ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q4 2023 Earnings Call Transcript
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q4 2023 Earnings Call Transcript February 27, 2024
ACADIA Pharmaceuticals Inc. misses on earnings expectations. Reported EPS is $0.28 EPS, expectations were $0.32. 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 ladies and gentlemen and welcome to ACADIA Pharmaceuticals Fourth Quarter and Full Year 2023 Financial Results Conference Call. My name is Abigail and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. [Operator Instructions] I would now like to turn the presentation over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications at ACADIA. Please proceed.
Al Kildani: Good afternoon and thank you for joining us on today's call to discuss ACADIA’s fourth quarter and full year 2023 earnings results. 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. Doug Williamson, our Head of Research and Development will provide an update on our pipeline programs; and Mark Schneyer, our Chief Financial Officer will review the financial highlights. Steve will then provide some closing thoughts before we open up the call to 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 Presentations 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 5. We transformed our business in 2023. Today we are a cash flow positive company with two first in class commercial assets. We have three late stage assets and a robust early stage pipeline and we continue to invest in future growth through business development. Let's begin with our commercial franchises which delivered record revenues of $231 million in the fourth quarter of 2023 and $726.4 million for the full year. DAYBUE, the first and only drug approved to treat Rett syndrome generated fourth quarter sales of $87.1 million in its second full quarter of sales since it was launched in April of last year. We're proud of our early success with the launch and excited about the future of DAYBUE.
NUPLAZID continued to deliver and be strongly cash flow positive. Sales in the fourth quarter were $143.9 million and reflect our ability to gain market share and grow the revenue base while continuing to manage the expense base. In addition to our two successful commercial franchises, we have a deep and growing pipeline which is making significant advances, including programs in the negative symptoms of schizophrenia, Prader-Willi syndrome and Alzheimer's disease psychosis. ACADIA has never been in a stronger financial position. We delivered 40% revenue growth in 2023 on the strength of our successful DAYBUE launch. We are now in a position to generate substantial, sustainable cash flow to fund further growth in our business. We ended the year with $438.9 million in cash, even after deploying a little over $100 million for business development, and expect our cash balance to grow to between $585 million and $655 million by the end of 2024.
ACADIA is relatively unique amongst our biotech peers, combining successful commercial franchises, exciting late and early stage assets and the financial strength to capitalize on these opportunities. This includes further expanding our portfolio and building on our success with DAYBUE and NUPLAZID in central nervous system and rare diseases. Let's next turn to a snapshot of our current products and pipeline on Slide 6. NUPLAZID is our treatment for Parkinson's disease psychosis, which today remains the only drug approved for the treatment of this condition. In 2023 we added significant growth potential to our business with the introduction of DAYBUE for the treatment of Rett syndrome. Here too, DAYBUE is the first and only drug approved for the treatment of Rett.
Behind these two successful commercial franchises, we have numerous late and early stage pipeline assets, including our negative symptoms of schizophrenia program with pimavanserin. There are no FDA approved treatments for this disorder, so the unmet need is high and we look forward to having top line results of our ADVANCE-2 study by the end of this quarter. As a side note, obviously we do not have results as of today. ACP-101 in Prader-Willi syndrome, where we are currently enrolling subjects. Prader-Willi is a rare and highly debilitating genetic disease where patients have an unrelenting drive to eat called hyperphagia. The severity of this disorder translates into an average lifespan of 30 years. Here too, there are no FDA approved treatments.
We're also currently enrolling our seamless Phase 2/Phase 3 program for ACP-204 in Alzheimer’s disease psychosis patients, another disorder where there are no approved treatments. ACP-204 is our second generation 5-HT2A blocker where we are leveraging our learnings from pimavanserin. And beyond that, we have a rich pipeline of early stage, disclosed and undisclosed programs that position us for future growth. I'll now turn the call over to Brendan to discuss our commercial performance on Slide 7.
Brendan Teehan: Thank you, Steve. I'm pleased to provide additional commentary on our two commercial franchises, DAYBUE and NUPLAZID, and the terrific performance both delivered in the quarter. Please turn to Slide 8 beginning with DAYBUE. We are now roughly ten months into launch and I'd like to begin by summarizing our accomplishments to date. The launch of DAYBUE has been one of the most successful recent launches in rare disease. We've had the privilege of bringing this therapy to Rett patients and their caregivers, who previously had no approved therapeutic options to help them deal with the debilitating condition. With an estimated 5000 diagnosed Rett patients in the United States and a prevalent population of 6000 to 9000, there is a substantial opportunity in front of us to bring the benefits of this therapy to many more patients.
We anticipate this will drive meaningful revenue growth well beyond this year. As the first drug approved for the treatment of Rett syndrome, we've experienced strong interest and demand from Rett families. As we've previously reported, this strong interest produced a surge of new patient starts in the first four months of the launch, followed by a demand curve that is much closer to our prelaunch expectations and the linear shaped curve we typically see in rare disease drugs. From a prescriber perspective, this initial surge was concentrated in Rett Centers of Excellence, or COEs, and we have since significantly expanded the breadth and depth of prescribers. This surge has produced multiple benefits. It's enabled us to reach a critical mass of experience in the medical and caregiver communities dramatically faster than we otherwise would have.
This has also enabled us to rapidly gain real world insights that we've been able to use to further educate the medical and caregiver communities. Ten months into the launch, COEs continue to represent a rich source of new patient starts. In fact, today, approximately 40% of our new patient prescriptions come from COEs and we are continuing to add depth in this sector. Non-COE high volume institutions account for approximately 30% of our new patient prescriptions. This sector represents an additional important growth opportunity as we continue to increase our breadth and depth in these institutions. I'd like to focus now on seasonal dynamics we observed in the latter part of the fourth quarter and early part of the first quarter. In December in particular, we experienced higher than average refill rates as families prepared for the holidays and health plan changes or reauthorizations in the New Year.
In January, we saw a decline in new prescriptions written, driven by seasonal and significant decline in Rett clinic visits following the holiday period, where approximately 50% of COEs had either no clinic days or reduced clinic days available. We have since seen a return of Rett clinic days in February, tracking back to historical levels and new patient prescription rates returning to the trends we observed prior to January. In January, we also saw a reduction in refills and conversion rates due to typical beginning of the year reauthorization and re-enrollment processes. This resulted in delays in patients receiving their first paid shipments in the New Year. We are working through those authorizations and do not see any long-term issues associated with processing these.
Let's turn to persistency on Slide 9. What you see on this slide is updated persistency information. There are two key points I'd like to highlight. First, we continue to track at least ten percentage points above our clinical trial experience, specifically, the LILAC-1 open label extension where patients rolled over to trofinetide from placebo, and this differential has continued to be very consistent for several months now. Second, when we look at these monthly milestones, they're improving. For example, our month-four persistency number was 75% when we reported on our earnings call in November and now at month-four you see that with many more patients we're at 80% persistency. And our month-six persistency, which we reported at JPMorgan last month, was 68% and now has risen to 70% and we continue to see this data improve at all time points thus far.
We are seeing improvements in persistency as patients and HCPs gain more experience with the safety and tolerability profile of DAYBUE. For clarity, the persistency rates we're including here are calculated based on the confirmed discontinuations, plus those that are 60 days beyond their scheduled refill date counted as a discontinuation. Please turn to Slide 10. As I mentioned earlier, we continue to generate a shared data supporting the long-term benefits observed in patients treated with DAYBUE. Here, we describe two important posters that we presented recently at the American Epilepsy Society, or AES meeting in December that underscore the benefits of DAYBUE. The first poster details the long-term outcomes in patients who completed our LAVENDER study and then continued into our open label LILAC-1 and then LILAC-2 studies.
Data presented in the poster demonstrated that patients treated with trofinetide and LILAC-2 continued to experience improvement in symptoms for up to 32 months. In addition, safety and tolerability were consistent with prior studies. Let's now turn to Slide 11 for the second poster presented at AES. This poster presented the results of the caregiver exit interviews for Rett patients treated with trofinetide in the LAVENDER and LILAC studies. You can see in the table on the left some of those specific real world improvements caregivers cited in their interviews. Consistent with the unmet need often highlighted by caregivers, the top three areas of improvement noted by these respondents and their children were improvement in engagement, improvement in hand use, and improvement in eye gaze.
We're pleased to have the feedback regarding the impact of trofinetide on the very symptoms that matter most to Rett families, and we're using this information to educate HCPs and Rett families about the potential benefits of DAYBUE. Let's turn to Slide 12. These quotes from caregivers reinforce some of the observations described above, which are consistent with the types of things 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.
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 next turn to our plans to make DAYBUE available to patients outside the United States on Slide 13. We see a clear opportunity to launch DAYBUE outside the United States and leverage the insights and learnings from the very successful U.S. launch to help many more patients suffering from Rett syndrome. Starting in Europe, it's estimated there are 9000 to 14,000 Rett patients between Europe and the UK. We've engaged with EMA this quarter and we anticipate filing a marketing authorization application with the European Medicines Agency in the first half of next year. In Canada, it's estimated there are 600 to 900 Rett patients.
We expect to file our new drug submission later this quarter, with the potential approval around year end 2024. And in Japan there are an estimated 1000 to 2000 Rett patients and this year we're engaging the Japanese Regulatory Agency to kick off our efforts to pursue approval. Let's turn to Slide 14 for a discussion of our NUPLAZID franchise. Product sales of NUPLAZID in 2023 were $549.2 million, an increase of 6% over 2022 as we continue to grow new patient starts and increase market share. Our primary financial objective for NUPLAZID is to optimize cash flow in that franchise, and we do that in two ways. First, we're continuing to grow bottle shipments and market share. The most effective lever to drive growth recently has been the broad educational campaign we launched last year to bring attention to our real world evidence studies.
These efforts have allowed us to grow new patient starts faster than the market. In fact, in 2023, new patient starts were up 12% year-over-year. The second way we optimize NUPLAZID franchise cash flow is by carefully managing expenses and will 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. We look forward to continuing to grow this franchise. I'll now turn it over to Doug Williamson, our Head of Research and Development, to provide an update on our pipeline programs starting on Slide 15.
Doug Williamson: Thank you Brendan. In addition to our commercial products, we have a strong pipeline of clinical programs providing us with several opportunities to further expand our growth. Let's start with pimavanserin as a potential treatment for the negative symptoms of schizophrenia on Slide 16. Predominant negative symptoms remain one of the largest unmet needs in schizophrenia and as of today, there are still no approved treatments for these symptoms. It's important to understand the distinction between treating the positive and negative symptoms of schizophrenia. Positive or psychotic symptoms are hallucinations, delusions and thought disorders that typically resolve with antipsychotic treatment. Negative symptoms are social withdrawal, restricted speech, lack of emotion, loss of motivation and blunted affect.
Our adjunctive pimavanserin program is designed to treat the approximately 700,000 patients in the U.S. whose positive psychotic symptoms are adequately controlled with antipsychotic treatment, but who still suffer from persistent and uncontrolled negative symptoms, inhibiting their ability to lead a normal, productive life. Please turn to the next slide to discuss our pimavanserin clinical program for negative symptoms of schizophrenia. Let's discuss the details of our program. The ADVANCE-2 study is designed to treat patients whose positive symptoms are adequately controlled, but still suffer from persistent uncontrolled negative symptoms. Negative symptoms of schizophrenia have proven to be an exceedingly difficult drug development challenge with multiple industry failures over several decades.
Therefore, with our previous positive ADVANCE-1 study of pimavanserin, we achieved something very rare in this population. ADVANCE-2, our second six-month study is designed to evaluate the impact on persistent negative symptoms in patients with acute psychosis has been controlled with antipsychotic treatment. As Steve said, we don't know the results yet, but remain on track to share them by the end of the quarter. Please turn to Slide 18 to discuss our late stage ACP-101 program for the treatment of hyperphagia in Prader-Willi syndrome. Let me start with just a brief reminder of the disease. Prader-Willi syndrome is a rare genetic neurobehavioral syndrome that affects approximately 8000 to 10, 000 patients in the United States and represents a significant unmet need.
There are currently no therapies approved to treat the hyperphagia in patients with PWS. Hyperphagia is the defining characteristic of PWS and commonly begins between the ages of three and eight. It's characterized by unrelenting hunger that often leads to obesity and behavioral challenges such as anxiety and aggression, and is extremely distressing for patients, parents, and caregivers. To illustrate just how devastating this disorder is, the average life expectancy is approximately 30 years, largely due to obesity and cardiovascular related disease. Please turn to Slide 19, where I'll speak to 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. Before getting into the details of the study, I'd like to note that the PWS community has shown an incredibly high level of enthusiasm for this opportunity and interest in our study.
COMPASS: Those patients who complete the study will be eligible to enroll in an open-label long-term extension study. If data from this Phase 3 study is positive, we plan to submit a new drug application for the treatment of hyperphagia in PWS to the FDA. We look forward to working with the Prader-Willi community and clinical experts as we continue to advance development of this program. Please turn to Slide 20. We're advancing ACP-204, our next generation 5-HT2A compound which we're developing as a potential treatment for Alzheimer's disease psychosis. As we previously described, ACP-204, like pimavanserin, works primarily as an inverse agonist at the 5-HT2A receptor. With ACP-204 we're seeking to build on our extensive learnings from pimavanserin and believe it has an exciting future.
Our work completed to date includes a comprehensive Phase 1 program and supports our target product profile for ACP-204, including no sign of QT prolongation at planned doses in our studies, a wide dose range supporting the potential for a dose approximately equivalent to two times that of 34 milligrams of pimavanserin and a steady state concentration achieved in less than half the time of pimavanserin. As you can see on the slide, ACP-204's profile could represent a significant improvement over an already strong product profile for pimavanserin. Please turn to Slide 21. Our seamless Phase 2/Phase 3 program for ACP-204 is now underway. This plan includes a Phase 2 study with over 300 patients, which we've aligned on with the FDA and which is designed to roll seamlessly into two Phase 3 studies.
The Phase 2 study has been designed and sized in such a way that, if successful, it could be considered a pivotal registration study. 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. This plan will ultimately provide three potential pivotal studies for a submission. We look forward to continuing to advance this program and providing future updates. And now I'll turn it over to Mark for a financial update beginning on Slide 22.
Mark Schneyer: Thank you, Doug. Let's start by reviewing our fourth quarter and full year performance on Slide 23. In the fourth quarter, we recorded $231 million in total revenue, up 69% from the fourth quarter of last year. For the full year 2023, we recorded $726.4 million of total revenue, up 40% from the prior year. Fourth quarter DAYBUE net product sales were $87.1 million. Full year DAYBUE sales were $177.2 million in the first eight and a half months of commercialization. Fourth quarter NUPLAZID net product sales were $143.9 million, up 5% versus the prior year, and our gross to net adjustment was 27.5% in the quarter for NUPLAZID. For the year, NUPLAZID net product sales were $549.2 million, up 6% compared to $517.2 million in the prior year.
Our NUPLAZID franchise achieved 3% demand bottle growth year-over-year, driven by increases in new patient starts in both market segments. Sell in growth increased by 2% as we experienced a modest reduction in in channel inventory over the course of the year. The NUPLAZID gross to net adjustment for the full year was 24.3% as compared to 20.8% last year. This increase was primarily due to increased accruals related to the Inflation Reduction Act. For 2023 our NUPLAZID franchise generated over $300 million of cash flow on a fully allocated cost basis. R&D expenses decreased to $351.6 million in 2023 from $361.6 million in 2022. The decrease was mainly due to the trofinetide commercial supply build in 2022 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 and business development investments year-over-year. SG&A expenses increased to $406.6 million in 2023 from $369.1 million in 2022. The increase was primarily driven by DAYBUE commercialization expenses, partially offset by reductions in NUPLAZID spend. Our cash balance increased year-over-year as we ended the year with $438.9 million of cash compared to $416.8 million at the end of 2022. Let's turn to Slide 24 for a discussion of our 2024 guidance. Beginning with DAYBUE, we expect net sales for DAYBUE in 2024 to be in the range of $370 million to $420 million. In our 2024 full year guidance, we project new patient prescriptions from the beginning of February forward that are consistent with the linear growth trend we observed in the fourth quarter.
Persistency rates that continue to be 10 percentage points above our clinical trial experience, compliance to dose continuing in the range of 75% to 80%. I'd also like to offer some financial perspective on the seasonal dynamics impacting the first quarter of 2024. Let's start with December. As Brendan discussed Q4 net sales were positively impacted by a seasonal increase in refill rates as families prepared for the holidays, healthcare changes and copay resets. In January, we saw a reduction in new patient prescriptions due to fewer office visits and Rett clinic days, together with reductions in conversion and refill rates as patients went through the payer re-enrollment process. And in February we have seen strong recovery across these metrics.
Factoring the seasonal dynamics and expected higher growth to net in the first quarter, we anticipate first quarter net sales to be in the range of $76 million to $82 million. This is reflected in our annual guidance range of $370 million to $420 million. Moving to NUPLAZID, we are providing net sales guidance between $560 million and $590 million for 2024. The midpoint of the range assumes approximately 1.5% volume growth and 3% net price growth. We are projecting gross to net for NUPLAZID to be between 25% and 29% for the full year and between 33% and 35% for Q1. We expect gross to net to be of similar levels for the remaining quarters of the year as we don't anticipate an increase in gross to net for the fourth quarter of 2024 because of the Medicare Part-D redesign that is expected to take place in 2025.
We expect R&D expense to be between $305 million and $325 million, including approximately $20 million in stock based compensation. We will be increasing our clinical spend year-over-year as we progress ACP-204, ACP-201 and our early stage programs and reduce our spend on trofinetide. As a reminder, our R&D range does not guide for incremental spend for business development transactions. We expect SG&A expense to be between $455 million and $480 million for the full year, including approximately $50 million in stock based compensation. The growth in SG&A year-over-year is primarily due to increased investment in our U.S. DAYBUE franchise, as well as the annualization of expenses from being on the market for a full year in 2024 and foundational investments preparing for trofinetide ex-U.S. launches.
Our SG&A guidance does not include prelaunch investment for negative symptoms of schizophrenia, which is contingent on positive results of ADVANCED-2. Finally, we expect our 2024 year end cash balance to be approximately $585 million to $655 million, based on our expected range of operational cash flows, excluding any expenditures for future business development transactions. With that, I'll turn it over to Steve for closing remarks.
Steve Davis: Thanks much, Mark. Please turn to Slide 25. I'll close by briefly recapping 2023 and highlighting our opportunities in 2024 and beyond. 2023 was a transformational year for us. We launched our second commercial drug DAYBUE. We achieved 40% revenue growth from two commercial franchises, DAYBUE and NUPLAZID, and we completed the enrollment in our ADVANCE-2 study in negative symptoms of schizophrenia. We also acquired worldwide rights trofinetide. We initiated our Phase 3 program of ACP-101 in Prader-Willi syndrome and we initiated our seamless Phase 2/Phase 3 study of ACP-204 in Alzheimer's disease psychosis. Looking to this year and beyond, we continued to capitalize on the successful launch of DAYBUE and project strong revenue streams from DAYBUE and NUPLAZID.
We will have the top line results from our ADVANCE-2 study by the end of this quarter. We're pursuing expansion of DAYBUE in Europe, Canada and Japan. We're now well on our way to determining the potential of ACP-101 in Prader-Willi syndrome with the potential new therapy there, likewise with ACP-204 for Alzheimer's disease psychosis. And we're now at a point where we have sustainable and growing cash flow from operations to fund future growth. With that, I'll turn it over to the operator for our Q&A. Operator?
Operator: Thank you. [Operator Instructions] One moment for our first question. Our first question comes from Tessa Romero with JPMorgan. Your line is open.
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