Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q1 2024 Earnings Call Transcript May 6, 2024
Axsome Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-1.44233 EPS, expectations were $-1.2. Axsome Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the Axsome Therapeutics Conference Call. Currently, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to your host, Darren Opland, Director of Corporate Communications at Axsome Therapeutics. Please go ahead.
Darren Opland: Good morning, and thank you all for joining us on today’s conference call. This morning, we issued our earnings press release providing a corporate update and details of the company’s financial results for the first quarter of 2024. The release crossed the wire a short time ago, and is available on our website at axsome.com. During today’s call, we will be making certain forward-looking statements. These statements may include statements regarding, amongst other things, the efficacy, safety, and intended utilization of our investigational agents, our clinical and non-clinical plans, our plans to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity, and our other pipeline products; revenue projections and possible intended use of cash and investments.
These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today’s date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; Mark Jacobson, Chief Operating Officer and Ari Maizel, Executive Vice President and Head of Commercial.
Herriot will provide an overview of the company and progress made in the first quarter of 2024 as well as key upcoming milestones. Following Herriot, Nick will review our financial results, then Ari will provide a commercial update. We will then open the line for questions. The questions will be taken in the order they are received. And with that, I will turn the call over to Herriot.
Herriot Tabuteau: Thank you, Darren. Good morning, everyone, and thank you for joining Axsome Therapeutics’ first quarter 2024 financial results and business update conference call. The first quarter of 2024 was marked by strong financial performance for our on-market products, which are delivering important and differentiated treatment options for patients living with depression, narcolepsy and obstructive sleep apnea. Total net product revenue in the quarter was $75 million, representing year-over-year growth of approximately 160%. We will share additional details on our financial and commercial performance later in the call. We also significantly advanced our innovative neuroscience pipeline in the quarter, including announcing positive topline results for AXS-12 in narcolepsy, advancing AXS-07 and AXS-14 towards NDA submissions, initiating pivotal trials in new indications with solriamfetol, and advancing and expanding our Alzheimer’s disease agitation program for AXS-05.
We expect to continue the commercial and pipeline momentum in the balance of 2024. I will now provide a brief update on our industry-leading neuroscience pipeline and expected milestones. Starting with our two NDA stage products. AXS-07 for the acute treatment of migraine is on track for an NDA resubmission this quarter. Additionally, we are conducting the EMERGE study, a multicenter, Phase 3, single-group trial evaluating the efficacy and safety of AXS-07 in adults with a prior inadequate response to an oral CGRP inhibitor. We anticipate topline results from this trial in the second half of 2024. For AXS-14, which we are developing for the treatment of fibromyalgia, resubmission activities for the NDA for this product are nearing completion.
We continue to target submission later this quarter. In March, we announced that the Phase 3 SYMPHONY trial of AXS-12 in narcolepsy achieved its primary endpoint and significantly reduced the frequency of cataplexy attacks as compared to placebo. AXS-12 also reduced excessive daytime sleepiness severity, improved cognition and reduced overall narcolepsy severity. An open-label safety extension trial for AXS-12 is ongoing with results expected in the fourth quarter of 2024. We are excited about the potential of AXS-12 to provide a differentiated treatment option to patients and HCPs for this debilitating condition. Moving on to AXS-05, we continue to anticipate completion of the Phase 3 ADVANCE-2 trial in the treatment of Alzheimer’s disease agitation in the second half of 2024.
Today, we announced that we launched the ACCORD-2 study, a double-blind, placebo-controlled, randomized withdrawal trial, to evaluate the efficacy and safety of AXS-05 in the treatment of Alzheimer’s disease agitation. This study is similar in design to the completed positive ACCORD-1 trial. With ACCORD-2, the clinical development program will now include four controlled efficacy trials. Importantly, ACCORD-2 further increases the robustness of our clinical program in Alzheimer’s disease agitation without impacting our overall development timeline. Enrollment in ACCORD-2 is very far along, and we expect enrollment completion around mid-year. With respect to solriamfetol, our dopamine and norepinephrine reuptake inhibitor and TAAR1 agonist, in addition to continued commercial performance, we launched the Phase 3 PARADIGM trial in major depressive disorder and the Phase 3 ENGAGE trial in binge eating disorder in the first quarter.
Results from both trials are expected in 2025. We are on track to initiate a Phase 3 clinical program in shift work disorder this quarter. Solriamfetol is also being evaluated in the FOCUS Phase 3 trial in ADHD, for which we continue to anticipate topline results in the second half of this year. Overall, our innovative neuroscience portfolio encompasses five late-stage, patent-protected product candidates targeting 10 serious psychiatric and neurologic conditions with substantial market opportunities. Each product candidates have the potential to transform the treatment landscape for serious and difficult-to-treat CNS disorders, which affects more than 150 million people in the U.S. I will now turn the call to Nick, who will provide details of our financial performance.
Nick?
Nick Pizzie: Thank you, Herriot, and good morning. Today, I will discuss our first quarter results and provide some financial guidance. Total product revenues were $75 million for the first quarter of 2024. This consisted of net product sales of $74.1 million and royalty revenue of $900,000. Total product revenues for the comparable period in 2023 were $94.6 million, which consisted of net product sales of $28.6 million, royalty revenue of $300,000, and $65.7 million in one-time license revenue received from the out-licensing of Sunosi in certain ex-U.S. territories. Auvelity net product sales were $53.4 million for the first quarter of 2024, representing year-over-year growth of 240%. Auvelity net product sales for the comparable period were $15.7 million.
Sunosi net product revenue was $21.6 million for the first quarter of 2024 and consisted of $20.7 million in product sales and $900,000 in royalty revenue associated with Sunosi sales in out-licensed territories. Sunosi net product revenue for the comparable period in 2023 was $13.2 million, consisting of $12.9 million in product sales and $300,000 in royalty revenue. Total cost of revenue was $6.3 million for the first quarter of 2024. Total cost of revenue for the comparable period in ’23 was $7.6 million, which included $5 million in Sunosi licensing transaction fee sharing expense. Research and development expenses were $36.8 million for the first quarter of 2024 compared to $17.8 million for the comparable period in 2023. The increase was primarily related to the initiation of the solriamfetol paradigm trial for major depressive disorder, the solriamfetol ENGAGE trial for the binge eating disorder, the advancement of the solriamfetol FOCUS trial for ADHD, the ongoing trials of AXS-05 and AXS-12, manufacturing costs associated with the anticipated NDAs for AXS-07 and AXS-14, post-marketing commitments for both Auvelity and Sunosi, and higher personnel costs, including non-cash stock-based compensation.
Selling, general and administrative expenses were $99 million for the first quarter of 2024, compared to $74.2 million for the comparable period in 2023. The increase was primarily related to commercialization activities for Auvelity and Sunosi, including sales force and marketing expenses, and higher personnel costs related to organizational growth, including non-cash stock-based compensation. Net loss for the first quarter of 2024 was $68.4 million, or $1.44 per share, compared to a net loss of $11.2 million, or $0.26 per share, for the comparable period in 2023. The net loss in the first quarter of 2024 includes $21 million in non-cash charges, of which the majority is comprised of non-cash stock-based compensation expense. The 2023 comparable period included approximately $62 million in net gain from the Sunosi out-licensing.
Q1 typically has a negative seasonality effect on GTN, which we saw on both Auvelity and Sunosi versus the prior quarter. Auvelity GTN discount for Q1 was in the low- to mid-50%s, and Sunosi GTN discount was in the mid-50%s. We ended the first quarter of 2024 with $331.4 million in cash and cash equivalents compared to $386.2 million as of year-end. We believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on the current operating plan. I would now like to turn the call over to Ari, who will provide a commercial update.
Ari Maizel: Thank you, Nick. Axsome delivered solid brand performance in the first quarter of 2024. Auvelity demand trends in Q1 once again outpaced growth rates for the market and branded competitors with approximately 95,000 prescriptions, representing 12% quarter-over-quarter growth and 206% growth compared to the first quarter of 2023. Nearly 18,000 new patients started Auvelity in the quarter, bringing the total number of unique patients treated with Auvelity since launch to more than 89,000. Our sales team continues to activate new prescribers at a consistent rate, with more than 36,000 first-time Auvelity prescribers in Q1, illustrating strong underlying demand for the product and expanded use among depression treaters in both psychiatry and primary care offices.
We’re especially proud of this performance in light of seasonal dynamics, which were compounded by the industry wide Change Healthcare cyberattack. Payer coverage was stable in Q1 as Auvelity remains accessible to patients representing approximately 70% of covered lives. As noted in our press release this morning, we just contracted with a large group purchasing organization for potential formulary coverage of Auvelity, laying the groundwork for future increases in covered lives. Pharmacy benefit managers and health plans under this GPO are now able to make coverage decisions for Auvelity based on the contracted terms. With this agreement, Axsome is now contracted with two of the three largest GPOs for potential coverage of Auvelity. We are very pleased with the strong commercial foundation we have created to support Auvelity performance, including our expanded psychiatry sales team, a recently enhanced sales and marketing campaign, and expansion of digital capabilities to maximize reach to targeted HCPs. Of note, we observed an inflection in weekly new patient starts or NBRx in March, a positive signal of both the impact of our optimized commercial footprint and continued adoption of Auvelity as a go-to treatment option for adults with major depressive disorder.
Transitioning now to Sunosi. Total prescriptions were just over 41,000, representing a 1.6% decline versus Q4 2023 and 14% growth versus Q1 2023. Demand in the first quarter was impacted by typical seasonality in the [EDS] (ph) market, as evidenced by the 3% decline observed in the weight-promoting agent market this quarter. Approximately 3,700 new patients started Sunosi treatment during the quarter, bringing the total number of unique patients treated with Sunosi to approximately 68,000 since launch. More than 400 new writers were activated in Q1, resulting in a total cumulative prescriber base of more than 12,600 since launch. Payer coverage for Sunosi in Q1 remained 83% of lives covered across channels. In closing, Q1 was a very positive start to 2024 for both Auvelity and Sunosi, with leading indicators such as trends with new patient starts and newly activated prescribers reinforcing our confidence that Axsome will deliver strong commercial performance in our second year as a commercial company.
We continue to receive compelling feedback from healthcare professionals and patients about the positive impact our products are having in real-world settings, and we are proud of Axsome’s growing reputation as a leader in the CNS space that delivers differentiated and impactful products for serious psychiatric and neurological conditions. I will now turn the call back to Darren for Q&A.
Darren Opland: Thank you, Ari. Operator, may we please have our first question?
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