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Edited Transcript of ADMS earnings conference call or presentation 1-Nov-18 8:30pm GMT

Q3 2018 Adamas Pharmaceuticals Inc Earnings Call

Emeryville Nov 15, 2018 (Thomson StreetEvents) -- Edited Transcript of Adamas Pharmaceuticals Inc earnings conference call or presentation Thursday, November 1, 2018 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alfred G. Merriweather

Adamas Pharmaceuticals, Inc. - CFO

* Ashleigh Barreto

Adamas Pharmaceuticals, Inc. - Director of Corporate Communications & IR

* Gregory T. Went

Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO

* Rajiv Patni

Adamas Pharmaceuticals, Inc. - Chief Medical Officer

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Conference Call Participants

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* David A. Amsellem

Piper Jaffray Companies, Research Division - MD and Senior Research Analyst

* Douglas Royal Buchanan

JMP Securities LLC, Research Division - Associate

* Irina Rivkind Koffler

Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Analyst

* John Lawrence Sullivan

Leerink Partners LLC, Research Division - Senior MD, Equity Research and Healthcare Investment Strategist

* Joshua Elliott Schimmer

Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst

* Kenneth Charles Cacciatore

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

* Raghuram Selvaraju

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Serge D. Belanger

Needham & Company, LLC, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Welcome to Adamas Pharmaceuticals Third Quarter 2018 Financial Results and Corporate Update Conference Call. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the call over to your host, Ashleigh Barreto, Director of Investor Relations and Corporate Communications at Adamas. Please go ahead.

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Ashleigh Barreto, Adamas Pharmaceuticals, Inc. - Director of Corporate Communications & IR [2]

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Thank you, operator, and good afternoon, everyone. Joining me on the call today are: Dr. Greg Went, our Founder, Chairman and Chief Executive Officer; Alf Merriweather, our Chief Financial Officer; and Dr. Rajiv Patni, our Chief Medical Officer.

Before we begin, I'd like to remind everyone that this call will contain forward-looking statements, which are subject to risks and uncertainties. Any statements regarding future events, results or expectations are forward-looking statements. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We undertake no obligation to revise or update these forward-looking statements in light of new information or future events. Information concerning factors that could cause actual results to differ materially from those contained in or implied by such forward-looking statements are discussed in greater detail on our Form 10-Q filed with the SEC today.

I would now like to turn the call over to Greg. Greg?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [3]

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Thank you, Ashleigh, and good afternoon, everyone. Thank you for joining us today.

At Adamas, our mission is to work each and every day to meaningfully enhance the daily living experience of those affected by central nervous system disorders. We do this by staying true to our vision, to create a world in which time-dependent medicines are the standard of care.

Our commercialization of GOCOVRI, the first and only medicine approved for the treatment of dyskinesia and people with Parkinson's disease taking levodopa-based therapy, is advancing both our mission and our vision. Our follow-on indications for GOCOVRI, such as our ongoing Phase III evaluation in multiple sclerosis walking and pipeline products, like our program for epilepsy, are progressing in accordance with our vision.

We created GOCOVRI, a glutamatergic therapy for the treatment of dyskinesia in people with Parkinson's disease. Importantly, it is also clinically proven to reduce both dyskinesia and OFF. These reductions result in GOCOVRI widening the therapeutic window for dopaminergic treatments like levodopa. GOCOVRI is taken at bedtime and is the only amantadine to use a time-dependent approach to deliver high levels of medicine when the patient needs it most: upon waking in the morning, before the first dose of levodopa and then delivers lower levels during the night.

GOCOVRI represents a paradigm shift in the Parkinson's disease treatment landscape on multiple levels: It shifts the focus from dopamine to dopamine plus glutamate, from threading the therapeutic window to widening it, from daytime administration to bedtime administration. Based upon its clinical effect on OFF and dyskinesia, GOCOVRI should be considered the preferred adjunct therapy to levodopa in people with Parkinson's disease.

As we reflect upon the first 9 months of GOCOVRI commercialization, we are encouraged by the strong foundation we've established and the progress with the launch to date. As Alf will discuss in more detail, we had a solid quarter, with revenue of $10.6 million. We had approximately 4,700 filled and reimbursed scripts in the quarter. And since making GOCOVRI available, nearly 1,200 unique prescribers. While early, we are very pleased with the persistence, with a significant majority of patients 6 months from starting on GOCOVRI remaining ON. And our compliance to date is outstanding. Additionally, our market access and distribution are solid.

While this is a great start, we have only just begun to realize the growth potential of GOCOVRI and we believe we are on our way to reaching our goal of 25% to 30% penetration. After 3 quarters of commercialization, we have increased our understanding of market dynamics and we are making adjustments and applying the learnings which we believe will lead to the prolonged success of GOCOVRI.

First, we have long understood that GOCOVRI adoption in major movement disorder centers, which treat a large portion of Parkinson's patients, is critical to our business. At this point, we believe that approximately 10% of the major centers have adopted GOCOVRI for greater than 5% of their eligible patients. Adoption is occurring in a combination of amantadine experienced and naïve patients. We need to continue to expand the use of GOCOVRI in these centers where it has been initially adopted and penetrate additional key treatment centers. To address this, we are refining our execution and focusing our sales efforts on these prescribers. In addition, we continue to improve and educate on the seamless access experience provided by GOCOVRI Onboard to support adoption and shorten times to fill.

Second, we must effectively communicate the scientific rationale and clinical benefits of GOCOVRI. We have learned a great deal from our first 9 months on how to effectively message the benefits of GOCOVRI to neurologists and we are simplifying and strengthening it. In addition, we are elevating our education on the glutamate pathway involvement in the Parkinson's journey as its role is not fully recognized.

Before GOCOVRI, neurologists focused solely on threading the dopaminergic therapy through the narrowing therapeutic window as the way to manage these patients. This often led to an undertreatment of their underlying Parkinson's symptoms. We believe that the potential for GOCOVRI, a glutamatergic time-dependent therapy, is to open the therapeutic window, and that's significant. And we could move that front and center in physician's mind through better training and education.

Thirdly, the initial use of GOCOVRI by neurologists has focused on Parkinson's disease patients experiencing more severe dyskinesia. This contrasts with the broader segment of the patients we studied in our clinical program. Just to address this, we are targeting patients across the full spectrum of dyskinesia in severity and duration, including those who have just started experiencing dyskinesia. We are using tools like patient profiles to help prescribers identify appropriate patients based upon the scope of our clinical program. Additionally, we are refining our communications regarding appropriate dosing to help prescribers use GOCOVRI. Dosing can directly impact prescriber and patient experience with the medicine. For example, patients with moderate to severe renal impairment, which can occur more often in the elderly, should start GOCOVRI at the 68.5-milligram dose to balance the efficacy with the tolerability, per GOCOVRI's label.

So to summarize, we are driving increased adoption in 3 ways: by refining our sales execution by focusing on MDS centers and high-potential prescribers; by simplifying and strengthening our messaging for GOCOVRI as a treatment for dyskinesia as well as its benefits in OFF, highlighting the role GOCOVRI plays in widening the therapeutic window for dopamine treatments; and effectively educating physicians on appropriate use and appropriate patients for GOCOVRI. We are well on our way to establishing GOCOVRI as a standard of care for people with Parkinson's disease with dyskinesia, and we understand that changing prescribing behavior and driving use of first-to-market medicines takes time. We continue to believe that GOCOVRI is an extremely important drug and that we can reach 25% to 30% peak penetration in the Parkinson's disease dyskinesia population and then build greater value with additional indications.

Finally, I am very happy with our dedicated and committed organization, our U.S. footprint and we'll continue to strengthen and deepen that team over time.

Over to you, Alf.

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [4]

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Thanks, Greg, and thank you all for joining our call today. In addition to discussing our third quarter results, based on Greg's commercial commentary, I will provide our thoughts on the outlook for the rest of 2018 and 2019.

We recorded GOCOVRI product sales in the amount of $10.6 million for the third quarter and $20.7 million for the 9 months year to date. This was recorded on the sell-in method, with revenue recognized typically upon delivery to our specialty pharmacy. For the quarter, the total number of paid prescriptions dispensed to patients was approximately 4,740 compared to 3,430 in the second quarter. This number does not include drug provided no charge to the patient through Quick Start and other patient assistance programs. Also, as of September 30, the total number of prescribers has increased to approximately 1,200 from 970 at June 30.

Due to patient starts having been at a generally consistent level over the last 2 quarters, we are intensely focused on increasing demand, especially, as Greg noted, at Movement Disorders Centers over the next several quarters. Total paid prescriptions were strong in the quarter, reflecting good persistence and compliance levels for patients on drug.

A year ago, we suggested that for a launch such as ours in the CNS space, a reasonable expectation for first year average penetration of the target patient population would be about 1%. For the full year 2018, we expect our results to be consistent with that framework.

Looking to 2019, we similarly believe that approximately 2% market penetration on average for the year is an appropriate framework.

Gross to net adjustments, or GTN, for the third quarter were generally consistent with the second quarter, and our expectation is that this will continue in the fourth quarter. Looking to 2019, our expectation is that GTN will, overall, be in the high teens to low-20s as a percentage. This is higher than 2018 due to changes to 2019 in the Part D rules that will require manufacturers to bear a greater portion of cost during the donut hole period. This change may also mean that the donut hole will impact Q2 as well as Q1 in 2019.

We continue to believe that our previously stated range of expectations for GTN in the 25% to 30% range is an appropriate long-term framework.

With regard to our financials. Research and development expenses were $11.7 million during the third quarter, reflecting continued enrollment in the ongoing Phase III trial for ADS-5102 in multiple sclerosis walking and preparations for pivotal studies for ADS-4101 in epilepsy that we expect to start in 2019. With respect to selling, general and administrative expenses, these are $27.5 million for the third quarter, consistent with the prior quarter. Interest expense was $5.4 million for the quarter. This reflects interest accrued based on the -- an estimated effective interest rate, nominal coupon rate or royalty rate reflected in our royalty bank's debt agreement.

Regarding our overall operating results. Net loss for the quarter was $33.2 million or $1.22 per share. In both cases, slightly reduced from the prior quarter. Cash used in operations for the quarter was $23.2 million, lower than the $32.6 million in the second quarter. Cash and investments as of September 30 were $233 million, positioning us well to execute on the key programs investments call.

I'll now pass the call to Rajiv.

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [5]

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Thanks, Alf, and good afternoon. I would like to start by reminding everyone that aberrant glutamate signaling is a key mechanism that underlies the occurrence of both dyskinesia and OFF. GOCOVRI's proven benefits on both the hyper and hypokinetic symptoms is how it uniquely widens the therapeutic window. Also, the treatment effect of GOCOVRI was demonstrated without changes to levodopa dose. It represents, in our view, a game changer for the treatment of Parkinson's patients, who had begun to experience dyskinesia and OFF.

I would like to make another crucial point. GOCOVRI represents, to date, our strongest example of a time-dependent medicine, an approach that maps and matches drug levels to the time when they are needed most. It is noteworthy that we administered the full daily recommended dose of GOCOVRI, 274 milligrams, as a single dose at bedtime, with an acceptable tolerability profile. This has never been done with any other form of amantadine.

Moving to Hong Kong. The 22nd International Congress of Parkinson's Disease and Movement Disorders was an opportunity for us to present our final open-label Phase III data and continue our disease education efforts. On the Phase III data, we reported a 35% treatment effect with GOCOVRI on both dyskinesia and OFF. This large treatment effect was observed at week 8 and was maintained up to week 100. Moreover, this treatment effect was consistent in all subgroups, including patients who are still experiencing dyskinesia at baseline despite treatment with amantadine immediate release. Discontinuations over the 100-week period were mostly due to reasons that were not related to adverse drug reactions, which is to be expected given the study population and study duration.

We also provided disease education at our very well-attended medical booth at this meeting. We focused on the role of glutamate in both dyskinesia and OFF as well as our data on the diurnal patterns of dyskinesia and OFF, with an emphasis on transitions during a waking day. The term transition captures the number of times during the waking day that a patient goes from being ON, to being either OFF or dyskinetic. This concept is a logical extension of the therapeutic window, which is narrowed on the top by dyskinesia and narrowed on the bottom by OFF. We have also progressed our evaluation of additional indications for GOCOVRI. For instance, there may be an opportunity to expand the GOCOVRI label in Parkinson's disease as well as in certain pediatric movement disorders. We will make a final decision in first quarter 2019.

Finally, the pivotal Phase III trial of ADS-5102 in multiple sclerosis patients with walking impairment inroads is enrolling well. There is strong enthusiasm by both the investigators and coordinators, as evidenced by our screening and enrollment across the majority of 66 U.S. sites. As reported previously, we continue to expect full enrollment in second half of 2019. If the data are sufficiently persuasive, we look forward to initiating a second Phase III study and bringing this new indication to market in 2022.

Lastly, we remain on track to initiate registration trials for ADS-4101 in 2019. As Greg let off, we are staying true to our vision, to create a world in which time-dependent medicines are the standard of care for central nervous system disorders.

Thank you, and back to Greg.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [6]

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Thank you, Rajiv. I continue to be pleased with the progress of the GOCOVRI launch to date and with the steps we are taking to drive performance going forward. I am also excited by the remarkable durability of GOCOVRI, as shown at the MDS meeting in Hong Kong, as well as our advancing development pipeline Rajiv spoke of.

We also have a lot of value to add for patients. And with our intellectual property portfolio, we believe we have the time and protection to do it. Intellectual property is a pillar of our execution strategy at Adamas, specifically with respect to GOCOVRI and ADS-5102, we are pleased with the continuing validation of the breadth and strength of innovation in our portfolio.

Recently, we defeated an opposition to our diurnal patent family in Europe. And the U.S. Patent and Trademark Office allowed a new patent covering the innovation of GOCOVRI's benefit with respect to OFF, with an expiry date of June 2034. Also, while it is our policy not to comment on litigation, we remain confident in our 2 ongoing patent enforcement actions. We have most recently asserted affirmative claims of infringement against OSMOTICA on 9 separate patents, seeking various forms of relief, including damages. We will continue to aggressively enforce and defend our IP for the benefit of patients and for the benefit of our shareholders.

My thanks to the entire Adamas team for their amazing efforts this quarter. And with that, I would like to 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) Our first question comes from the line of Josh Schimmer from Evercore ISI.

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Joshua Elliott Schimmer, Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst [2]

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Maybe you can comment a little bit further on some of the issues we've heard about, regarding persistence, the titration phase, the percent of patients that are able to work through that. How prevalent or persevering an issue is it? And is it something that you think you can improve upon? And then, separately Alf, you had reiterated 1% market penetration in 2018, 2% in 2019. Is this the cadence going forward? Or do you see any reason for the acceleration of penetration beyond or even within 2019?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [3]

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Josh, it's Greg. Thank you for your questions. Let's start with Rajiv on what we're seeing with the drop-offs.

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [4]

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So we're seeing excellent persistence. And to be specific, we're seeing significant majority of persistence at 6 months, which is really great. Persistence is expectedly lower in the more elderly patients, which is actually consistent with our Phase III program and labeling. We are focused on improving it by educating physicians on appropriate dosing. For example, starting the 68.5-milligram dose in patients who are moderately renally impaired. Again, all consistent with labeling.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [5]

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And Alf?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [6]

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Yes, Josh. So the -- you may remember last year, the 1% framework was what we couched as a reasonable framework for folks to think of first year penetration. And that was in reference to the dyskinetic population, which is 150,000 to 200,000, as you know. We internally tend to think of the low end of that range just for the planning, but certainly that entire range is the reference and scope of the market. The 2% number that we suggested for next year, we naturally would hope to beat that. We would hope to beat any number that gets out there. So again, we just think that's a prudent way to be thinking about next year. And I think as Greg described in the call, we've been doing -- understanding certain key learnings on our first 9 months and implementing some actions, which we believe will help us get to that benchmark or perhaps beyond.

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Joshua Elliott Schimmer, Evercore ISI Institutional Equities, Research Division - Senior MD & Equity Analyst [7]

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One more question, if I may. Looks like in the third quarter, you've now switched to growth driven much more extensively by scripts per prescriber as opposed to the incremental number of prescribers, which seems to be slowing a little bit. Maybe as you look at the trends throughout the quarter, you can give us a sense of what you expect going forward as the primary driver? And whether this -- either of these growth trajectories are at some kind of a steady state?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [8]

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Josh, it's Greg. Let me take that on. What we're seeing in my remarks on the call, it really kind of reflects the sort of specialty, subspecialty nature of this market. We're getting very, very strong adoption in the movement disorders. We've become adopted in with greater 5% penetrance in that percentage, which means a relatively high-volume prescription there. And then, if you work back all the way down to the general neurologist, it's still in a smaller population and then more of a trialing phase. So with the efforts we're going to take during the quarter and in next quarter, it really is about aligning sales execution and incentives into those movement disorder centers. The simplification of the messaging and then the educating on the breadth of patients present there and your other message, which was how to properly dose them, we think is what's going to drive the business forward. And what that's going to lead to is, we believe, greater penetrance in these very large centers. And where we have neurologists who have eligible patients, it's a smaller practice. And we look forward to seeing that occur as well. But clearly, for the next several quarters, the focus is on the larger centers and deepening the prescribing behavior per physician.

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Operator [9]

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Our next question comes from the line of David Amsellem from Piper Jaffray.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [10]

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Just a couple of quick ones. So first on the payer landscape. Any changes that you've observed regarding step edits and anything regarding increasingly onerous prior OFFs that we should be aware of? And as penetration deepens, any thoughts on how the landscape might change? Then secondly, Greg, you commented on trying to push into less severely dyskinetic patients. Do you get the sense that movement disorder specialists and neurologists in general have a different view of the risks-benefit profile of amantadine and GOCOVRI in less severely dyskinetic patients? And maybe help us understand how the prescriber audience thinks about that subgroup?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [11]

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So let me handle the first one, David. Thank you for the question. With regards to the payer landscape, we have not seen a change. We continue to be covered through prior authorizations. Makes a prior authorization a medical necessity. The prescriptions are being filled in a vast majority and they're being filled quickly. So while we continue to work to improve it, we haven't seen a change. And although that may not predict future performance, we don't expect anything on the near horizon right now. And I think it kind of reflects the value that we're bringing to patients with GOCOVRI. With regards to moving earlier in the journey, I'll let Rajiv comment on what we sort of see as normal practice in patients that a doctor is likely to prescribe to. Rajiv, you want to handle?

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [12]

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Yes. I think what we're seeing with the use of GOCOVRI amongst movement disorder neurologists is they are initially trying it in patients who are more severely dyskinetic or have had dyskinesia for a long period of time. And then based on their experiences in that cell population, they're then opening up their utility GOCOVRI in patients who had less severe or milder dyskinesia or new onset dyskinesia. So this is very much what we expected to see amongst the movement disorder community. And the other thing I would also add, and this was in Greg's commentary and my commentary, is the effect on OFF with GOCOVRI is something that the movement disorder community is very drawn to. And part of what will also increase the use of GOCOVRI in patients with new onset dyskinesia or mild dyskinesia is the secondary benefit in OFF, which is something that this expert community does not ascribe to other forms of amantadine.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [13]

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Okay. And if I may just sneak in a quick additional question on, just on MS [gate]. Has the FDA clearly communicated to you that you have to do a second study? I thought there was some ambiguity previously about whether or not you were going to do one. So I just wanted to clarify what the FDA's telling you in terms of what you need to do to get to a filing?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [14]

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David, it's Greg. I think you should know, the communication sponsors have with the FDA, we don't go in a lot detail, are always allowed for interpretation once data comes in. That was certainly true for the initial approval of GOCOVRI. And we'd expect it to be here. So if the results of the initial study are compelling, we will take that back to the FDA and have a conversation. I would point out that the -- in terms of the protection and the time line, we've indicated that, that product should be expected in your mind to be ready for the market in 2022. And that's kind of timed as well with the expiration of our orphan exclusivity late in 2024.

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Operator [15]

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Our next question comes from the line of Ken Cacciatore from Cowen and Company.

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [16]

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So just a question on the new patient starts. I just wanted to confirm what I scribbled down here. So I think you said they were the same quarter-over-quarter. Do you mean literally they're the same? Or was there any growth? So if you could just clarify. And then maybe give us some perspective of how much you're giving away in providing outside of the capture that you're giving us so that we understand maybe what the real demand is, even outside of the paid prescriptions? And then lastly, I think, Greg, you hit on this, but I'm a little confused. I mean, you're basically saying you're going to be focusing on high prescribers and high-prescribing centers, and that just seems like an obvious. So can you just kind of backtrack and explain maybe what you were doing before, that, that was not an area of focus?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [17]

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Alf, you want to start with the quarter-over-quarter and I'll hit high prescribers?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [18]

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Yes. Ken, we're not wanting to get into sort of the specifics of Rx levels and so on. But what we're trying to convey was -- a term we use as generally consistent. So really, we're saying they're in that very same range quarter-to-quarter. That, that was the tone that we were trying to, in the general sense, we were trying to convey. With regard to that, I think the question was sort of, was free drug, I think that was the gist of your question. And we continue to see a minority of prescriptions, patients coming through the Quick Start program. So it's there as part of our armory, if you like, but not necessarily a significant element. It's not trivial, but it's certainly not significant.

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [19]

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And then, Ken, I'll take the last one. Yes, the notion that you would go to the highest volume physicians seems rather straightforward. In the launch period though, and I think this is true of everyone, and as you begin to collect data over the first 9 months, you're really able to refine what that balance is in your sales execution, your message execution, how that message execution varies by physician type. And to the question that was asked earlier, where can you explore the greatest breadth of patients as you go through the launch phase, with the general dynamic that doctors are going to start where they've got these rather large unmet need populations who had never had a treatment for dyskinesia and never had a treatment for dyskinesia and OFF. So it's not turning on something that wasn't already on. It is refining it, and really aligning the incentives of the sales team, of the company onto those centers and really allowing people to get to a higher frequency there, to spend the time that's required to make an impact in those environments. So nothing new on the overall concept but yes, a shift in how we are directing and incentivizing, based upon what we've seen over the first 3 quarters.

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Operator [20]

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Our next question comes from the line of Jason Butler from JMP Securities.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [21]

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Hi, it's Roy in for Jason. I had a quick follow-up, I hope, on Joshua's and Kent's question. I guess it sounds like you're no longer targeting 6,500 physicians. Can you tell us how many prescribers you're targeting in these movement disorder centers? And then how many prescribers do you think you need to achieve this 25% to 30% penetration?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [22]

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That's a great insight and a great question, so thank you for that. What we're doing right now at this point in the launch is focusing down on a little less than half of that 6,500 right now. We've got about 1,200 writing. And by taking the footprint that we have, which is well positioned around the country, juxtapose these movement disorder centers and really directing them to spend their time to a greater proportion, increasing the frequency at those difficult-to-get-into centers, which by the way, contain multiple prescribing physicians. We anticipate getting a much better overall performance to be able to achieve our goal. Over time, after that beachhead is secured, we will continue to promote, maybe broadening out our promotion to a higher degree. But over the next several quarters, our focus is really dedicated on those movement disorder centers at this point.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [23]

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Okay, great. You may have just answered the question, but how do you expect these changes to take the selling efforts? And when do you think we'll probably see the results of those changes?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [24]

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Yes. I think it's typical to see when you're making changes in a -- normal changes during the course of a quarter-over-quarter, to see a few quarters until you see the impact of it. But obviously, we're looking at the ways of detecting the benefit at a very early stage and continue the process of learning as anyone would, and as you would expect us to during the course of the launch.

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Operator [25]

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Our next question comes from the line of from Irina Koffler from Mizuho.

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Irina Rivkind Koffler, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Analyst [26]

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I just wanted to understand, won't physicians be somewhat reluctant to learn about the glutamate pathway, or to treat milder dyskinesia patients given their preconceived notions about, this is just amantadine, and we already know how to use it? Isn't a bit of an uphill battle to educate them on these concepts? That's question one. And then the second question is, is do you think you have enough cash to take you through to profitability with this product? Maybe you can comment on that.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [27]

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So let me tee this up, and then throw to Rajiv and let Alf handle the cash question. So to tee this up over the last few decades. The notion that there's a glutamate pathology underlying Parkinson's is something which is taught, Irina, in med school. And yet as we grow in the field, dopaminergic approaches have dominated. So Rajiv has been leading this charge here since he's joined the company. Maybe you can comment, Rajiv, on how you're approaching this?

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [28]

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Irina, I'll just go back and reiterate what I said in the commentary about the movement disorder society meeting. There was high interest in the mechanism of dyskinesia and OFF, due in part to the overactive glutamate system. So that as an example indicates to us that the community of movement disorder neurologists is very much interested in how does GOCOVRI do what it does clinically. So that's point number one. And point number two, about GOCOVRI as what I said in an earlier question, they are very drawn, not just to the effect on dyskinesia but they're equally drawn to the effect on OFF time. And that something that, since I've joined arena, has been what puts this medicine in juxtaposition to any other medicine to treat this population at this point in journey of Parkinson's disease. Not talking about nuance at Parkinson's disease. I'm talking about patients in Parkinson's disease that exited, what we call the honeymoon period, and now are experiencing dyskinesia and OFF.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [29]

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And I do think that's really what the entire clinical program demonstrated and validated. And it's the source of the curiosity that we're going to tap into -- continue to tap into, Irina, through our disease education efforts. Alf, on the cash?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [30]

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Yes. So Irina, the really -- the way we characterize our cash hasn't changed in the last couple of quarters. We believe we're well capitalized to continue the GOCOVRI launch to complete the Phase III trial in MS walking that's ongoing and similarly finished off the 4101 pivotal study. So that indicates we had $233 million in cash. The burn -- operating burn in the third quarter is $23 million. So I think we believe we have a pretty strong cash position. One other related point I'd make, just in terms of your modeling. We're not formally updating our expense guidance for the year, but I think it's, you can look at the expenses year to date and would expect our expenses for the year to be near to the low end of our guidance range, not the higher end.

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Irina Rivkind Koffler, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Analyst [31]

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Okay. And just one follow-up. I think last quarter, you talked about how physicians are sort of in the middle of, like a wait-and-see period and just deciding what to do. Can you comment on how that has changed? What have those doctors concluded?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [32]

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I think, for those physicians -- it's Greg. For the physicians who have begun in the larger movement disorder centers, you can see from the numbers that we've reported that they're doing quite well. It's not as large of a fraction that we would like at this time, which is why we're going to continue to focus there. And the folks who are in the more general neurology area do continue to trial. They have a more, a larger space between visits and a larger, therefore, space between getting feedback. And from our earlier comment, we're not ignoring the importance of getting GOCOVRI into the hands of all 6,500 neurologists over time. We're in fact, quite thrilled with being at 1,200 at this early point in the launch, in terms of riders. But we expect that to continue in the general neurology, but in the movement disorder area it's a little more of a rapid adoption with larger numbers of patients.

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Operator [33]

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Our next question comes from the line of Serge Belanger from Needham & Company.

Our next question comes from the line of John Sullivan from Leerink Partners.

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John Lawrence Sullivan, Leerink Partners LLC, Research Division - Senior MD, Equity Research and Healthcare Investment Strategist [34]

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So I'd like to understand just a little bit better, the profile of the movement disorder centers. What percentage of disease sufferers are accessed through movement disorder centers, do you suppose? And then the second question. If a patient is being seen through one of these centers, how often are they seeing a neurologist versus other clinicians through the center, nurse practitioners and the like?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [35]

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Well, those are excellent questions. And as you can imagine they vary center by center. We have talked about different estimates of the percentage of Parkinson's patients treated at movement disorder centers, and there's no exact way to answer that question. But I think a good thoughtful number is in the area of 40% to 60% are treated in those centers. There are -- again, depending on the reference in the math, somewhere between 100 and 200, it's just sort of, there's not a stated number that this is exactly what it is. And they do, as you're neatly pointing out, have a practice, which has a combination of academic department head neurologists, younger neurologists who are seeing lot of patients and assistants who are covering OFF on these patients. The exact treatment pattern, as to who's seeing who. Rajiv, I don't know if you want to weigh in on -- I gave the numbers, but in terms of what it's like inside?

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [36]

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I think it's very valuable. You'll see a typical academic movement disorder center having, composed of senior movement disorder neurologists who've practicing for many, many years, And have an established patient panel, new faculty members that have just joined the practice and are building their practice. Then you have the allied health professionals, as you point out, nurse practitioners or PA. So it's really very heterogeneous and very geographical. And the other key point I'd make is, often many of these movement disorder neurologists would then also consult with the general neurologists, who provide more of the care in between the movement disorder clinic follow-ups, which can happen at a cadence of maybe every 3 to 6 to 9 months, depending on the practice and the patient.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [37]

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And when I -- it's Greg again. So I reference the dynamics that we've begun to learn more intensely. Most of our learning came from really establishing ourselves in the clinical trial area at some of these movement disorder centers, starting in 2010. But the experience of having our NASs on the ground, working each and every day to really understand the local dynamics that Rajiv just referred to, is part of the learnings that's allowing us now to better target and better deploy our resources.

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Operator [38]

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Our final question comes from the line of from Ram Selvaraju from H.C. Wainwright.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [39]

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I wanted to ask whether you felt, at this juncture, knowing what you know about the product at this stage of the launch, whether you think the reduction in the number of daily transitions or the long-term effectiveness data represents the most crucial factor in impacting patient retention for recovery?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [40]

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I'm going to let Rajiv handle that. We're smiling. Go ahead.

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [41]

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I think it's both. It's both. And it goes back to persuasiveness. And I'll just share with you an anecdote, when I was out visiting a movement disorder center recently. The transition data allows the movement disorder neurologist to have a communication, a dialogue with their patients. And say, based on the clinical trial data, this is what was -- this was the treatment effective GOCOVRI during a day. And ultimately, and you've heard Greg say this, feel, function and live. Feel, function and live is about the day. So the transition data's about communicating, translating the clinical trial data of GOCOVRI to a patient. The long-term data, which is a combination of our control trials and our open-label trial, that's the evidence that the prescriber needs to say that this medicine, GOCOVRI, provides durability of effect, because since this is a progressive neurodegenerative disorder, we get this question all the time. Is there a durability of effect? Or is there a waning of effect since this is a symptomatic treatment? And so the fact that we now have pivotal data out to 6 months, supportive data out to a total of 2 years, gives the movement disorder neurologists the evidence he or she needs to say that this drug is durable. So I close with how it began, both are equally important.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [42]

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Okay. And then with respect to the prior authorization paradigm or the MS patient population. Obviously, it's early days yet, but could you maybe talk about what's the experience so far with the prior authorization paradigm for GOCOVRI? And how you think that might compare to the prior authorization paradigm for 5102 if it were to be approved in treatment of walking impairment in MS? And then I just have 2 quick questions on 4101. Do you have any further granularity on when the 4101 pivotal trial is likely to start within the context of 2019? And if you can elaborate for us on what you expect the principal efficacy endpoints to be? And what prior pivotal trial programs in epilepsy might be the most appropriate sort of models for this? What would be the most comparable kind of general trial programs in epilepsy to the 4101 program?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [43]

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All right. Let me take the first 2. It's obviously, a long time away from bringing ADS-5102 or GOCOVRI to market in MS. So it really is too early to predict, what, if anything will have changed by the time we get to 2022. We're happy with the processes which are in place right now. We're getting a vast majority of patients on drug in a short period of time through the prior auth, and medical necessity process, but where we'll end up being in 2022, I just think it's a little early to detect. I do -- I'll tell you though, as we look at the data for 5102 and MS, we will be in that position if we continue as we have with GOCOVRI implying and providing a really strong value proposition for all stakeholders who are involved, so that they see the value of reimbursing and staying on GOCOVRI. Your second question, I'm not going to comment further on the timing of 4101. We'll give an update in the first quarter on how that's coming. And finally, Rajiv, analog in terms of endpoints for...

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [44]

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I think, for endpoints in the 4101 program. I would look to other approved adjunctive antiepileptics. That's a framework we're looking at as we think about what the registration program would look like. So there are many examples to look at on how adjunctive antiepileptics are developed and what efficacy endpoints are looked at, which come down to looking at a measure of seizure frequency. And the other point, I want to just make, back to MS, which we mentioned earlier is, in the ongoing Phase III trial for MS, we're going to catch -- we're going to collect data on the effective 5102, both in patients who are naïve to dalfampridine as well as in patients who were on dalfampridine in the past. So our thesis is, we'll be able to generate data in a wider population, including dalfampridine failures, because based on our own registration program and what we posit, we think, to be subject to Phase III confirmation, will have a larger treatment effect in a broader population.

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Operator [45]

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And Serge Belanger from Needham & Company has queued back up.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [46]

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So I just have a question. Do you expect any increase in formulary coverage starting next year? And do you expect the launch of OSMOLEX to affect your future coverage in 2019 and going forward?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [47]

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Thanks for the question. We don't really expect any change in the formulary coverage. As you know, we're not formally covered, but we are reimbursed. And the majority of prescriptions are getting reimbursed in a really good period of time. We have heard a bit about OSMOLEX coming to the market. That product has a very different value proposition, being a once daily in the morning, equivalent version of amantadine IR. I think it will be -- it has a separate indication. It is supported only by pharmacokinetic data and not by any efficacy data, since as you recall, the original label for SYMMETREL does not contain a significant data package to promote to. And so I think it will be largely independent from us, in terms of how it ends up being reimbursed and what its challenges will be, and whether or not it gets folded into something that physicians are encouraged to try, as some plans have done with amantadine IR, I think remains to be seen. But again, we are -- we've been facing that market reality since, well before we launched the product, and are pleased with how that is playing out right now, in terms of any kind of a prior attestation of use of amantadine IR. Bottom line, and it goes back to an earlier question on the call, this is a brand-new effect of a product, is a time-dependent interaction with the glutamate pathway, as opposed to other approaches that have been taken, and this really durable benefit that Rajiv just talked about in dyskinesia and OFF, this widening of the window to render all dopaminergic therapies more flexible is a really remarkable accomplishment and a detectable effect in the lives of these patients and these physicians. So we're going to get them eventually, is my view, because the value is there.

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Operator [48]

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This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Greg Went for any further remark.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [49]

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So I thank you all your time today. We look forward to seeing you at an investor conference this fall and getting closer to the holidays. And we look forward to updating you on our continued progress on our next call in February. Thank you very much.

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Operator [50]

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Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.