ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q1 2024 Earnings Call Transcript May 8, 2024
ACADIA Pharmaceuticals 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 day, everyone, and thank you for standing by. Welcome to the ACADIA Pharmaceuticals First Quarter 2024 Financial Results and Operating Overview Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Al-Kildani, Senior Vice President of Investor Relations and Corporate Communications. Please proceed.
Al Kildani: Thank you. Good afternoon and thank you for joining us on today’s call to discuss ACADIA’s first quarter 2024 earnings. Joining me on the call today from ACADIA are Steve Davis, our Chief Executive Officer, who will provide some opening remarks, followed by Brendan Teehan, our Chief Operating Officer and Head of Commercial, who will discuss our strong commercial franchises, DAYBUE and NUPLAZID. Also joining us is Kimberly Manhard, Senior Vice President of Global Strategic Planning and Execution, who will provide an update on our pipeline program. And Mark Schneyer, our Chief Financial Officer, will review the financial highlights. Steve will then provide some closing thoughts before we open the call up for your questions.
In addition, Parag Meswani, Senior Vice President, Trofinetide – Rare Disease Franchise, will be available for the Q&A session. We are using supplemental slides, which are available on our website’s events and presentation section. Before proceeding, I would like to remind you that during our call today, we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events, or future results, are based on current information, assumptions, and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially.
These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today’s date. I’ll now turn the call over to Steve for opening remarks.
Steve Davis: Thank you, Al. Good afternoon, everyone, and thank you for joining us. Please turn to Slide five. The foundation of ACADIA’S business is built on our two first-in-class drugs on the market, a robust pipeline of late-stage assets with more behind them, and a strong balance sheet that allows us to invest in future growth. During the first quarter, our commercial franchises delivered total revenues of $205.8 million, increasing 74% from the first quarter of 2023, which did not yet include sales of DAYBUE. NUPLAZID remains a strong cashflow-generating franchise that delivered first-quarter sales of $129.9 million, up 10% from the first quarter of last year, as we continue to grow volume and gain share in the Parkinson’s disease psychosis sector.
We look forward to expanding on this growth. Sales of DAYBUE were $75.9 million in the first quarter, our first time completing this calendar period since our April 2023 launch. As we’ll discuss on this call, one year into the launch, approximately one in four diagnosed Rett patients have initiated therapy with DAYBUE. The remaining three-quarters of diagnosed patients and those not yet diagnosed represent a very large opportunity to continue to grow this drug and reach families not yet benefiting from the only drug approved to treat Rett syndrome. Beyond our two commercial franchises, we have a deep and growing pipeline, including our Phase 3 Prader-Willi syndrome program and our seamless Phase 2-Phase 3 program in Alzheimer’s disease psychosis.
ACADIA continues to operate from a position of financial strength. Revenues from our two commercial franchises enabled us to add $30 million to our cash position in the first quarter, which is traditionally a seasonally weak quarter of the year in our industry. As a result, we continue to maintain a very strong balance sheet with total cash of $470.5 million as of March 31. Turning to Slide six, I’ll now provide a high-level update on DAYBUE that both Brendan and Mark will expand on in their sections. We’ve just completed one year into the launch of DAYBUE. Let me take a moment to recap where we stand today. As you know, after launch, we experienced a surge of patients that initiated therapy quickly in the first several months of DAYBUE’s availability.
As I referenced a moment ago, we have a sizable population to continue building share. Out of 5,000 diagnosed Rett patients in the U.S., as I mentioned, approximately one in four of these patients have initiated therapy with DAYBUE. In addition, we believe the prevalent population of Rett patients in the U.S. is between 6,000 and 9,000 patients. We expect as DAYBUE is on the market longer, we will see more and more of the undiagnosed patients get diagnosed. Importantly, we continue to see real-world persistency rates track about 10 percentage points above the time-based rates of persistency observed in the most relevant population from our clinical studies. We believe that on average, the dose patients take following any period of titration up or down is approximately 75% to 80% of the labeled dose.
Today, we’ve established a very broad prescriber base with over 650 individual riders. Brendan will speak to the shift in mix of prescribers we’ve observed since launch together with our expectations going forward. We’ve established a broad access to DAYBUE with over 80% of Rett lives covered and conversion metrics that are consistent with industry norms and seasonality. Let me turn to a few of the key dynamics we see today as we enter our second year on the market. In the last year, we’ve now accumulated a substantial body of real-world experience with DAYBUE. We’re seeing more and more stories shared on both the medical and caregiver communities regarding the benefits of DAYBUE, including alertness, engagement, communication, and motor benefits.
On the dosing and GI management front, while our data indicate the average dose patients take longer term continues to be in the 75% to 80% range, we are seeing some variability in the application of strategies for titration and dose adjustments getting to the longer term dose. This represents an opportunity where we are focused on supporting dialogue in both the medical and caregiver communities regarding the establishment of consistent application of GI management strategies and best practices. Brendan will speak to both observed benefits of DAYBUE and GI management practices in his section. During most of the first quarter, we saw a decline in active patients on therapy as we experienced first-time seasonal dynamics together with an increase in numerical discontinuations primarily associated with the higher rate of new patient starts in the preceding two quarters.
In other words, there is somewhat of a lag between numerical new patient starts and numerical discontinuations. Just to be clear, our overall rate of persistency continues to track well above our clinical trial experience despite the fluctuation of numerical discontinuations we see in any given month or quarter. Importantly, we now see net patient additions in each of the last six weeks and believe the lag-based increase in numerical discontinuations we observed in the first quarter has peaked and is now largely digested. To recap on DAYBUE, one year into the launch, we’ve established very healthy share with one in four diagnosed patients on therapy. Key long-term value drivers include a very large opportunity to continue adding share and rates of persistency attract approximately 10 percentage points above our clinical trial experience and are supported by a large prescribing population and broad payer access.
Let’s turn to a snapshot of our current products and pipelines on Slide seven. NUPLAZID continues to contribute substantial revenues and share growth, furthering our strategic objective of optimizing cash flow in this franchise. In addition to our two successful commercial franchises, we have numerous late and early stage pipeline assets representing important opportunities. These include ACP-101 and Prader-Willi syndrome, where we are currently enrolling subjects in our Phase 3 study. Prader-Willi is a rare and debilitating genetic disease where patients have an unrelenting drive to eat called hyperphagia. Sadly, the severity of this disorder translates into an average lifespan of only 30 years. Here too, there are no FDA approved treatments.
We are currently enrolling our seamless Phase 2-Phase 3 program with ACP-204 in Alzheimer’s disease psychosis patients, another disorder where there are no approved treatments. ACP-204 is our second generation 5HT2A blocker, where we are leveraging our learnings from pimavanserin. And behind that, we have a rich pipeline of early stage disclosed and undisclosed programs that position us for future growth. I’ll now turn it over to Brendan to discuss our commercial performance beginning on Slide eight.
Brendan Teehan: Thank you, Steve. Please turn to Slide eight, beginning with DAYBUE. Let me start by discussing the three key drivers of long-term value for DAYBUE and the continued growth potential they represent. First, with now one out of four diagnosed Rett patients having received treatment with DAYBUE, we still have a large remaining patient population in the market that has significantly higher physician and caregiver awareness about the product one-year post-approval. Launched to date, we’ve been successful penetrating centers of excellence, where we now have approximately 50% share of patients treated, so we have a lot of room to grow to pursue growth to pursue in this segment. In addition, we’re also focusing on driving depth of prescribing outside of COEs, where the majority of our patient potential exists.
We’re already seeing a shift in the source of prescriptions today and expect an increasing share to come from non-center of excellence high-volume institutions and community practices moving forward. Second, a year into launch, we now have a foundation of real-world evidence providing us with the following levers. Number one is real-world benefits. We are describing the real-world benefits patients and families are seeing across a wide range of ages, as well as severities of disease, serving as examples of successful treatment with DAYBUE. In a moment, I will share some quotes from caregivers about the meaningful benefits they’re seeing in their patients. Number two is GI management. We’re sharing key learnings from successful GI management strategies.
We’ve observed a wide range of GI management approaches, and we see an opportunity to further enhance and accelerate the establishment of best practices in the community. Number three is that time to benefit is a key consideration. We know a majority of patients, with their doctor’s guidance, are starting treatment by titrating. And of course, when you titrate over a period of several weeks, it may take longer to get to a therapeutic dose. It’s therefore important to ensure that families and physicians have the right expectations regarding the time it may take to observe benefits. We have observed that many discontinuations happen early in a patient’s treatment, a timeframe that may not have been sufficient to get to a dose that produces benefits or work out an appropriate GI management regimen.
To further support these families, our messaging on treatment expectations emphasizes the importance of HCPs and caregivers working together on setting the appropriate timeline to realize the benefits of DAYBUE and determine the appropriate GI management strategy for each patient. Our third driver is persistency on therapy. We now have data out to the nine-month mark that demonstrates persistency tracking 10 percentage points above what was observed in the Lilac open-label extension study for placebo rollover patients. This continues the consistent persistency curve we’ve seen from the time of launch. I’d like to take a deeper dive into each of these drivers. First, let’s discuss market penetration and growth potential. One year into launch, we’ve started more than 1,300 patients on DAYBUE in a market with 5,000 diagnosed Rett patients.
Many of these patients come from COEs where we have approximately 50% patient share, which leaves us ample opportunity for growing in that setting. Our mix is shifting to an even more split of prescriptions, with one-third of prescriptions coming from centers of excellence, one-third from non-center of excellence high-volume institutions, and one-third from community practices. Since the level of experience with treating Rett patients outside of centers of excellence is lower, we’re delivering enhanced messaging to these prescribers on both clinical benefits to expect from DAYBUE, as well as tolerability management strategies. Our second key driver is the real-world evidence and the success stories those have created to motivate both HCPs and families to initiate DAYBUE.
Broad prescribing early post-launch has led to many DAYBUE treatment success stories across a range of ages and disease severities. We’re now utilizing these successes to educate prescribers and caregivers on what to expect when starting and staying on DAYBUE, which will encourage broader adoption. Looking at GI management strategies, we’ve seen a pretty wide range of approaches. Some physicians and practices, particularly a few of the COEs, feel they have this very much dialed in, utilizing product labeling and GI management strategies to achieve success. However, implementation of these strategies in the broader community is variable, telling us there is an important opportunity to educate further on these guidelines. While we continue to be very encouraged by the longitudinal rate of persistency we’ve been tracking, we believe that in addition to communicating DAYBUE’s clinical benefits, implementation of more consistent best practices in GI management will further support building a sizable base of enduring patients over time.
This leads to our next driver, persistency, where we’ve seen a very consistent pattern since launch when comparing the post-launch rate of persistency to our clinical trial experience. Let me now share our latest persistency data. With patient cohorts now out to nine months, the real-world persistency rate is 58%, compared with 47% seen for placebo rollover patients in Lilac at nine months. As we described on our last call, approximately 40% of patients that initiated therapy on DAYBUE in Phase 3 remain on therapy today, and have been on therapy for more than two and a half years. This comparison underscores the opportunity we see to build a sizable enduring population on DAYBUE. If we continue to track approximately 10 percentage points above our clinical trial experience, we believe the enduring population could be approximately half of patients who initiate therapy.
Let me touch on the number of patients we have on therapy. As of the week ending May 3, we have 862 patients active on DAYBUE therapy, compared with the figures we shared on February 27 of 860. During most of the first quarter, we saw a decline in active patients on therapy due in part to an increase in numerical discontinuations Steve described earlier. We’ve now seen net patient additions in each of the last six weeks, and we believe the increase in numerical discontinuation we observed in the first quarter has peaked and is now largely digested. I’d like to recap our view of the U.S. opportunity as we now commence our second year on the market. With over 3,500 diagnosed patients who have not yet tried DAYBUE, and several thousand Rett patients who have not yet been diagnosed, we have an opportunity to continue to substantially grow DAYBUE.
Our persistency experience to-date indicates we can build a sizable enduring population benefiting from DAYBUE. We have a strong foundation to build on, including a large prescribing population and broad payer access. Please turn to Slide 10 for a discussion of our plans on DAYBUE outside the United States. Looking beyond the U.S., we are rapidly advancing toward making DAYBUE available in additional markets. Our Pediatric Investigation Plan, or PIP, which detailed the previously completed clinical trials for DAYBUE, has been agreed upon with the Pediatric Committee of the EMA, paving the way for an anticipated filing in the first quarter of 2025. In Japan, we now have a formal meeting scheduled with the PMDA later this quarter to discuss our proposed clinical plan.
And in Canada, we recently announced that our new drug submission was accepted for filing and granted priority review by Health Canada, potentially leading to an approval in that market around the end of this year. Let’s now turn to Slide 11. Here you see quotes from caregivers reinforcing some of the observations described above, each consistent with the feedback we’ve been hearing for many months, such as caregivers noting higher levels of engagement, improvement in speech with a broadening vocabulary, and improved engagement in conversations, more purposeful use of hands, and decreased hand-wringing and stereotypies. We also regularly hear feedback about a loved one’s increased cognitive ability or increased alertness, with patients now being able to better follow conversations.
Caregivers tell us they view these improvements as meaningful enhancements in quality of life for the patients in their care, as well as their families. These testimonials all speak to the promise of treatment with DAYBUE and underscore exactly why we at ACADIA do what we do to support and benefit those with greatest needs. Let’s turn to Slide 12 for a discussion of our NUPLAZID franchise. I’ll start by reiterating that our primary financial objective with NUPLAZID is to optimize cash flow, and we do that in two ways. First, we’re continuing to grow bottle shipments and market share in our eighth year on the market for PDP. The most effective lever to drive growth recently has been the broad educational campaign we launched last year, bringing attention to our real-world evidence studies.
These efforts have allowed us to grow new patient starts faster than the market. The second way we optimize NUPLAZID franchise cash flow is by carefully managing expenses, and we’ll continue to do that throughout 2024. These combined efforts have enabled us to generate over $300 million on a standalone, fully burdened basis in annual cash flow. Now let’s turn to Slide 13 to review our quarterly performance. In the first quarter of 2024, NUPLAZID delivered $129.9 million in net product sales. As evidenced in the prescription data presented on this slide, the Parkinson’s disease market remains largely flat, with both Carbidopa-Levodopa TRXs essentially flat versus their prior quarter, while other antipsychotics and NUPLAZID both increased by 4% and 6% respectively in the first quarter compared with the fourth quarter of last year.
Importantly, NUPLAZID outperformed growth in the PD market in both the office-based and long-term care channels. We are encouraged by these recent trends and look forward to continuing to grow this franchise. I’ll now turn it over to Kimberly Manhart, Senior Vice President of Global Strategic Planning and Execution, to provide an update on our pipeline program, starting on Slide 14.
Kimberly Manhard: Thank you, Brendan. In addition to our commercial products, we have a strong pipeline of late-stage clinical programs and early-stage disclosed and undisclosed programs, providing us with several opportunities to further expand our growth. I’ll review our two late-stage programs. Please turn to Slide 15 to discuss our ACP-101 program, the Treatment of Hyperphagia and Prader-Willi Syndrome, or PWS. Let me start with just a brief background on the disease. Prader-Willi Syndrome is a rare genetic neurobehavioral disorder that affects approximately 8,000 to 10,000 patients in the U.S. The defining characteristic of PWS is hyperphagia, which commonly begins between the ages of three to eight. Hyperphagia is characterized by unrelenting hunger that often leads to obesity and behavioral challenges, such as anxiety and aggression.
As you can imagine, it is extremely distracting for patients, as well as parents and caregivers of patients with PWS. To illustrate just how devastating this disorder is, the average life expectancy is 30 years, largely due to obesity and resulting cardiovascular-related diseases. Hyperphagia and PWS represents a significant unmet need, as there are currently no therapies approved to treat it. Let’s now turn to Slide 16, where we describe our clinical program in Prader-Willi Syndrome. Late last year, we initiated a Phase 3 study of ACP-101 for the treatment of hyperphagia in PWS. This study builds on the prior Phase 3 experience and includes a 3.2 milligram dose that was shown to significantly reduce hyperphagia-related behaviors. As you see on this slide, the COMPASSPWS is our Phase 3 global, multi-center, randomized, double-blind, 12-week placebo-controlled study evaluating the efficacy and safety of ACP-101 in approximately 170 Prader-Willi patients.
The primary efficacy endpoint is improvement of hyperphagia, as measured by the Hyperphagia Questionnaire for Clinical Trials, or HQCT scale, also used in the prior Phase 3 study. Those patients who complete this study are eligible to enroll in an open-label, long-term extension study. If data from the Phase 3 study are positive, we plan to submit a new drug application for the treatment of Hyperphagia and PWS to the FDA. The Prader-Willi community has incredibly high-level enthusiasm for this opportunity and interest in our study. We look forward to working with them and with clinical experts as we continue to advance this program. Please turn to Slide 17 to review our second late-stage clinical program, ACP-204. ACP-204 is our next-generation 5-HT2A compound that we’re developing as a potential treatment for Alzheimer’s disease psychosis.
Similar to pimavanserin, ACP-204 works primarily as an inverse agonist at the 5HT2A receptor. With ACP-204, we are seeking to build on our learnings from pimavanserin and believe it is an exciting product opportunity. Our work completed today includes a comprehensive phase one program that supports our target product profile for ACP-204, including no sign of QT prolongation at planned doses in our study, a wide dose range established supporting the potential for a dose equivalent to approximately 2x the approved pimavanserin 34 milligram dose, and steady state PK achieved in less than half the time of pimavanserin, suggesting potential for an earlier onset of activity. ACP 204’s profile could represent a significant improvement over their already strong product profile for pimavanserin.
Please turn to Slide 18. Our seamless Phase 2-Phase 3 program for ACP-204, which we have aligned on with the FDA, builds on our clinical experience with pimavanserin and is now underway. Our plan includes a Phase 2 study with over 300 patients, which is designed to roll seamlessly into two Phase 3 studies. This Phase 2 study is ongoing and is designed and sized in such a way that if successful, it could be considered an adequate and well-controlled registrational trial. Once the full study allocation of patients for Phase 2 is complete, we will analyze and report Phase 2 results, by which time the two Phase 3 studies will already be underway. We are pleased to be advancing both of these promising late-stage clinical assets and look forward to providing future updates.
And now, I’ll turn it over to Mark for a financial update, beginning on Slide 19.
Mark Schneyer: Thank you, Kimberly. Let’s review our quarterly financial performance on Slide 20. In the first quarter, we recorded $205.8 million in total revenue, up 74% from the first quarter of last year. DAYBUE net product sales were $75.9 million in the first quarter, which was a sequential decline of 13% as compared to the fourth quarter of 2023. The sequential quarterly change was comprised of a 10% reduction in bottles sold and a 3% reduction in net price due to higher gross to net. In terms of the reduction in bottles sold, on our last call, we described the seasonal dynamics that were affecting our business in the first quarter, including fewer Rett clinic days and Rett patient visits, as well as reductions in refills and conversion rates due to the beginning of the year insurance reauthorization and re-enrollment process.
In addition, for a period of time, numerical discontinuations outpaced new patient starts, the dynamics of which were described earlier by Steve and Brendan. As we are now back to a period of net patient ads and the first quarter seasonal dynamics are behind us, we are confident in our ability to grow DAYBUE sales on a quarter-by-quarter basis through the remainder of the year. NUPLAZID net product sales were $129.9 million in Q1, up 10% versus the prior year’s first quarter. Gross to net for NUPLAZID was 33.1% in Q1. Our NUPLAZID franchise achieved 4% demand bottle growth year-over-year, driven by increases in new patient starts in both segments. Sell-in growth increased by 6%, benefiting from the impact from a larger reduction in in-channel inventory in the first quarter of last year, as compared to the level of in-channel inventory reduction we experienced in the first quarter of this year.
R&D expenses decreased to $59.7 million in the first quarter of 2024 from $69.1 million in the first quarter of 2023. The decrease was mainly due to the Trofinetide commercial supply build in Q1 2023 that was accounted for as R&D expense, as those expenditures took place prior to the FDA approval of DAYBUE. We had a similar level of clinical spend year-over-year. SG&A expenses increased to $108 million in the first quarter of 2024 from $101.2 million in Q1 2023. The increase was primarily driven by annualization of DAYBUE expenses, as well as foundational investments to commercialize Trofinetide outside the U.S. We ended the quarter with a cash balance of $470.5 million, which increased by $31.6 million from our 2023 year-end balance of $438.9 million.
Turning to slide 21, you can see that we are reiterating our guidance ranges for 2024. And now I’ll turn the call over to Steve for closing remarks.
Steve Davis: Thanks, Mark. Let’s now please turn to Slide 22. Looking to this year and beyond, we are focused on penetrating the significant opportunity that remains in front of us for DAYBUE in the United States. Together with NUPLAZID, we expect our commercial franchises to drive strong growth. We’re excited to bring DAYBUE to the markets outside of the U.S. and are making strong progress already this year. We look forward to further enrolling our two late-stage programs including our Phase 3 program for Prader-Willi Syndrome and our seamless Phase 2, Phase 3 program in Alzheimer’s disease psychosis. We’re pleased to have these terrific opportunities ahead of us while at the same time being in a position to generate sustainable and growing cash flow from operations to fund future growth. With that, I’ll turn the call over to our operator for Q&A. Operator?
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