Alkermes Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 1, 2024

There are 13 speakers on the call.

Operator

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

Good morning. Welcome to the Alkermes Plc conference call to discuss our financial results and business update for the quarter ended March 31, 2024. With me today are Richard Pops, our CEO Blair Jackson, our Chief Operating Officer and Todd Nichols, Chief Commercial Officer. During today's call, we will be referencing slides. These slides, along with our press release, related financial tables and reconciliations of the GAAP to non GAAP financial measures that we'll discuss today are available on the Investors section of alkermes.com.

Speaker 1

We believe the non GAAP financial results in conjunction with the 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 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 update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments.

Speaker 1

After our prepared remarks, we'll open the call for Q and A. And now I'll turn the call over to Blair for a review of our quarterly financial results.

Speaker 2

Thank you, Sandy. Over the past 2 years, we've been executing a plan to streamline our business and drive the growth of our proprietary products, our pipeline and our profitability. We entered 2024 as a pure play neuroscience company with the top line driven by VIVITROL, ARISTADA and LYBALVI. Our 2024 financial expectations provided in February assumed Q1 seasonality followed by growth in the Q2 and beyond. This continues to be our expectation and today we are reiterating our 2024 financial guidance.

Speaker 2

Our first quarter performance reflects continued year over year growth of our proprietary product portfolio net sales, investment in Libolvi and advancement of the ALKS 2,680 development program, as well as our ongoing focus on efficient management of our cost structure to drive profitability. We're in a strong financial position and confident in the growth opportunities ahead of us. For the Q1, we generated total revenues of $350,400,000 driven by our proprietary product portfolio, which grew 9% year over year. This top line result also reflected the impact of a combined $10,200,000 drawdown of inventory in the channel for our 3 proprietary products. Starting with VIVITROL, net sales in the quarter were $97,700,000 driven primarily by the alcohol dependence indication compared to $96,700,000 in the same period last year.

Speaker 2

For the ARISTADA product family, net sales were $78,900,000 for the Q1 compared to $80,100,000 for the same period last year. For Libolby, consistent with the expectations we outlined in February, net sales during the quarter were fairly flat sequentially at 57 represented 50% year over year growth. Gross to net adjustments were stable sequentially. Moving on to our manufacturing and royalty business. In the Q1, we recorded manufacturing and royalty revenues of $116,800,000 compared to $72,900,000 for Q1 last year.

Speaker 2

Revenues from the long acting INVEGA products were $62,700,000 compared to $13,600,000 for Q1 last year, reflecting the reinstatement of royalties related to these products in the Q2 of 2023. Revenues from VUMERITY were $31,300,000 compared to $28,900,000 for Q1 last year. Turning to expenses. Following the separation of our oncology business last year, expenses associated with the oncology business are considered discontinued operations. Today, I'll focus on results from continuing operations as those results are more relevant to the financial profile of the company going forward.

Speaker 2

Our Q1 results reflect slightly elevated operating expenses driven by the phasing of certain investments in clinical development, commercial support activities, labor related costs and recognition of certain share based compensation expenses. We expect the total operating expenses will decrease sequentially throughout the remaining quarters of the year. Cost of goods sold of $58,600,000 were flat compared to $58,200,000 for Q1 last year. R and D expenses were $67,600,000 compared to $63,800,000 for Q1 last year. This reflects focused investments in our neuroscience development programs, primarily related to the ALKS 2,680 clinical program and support activities for our proprietary commercial products.

Speaker 2

We expect R and D expense to decrease by approximately $10,000,000 in Q2 and then remain relatively steady at that level through the end of the year. SG and A expenses were $179,700,000 compared to $167,800,000 for Q1 last year, primarily reflecting continued investment in the launch of Liboldi. Looking ahead, we expect phased investments in selling and marketing initiatives to remain fairly consistent in Q2, followed by decreases in the second half of the year, reflecting the timing and mix of promotional activities. Within our non cash expenses across R and D and SG and A, we recorded $3,200,000 $6,200,000 respectively of non recurring share based compensation expenses during the Q1 related to the achievement of certain performance award criteria. We continue to focus on driving profitability and during the Q1 we delivered GAAP net income from continuing operations of $38,900,000 non GAAP net income from continuing operations of $76,200,000 and EBITDA from continuing operations of $51,500,000 reflecting significantly enhanced profitability year over year, primarily driven by the growth of our proprietary commercial product portfolio, the separation of the oncology business completed during the Q4 of 20 23 and our continued focus on operational efficiencies and disciplined expense management.

Speaker 2

Turning to our balance sheet. We ended the Q1 in a strong financial position with $807,800,000 in cash and total investments and total debt outstanding of $290,100,000 Additionally, we expect to close the sale of our Athlone, Ireland manufacturing facility to Novo Nordisk within the next day or 2. In connection with the closing, Alkermes will receive a one time cash payment of approximately $91,000,000 This transaction represents a significant element of our multiyear program to drive operational efficiency and further align our infrastructure and cost framework with the anticipated needs of our business. Taking a step back, our Q1 results were largely consistent with our expectations and we believe provide a solid foundation for growth through the rest of the year. We expect top line growth to accelerate into the Q2 and are pleased with our trajectory thus far.

Speaker 2

We remain focused on disciplined management of our expenses and expect enhanced profitability as we move through the remaining quarters of the year. With that, I'll now hand the call to Todd.

Speaker 3

Great and thank you, Blair. Good morning everyone. In the Q1 net sales from our proprietary product portfolio grew 9% year over year, even with meaningful reductions in inventory in the channel for all three products. As we enter the Q2, we are reiterating our 2024 financial expectations for each of our 3 proprietary products, Libolvi, ARISTADA and VIVITROL. Starting with Libolvi.

Speaker 3

During the Q1, we generated net sales of $57,000,000 which was relatively flat sequentially compared to the Q4, consistent with our expectations. Total prescriptions of approximately 49,600 during the quarter reflect underlying prescription growth of 6% sequentially and 50% year over year as well as continued expansion of prescriber breadth. This growth in demand was partially offset by a decrease in inventory in the channel equal to approximately $2,300,000 During the Q1, Libavvy continued to be the fastest growing oral brand in the market on a prescription basis. Optimizing Libalbi's access profile is an important element of our long term growth strategy for the brand. Payer coverage across Medicare and Medicaid is established with most patients having a pathway to access.

Speaker 3

For the commercial payer channel, our disciplined contracting strategy is playing out as we seek to maximize net sales of LYVOLVI while expanding patient access. We recently enhanced the access profile for LYVOLVI through selective contracting with a large pharmacy benefit manager to improve formulary positioning. This contracting is not expected to significantly impact our anticipated gross to net adjustments this year. We have additional opportunities to further enhance commercial payer access for patients and believe we are well positioned to continue to execute our strategy. For the full year, we continue to expect evolving net sales in the range $275,000,000 to $295,000,000 Turning to the ARISTADA product family.

Speaker 3

Net sales in the Q1 were $78,900,000 reflecting pronounced seasonality in prescriptions and a substantial decrease of inventory in the channel equal to approximately $3,600,000 We expect inventory levels to approach more normal levels in the 2nd quarter. We continue to focus on highlighting ARISTADA's differentiated features and supporting clinical data. For the full year, we continue to expect ARISTADA net sales in the range $340,000,000 to $360,000,000 Moving to VIVITROL, net sales in the Q1 were $97,700,000 reflecting normal seasonal trends in patient flow and a decrease of inventory in the channel equal to approximately $4,300,000 VIVITROL performance continues to be largely driven by the opportunity to alcohol dependence indication, which currently accounts for approximately 75% of VIVITROL volume. Alcohol dependence is an important growth opportunity and our team is energized about driving awareness and uptake in that underserved disease area. Looking ahead to the full year, we continue to expect VIVITROL net sales in the range of $410,000,000 to $430,000,000 With the Q1 now behind us, we have a solid foundation for growth into the 2nd quarter and the second half of the year.

Speaker 3

For all three of our products, inventory levels have started to rebound in recent weeks and prescription growth has been in line with our Q2 expectations. Our commercial team is focused on execution across our portfolio and we look forward to sharing our progress. With that, I will pass the call to Richard.

Speaker 4

Good. Thank you, Todd.

Speaker 5

Good morning, everybody. Alkermes is now a profitable pure play neuroscience company with an advancing pipeline. This profile drives our objectives for 2024, commercial execution, advancing ALKS 2,680 in the clinic and expanding our development pipeline. Blair and Todd covered the financial and commercial elements. Mean to spend a few minutes on recent developments within our R and D pipeline, particularly ALKS2680, our novel once daily oral orexin 2 receptor agonist in development for narcolepsy.

Speaker 5

Starting with our progress in narcolepsy type 1 or NT1. Based on the biology, the core of the ALKS 2,680 development program is in NT1, which is associated with an absence or significant deficiency in orexin levels. We are moving quickly in this indication. Last year, we generated important proof of concept data in patients with NT1. Based on the compelling initial data from our first four patients, we made the decision to accelerate the Phase 2 planning.

Speaker 5

Toward year end, the data from the full NT1 cohort of 10 patients reinforced our conviction in that decision. So we entered 2024 with work well underway to finalize the Phase 2 protocol, manufacture clinical supplies of the Phase 2 dose strengths, interact with FDA and clinical study sites and investigators. These activities culminated in the recent initiation of Vibrance 1, a Phase 2 randomized placebo controlled multinational study, which we announced last week. Vibrance 1 is planned to enroll approximately 80 subjects, randomized to single daily doses of either 4, 6 or 8 milligrams of ALKS 2,680 or placebo over a 6 week double blind treatment period. Data from this study will further characterize the safety and efficacy profile of ALKS 2,680.

Speaker 5

Utilizing well established efficacy endpoints, including the maintenance of wakefulness tests or MWT, Epworth Sleepiness Scale and weekly cataplexy rates. We expect the study will take approximately 1 year to fully enroll. As we gain more experience with clinical site initiations and patient enrollment trends, we'll look to put a finer point on the timelines. As we launch this Phase 2 study, we're also looking forward to sharing additional data from the full NT1 cohort from the Phase 1b study with the clinical community at the Sleep 2024 meeting in June. These data will include safety, tolerability and MWT improvements for the full cohort of 10 patients as well as our first presentation of improvements in subjective levels of sleepiness as measured by the Karolinska Sleepiness Scale or KSS.

Speaker 5

Narcolepsy Type 2 or NT2 represents another significant potential opportunity for ALKS 2,680. Last month, we announced positive line data from the Phase 1b cohorts in NT2 and idiopathic hypersomnia. In these cohorts, participants were randomized in a four way crossover design in which each participant received single oral doses of 5, 12 and 25 milligrams of ALKS 2,680 and placebo with washout periods between each treatment. ALKS 2,680 was generally well tolerated and resulted in clinically meaningful and statistically significant improvements in wakefulness as measured by MWD sleep latency scores at all doses tested. We'll refer you to the press release we issued on April 9 for more details related to the safety, tolerability and efficacy observed in these cohorts in the 1b study.

Speaker 5

Importantly, the data showed dose dependent effects in a pharmacodynamic profile that support advancement into a planned Phase 2 study in NT2 patients, which will be known as VIBRENZ II. We recently finalized our dose selection for that Phase 2 study and plan to move forward with 10, 14 and 18 milligram doses of ALKS 2,680. ALKS 2,680 is currently the only orexin 2 receptor agonist moving into later stage clinical evaluation in narcolepsy type 2. We are working to initiate VIBRENZ II as quickly as possible, which we expect to be in the second half of twenty twenty four. The data from the 1b cohorts validate our hypothesis and orexin agonist with appropriate pharmaceutical properties has the potential to provide clinical benefits for both NT1 and NT2 patient populations.

Speaker 5

Importantly, the data also demonstrate that orexin 2 receptor agonist such as ALKS2680 may have utility in treating other disorders in patients without known orexin deficiency. This represents a significant opportunity to evaluate expansion into broader disorders where excessive daytime sleepiness is a feature. To explore these opportunities, we continue to advance our portfolio of preclinical Oraxant 2 receptor agonists and recently nominated our next candidate, which is now in IND enabling studies. We look forward to sharing additional details about our plans in this space later this year. So 4 months into the year, we're continuing to execute against our strategic priorities.

Speaker 5

Across the commercial business, the team is focused on delivering growth and strong financial performance. The 2,680 development program is well on track and represents a potentially transformative opportunity for our business. And consistent with the capital allocation framework we unveiled earlier this year, we continue to evaluate opportunities for external business development and to return capital to shareholders. We look forward to sharing our progress with you. And now with that, I'll turn it back to Sandy to run the Q and A.

Speaker 1

Thanks, Rich. Maria, could you please poll

Speaker 6

the audience for questions?

Operator

Thank you. We will now be conducting a question and answer session. Our first question comes from Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

Speaker 7

Hey, good morning, Rich and team. Congrats on a good quarter progress. I had a couple of pipeline questions. Thanks for taking them. And that is primarily around $2,680,000,000 I think it was mentioned that R and D is coming down by $10,000,000 And despite all of the progress that you're making in the clinic, I'm trying to reconcile that.

Speaker 7

In addition, I had a question on Vibrance too, but I'll hold that for the first answer.

Speaker 2

Hi, Charles. This is Blair. I hope you're doing well. Thanks for the question. With regards to R and D, there's a couple of dynamics associated with the spend this year.

Speaker 2

One is that we have a number of non recurring expenses in the Q1

Speaker 5

that apply to the

Speaker 2

R and D group that implies payroll taxes and things like share based comp. Those won't recur. And so you'd expect declines from that through the course of the year. And then also there's a phasing of the payments associated with the programs. As you know with ELKS 2,680, we had a lot of activity in closing out our Phase 1b program in NT1 and NT2 and IH and we had expenses associated with that.

Speaker 2

And then as we kick off the Phase 2 program, there's a lot of contractual dictated spend and that leads to some phasing over the course of the year.

Speaker 5

Charles, the only thing I'll add is from a capital allocation perspective, 2,680 gets what it needs. We're not throttling that back at all. On the contrary, we're leaning into that one as aggressively as we can.

Speaker 7

Sounds like that's the case. Regarding NT2, I'm not sure if I misheard it, but you're moving in or yes, Vibrance, so you're moving into NT2 specifically. Wondering if you have further thoughts on I8 or is that perhaps an indication that is better suited for a second candidate? And can you provide any color on target product profile for that second candidate in terms of differentiating from 2,680? Thank you.

Speaker 5

Yes, it's a great question. We are really pleased with those IH data and taking it in whole with the NT1, NT2, IH, you just see this very consistent profile for ALKS 2,680 and driving wakefulness almost irrespective of the orexin tone in the underlying disease. Clearly, the most aggressive path to first approval is in narcolepsy, that indication. That's why we're prioritizing NT1, NT2, Vibrance 1, Vibrance 2, go as fast as we can. We are very interested in the IH population as a disease indication itself, but also as it reads on to other indications that might be characterized by excessive daytime sleepiness with orexin tone in the brain.

Speaker 5

It may be something we would do subsequent with 2,680 or it may be indeed something with an additional compound. I'm not going to give you specifics backup or the next generation compounds because there's some competitive aspects to the profiles that we're working on, but you'll expect you'll hear more about that later this year.

Speaker 1

All right. Thanks, Charles.

Operator

Maria, can we take the next question, please? Our next question comes from David Amsellem with Piper Sandler. Please proceed with your question.

Speaker 8

Hey, thanks. So, one question on the Oraxans and one on Libavoliv. First on the Oraxans, there's a number of these agents that are kicking around,

Speaker 4

I think

Speaker 8

recently, Harmony, in license, the preclinical stage, orexin 2 receptor agonists and there are certainly others. So Richard, maybe help us understand how you're thinking about the extent to which multiple orexins can coexist, maybe not just in narcolepsy, but as you're thinking about IH and other disorders where hypersomnolence is a hallmark symptom. So just wanted to get your high level thoughts there. And then secondly on LIBORVI, also a high level question as it relates to the availability of CAR XT and the noise in the marketplace, if you perceive any noise, and how you think that could, impact new starts on Libavie as we move through 2025? Thank you.

Speaker 4

Good morning, David. Yes, I'll start

Speaker 5

on the orexin and give you a thought on the Libolvii too and then I'll ask Todd to give you his perspective from the front lines on it. But the one thing we've learned about this orexin space, if we've learned anything is that each of these molecules is quite different when they get into the clinic. And we anticipated that. You recall the slide that we presented multiple times, which shows the various optimization parameters that one needs to consider when developing an oral small molecule GPCR agonist that gets into the brain. And what we saw from competitive programs is that programs that the molecules when they get into humans separate pretty distinctively.

Speaker 5

So to your question, it presupposes that there's multiple coexisting commercial orexin agonists that are similar in the profile. I just don't believe that's going to be the case. Now that will yield to data of course, but I think that in our case we're focused on developing a once daily very well tolerated erection agonist that is approved for narcolepsy NT1, NT2. And so far, we're right on track for that. With respect to Libolvii, I think the first approval for CAR XT we expect will be in schizophrenia.

Speaker 5

And remember that Libolvio is competing in a broader market, which is both schizophrenia and bipolar. And most of the big oral brands in the space need multiple indications to really drive sales across multiple patient populations. With that said and the focus in schizophrenia, I think that our differentiating feature in schizophrenia is the efficacy of Libolvii. And if physicians and patients are talking about efficacy, that's a good setup for LYVOLVY. Todd, what's your thought?

Speaker 3

Yes. I would agree with that. I think it's important to remember, when we look at the category overall, it's a very large category for Libolvii in general, I'm speaking about bipolar 1 and schizophrenia. The dynamics of the market are switch. So this is a switch market.

Speaker 3

So you have to be able to compete within the switch market. CarXD coming out in the market, the first indications, Rich said, is going to be schizophrenia. This is obviously a market that we know very well, but the core attribute has to be efficacy. And LYVOLVI is very well positioned through all of our research. HCPs continue to tell us that the core value proposition for LYVOLVI is efficacy, you have to have a good balance of tolerability and safety as well.

Speaker 3

So we believe LYBALVI is extremely well positioned now and in the future even with new

Speaker 1

Thanks, David.

Operator

Our next question comes from Joel Beatty with Baird. Please proceed with your question.

Speaker 4

Hi, thanks for taking the questions. First one is on 2,680. With the recent NT2 IH data, do you think visual disturbance is on or off target? And if it's on target, why hasn't it been seen with other agents such as with tiketas?

Speaker 5

Well, as I said earlier, I think that each of these agents is quite different. And this is 26a is a very potent, very selective molecule in the clinic. Just to be clear, when we talk about visual disturbances, what we've observed in patients so far is very mild and very transient and very infrequent. We saw no visual disturbances in patients with NT1 at the doses tested. And we saw one event in patients with NT1 and one in patients with IH, both were mild transient self limiting single occurrences.

Speaker 5

And just to be understanding what the parlance is with respect to adverse event characterization, when something is characterized as mild, it means that it's noticeable by the patient, but it's easily tolerated and doesn't impact their activities. So, to the extent that it may be on target, we'll need more data across a wide dose range to know that for sure. But the profile is currently configured and we're very comfortable with.

Speaker 4

Great. And then for Libavolvii, what's the outlook for the DTC campaign? Does it seem to be having the impact you were

Speaker 3

hoping for? Yes, I'll take that one. I would say right now, we're really pleased with our DTC program. We've been executing the program over the last couple of quarters as planned. The leading indicators, the trends are positive as we've discussed in the past such as website visits, branded searches.

Speaker 3

In fact, they're significantly up year over year. And our early indicators, our early analysis shows that the overall program, which is TV and digital is contributing to TRx growth. So, our data actually shows that there is a meaningful contribution. So our plan is to continue to execute that program throughout the year.

Operator

Thank you. Our next question comes from Akash Tewari with Jefferies. Please proceed with your question.

Speaker 9

Hi, this is Kathy on for Akash.

Speaker 6

I just have a couple of questions. So when TAC presents full data at sleep in June, what data points are you looking for that will give you confidence that OX2 won't need to be combined with sodium oxybate? And then also what measurements do you think are the most important regarding sleep architecture? And then finally for your NT2 study, will you require any driving restrictions? Thank

Speaker 5

you. Yes. We look forward to seeing Takeda's presentation of data at sleep in Houston in June, because there we should see the results of the randomized Phase 2 study at multiple doses, dosed twice a day for that drug, both safety as well as efficacy. So we'll look forward to seeing what they present. And obviously, we don't know at this point what they will present.

Speaker 5

With respect to the effect of orexin agonist on sleep architecture, I think that's yet to be fully characterized. Perhaps we'll see some data in June that begin to describe that. But I think that the theory is that with a full day of wakefulness that sleep should be consolidated and resume more normal architecture. But that needs to be proven in the lab. We'll be doing that in our Phase 2 study looking at polysomnography in our Phase 2 study for both Vibrance 1 and Vibrance 2.

Speaker 5

And no, there's no need for any fiber driving restrictions in New York State.

Speaker 6

Okay, great. Thank you so much.

Operator

Thanks. Our next question comes from Paul Matteis with Stifel. Please proceed with your question.

Speaker 4

Hey, this is James on for Paul. Thanks for taking our question. I just have one question around kind of like margins going forward and specifically on EBITDA. I guess as you look ahead and as some of these royalties kind of start to peel off, I guess, do you think the current kind of EBITDA margin profile then I guess in that context, how are you thinking about investing in R and D or looking at BD opportunities? Thanks.

Speaker 2

Maybe I'll start with the margins. This is Blair. And then I'll ask Rich to give some context on our future strategy on BD and things. I think with regards to margins, as you said, we have a healthy margin going forward. We expect to generate significant cash for the business.

Speaker 2

We plan to continue to operate the business at a profitable level in this sort of range moving forward. And but still that allows for significant investment both in the portfolio and in our commercial business and that's our overall plan for the business. Rich, did you want to comment on all?

Speaker 5

Just because if you look at our Long Range plan, what you see is you see as Blair indicated, you see growing profitability with a growing top line. And so that accommodates both expansion in R and D spending as well as potential return to capital to shareholders, while maintaining significant profitability. So we think we can do all this at the same time, and it's all driven by that advancing top line.

Speaker 4

Great. Thanks.

Operator

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

Speaker 10

Hi guys. Thanks for taking my question. Maybe a boring question and then a less boring question. So the boring question is, Part D reform, how much of an impact do you expect on your top line and EPS into next year? And I realize this could be relevant, so I'd be curious.

Speaker 10

On the second one, on the RExAN, I just wanted to look into the potency a little more. I know you've shown some very good data previously. I think it was a world sleep where it was in CHO cells and I'm assuming it was the IP1 assay where 2,680 was about 10 times more potent than the native orexin. But other data seems to also suggest native orexin underperforms in IP-one assays. So my question is, how does your potency look versus native orexin in a flipper assay?

Speaker 5

Good morning. Those are both boring questions, I would say. So the Part D is interesting because we are one of the companies that qualifies for the phase in. So that phase in just to orient folks as companies take on more liability in the catastrophic phase in Part D that for certain companies with the qualify, it begins a very gradual phase in. So the exposure in 2025 is 1%.

Speaker 5

So it's a small, but it's a ramp toward a full participation in the program at the end of the decade or so. So it won't have much impact on 2025. I have to smile about the potency because I mean the potency that matters is actually the human potency. And I think that we're way ahead of everybody else in demonstrating the high potency of ALKS 2,680 in the form of doses in 4, 6, 8, 10, 14 and 18 in NT1 and NT2 where we're driving meaningful efficacy. So we can talk all day about various in vitro systems about both selectivity and potency.

Speaker 5

But I would say they're as a medicine. So the answer to your question, I don't actually know what our Flipper values are, because we're so far beyond that now in our development program that it's essentially irrelevant at this point.

Speaker 10

And sorry, Richard, just to clarify on the Part D point that you made, you said there's a phase in obviously. Whatever the max impact is by 2,030, how much of the max is in by 2025? Is it a quarter of that or a 10th of that?

Speaker 5

No, no. 2025 is 1%. It's the absolute value is a 1% participation in that catastrophic phase.

Speaker 10

Okay, got it. Thank you very much.

Speaker 5

But that's from 0. We have 0 right now. So we add 1% and then it scales over the next several years until it ultimately hits the full level. But it's a specific carve out for companies that are smaller companies with dependence on that Part D population as a significant source of income. And it was specifically oriented by the policymakers to make sure that companies like ours weren't devastated by going from 0 exposure in catastrophic to a 10% or 20% exposure in catastrophic.

Speaker 10

Correct. Thank you very much. So it's 1% of the max 20%, correct? It's not 20%, 30%, 500%, 23%.

Speaker 5

It's not 1% of 20%, it's 1% absolute.

Speaker 10

1% absolute. Okay, got it. Thank you very much.

Speaker 4

Okay.

Speaker 5

If you have any call us, Umer, because we can take you through that whole phase in if you want. I know you just did a big thing yesterday on it, which is smart. So make sure give us a ring and we can take you through the phasing in particular if you have any specific questions.

Speaker 10

Thank you, Ashish.

Operator

Our next question comes from Jason Gerberry with Bank of America. Please proceed with your question.

Speaker 4

Hey guys, I've got a couple of boring questions as well. Just

Speaker 5

on I'll be the judge of that, Jason.

Speaker 4

Yes. On your comment about the Livolvi PBM contract not impacting 20 24, I'm just sort of curious about 2025 plus like directionally, how we think about these high 20% gross to nets? And as you move towards a more commercial contracted basis, directionally how that looks? And then just a follow-up on the CAR T impact. Is your bipolar schizophrenia mix still fifty-fifty or has that shifted more to bipolar?

Speaker 4

I know with the DTC, the thought was that you might activate more bipolar

Speaker 3

take that take that. For gross to net, yes, we're really pleased that we were actually able to continue to execute on our strategy, our commercial contracting strategy. So as I said in the prepared remarks, we did enter into a new agreement with a really large PBM that we're really pleased with to improve the formulary positioning and get more patients access to LOVALVI. Even with that, for 2024, we had a range of scenarios for gross to net plus net sales. So that fits perfectly in the range that we've outlined.

Speaker 3

For the full year, we still expect gross to net to be in that high 20s. Going into 2025 and beyond, we're not guiding to 2025 and beyond, but that may widen a little bit as we continue to execute our strategy and get more access for patients on formulary for commercial. In terms of the mix overall for schizophrenia and bipolar, the mix for TRx is still approximately 50% for schizophrenia and bipolar. We continue to see new patients start skew more towards bipolar 1, which again was part of our strategy. So it's approaching a little north of 55% for new patient starts and the volume growth overall, most of the volume growth we're seeing within the brand right now is coming from Bipolar I.

Speaker 3

So we think that's a combination of obviously of growing breadth of prescribing and also the activation we have with patients right now.

Speaker 4

Great. Thanks guys.

Operator

Our next question comes from Ui Yihir with Mizuho Securities. Please proceed with your question.

Speaker 11

Hey guys. Yes, thanks for taking my question. Just high leveling, just curious, given the recent in licensing by Harmony, an Orexin 2 agonist, The deal was kind of strange. It just went from one company to the next. And curious, to see what the landscape is like.

Speaker 11

Is an orexin molecule this rare or is it easily, I guess, can be generated? Maybe just provide a little color on the ability to have access to one of these molecules? Thanks.

Speaker 5

I think it's actually relatively rare. I think that's why people have had such difficulty coming up with chemical diversity in this space. These are, as you've heard me say ad nauseam, these are complicated molecules to make because they have to be orally bioavailable yet cross the blood brain barrier. And once they've done that, they need to bind to a G protein coupled receptor as an agonist. And so drive signaling in the brain and the target neurons of choice and do all that with a pharmacokinetic profile, a concentration profile over time that's consistent with the normal sleep wake cycle.

Speaker 5

So people can wake up in the morning and go to sleep at night. So it's really quite difficult to do. And that's why I think even with this much of a commercial and medical promise, you see a very small number of products in the clinic right now. I contrast it to other systemically available kinase inhibitors or other types of drugs where there's a lot of chemical diversity that can be brought to bear, even small molecules ranging from small molecules to large molecules. But here it's a really, really constricted area.

Speaker 5

So I think that one can find molecules to license. The question is, are they good molecules?

Speaker 11

Just a follow-up on that. Could you maybe also speak a bit about the number of molecules that you perhaps have in house, if you can share that? And what is it about your platform that gives you an advantage, I guess? Thanks.

Speaker 5

I think our platform derives from a sensibility from the outset when we began the medicinal chemistry about what the features that needed to be integrated rather than so you'll hear a lot of people talking about potency. Potency is absolutely important, but it's absolutely insufficient. So we began our screening and missile chemistry efforts based on optimizing across all of these different domains. And it yielded chemical structures that we think separate from others. But even in our patent suite, there's a limited number of structures that that can confer all these attributes.

Speaker 5

So our patents are critical to the foundation of this. Within that patent suite, we can generate multitude of compounds. And so our job pre clinically is to try to stratify those into ones that map best on particular indications that we're thinking about pursuing. The core of the bull's eye is narcolepsy. This is the most simple embodiment of the idea of replacing a deficient neurotransmitter in disease NT1 with a small molecule analog.

Speaker 5

And that's why it's such a great place to start with this whole chemistry and this whole biology. But if we're indeed interrogating the circuitry in the brain that drives wakefulness, that has implications beyond narcolepsy.

Speaker 11

Thank you.

Operator

Our next question comes from Jessica Fye with JPMorgan. Please proceed with your question.

Speaker 6

Hey guys, good morning. Thanks for taking my questions. Curious, did you see any impact of volumes from the Change Health cyber attack in the Q1? And separately on the Orexin, I think for the recent NT 2 NIH update, the description on AEs was just listing those that happened in more than one participant. And I think it left some investors wondering about the rates that you saw, for example, if that just meant some of these occurred in only 2 patients versus more than that.

Speaker 6

So curious if there's any color you can provide there? Thank you.

Speaker 4

Chad, do you want to

Speaker 3

Yes, absolutely. Jessica, Yes, in terms of change healthcare, there were a lot of reports in the marketplace about operational issues for HCP offices, pharmacies and hospitals about processing claims. The biggest impact overall The biggest impact overall for the market overall was really with processing of copay cards, copay claims. We our 3 copay our 3 brands with our copay cards had no impact. So we didn't see any impact at all from the chain to healthcare cyber attack.

Speaker 3

And Jess, I don't

Speaker 5

have the AE tables in front of me, but remember we were very pleased with the AE profile in the NT2 IH cohort. And remember that across all the doses, it was observed to be generally well tolerated. The treatment emergent adverse events assessed as related to the study drug were mild transient result without treatment. No severe or serious AEs were reported and there were no AEs that led to study drug discontinuations. So we'll provide the full data tables when we present the data later this year, but the overall profile is just as I described.

Speaker 6

Great. Thank you.

Operator

Our next question comes from Mark Goodman with SVB Securities. Please proceed with your question.

Speaker 12

Hi, thanks for taking my question.

Speaker 4

This is

Speaker 12

Rudy on the line for Mark. So you mentioned increased breadth for LIBORVI prescribers. So what percentage of this 20,000 prescribers have you reached? And what is your strategy to increase the breadth and depth in prescribers moving forward? Thanks.

Speaker 3

Yes, absolutely. I'll take that. So we with our sales force overall, we target about 22,000 prescribers. There's a really meaningful we've had a really meaningful impact there in terms of breadth and depth of prescribing. Overall for the quarter, we saw we see approximately 6,600 prescribers in Q1.

Speaker 3

That's a growth year over year of about 34%, which we're really encouraged with. And a lot of this is just timing. We continue to bring on new prescribers every single week and every single month. And a lot of that is being driven by just the utility of the brand. We hear this consistently with HCPs that efficacy is the differentiator, and it provides broad utility across schizophrenia and bipolar 1.

Speaker 3

Additionally, in some of our most recent market research about 90% of HCPs report that they can they plan to continue to prescribe and increase prescribing over the next calendar year. So we think that's a very encouraging trend to continue to drive breadth, but also depth of prescribing.

Speaker 12

Got it. Thanks.

Operator

Our next question comes from Vivek Sall with H. C. Wainwright. Please proceed with your question.

Speaker 4

Hi, good morning. Thanks for taking the questions. Just first on the VAVALVI, I'm just curious as a follow-up to that last universe of riders?

Speaker 3

Yes, actually it's both. But overall, we're still in the early stages, I would say of our launch. And so prescriber breadth is obviously been primary job number 1. Prescriber deaths, every single quarter actually is improving. So we continue to see that.

Speaker 3

We've done a lot of research with that. And really the key insight is once an HCP has a positive experience with Libalbi, whether it's schizophrenia or bipolar, they tend to expand utilization will ultimately over time drive a lot of depth. But, will ultimately over time drive a lot of depth. But primarily job number 1 right now is continuing to drive

Speaker 4

just how long does that take in terms of sort of accruing that experience to accrue to feel confident in terms of for individual docs to start writing more? Thank you.

Speaker 3

Yes. Well, I think you got to think about that in the context of the market that we compete. Again, as I said earlier, this is schizophrenia and bipolar patients, this is a switch market. So it's a dynamic switch market. Patients in this category will switch therapies about 5 to 8 times.

Speaker 3

So it's rather dynamic. It's more dynamic and bipolar than schizophrenia. So it really depends upon the origination of the patient, the experience that they're having, but it would typically take a couple of months. So what we've seen is early on, once an ACP has a good experience with Libavvy, whether it's schizophrenia or bipolar and they have a positive outcome from patients, they're very quickly to think about expanding utilization. So at large, I would say it's usually a couple of months really based upon the issue with the patient, based upon the tolerability, their efficacy they're receiving on the current medication.

Speaker 4

Okay, great. That's really helpful.

Speaker 1

Marie, I think we have time for one more question.

Operator

Okay. Our last question then is from Chris Shibutani with Goldman Sachs. Please proceed with your question.

Speaker 9

Hi, this is Karishma on for Chris. Thank you so much for taking our question. So with the schizophrenia and bipolar markets, in particular with regard to long acting injectables and the progress there, are your assets here namely Libolvia and ARISTADA continuing to increase in terms of penetration in the U. S? Or is this kind of plateauing at this point in time?

Speaker 9

And then I have a follow-up as well.

Speaker 3

Yes, absolutely. So we continue to see encouraging trends overall with both products and they're not plateauing at all. Libavie is still in the initial phase, obviously our view on launching. And I think that to support that is Libavie for Q1 year over year continues to be the fastest growing branded product in the category, not only for TRxs, but also for new patient starts. And that's a really important leading indicator right now.

Speaker 3

So it gives us a lot of confidence in the growth opportunity long term. And in terms of ARISTADA, ARISTADA has quite a bit of seasonality in the LAI category in Q1, but we've already seen encouraging trends going into Q2. And in fact, we see in Q2 already, we're seeing encouraging new patient starts. So the lifeblood of the brand is new patient starts and we don't see that slowing down for ARISTADA as well.

Speaker 9

Okay, great. Thank you. And then one follow-up if I could. What potential implications do you see to the legacy products when potential new mechanisms such as muscarinic agonists are introduced? Should they be successfully developed?

Speaker 3

Yes, absolutely. So we watch the competitive landscape category really clearly. I think the key for us right now is the addressable market that we're focused on. We have a very clearly differentiated market that we're focused on for Libavvy and also for ARISTADA. The value proposition for both brands resonates very well.

Speaker 3

For Libalvi, it's about efficacy. Libalvi is considered one of the most efficacious branded products in the category. And so that's a really, really strong position to be in at this point in launch. In terms of ARISTADA, you don't typically see a lot of market growth with LAIs coming into the category. They typically trade within the molecule themselves.

Speaker 3

HCPs continue to report to us that ARISTADA has a differentiated profile. It's the only LAI that you were able to initiate on day 1 for up to 2 months and HCPs tell us that differentiates the brand. So we feel really confident regardless of new market entrants on how these products can compete now and into the future.

Speaker 9

Got it. That makes sense. Thank you so much.

Operator

We have reached the end of our Q and A session. I would now like to turn the floor back over to Sandy Combs for closing comments.

Speaker 1

Thanks, Maria, and thank you everyone for joining us on the call this morning. Please don't hesitate to reach out to the company if you have any follow-up questions. Have a good day.

Operator

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

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Earnings Conference Call
Alkermes Q1 2024
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