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Edited Transcript of ACAD earnings conference call or presentation 31-Jul-19 8:30pm GMT

Q2 2019 ACADIA Pharmaceuticals Inc Earnings Call

SAN DIEGO Aug 2, 2019 (Thomson StreetEvents) -- Edited Transcript of ACADIA Pharmaceuticals Inc earnings conference call or presentation Wednesday, July 31, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Elena H. Ridloff

ACADIA Pharmaceuticals Inc. - Executive VP & CFO

* Mark C. Johnson

ACADIA Pharmaceuticals Inc. - VP of IR

* Michael J. Yang

ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer

* Srdjan R. Stankovic

ACADIA Pharmaceuticals Inc. - President

* Stephen R. Davis

ACADIA Pharmaceuticals Inc. - CEO & Director

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Conference Call Participants

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* Alan Carr

Needham & Company, LLC, Research Division - Senior Analyst

* Andrea R. Tan

Goldman Sachs Group Inc., Research Division - Research Analyst

* Benjamin Jay Burnett

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Charles Cliff Duncan

Cantor Fitzgerald & Co., Research Division - Senior Analyst

* Danielle Catherine Brill

Piper Jaffray Companies, Research Division - VP & Senior Research Analyst

* James Scott

JP Morgan Chase & Co, Research Division - Analyst

* Jason Nicholas Butler

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Ritu Subhalaksmi Baral

Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst

* Roanna Clarissa H. Ruiz

SVB Leerink LLC, Research Division - Associate

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals Second Quarter 2019 Financial Results Conference Call. My name is Michelle, and I will be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to Mark Johnson, Vice President of Investor Relations at ACADIA. Please proceed.

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Mark C. Johnson, ACADIA Pharmaceuticals Inc. - VP of IR [2]

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Thank you, Michelle. Good afternoon, and thank you for joining us on today's call to discuss ACADIA's second quarter 2019 financial results. Joining me on the call today from ACADIA are Steve Davis, our Chief Executive Officer, who'll provide a brief overview of our strategy, recent achievements, pipeline opportunities and financial performance; Michael Yang, our Chief Commercial Officer, who will provide updates on our commercial initiatives with NUPLAZID; Serge Stankovic, our President, who will discuss our pipeline progress; and Elena Ridloff, our Chief Financial Officer, who will discuss our financial results, before turning it back to Steve for his final remarks and opening the call for questions. I would also like to point out that we are using supplement slides, which are available on the Events & Presentations section of our website.

Before we proceed, I would first like to remind you that during our call today, we'll be making a number of 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 a number of risks and uncertainties that may cause actual 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 Davis, our Chief Executive Officer.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [3]

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Thank you, Mark. Good afternoon, everyone, and thanks for joining us today. Our team delivered strong sales performance this quarter as you can see on Slide 5. In the second quarter, NUPLAZID achieved $83.2 million in net sales, a 46% year-over-year increase. Based on our execution and the growth of NUPLAZID in the second quarter, we raised our full year revenue guidance to $320 million to $330 million from a previous range of $280 million to $300 million. This represents a 45% year-over-year revenue and 30% year-over-year volume increase at the midpoint of the range.

We continue to leverage our R&D capabilities as we pursue several pipeline programs addressing unmet needs in the CNS space with very large market opportunities. In dementia-related psychosis, we continue to make good progress with our pivotal Phase III HARMONY study and expect to announce top line results in the second half of next year, 2020, with an interim read in the second half of this year. In major depressive disorder, we have now initiated both of our Phase III studies. In schizophrenia, we look forward to completing dosing in our ongoing ADVANCE study, evaluating pimavanserin in schizophrenia patients with predominant negative symptoms and remain on track to announce top line results around the end of this year. And finally, we plan to initiate our Phase III study, LAVENDER, evaluating trofinetide as a treatment for Rett syndrome in the fourth quarter of this year.

With that, I will now turn it over to Michael to discuss our commercial performance.

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [4]

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Thank you, Steve. Please turn to Slide 7. We are very pleased with the strong performance we achieved in the second quarter. This is a reflection of our team's continued execution on our key commercial initiatives, driving awareness of PD Psychosis and the adoption of NUPLAZID as a treatment of choice.

In the second quarter, we continue to expand our reach, adding new prescribers for NUPLAZID and new long-term care pharmacies as well as new patient starts and growing volume at long-term care facilities. As a result, we achieved sequential volume growth of approximately 15% and year-over-year volume growth of approximately 34%.

In the quarter, we were able to increase demand for NUPLAZID in both the specialty pharmacy and the specialty distribution channels. Principal drivers of growth were the completion of the 34-milligram transition of the 17-milligram tablets and a successful brand and DTC campaign. Patient screening and care plan tools developed for health care practitioners also contributed to driving growth in the long-term care channel during the quarter.

In the second quarter, we realized both an increase in compliance for established patients and additional new patients starting on pain treatment. Both of these benefits contributed significantly to the sequential volume growth and will continue to benefit our year-over-year growth for the remainder of 2019. Since we launched NUPLAZID, we have seen very consistent high compliance for patients who continue on therapy. Notably, during the second quarter, we saw this compliance to therapy increase even further, which was a strong contributor to our second quarter performance.

Reaching patients and caregivers directly is an important part of our promotional strategy. According to market research, our initiatives have resulted in increased awareness of PD Psychosis and NUPLAZID as the only FDA-approved treatment choice. Motivated caregivers and patients are actively seeking additional information on PDP and NUPLAZID and having conversations with their health care practitioners.

Given the positive return we're seeing from our DTC campaigned, we plan to invest in an additional DVT -- DTV advertising in the second half of 2019 to complement our ongoing patient and caregiver commercial initiatives. As a reminder, we would anticipate a lag before realizing positive benefits associated with new patient initiating treatment. We believe we have the right disciplined approach and cadence with these initiatives to deliver an attractive return on investment while continuing to increase brand awareness for NUPLAZID.

Looking ahead, we will continue to implement and execute on our commercial initiatives to grow NUPLAZID and PDP. I'd like to thank our team for delivering a strong quarterly performance, and now, more patients and caregivers are able to experience the benefits of NUPLAZID in the treatment of their PD Psychosis.

I'll now turn it over to Serge to provide R&D updates on our pipeline.

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [5]

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Thank you, Michael. As usual, I will provide updates regarding our R&D progress. Slide 9 highlights our pipeline programs, which I will be reviewing with you today. In total, we have 4 programs in late-stage clinical development.

Let's start with our dementia-related psychosis or DRP program on Slide 10. There is no FDA-approved treatment for DRP. DRP is estimated to affect approximately 2.4 million patients in the United States, of which only about half are diagnosed. We currently conducted HARMONY, a Phase III relapse prevention study. We have agreement with the FDA that robust results from HARMONY can serve as the basis for a supplemental NDA submission.

On Slide 11, we have a high-level illustration of the Phase III HARMONY relapse prevention study. We plan to announce the final top line results for HARMONY in the second half of 2020, with an interim read in the second half of this year. As a reminder, the statistical threshold for the interim read is very high.

Let's turn to Slide 12 to discuss our MDD program. The majority of patients with major depressive disorder do not adequately respond to their treatment and continue to experience significant depression. Based on the positive and robust study results from our CLARITY study, we believe pimavanserin may represent an important new adjunctive therapy for patients struggling with their depression.

Slide 13 shows our Phase III development program for pimavanserin for adjunctive treatment of MDD. We are very encouraged by the investigators' enthusiasm for our CLARITY-2 study, and this study is already enrolling well. In addition, we recently initiated our second Phase III study, CLARITY-3. If we are successful, our Phase II CLARITY study, combined with at least one of the Phase III trials, would be the basis of a supplemental NDA submission.

Last week, we announced top line results from our Phase III ENHANCE study. These results and key takeaways are summarized on Slide 14. As we reported last week, the study did not achieve statistical significance on the primary endpoint. However, we were encouraged to see a consistent trend of antipsychotic effect and positive improvements on the negative symptoms of schizophrenia as measured by the prespecified secondary and exploratory endpoints.

Let's turn to Slide 15 to discuss our program for the negative symptoms of schizophrenia. Currently available antipsychotic treatments primarily treat the positive symptoms of schizophrenia. Approximately 40% to 50% of schizophrenia patients experience predominant negative symptoms, which include apathy, lack of emotion, social withdrawal and cognitive impairment. This remains a significant unmet need for patients as there are no FDA-approved treatments available.

On Slide 16, we have a high-level illustration of the ADVANCE study. This is a 26-week study of evaluating pimavanserin as an adjunctive treatment for schizophrenia patients with predominant negative symptoms while controlling for their positive symptoms. The primary endpoint is the change from baseline on the negative symptom assessment, 16-item scale. We have fully enrolled the ADVANCE study and expect to announce results around year-end.

We are excited about our trofinetide program for Rett syndrome, Slide 17. Rett syndrome is a debilitating neurodevelopmental disorder that occurs predominantly in females following apparent normal development for the first 6 months of life. Currently, there are no approved medicines for this rare disease, which affects approximately 6,000 to 9,000 patients in the United States.

Please turn to Slide 18. We remain on track to initiate LAVENDER, our pivotal Phase III study for trofinetide in Rett syndrome, in the fourth quarter of this year. This 3-month study will evaluate approximately 180 females with Rett syndrome age 5 to 20.

Slide 19 highlights our upcoming clinical milestones. We look forward to sharing our clinical development progress on all 4 late-stage pipeline programs addressing significant unmet needs.

I'll now turn the call over to Elena to discuss our financial performance.

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Elena H. Ridloff, ACADIA Pharmaceuticals Inc. - Executive VP & CFO [6]

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Thank you, Serge. Today, I'll discuss our second quarter 2019 results and our financial outlook. Please turn to Slide 21. In the second quarter of 2019, we reported $83.2 million of net sales, an increase of approximately 46% compared to $57.1 million of net sales in the second quarter of 2018. This was driven by approximately 34% volume growth year-over-year in Q2.

For the first half of 2019, NUPLAZID volume growth was approximately 27% year-over-year. The gross-to-net adjustment in Q2 is 13.2%. Gross-to-net this quarter was favorable versus our expectations as a result of the higher compliance rates for established patients. Weeks of inventory in the channel at the end of the second quarter were consistent with previous quarters.

Moving down the P&L. GAAP R&D expenses increased to $67.3 million in Q2 2019 from $46.6 million in Q2 of 2018. The increase was primarily due to development costs for trofinetide and additional clinical study costs for pimavanserin. GAAP SG&A expenses decreased to $68 million in Q2 2019 from $69.5 million in the second quarter of last year. The decrease was primarily due to timing of DTC advertising expense versus the prior year, partially offset by an increase in personnel costs. Noncash stock-based compensation expense during the quarter was $20.4 million compared to $20.6 million for the same period in 2018. Cash used in operations during the quarter was approximately $38.4 million compared to $40.9 million for the second quarter of 2018. We ended the quarter with $381.9 million in cash and investments on our balance sheet.

Please turn to our 2019 guidance on Slide 22. We are increasing our net sales guidance to be between $320 million to $330 million from the previous range of $280 million to $300 million. This reflects the increased compliance of new patient starts we saw in Q2 as well as the increased expectations we now have for the remainder of the year. At the midpoint of the new guidance range, this represents approximately 45% revenue growth and approximately 30% volume growth year-over-year. Given the favorable growth to net adjustments in the first half of the year, we now anticipate the full year gross-to-net to be in the range of 17% to 18% and forecast Q3 gross-to-net to be in the mid-teens. As a reminder, gross-to-net in the fourth quarter will be higher than Q2 and Q3 as a result of accruing for the donut hole obligation associated with year-end inventory in the channel.

Turning to expenses. We continue to forecast GAAP R&D expense to be between $250 million and $265 million. We are now forecasting GAAP SG&A expense to be between $300 million and $315 million from the previous range of $280 million to $295 million. The increase is in part due to our plan to run additional television DTC ads in the second half of 2019. We continue to expect noncash stock-based compensation expense to be between $80 million and $90 million.

And with that, I'll turn the call back over to Steve.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [7]

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Thank you, Elena. Please turn to Slide 24. We are very pleased with our strong quarterly performance and outlook for the remainder of the year. Ultimately, we don't measure our success by financial metrics alone but by the true difference we can make in people's lives. Because of our commercial initiatives, more patients with Parkinson's disease psychosis are getting the treatment they need. Not only are their lives improving with treatment but also those of their caregivers. Beyond PDP, we are excited that pimavanserin and trofinetide may offer hope to patients and their caregivers who struggle with dementia-related psychosis, depression, schizophrenia and Rett syndrome.

Please turn to Slide 25. Looking ahead, we will continue to execute on all 3 of our strategic pillars: grow the sales of NUPLAZID in PDP; leverage the potential of our pipeline programs; and expand our pipeline through focused business development.

I'd like to close by thanking our employees whose dedication and hard work are driving our company's continued success and execution of our 3-pillar strategy.

I'll now open up the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Cory Kasimov of JPMorgan.

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James Scott, JP Morgan Chase & Co, Research Division - Analyst [2]

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This is Gavin on for Cory. Congrats on the quarter. We just had one on the Phase III HARMONY study. Anything you can provide on the -- like as far as qualitative data on event rates? And then I know it's a long shot, but can you provide granularity on timing, i.e., Q3 versus Q4? Any color would be helpful.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [3]

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Yes. Sure. Serge, do you want to take both those questions?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [4]

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Yes. Thanks for the questions. I -- first question, in terms of we have been providing just some of the insight on the progress on recruitment and success rates in the open-label study. We haven't been providing details on the relapse rates because that's a very variable and it's really not an indicator because it's very independent-driven event in the trial.

So from that perspective, no change. We are progressing very well in both enrolling patients in the trial as well as, as I've always said, our success rates have been somewhat better than what we initially anticipated. But mostly, for the most part, around those numbers. So that's all I can say about that.

Your second question, I'm not quite sure, are you referring to higher granularity around the final analysis or the interim analysis? If you would please clarify that.

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James Scott, JP Morgan Chase & Co, Research Division - Analyst [5]

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Right. I was talking about the interim. As far as the 2H '19, can you provide any granularity in terms of Q3 or Q4?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [6]

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Well, we have not been commenting on the specific timing on that, other than that it will definitely happen in the second half of this year.

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Operator [7]

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Our next question comes from Tazeen Ahmad of Bank of America.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [8]

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Maybe a couple for Michael just to follow up on your prepared remarks. You talked about improvements or continued improvement in compliance rates particularly seen this quarter. Can you give us a little bit more granularity on why you think that particular trend is occurring and whether you would continue to expect improvement in compliance?

And then secondly, I think you mentioned that you are planning a new DTC campaign to start in the second half of the year. I was curious as to how that might be any different from the DTC campaign that you had going on, which you ended in the, I believe, the last quarter.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [9]

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Yes. Sure. Michael?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [10]

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Yes. Tazeen, thanks for the question. So when I talk about the compliance, I'm referring specifically to the number of bottles that a patient takes in the quarter and specifically around established patients or continuing patients. And as I mentioned, historically, we've seen a very consistent and high compliance rate for those patients. We did in the past comment on the 34-milligram and how we believe that's going to lead to a better patient and physician experience. And notably, as I mentioned in this quarter, we saw an increase from those historical norms. So I think that if we were to attribute it, then we think, number one, the 34-milligram and also, I think, with the strong endorsement of the value proposition and the profile of NUPLAZID. So I think all of those things in totality, I think you'll start to see that benefit in the base for the coming year and the rest of the year and that'll be part of our new base.

In regards to DTC, I think you're going to see the same kind of look and feel that we've had with the prior campaign. Of course, we've learned a lot along the way, and we'll be implementing those learnings mostly on the back end and in our refined other tactics. But from a consumer point of view, I think you're going to see a very similar campaign from an external perspective.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [11]

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And I guess why are you choosing to restart DTC?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [12]

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Right. Yes. There's a number of factors we look into when we evaluate TV, media. We have an ongoing initiative to support caregiver and patient awareness and education, and those are on all the time. When it comes to TV, it's a pivotal, obviously, element to our campaign in general. And we take things into consideration as how fresh and compelling our creative is, the media ways and the intensity to reach our target audience and, more importantly, the time it takes for those behaviors to manifest themselves and the actions that benefit the brand. In totality, we believe we have the right cadence and approach.

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Operator [13]

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Our next question comes from Jason Butler of JMP Securities.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [14]

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Congrats on the quarter. A couple of questions for Michael again. Any more granularity you can give us around the trends in the new patient adds or changes in the trends of patients who drop off therapy early versus those that go on to stay on the drug longer?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [15]

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Jason, great question. So in regards to patient dynamics, obviously, the continuing benefit we're seeing in the take rate, we're going to have to have more quarters to see how that plays out in regards to duration of therapy. I can't say that we're ready to comment on duration of therapy, but certainly, the inter-quarter dynamics who's benefited from what we think, as I mentioned before, the improved experience with the 34-milligram.

We added new patients, we added new physicians, long-term care, pharmacies ordering the drug, so I think we still have a lot more penetration, but nothing really unusual comment in regards to the intra-patient dynamics in regards to drop-offs, et cetera, just yet.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [16]

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Okay, great. And then with the continued investment in DTC, any thoughts on the current size and structure of the sales force? And how are you thinking about that for the second half of the year?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [17]

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I'm not quite sure I heard the question. Was it DTC and the sales force?

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [18]

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Just -- you're obviously -- you're continuing to invest on driving awareness, driving more interest in the product. Are you on the back end? Do you feel like you have the right size and structure of the sales force to capture that?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [19]

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Yes. Great question. Yes. So over the past year or so, and I think we've commented on this, we've added capabilities in the organization, focusing on increasing -- for example, we've increased the footprint of our long-term care group. In the past, we've added kind of a key account function. So we're going to continue to make the promotional, I'd say, adjustments to make sure that we capture all the best wind in the sails, if you will. So I think we're optimizing and I think we're operating at a very high level at the moment.

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Operator [20]

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Our next question comes from Salveen Richter of Goldman Sachs.

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Andrea R. Tan, Goldman Sachs Group Inc., Research Division - Research Analyst [21]

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This is Andrea on for Salveen. Maybe a question for Serge. As a follow-up to Gavin's question on the HARMONY study, when you think about how rapidly the trial has been enrolling, can you say if that's due to the large number of patients that are eligible to come onto the trial? Or is that perhaps more reflective of the proportion of patients that are responding to therapy who are then continuing onto the double-blinded portion?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [22]

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Thanks, Andrea. It is hard to speculate about. I think that is a little bit of both involved. There is certainly -- we had -- we've been reporting significant interest and in the trial by the investigators and families and patients. And I think that's in large part also due to the kind of design of the trial where patients are starting treatment with the open active treatment for 3 months, and that's much more akin to what a standard clinical practice is. So we definitely had a high interest in participation in the trial. And so from my perspective, that's probably a reason that we saw a very kind of steady enrollment and interest throughout the execution of the trial.

On the other side, I also do believe that with the inclusion of all subtypes of dementia, that definitely, there is a large population of patients, and that also reflected itself in potential candidates for the trial study participation.

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Andrea R. Tan, Goldman Sachs Group Inc., Research Division - Research Analyst [23]

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Sure. So maybe just to follow up on that, I guess maybe what we're trying to understand is if the enrollment and the pace of that is because of that large population or I guess in terms of the number of patients who are responding and moving onto that second portion, right? Like you could have -- that could be the driving factor where you're seeing rapid progression of patients because so many people are responding to the drug in the open-label portion.

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [24]

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Well, the response rates that we anticipated are based on the response rates that we were seeing in the Parkinson's disease psychosis trials that we conducted. And as I said, we are seeing approximately, probably slightly higher rates of response after -- stable response, I want to say, after 8 and 12 weeks of treatment. So that's certainly encouraging, and I would not say that, that may not play a role in a continued interest by the investigators in enrolling the patients in the trial. But it would be a pure speculation on my part to say to what extent is that, to what extent is overall design of the trial and to what extent is just this is a huge patient population.

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Operator [25]

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Your next question comes from Ritu Baral of Cowen.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [26]

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My first question is a little, I guess, broader. How do you guys think about pricing, assuming either negative symptoms goes through, MDD goes through or Alzheimer's -- I'm sorry, DRP goes through? How do you think of the current price and the current dose for PDP? And how might that flex into additional indications? And have you done any payer discussions on the value proposition? More specifically, have you talked to payers about what relapse prevention clinical data actually means for DRP?

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [27]

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Great. I think there's several subquestions in there. I'm going to turn it over to Michael. I'll try to keep (inaudible).

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [28]

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Fair enough. Ritu, yes, so I guess the first place to start from a commercial perspective is, really, the unmet need that we're going after, whether it's DRP, adjunctive MDD, negative symptoms, these are all high unmet needs and the weight of the clinical evidence that we've seen. Obviously, we don't have the results of the approval studies, but going into these studies, when we've done the research, we do see that there is a recognition of the commercial value or the patient value of the innovation. So if there's a lot of innovation, the payers recognize that. We've done -- we have done research on each of those indications that we're doing what I would call multi-indication scenario planning.

Broadly speaking, without getting into too many specifics, you're mixing -- we're having to mix and match books of business with insurance companies. So for example, MDD has a larger footprint or weight on commercial. DRP is going to be very similar in regards to our current PDP profile. And for schizophrenia, it's an entirely -- a new ball of wax entirely.

Despite all those things, we do believe there is a way for us to find ways to partner with payers for the appropriate access and know that we're not in any indications going up against cheap generics. We are playing in specialty tiers, and that affords us the appropriate use criteria that payers are looking to see.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [29]

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I think there was one...

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [30]

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If I may add just one thing, just not to remind everybody, in addition to our relapse prevention trial, which is a long-term treatment trial, we also have positive data in 2 acute short-term trials that are done in a classical parallel design. So I think from the payer's perspective and from overall looking at the data, we have a fairly complete package that is actually more comprehensive than you usually have at approval.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [31]

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Got it. And I do recognize that my first question had about 4 different parts (inaudible) by design. Serge, can you just comment on the characteristics of HARMONY enrollment across the background diseases? You had mentioned earlier this year that enrollment was sort of tracking on epidemiology. Is that still the case? Or is it shifting?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [32]

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Yes. It's absolutely the case. We, as you can imagine, follow that fairly continuously. And both in terms of the enrolling people in the open-label trial as well as people that qualify for -- that essentially respond and then qualify for a randomized double-blind stage of the trial, we are tracking very, very close to epidemiological data on the proportion of different subtypes.

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Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD and Senior Biotechnology Analyst [33]

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And I'm sorry if I missed it in your prepared remarks. Did you say precisely what your rollover to the open-label rate is?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [34]

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No, we did not. We did -- I did not say a specific number. It remains at the same -- slightly above what we were anticipating but thereabout. It's fairly steady.

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Operator [35]

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Your next question comes from Charles Duncan of Cantor.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [36]

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Steve and team, let me add my congratulations on what looked to be a very nice quarter. My first question was kind of related to guidance, and I'm going to take a page out of Ritu's book and ask, call it, a multi-pronged question. But if you look at guidance going forward, if you had to identify 1 particular driver of that, would it be prescriber base increasing? Would it be new patient adds increasing? Would it be compliance increasing? Or would it be pricing? What would be the main driver to the guidance?

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [37]

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Charles, I'm going to ask Michael to answer that question.

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [38]

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Sure. Charles, thanks for the question. Going forward, I think we've created a lot of momentum, as I mentioned, in the business across all the levers that we're looking to affect, adding new physicians, adding new patients, penetrating our long-term care channel both in the new pharmacies and deeper -- depth out of the existing pharmacies. So I would anticipate continued volume growth out of the existing patients, and also, adding new patient starts would be the primary drivers to the forecast.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [39]

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And maybe just to reiterate what Michael said. One of the things that we saw in the second quarter was a significant uptick in the take rate from existing patients. And so as Michael mentioned, we see that carrying through into the third quarter and the fourth quarter as well. Now the impact on rate of growth, obviously, is different than the higher base rate that we have at those compliance [subs]. But we did reflect it in our guidance for the remainder of the year.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [40]

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That makes sense, especially given the clinical value of 34 mg. If I could just ask one more question, that would be probably for Serge, related to the MDD program. Could you help us understand maybe the differences between CLARITY-2 and CLARITY-3? Between the 2 Phase IIIs, but also those 2 Phase IIIs relative to Phase II, are you using different sites or different entry criteria or anything? Because I think you mentioned that CLARITY-1 with one of the 2 Phase IIIs would be sufficient for sNDA. And so I guess I'm wondering if there's different probability success for the 2 Phase IIIs.

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [41]

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The 2 studies, 2 Phase III studies, CLARITY-2 and CLARITY-3, are identical, with 1 exception. CLARITY-2 is done in the United States, and CLARITY-3 is done in Europe.

In regard to the sites, obviously, our CLARITY study, Phase II study was done in the United States, and we naturally included in the CLARITY-2 those sites that were performing well in the previous study. So I can say that they are identical sites because CLARITY-2 has a tad more sites. And also -- but there is a considerable overlap in that respect. So that's one.

There are also -- in regard to design differences between Phase II and Phase III trials, there is not much difference with exception. To remind you, Phase II was SPCD design, so have 2 phases. Phase III trials are just parallel Stage 1 sort of design of the trial. So there is no other differences in -- there are minor differences in terms of certain things that we learned in trial, but they are not really -- the trials are essentially identical with the Stage 1 of the Phase II trial.

And in regard to the size of these trials, as you will remember, we had about 200-plus -- a little more than 200 patients in Phase II. Here, these trials are 280, which is fairly close for the difference between Phase II and Phase III, and we were able to do that on a basis of robust results that we had in Phase II and then accounting to continue to do a relatively smaller trial where we can control the quality.

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Charles Cliff Duncan, Cantor Fitzgerald & Co., Research Division - Senior Analyst [42]

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And just to clarify, with regard to CLARITY-3, pardon the pun, that is an ex-U. S. trial only?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [43]

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Yes. Yes. Correct.

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Operator [44]

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Your next question comes from Marc Goodman of SVB Leerink.

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Roanna Clarissa H. Ruiz, SVB Leerink LLC, Research Division - Associate [45]

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This is Roanna on the line for Marc. I just want to ask a quick question. In the past, you've highlighted certain initiatives focusing on LTC, and we are wondering if you could add any color on those, such as what are their main goals? And what percentage contribution do you see them making to overall sales? Has that changed at all from 1Q, 2Q, et cetera?

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [46]

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Great. Michael?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [47]

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Sure. Thanks for the question. As I mentioned in my prepared remarks, the patient screening and care plan tools, we believe, contributed to the growth that we saw in long-term care. Importantly, in the long-term care channel, where you're dealing with more of an institutional kind of facility approach, treatment algorithms and electric -- electronic health records are very important resident-patient management processes kind of at the facility level. So what we've done is we've designed a number of different tools to these education patient screening, et cetera, that helps the facility and its health care practitioners and staff fit into their existing treatment algorithms and care pathways. It helps them identify appropriate patients and, more importantly, helps them facilitate the documentation necessary. It's a heavily regulated environment, and I think we're well on our way to establishing efficacy with these tools as it relate to patient indemnification.

In regards to long-term care and what we see, just as a reminder, we have 2 segments of our business, 2 channels, the SP, specialty pharmacy, reflects mostly like a community-based physician setting; and the specialty distribution setting or channel, of which 2/3 of that -- or 2/3 of that 1/3 is long-term care. We have not seen any shifts in our historical splits of the business in that regard.

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Elena H. Ridloff, ACADIA Pharmaceuticals Inc. - Executive VP & CFO [48]

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(inaudible) comment, we've seen continued growth, including in this quarter, in both the SP and SD channel.

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [49]

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Yes. Good point.

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Operator [50]

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Our next question comes from Alan Carr of Needham & Company.

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Alan Carr, Needham & Company, LLC, Research Division - Senior Analyst [51]

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A couple of them. With respect to the 2 CLARITY trials, do you have any prospective biases in terms of which one of these might be more risky? Because I remember last week, after the schizophrenia trial, you had mentioned that you had some concerns over European sites versus U.S. sites. Do you have any kind of bias for the effort for depression?

And then the other one is, I think in the past, you've said -- like on the last call, you said you had about 15% penetration of 125,000 patients. Are they -- what are your updated numbers on that? And do you think the 125,000 can grow?

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [52]

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So Serge -- I'm going to let Serge take the first question, Michael.

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [53]

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Alan, the short answer is I do not have any bias, one or the other way. And the reason for that is just a different condition. And when we look at the literature and the trials done, the picture with the major depressive disorder trial versus schizophrenia trial and the placebo response rates being higher in the United States has probably more to do with the study participants that are more specifically related to schizophrenia as a condition than major depression. So it is more depends on the sites, country, circumstances of the trials than uniformly as it is seen in the schizophrenia trials.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [54]

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Great. Michael?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [55]

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Yes. Thanks, Alan. Good memory. Those are, I think, the right metrics you have with regards to market share and the market of PDP. We'll be updating the [SD] forecast. I would anticipate the 125,000 number will go up, as you would expect with patient population. We're going to update the model. But for now, we're staying with the mid-teens, as you had it, and the 125,000 in the PDP market.

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Operator [56]

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We have time for 2 final questions. Our next question comes from Paul Matteis of Stifel.

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Benjamin Jay Burnett, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [57]

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This is Ben Burnett on for Paul Matteis. Just one more on pimavanserin. You've mentioned a little bit about long-term care clinics and adoption care. I was wondering how the compliance or the script for patient comparison and long-term clinics versus like academic or community centers, do you have any window into that or anything anecdotally that you've heard?

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Michael J. Yang, ACADIA Pharmaceuticals Inc. - Executive VP & Chief Commercial Officer [58]

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Yes. Great question. I would identify or just really characterize the long-term care patient who has Parkinson's disease and then has Parkinson's disease psychosis. Is that a later and more advanced stage? And -- so the amount of duration of therapy, if you will, is shorter that we see in long-term care than it is in the community, in part because the fragility of the patient and the mortality and morbidity complications that occur.

With that being said though, the long-term care facility also, in part, has a higher concentration, at times, of patients with Parkinson's disease psychosis than, say, a general neurologist. So it's kind of an offsetting element. There's more patients perhaps, but they're also a little less in terms of duration of therapy. But nonetheless, it's a very big opportunity for us to penetrate and get greater depth in that market.

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Benjamin Jay Burnett, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [59]

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Okay, okay. And I guess I just had 1 other question on the -- just design of the Phase III CLARITY studies. Are there any details that you can provide, I guess, regarding the powering of the study on the HAMD rating scale?

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [60]

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Serge, do you want to take it?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [61]

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Yes. I think that we -- there was -- in terms of the design and in terms of the powering, there were same assumptions, very similar assumptions, that we made with our Phase II trial. So the only difference is these Phase III trials are powered at 90%. So that's really -- otherwise, we made the same starting assumptions in designing this trial. And I want to use this opportunity and thank you for going back to MDD trials.

To prior question, one other thing that I would add is important people may wonder why did we do 1 trial in the United States and another trial ex-U. S. rather than mixing the 2 regions, like it is done with schizophrenia. The simple reason for that is that assessment of depression, there are significant cultural impact on the plasticity of depression symptoms, and that play -- and that may play a role in variability. So staying within the region is well advised in that respect, and that was the reason why we chose to go with this setup for the Phase III trials.

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Operator [62]

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And our last question comes from Danielle Brill of Piper Jaffray.

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Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [63]

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I guess I'll stick with MDD first. Wondering when we can expect an update on enrollment and the anticipated timing of data. And then going back to DRP, sorry if I missed this before, but just want to clarify, powering is based on an estimated responder rate during the lead-in. Is that correct? And can you remind me if there's a futility component to the interim?

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [64]

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Yes. Okay. I'll try 3 questions there, so I'll try one by one. On the MDD trial, we are in early months of initiation of these Phase III trials. Recruitment and interest is going very well. In the United States, where we started earlier, we are seeing a very -- quite a bit of enthusiasm for the trial, and a positive data always helps in that, I would say. But it's going well. But we are just very early to make any more precise predictions on -- these trials, as we always say, take about 2 years, 2.5 years, and at this point, we would stay with that general kind of estimate. But as we are recruiting further, we will be in better position, and we will be reporting a more precise timing for the expectations of top line results.

On the DRP study and assumptions for powering on the study, actually, we powered the study on the number of events and the difference in the proportion of the relapses that would occur on placebo versus drug. So it's not really power on the response in the open-label stage, but it's rather power on the assumption of what will be a difference in the relapses between treatment arms in the double-blind stage of the study.

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Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [65]

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Got it. And then -- yes, a futility component.

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Srdjan R. Stankovic, ACADIA Pharmaceuticals Inc. - President [66]

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Yes. No, there is -- the interim analysis is designed and statistical analysis that is being done as a part of interim analysis is designed around efficacy. There is a certain threshold of hazard ratios or p values that you need to reach in order to declare that the efficacy is demonstrated and trial would stop for efficacy.

Obviously, this trial, like other trials that we conduct, also has independent data monitoring committee that will receive this statistical analysis and inform us of the outcome of that analysis. But there is no futility statistical analysis. I do want to say, data safety monitoring committee, for a variety of reasons, has always ability to stop the trial for one or the other reason. But there is no futility included in the interim analysis here.

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Operator [67]

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Mr. Davis, please proceed to closing remarks.

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Stephen R. Davis, ACADIA Pharmaceuticals Inc. - CEO & Director [68]

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Great. Thank you, operator. Thanks to each of you for listening in today, and we look forward to updating you on our progress next quarter.

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Operator [69]

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Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.