunities outside the U. S. Given the reference pricing in those markets. 2,680 is a completely different story. I mean, that's absolutely a global product and we think about it as such.

Speaker 2

And so our registration strategy and our teams now are working through The strategy for a global presence. Given the size of the market on the order of a couple of 100,000 patients in the U. S. And about 3,000,000 worldwide, It's very tractable for a company with our infrastructure to go after an OUS presence with respect to 2,680. So we'll give you more information on that as it evolves.

Speaker 10

Great. Thanks for the comments.

Operator

Our next question is from the line of David Amsellem with Piper Sandler. Please proceed with your question.

Speaker 6

Hey, thanks. So just a couple. So on Libolvi, you had talked about potentially A widening gross to net in the second half of this year to the extent that there is new commercial contracting. In the past, You sounded more certain that there will be a wider gross net due to the impact of commercial contracting. So is there anything that's Sort of changed in your discussions with commercial payers that has driven The revised commentary, somewhat revised commentary, if you will, that's number 1.

Speaker 6

And then secondly, as you think about The cash that's coming in by the Janssen win, can you talk about the to which that could be used to seed the oncology business? And just also generally, you mentioned strategic purposes, how are you thinking about use of capital broadly to build out the neuroscience pipeline? Thank you.

Speaker 4

Yes. I'll start first with Lebovie market access. I think the way to think about this, what we've been thinking about this is, the market across all three of those channels. I would say nothing's changed to your question. We are strategically managing growth to net to Our plan is to continue to determine over time if we need to change our access position within commercial.

Speaker 4

So we're actively discussing in discussions with all of the commercial payers regarding the future of Libavvy. And if We do make a decision that we need to change that profile. Our plan is to do so over time and we'll keep you informed as things progress. But to your question, nothing has changed.

Speaker 3

And then on the incoming cash, assuming the final award reflects the interim awards, With respect to the oncology business, it would certainly be helpful in seeding the oncology business. That's not to say we would change the amount That we believe the oncology business needs in order to reach its next data inflection point, which has always Being tied to the level of funding that we provide. And then with respect to items beyond that, the cash is obviously Strategic assets, and we could look to potentially augment the pipeline or further leverage the commercial infrastructure With appropriate products at some point into the future, but we'll provide more information as things materialize in that direction.

Speaker 6

Thank you.

Operator

Thank you. Our next question is from the line of Paul Matteis with Stifel. Please proceed with your question.

Speaker 11

Thanks so much. I appreciate it. I wanted to ask a question on the Balbi and your full year guidance. If you assume that the sequential script growth declines even a little over the next handful of quarters, say 1% to 2%. Even at stable gross to net, you get closer to the low end of your guidance.

Speaker 11

So I wonder if that's a realistic way to think about this Or whether part of the assumption here is that the DTC is going to actually boost demand growth relative to what we just saw sequentially or whether 1Q was maybe just kind of a lighter quarter for various seasonality reasons? Thank you.

Speaker 4

Yes. I'll take that question as well. Our guidance has a range of scenarios As we discussed earlier, from demand, gross debt and so forth, we are very encouraged With what we're seeing, we Q1 the story for Q1 was a demand story, up 16%. We've been at this launch now for approximately 18 months. We continue to see strong uptake And expansion of breadth of utilization, that's probably the best metric that we're watching at this point.

Speaker 4

We fully believe that Building awareness through a direct to consumer campaign will also support our demand aspirations over time. Typically what you see with broad campaign such as this and other categories and also in psychiatry is it usually takes about 6 to 12 months To actually see some type of inflection, we think it will be gradual overall. And so we do believe that this is going to support the long term growth aspirations that we have for the brand, but we're encouraged right now and we think this is about expanding prescriber breadth, building awareness and seeing the demand continue to grow quarter over quarter. And I'll just reinforce again, as Ian said earlier, we Reiterating our guidance today, our range and we're confident in what those ranges are.

Speaker 11

Can you say anything about what the top end of your guidance Would assume or what would have to happen?

Speaker 4

No. At this point, I mean, we provided the outlook. It's We've looked at a range of possibilities from market access demand also with direct to consumer. So we're comfortable with where that range is right now. Okay.

Speaker 4

Thanks.

Operator

Our next question is from the line of Jessica Fye with JPMorgan. Please proceed with your question.

Speaker 12

Hey, guys. Good morning. Thanks so much for taking the questions. Just a couple on LYVOLVY. Can you remind me of the payer mix Between government and commercial in the bipolar market.

Speaker 12

And can you elaborate on what you mean by a pathway to access in commercial? Where does commercial coverage stand? And specifically, I guess, how could the quality of access be improved via contracting? And then I have one follow-up on the Erection.

Speaker 6

Yes, absolutely.

Speaker 4

So overall, what you see across the category, Across all the channels is typically it's broken into thirds, about a third commercial, a third Medicaid, a third Medicaid. You see a little bit of a change within the bipolar space. There's a little bit more commercial and also a little bit more Medicaid and a little bit less Medicare. So The bipolar market is typically categorized by commercial and Medicare. We think about a pathway to access is It's broader than just gross to net and doing contracting as well.

Speaker 4

And that's really the dynamic in the And I'll keep in mind that it's a very large generic market. All of these products, All of the branded products have to step through generics. So that's not different for what Libolvii is facing. And providers and HCPs in the U. S.

Speaker 4

Are very comfortable with managing medical exceptions, Prior authorizations and steps there. So our goal right now is to make sure that we're balancing and managing the Access profile that would be across commercial Medicaid and Medicare along with the programs that HCPs and patients would need to be able to get access. And we also look very closely. We do a lot of research with patients and also with providers. And we hear really consistently That HCP is perceived that Libolby's formulary access is on par with branded competitors.

Speaker 4

And we see that in terms of The access that's happening within the marketplace at large. Over time, we'll continue to watch what's happening in Commercial space, we watch product we watch our NDC block lives. We also have a number of lives that have open access. And so it's not a stagnant market, I can tell you that. It takes a lot of focus and attention and we put a lot of And so overall, we're going to be managing our growth to net.

Speaker 4

It's a big strategy for the company, making sure that we have the right access profile All the support that the long term growth aspirations and so we're in a good place with that right now. We have a solid foundation.

Speaker 12

Okay. Thanks for that. And then for the Orexin, thanks for the additional color in prepared remarks. Should we expect a more detailed update on the SAD and MAD results prior to learning the Phase 1b results later this year?

Speaker 2

Jessica, it's Rich. I think that what we're trying to do Is move as quickly as we can and being mindful of some of the major scientific meetings that occur in the fall, what the late breaking Status would be, so we'll try to present as much data as we can comprehensively in scientific fora rather than just via press release. But I think that the primary goal right now is to finish off the SAD, MAD, Get the Phase 1b data, particularly with respect to the NT1 cohort as fast as possible, so that we get a real sense of the clinical profile of the drug and then we'll present those data as rapidly and as comprehensively as we can.

Speaker 1

Great. Thank you.

Operator

Our next question is from the line of Uyghur with Mizuho. Please proceed with your question. Thanks.

Speaker 4

Good morning, guys. Thanks for taking my question. I know you probably can't say much, but could you sort of just walk us through sort of what needs To or at least the procedure for the arbitrations in order to sort of get The interim awards finalized, is there anything else? Should we expect additional interim awards? So that's the first question.

Speaker 4

I guess my follow-up question is, can you tell us like how much of the royalties come from TRENZA and HAPURA? Thanks.

Speaker 2

Good morning, it's Rich. The arbitration procedures has proceeded in a really deliberate and careful way And we have a lot of respect for the way the panel is conducting itself because essentially they're giving the parties the opportunity to brief and make sure that the voices Both sides are heard throughout the process. So the 1st interim award in January, as I mentioned, ticked off the central issue, which The ability for Janssen to continue to sell the products without paying us a royalty. That was adjudicated in our favor. The next question was then okay, let's start seeing how that applies directly to the various products and the terms of those And that's what we just learned in the 2nd interim award.

Speaker 2

The numerical quantification of 2022 And then what 2023 looks like and the fact that each of the 3 products are being treated independently with different terms. That's check, check, that's now. In the 2nd interim, the panel came back and said the parties have 21 days to alert the panel whether there's any other things they want the panel, we want the panel To opine on. So we're nearing the end of the runway here. I think that this is coning down now to the any remaining issues.

Speaker 2

From Alkermes' perspective, we don't see any outstanding issues. We'll wait to see if J and J has any other outstanding issues, but I think we're approaching the final award.

Speaker 3

And then with regard to TRIMSA and HAPAIRA, this is based on IQVIA data in the U. S. We would estimate that somewhere between 20% to 25% of volume is on a month of therapy basis is related to TRINZA and HAPIERA.

Speaker 4

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Jason Gerber with Bank of America. Please proceed with your question.

Speaker 9

Most of my questions have been asked, but I'll ask a couple. Rich, in the past, just thinking about the whole VIVITROL generic threat and whatever shape it takes, you've talked about a lot of the commercial challenges to Making or selling a generic of VIVITROL. Given the shift of the business to alcohol, I'm wondering is this becoming more of a conventional channel product versus When there was more of an opioid component to revenue and starts were occurring in prisons and addiction clinics, maybe it was a harder product commercially to reach. So Just wondering if there's any change that's noteworthy there. And then just as a follow-up, your comment about IRA and the orexins Got me thinking, obviously, 2 indications you lose the orphan drug shield.

Speaker 9

Have you thought about adjudicating 2 different NCEs in the orexin space, one for narcolepsy and one for IH. Thanks.

Speaker 2

Yes. To the second question, absolutely, yes. I mean, that's what I think I was saying earlier, Jason. I think this Whole pathway is so important and fundamental to awake, the sleep wake cycle and I think Our first embodiment is 2,680, but we're already thinking about other ways of engaging that pathway. I wish VIVITROL became more conventional with the advent of the alcohol side.

Speaker 2

It remains and I'll let Todd comment. These are definitely Different settings of care than your classic medical setting. So it remains incredibly idiosyncratic and incredibly bespoke With still a large overlay of public policy and government intervention in the way that patients get treated, but I'll talk

Speaker 4

Yes, let me just I'll add to that. When we think about VIVITROL right now, 65% of the contribution of the volume is coming from alcohol dependence. We're hitting all time highs with utilization for alcohol dependence. At this stage in the life cycle, we're actually hitting all time highs with Prescriber and account breadth as well and there's a very high receptivity to the stores of VIVITROL for alcohol dependence. It's not a typical retail product.

Speaker 4

And so we've done a lot of models, looked at analogs as well too. And Our expectation is that regardless if there was a generic injectable naltrexone Coming into the marketplace, we don't believe that it would resemble a low cost, small molecule erosion. And it really comes down to Kind of what Rich said as well too. It's a complex market overall. And the way to think about the complexity of the market is there's various settings of care.

Speaker 4

It's just not one setting of care that you have to be able to commercialize. There's various payer dynamics and there's also various fulfillment Channels as well too, which is different than your typical retail products. So we think it's really complex actually the product attributes, but The actual commercialization attributes. So we don't see this as a typical generic erosion.

Speaker 9

Okay. Thanks guys.

Operator

Thank you. Our next question is from the line of Mark Goodman of SVB Securities. Please proceed with your question.

Speaker 13

Mitch, obviously BD must be pretty important to you and I know that you're probably out there looking pretty actively for new molecules. Can you just talk about The landscape right now, I mean, do you feel like some of these smaller companies are capitulating on valuations? Are you closer this year than last year on bringing in some new assets from the outside?

Speaker 2

Thanks. Hey, Mark, it's Rich. Yes, I think that there's you would have characterized this area as being Not very fertile for business development a couple of years ago, and I think it's getting more so. And the cost of capital for small companies is helping. I must say, we've not been rabid about expanding the pipeline and the R and D Spend over the last couple of years being so focused on the launch of Libolvii and getting the Orexin program and its Derivatives and other things in the labs that we haven't discussed moving along.

Speaker 2

So we've been in a nice position where we feel like there's enough in the pipeline They're looking at things from late stage commercial things all the way through to things at ideation. They are consistent with our scientific But stay tuned. I mean, we feel like as the neuroscience company spins, it will want to augment its pipeline, but we want to do so in a really cost

Speaker 13

And Orexin derivatives, is that referring to the previous question about Potentially having multiple orexins for the different channels of with cataplexy, without cataplexy, IH, that kind of thing?

Speaker 2

Yes. And there's a lot to be done as we figure out how to create these small molecule orexin receptor agonists That I think thinking that the full embodiment it would be in the first drug is probably naive. So we want to make sure we're ahead of the curve on that.

Speaker 1

Okay. Thanks, Mark. I think we have time for one more question.

Operator

Hi. That question comes the line of Douglas Tsao with H. C. Wainwright.

Speaker 10

Hi, good morning. Thanks for taking my questions.

Speaker 7

Just Most of my questions

Speaker 10

have been asked and answered. But just in terms of the DTC campaign, I'm just curious, do you expect to have a greater impact on the demand for bipolar indication? Or do you think it would have more impact on the schizophrenia indication? Thank you.

Speaker 4

Yes. Doug, the way we think about that is it works together. The powerful thing about Libavvy is We have a very broad indication, which is not typical for a launch product in the category. What we've learned over the 1st 18 months is this is totally an efficacy driven market. And that's how really LYVOLVIA is differentiated.

Speaker 4

So we believe that we have a campaign that is differentiated. We know the media consumption patterns of patients with schizophrenia and bipolar. We know what their habits are. The initial launch of our digital program was really focused specifically on schizophrenia and bipolar. With the TV component of this, the bipolar is a very large market opportunity.

Speaker 4

There's a lot of switching within the marketplace. Patients switch therapies anywhere between 5 to 7 times over their span. So we know this is a large switch opportunity. So this program overall actually works Together you have the digital component that hits both indications, but then we're really going to activate the bipolar patient through TV.

Speaker 10

Okay, great. That's very helpful.

Speaker 1

Good. All right. Well, thanks everyone for joining us on the call today.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Earnings Conference Call
Alkermes Q1 2023
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