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Edited Transcript of ADMS earnings conference call or presentation 4-Mar-19 9:30pm GMT

Q4 2018 Adamas Pharmaceuticals Inc Earnings Call

Emeryville Mar 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Adamas Pharmaceuticals Inc earnings conference call or presentation Monday, March 4, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alfred G. Merriweather

Adamas Pharmaceuticals, Inc. - CFO

* 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

* Kenneth Charles Cacciatore

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

* Marc Harold Goodman

SVB Leerink LLC, Research Division - MD of Neuroscience & 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

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

* Timothy Francis Lugo

William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research

* Mike Biega

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Adamas Fourth Quarter 2018 Financial Results Conference. (Operator Instructions) And now, it's my pleasure to turn the call to Mike Biega of Investor Relations.

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Mike Biega, [2]

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Thank you, operator, and good afternoon, everyone.

Before we begin, I would 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 in our Form 10-K filed with the SEC today.

I'll now turn the call over to Dr. Greg Went, our Chairman and Chief Executive Officer.

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

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

I'm here with Alf Merriweather, our Chief Financial Officer; and Dr. Rajiv Patni, our Chief Medical Officer.

As we reflect on our first year of commercialization of GOCOVRI, we are pleased to have closed out the year with $34 million in sales and approximately 15,500 total prescriptions. More importantly, we brought the significant benefits of GOCOVRI to Parkinson's patients to reduce both dyskinesia and OFF time.

As we look forward to 2019 with a strong year-end cash position, we are focused on the 2 most immediate drivers of value to patients and shareholders alike: first, we are focused on advancing the commercialization of GOCOVRI; and second, we continue to advance a potential additional indication for GOCOVRI for the treatment of walking impairment in patients with multiple sclerosis.

As we disclosed earlier in the year, we expect to have top line data in the second half of this year from our ongoing Phase III study in this population. Rajiv will provide more information on this opportunity later in the call.

In 2018, we had a strong start to GOCOVRI commercialization. We are energized about both GOCOVRI's ability to positively benefit patients and its robust market opportunity. In 2018, we met our overall goals, introducing GOCOVRI in the -- as the first and only FDA-approved medicine for the treatment of dyskinesia in patients with Parkinson's disease. In 2019, we expect to continue to expand the use of GOCOVRI by broadening prescriber adoption and encasing -- increasing positive prescriber and patient experience. Our confidence comes from the large effect on reducing both dyskinesia and OFF time, resulting in a 45% increase in functional time; the rapid penetration of GOCOVRI in certain areas in which prescribers who understand GOCOVRI's science are treating a broad spectrum of patients and seeing first-hand GOCOVRI's impact on those patients. And once patients experience the benefit of GOCOVRI, they generally remain on the medicine. In 2018, patient persistence for GOCOVRI was nearly 60% at 6 months. This real-world strength in persistence is generally consistent with our clinical trial experience. We see these as confirmation of both GOCOVRI's efficacy and its market potential.

Since our last call, we completed extensive field research and implemented changes to our commercial execution to expand the GOCOVRI experience. Firstly, we've evolved our promotional messaging. The revised messaging enables our neurology account specialists to more widely and more effectively communicate the scientific rationale for the clinical benefits of GOCOVRI. Specifically, we condensed our messages into a compelling and cohesive 4-pillar GOCOVRI narrative that emphasizes its demonstrated benefit in terms of less dyskinesia and less OFF without adjustments to levodopa dosing, its demonstrated efficacy and safety profile, the diurnal role glutamate hyperactivity plays in dyskinesia and OFF time and finally, GOCOVRI's unique bedtime dosing administration, allowing for PK coverage upon waking. In addition, we deployed new selling tools, including new disease state insights, patient profiles, patient video clips and mechanism of disease and mechanism of action animations, all to better educate prescribers.

Secondly, as we explained on our Q3 call, we are focusing execution efforts on the regional centers which treat a substantial portion of the 150,000 to 200,000 patients we are seeking to reach. We have equipped our neurology account specialists with tools to distinguish between those movement disorder specialists that use amantadine as a part of their treatment toolbox and those who don't. In certain regions, we've seen strong adoption of GOCOVRI by the first group who understand the challenge of treating both dyskinesia and OFF without worsening either, but slower adoption by the second group, many of whom use less levodopa as a means of managing or avoiding dyskinesia at the expense of more OFF time. Moreover, this group does not typically use amantadine immediate release because in their experience, it is associated with limited efficacy and/or poor tolerability. For this latter group, we believe, based upon market research and confirmed through field feedback, that we need to more strongly emphasize the connection between dyskinesia and OFF time and the role glutamate hyperactivity plays in the occurrence of both as PD progresses. This education will help prescribers appreciate their patients' journey as well as GOCOVRI's unique ability to reduce both dyskinesia and OFF as an adjunctive non-dopaminergic therapy so they don't have to leave their patients OFF. Importantly, our neurology account specialist are now better equipped to tailor information to prescribers based upon their approach to treating underlying Parkinson's disease. We see educating those clinicians seldomly using amantadine as a substantial opportunity to expand the breadth of GOCOVRI prescribing.

Finally, we have evolved our Quick Start program into a broader free trial program to allow more prescribers and patients to readily experience first-hand the benefits of GOCOVRI. This option will also potentially encourage trial of GOCOVRI in a broader array of patients with dyskinesia, consistent with the population in which GOCOVRI was studied.

We see, as a proof point, our learning from 2018 that we needed to better educate prescribers about the appropriate use of GOCOVRI and the availability of the 68.5-milligram starting dose for patients with moderate-to-severe renal impairment. Many PD patients are elderly and thus, more likely to have renal impairment. Such patients not properly dosed on GOCOVRI could have, and in some cases, have had, negative experiences on the medicine with the occurrence of adverse events. Accordingly, we armed our field team with specific messages around appropriate dosing and added the 68.5-milligram dose as a reduced dosing option on our treatment form. We're already seeing a positive impact of this approved education. We believe that prescribe -- advancing prescriber education and positive experience with GOCOVRI through these and our other commercial efforts, will drive the use of GOCOVRI going forward. We are excited about the potential of these approaches, which are live in the field today. Of course, we are still relatively early in our launch, actively learning, and we expect it to take a few quarters for these improved execution efforts to take effect. During this time, our results may continue to fluctuate quarter-to-quarter. As we look back on the latter part of 2018, we specifically note a slowing in the rate of total prescription growth quarter-to-quarter, which we see continuing into the first part of 2019. While seasonal phenomena may be playing some role in this, we are focused on the improved execution previously mentioned in order to expand GOCOVRI use and adoption in 2019 and beyond. Success for us -- for GOCOVRI is for it to be widely considered the key adjunctive therapy for levodopa and other dopaminergic therapies as a part of a treatment strategy to reduce both dyskinesia and OFF time for Parkinson's patients, thereby allowing prescribers to target functional time as their treatment goal. That, in fact, has started, and our job is now to expand it.

With that, I'll turn over the call to Alf. 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.

As we announced in January, through our first year of full commercialization, we recorded GOCOVRI product sales in the amount of $13.3 million for the fourth quarter and $34 million for the full year 2018. This was recorded on the sell-in method, with revenue recognized typically upon delivery to our specialty pharmacy.

For the fourth quarter, the approximate number of total paid prescriptions was 5,730 compared to 4,740 in the third quarter. Total prescriptions for the year were approximately 15,500. An important indicator of the performance of GOCOVRI is that persistence, expressed as the percentage of patients who remain on drug after 6 months, remained strong in 2018.

Regarding expenses. I am pleased that we ended 2018 with full year R&D and SG&A expenses of $39.3 million and $109.1 million, respectively, below the low ends of our guidance ranges by approximately $0.7 million and $6 million, respectively.

Regarding our overall operating result. Net loss for the quarter was $28.9 million or a loss of $1.06 per share, in both cases reduced from the immediately preceding quarter.

Overall use of cash for the quarter was $22 million, about the same as in the third quarter. Cash and investments as of December 31, 2018, were $211 million, positioning us well to execute on the strategies discussed earlier in this call.

Let me now turn to our outlook for 2019. We expect continued total prescription and revenue growth for the year based upon the benefits of GOCOVRI and the commercial initiatives to drive demand that Greg noted. Because we're still very early in the commercialization of GOCOVRI, we are not providing prescription or revenue guidance in 2019.

During 2019, on a quarterly basis, there may be some unevenness in the trajectory over coming quarters. Specifically, there are a number of seasonal factors that can impact all pharmaceutical companies that may affect our results in the first quarter and potentially into the second quarter, including the Medicare Part D donut hole and new year coverage and plan changes with deductible resets. In addition, our new free drug trial program, while expected to benefit the amount of total prescriptions for the year, could have a negative impact on paid prescriptions in the near term.

Turning to our operating expenses. We are providing the following full year 2019 expense guidance. We expect R&D expenses of $35 million to $45 million and SG&A expenses of $120 million to $130 million, respectively, including stock-based compensation. Such stock-based compensation expense for R&D and SG&A is expected to be approximately $3 million and $50 million, respectively.

I'll now pass the call over to Rajiv to comment on progress and our development program for ADS-5102.

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

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Thanks, Alf. I will begin by reviewing our 570-patient Phase III trial in multiple sclerosis, which is enrolling very well, suggestive, we believe, of a strong interest on the part of both the MS physician and MS patient communities.

We had targeted completion of enrollment by the end of 2019. And as we reported in January, we now expect completion of enrollment in the first half of 2019 and top line data in the second half of 2019. Since walking impairment is a central feature of MS progression and morbidity, and dalfampridine is the only FDA-approved medicine to improve walking speed, the treatment of walking impairment remains a significant unmet medical need. Additional medicines with different mechanisms of action are needed to improve walking speed and improve other aspects of walking, such as functional mobility and walking distance. We are very excited about the pending data from this trial. I'm happy to announce the American Academy of Neurology, AAM, has accepted our abstract for presentation at their upcoming meeting in May 2019. In the Congress poster, we will present the study design and baseline demographics.

First, on the study design, I would like to remind you, we reviewed the design with the FDA at the end of Phase II meeting, and to emphasize that in the study, we are evaluating the effect of ADS-5102 versus placebo on walking speed as well as functional mobility and distance. Functional mobility, which involves balance and transfer, will be assessed by the timed up and go test. Distance will be assessed by the 2-minute walk test. Taken together, these measures constitute complementary measures of walking or ambulation. Coupled with the 12-item multiple sclerosis walking scale, we seek to generate robust data with ADS-5102 using both physician assessments and a patient-reported outcome.

There's one other study design feature I would like to draw your attention to. We are enrolling patients with reduced walking speed, which, by protocol, is defined as the following: the patient completes a 25-foot walk in 8 to 45 seconds. This broad population is composed of the expected 2 subgroups: patients treated with dalfampridine in the past, that is the prior dalfampridine subgroup; and those who were never treated with dalfampridine in the past, that is the dalfampridine-naïve subgroup. In the baseline demographic stage of the case report form, investigators will provide the reason dalfampridine was discontinued in the prior dalfampridine subgroup. Thus far, approximately 50% of the enrolled population were treated with dalfampridine in the past. This subgroup is reasonably sized, as we expected. Moreover, the statistical analysis plan includes prespecified subgroup analyses. Based on our Phase II data, and of course, subject to Phase III confirmation, we expect ADS-5102 to have a consistent treatment effect irrespective of prior dalfampridine use.

In conclusion, our thesis on the potential role of ADS-5102 in walking impairment in patients with MS, pending Phase III data, remains unchanged: number one, a relatively large treatment effect in a broad population using complementary measures of walking; number two, approximately 30% to 35% of patients experiencing at least a 20% improvement in walking speed; number three, a treatment option in dalfampridine failure.

With that, I will turn the call back over to Greg.

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

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Thanks, Rajiv. So to summarize, we plan to continue to focus in 2019 on our 2 most immediate drivers of value to patients and shareholders alike: our current updated commercialization of GOCOVRI to benefit more Parkinson's patients; and advancing the potential additional indication for our GOCOVRI in multiple sclerosis. As to the latter, we look forward to seeing top line results of the Phase III study later in the year and continuing to communicate with you about the commercial opportunity we see in this population, which we believe is substantial. Our experience commercializing GOCOVRI is preparing Adamas to effectively seize that opportunity as well.

We remain committed to our mission to bringing the benefits of our time-dependent biology approach to an increasing number of patients with CNS disorders. I'd like to add my thanks to the entire Adamas team for their contributions this quarter.

And with that, I'll open the call up for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question is from David Amsellem with Piper Jaffray.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [2]

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So just a clarification question on 2019 and the outlook for GOCOVRI. So should I take your comments to mean that you're backing off of your prior guidance that prescriptions or share would double? And I guess, the second part of the question is, I guess, in the absence of guidance, are there any kind of guideposts that you can point us to regarding the trajectory of the product, particularly considering that you had provided certain clear markers regarding expectations last year? How should we think about that?

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

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David, thanks for your question. Listen. As we started with on the third quarter call and reiterated today, our goal right now is to drive growth in TRx through the strategies I just described. We've implemented a number of these in the last few weeks at our national sales meeting, as we came off the call and really spent the fourth quarter developing the materials and the new tools that we've rolled out to the field. So they're now all live in the field. As we look back from the end of last year, as I mentioned on the call, we did see a slower rate of increase in the TRx. And given that trend in the end of the fourth quarter and going into the first quarter, are not going to provide any specific TRx guidance this year or revenue guidance. So we'll continue to drive that growth through spreading the GOCOVRI message, broadening the GOCOVRI message around and it's typical early -- it's still in launch, we're really not in a position right now to guide for quarter-over-quarter for this year.

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David A. Amsellem, Piper Jaffray Companies, Research Division - MD and Senior Research Analyst [4]

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Okay. And then as a follow-up. So you're talking about the OFF time benefits and emphasizing that as part of the overall detailing message. I guess, what I'm struggling with here is that OFF time are -- the benefit is in the label. This is not new. So why wasn't it part of the initial commercialization plan? And given that it's already in the label and that presumably, movement disorder specialists are aware of it, what kind of incremental benefit can you get out of that refined marketing message?

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

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So I think, David -- and I think you've experienced this in many, many, many launches, it is a learning experience. And certainly, we've done nothing to change the label for GOCOVRI. It was always positioned in Section 14 of the label. But what we've learned through the course of the 3 quarters of launch and additional research is just how the pull of the messages together for our neurology account specialists to impact the broadest possible audience of physicians. In particular, those movement disorder specialists who are less familiar with amantadine, who may predominantly employ dopamine sparing and dopamine adjustment strategies in their treatment of Parkinson's. And as we learned during the launch, there are ways that we can better tell that story, put that story in our NAS's -- in our neurology account specialists' hands. We're also focusing on that just remarkable diary data sitting there in Section 14 that highlights the ability to reduce the OFF, the ability to increase the functional on-time. So it's really refinement, learning from what works and what works at the top -- in the top neurology account specialists' hands and then beginning to apply those learnings towards the rest of the U.S. and rest of the territories.

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Operator [6]

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Our next question comes from Jason Butler with JMP Securities.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [7]

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It's Roy on for Jason. I just had one. If you can you give us an update on the development plans for 4101. In 2019, your R&D expense guidance seems kind of light for a Phase III start. That's the first question.

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

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So with regards to -- thanks for the call, Roy -- for the question, Roy. In terms of 41, we continue to work on establishing the clinical supply and manufacturing infrastructure for the program. We continue to focus on a loss of exclusivity date for VIMPAT in the early part of 2022, and we will be providing updates as we move that product forward into an announceable clinical study. But until then, we're going to minimize our comments.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [9]

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Okay. Sorry, I have one more on 4101. Maybe you can't answer it. But was there anything unique in the FDA feedback to the program versus other adjunctive treatments, antiepileptics?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [10]

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The feedback -- thanks, Roy. The feedback that we're operating -- actually, Rajiv, why don't you handle that question?

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Rajiv Patni, Adamas Pharmaceuticals, Inc. - Chief Medical Officer [11]

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As we previously reported, the 4101 development program is centered on an efficacy trial in the adjunctive setting in patients with refractory partial onset seizures.

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Operator [12]

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Our next question is from Tim Lugo with William Blair.

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Timothy Francis Lugo, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research [13]

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Was the backing off of your prescription goals for 2019 driven by something which occurred in the past 2 months? And if so, should we be modeling some sort of reset in Q1? And can you also discuss your thoughts around GTN for the year? Should we still expect high teens or low 20s?

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

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Tim, thanks for the question. The answer to the first question is no. It's just based upon our ability to provide real revenue -- real quarterly annual revenue guidance and TRx guidance. Nothing in the last 2 months. But really, what we are seeing right now and how we're focusing all of our energy is on driving that right now. So given the stage we are in launch, given the quarter-over-quarter fluctuations, we are not going to be providing guidance until those items stabilize. In terms of GTN. Alf?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [15]

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Yes. No change in our expectations, Tim, from what we previously said.

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Timothy Francis Lugo, William Blair & Company L.L.C., Research Division - Co-Group Head of Biopharma Equity Research [16]

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Okay. Fair enough. And sequentially, should we be expecting growth throughout the year in GOCOVRI in terms of just net product sales?

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

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Tim, our -- what we think, the current trajectory, it's just very difficult to model, as know, 4 quarters into a launch. We're pleased with where it is overall. The strategies we're employing right now are specifically intended to drive TRx and adoption into the areas where we're seeing lesser performance. We're very enthused by what we're seeing in some really core areas as adoption has occurred, both broadly and deeply. But we still need to make progress, and we believe the tactics we're laying out are going to allow us to grow. And we will be monitoring it and reporting it to you very carefully as the next couple of quarters proceed.

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

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But just one very specific sequential aspect, Tim, the Q4 to Q1 transition is affected by the things that we mentioned in our prepared remarks in terms of the Part D donut hole and insurance plan resets at the beginning of the year. Those certainly, as with every pharma company, to be expected to have an impact sequentially as you go from Q4 to Q1 on both revenue and potentially on prescriptions.

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Operator [19]

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Our next question comes from Ken Cacciatore with Cowen and Company.

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD and Senior Research Analyst [20]

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Just couple of questions here, just -- I'm a bit confused maybe like some of the others, trying to understand, first, if you could, at some point, give us new prescriptions? That would be helpful because I want to ask about tolerability. It seems you're talking about fluctuations or slowing prescription growth. I'm just trying to understand, is there any issue with tolerability? And wanting to understand the retention of patients. That's just one question. Maybe you can discuss it for us. And then maybe talk about some of the clinicians that are currently prescribing. Are you seeing them writing more, or are you seeing some of these clinicians writing less? Just really confused by the commentary. At this point, I would think enough clinicians had touched the product that we wouldn't have a slowing, and you all not being able to give us a little bit more color on the go-forward.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [21]

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Several questions there, Ken. Greg. Thank you for those. Let me take the tolerability first. The tolerability we're seeing, we commented on the last call that we attributed some of the prescriber experience to tolerability concerns. And it really does show up in 2 places: one is physician adoption as they have their initial experience with GOCOVRI. And we observed, and I commented on in my prepared remarks, that if a physician did not properly account for the renal impairment state and dosed with too high of initial dose of GOCOVRI, that could, and we noticed it did, lead to some negative physician experiences. And if you recall all the way back to the second quarter call, we talked about some of the trialing and the [N equals one] experiences. And I would chalk some of those N equals one not being favorable to that. So we made a change. We learned, we made a change and we've seen a substantial increase in the utilization of the 68.5 just based upon the messaging we rolled out in the fourth quarter. So we think that one is proceeding well right now. We think there's a better dialogue going on between our team and the offices to make that happen. The other major measure of tolerability is how do people persist on the product. And clearly, we are seeing a level of persistence, a level of durability that matches nearly our clinical trial experience with GOCOVRI, which is very much in contrast to what physicians are used to with add-on treatments in this area. There's just -- the evidence is very strong. So it's really not -- that's not the phenomena we're working with. The phenomena that we are seeing and that we are driving hardest towards is where we have an understanding of the off dyskinesia access and the benefit that can -- GOCOVRI can provide. And it may be the underlying scientific rationale. In those areas where we see the greatest success, we are attempting to learn as much as we can from those -- what our sales force is doing in those areas, what's happening in those geographic areas and really apply those learnings broadly to the rest of the country. And we're still on the process of doing that, Ken, and are focusing our energy right now on those lessons learned and bringing -- rolling out to the field those tools that we think will allow them to recognize better and message more successfully to drive that initial adoption. Finally, we have altered our free drug program so that people can experience GOCOVRI prior to completing -- just making it more readily available prior to completing their coverage process. And we think that may, and hopefully, be a great driver here over the next couple of quarters, to get that TRx growing to where they need to grow for us to achieve our goals.

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Operator [22]

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And our next question comes from Tazeen Ahmad with Bank of America.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [23]

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So I just wanted to ask you a little bit more about your plans to allow free trial for a full 28 days. Would you allow patients to extend beyond that?

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

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No. It's a 28-day program, Tazeen, at this time.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [25]

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Okay. And then I wanted to get your thoughts also on how you're thinking about the overall ramp. So if you're not giving guidance on specific numbers, on script growth, where do you think you can guide us to where the growth could be? Is the growth going to come from doctors that have already been prescribing it, or are you looking more to growth from new prescribers?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [26]

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Great question that kind of ties into Ken's. Where we're seeing adoption that we're pleased with in those areas, what we are seeing is both a breadth of adoption in an area as well as a depth of adoption and physicians are continuing to prescribe GOCOVRI and we see them deepening that as is common in the launch of a new product. Where we need to be successful with the efforts that we're laying out and that we've just introduced to the field in the last couple of weeks is in areas where the adoption is not as deep, where the number of experiences the physicians have had are not as significant as they'd like to be. And we believe from what we've seen, that the market is every bit as big as we thought it was based upon how the top areas are performing. But in those areas where we're not seeing that performance, we really need to get, if you will, the fire started, get that deepening beginning so that physicians and then neighboring physicians can see the impact that GOCOVRI can have, both on their reduction in dyskinesia but they're ability to manage these patients more effectively through the improvements in reduction in OFF time as well.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [27]

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Okay. And then the last question, Greg, is about your payments for your royalty-backed HCRP note. Can you give us some details about that? For example when it's due and the amount that you're paying out?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [28]

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Tazeen, this is this Alf. We make payments, 12.5% royalty on GOCOVRI revenues. There's also the first $15 million annually of NAMZARIC revenues that come in, in the 2020-2025 time frame. So the cash payments are royalty-based, revenue-based, which makes it a very flexible structure. There's a coupon rate of interest that is paid out of the royalties and that actually is [pick] in the first 9 quarters so that interest is still being accumulated into principal for the time being. So there is no fixed amortization schedule debt. Originally, it had a term of 10 years, nonrecourse to the company. So it's a very flexible revenue-driven to the cash flows and be paid over time. But it's based on royalties, not on a fixed amortization schedule. So any royalty in excess of the interest goes to pay down the debt.

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Operator [29]

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Our next question comes from Marc Goodman with SVB Leerink.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [30]

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Two things. First, is the more aggressive free drug trial program really the major change with respect to how you're more -- how you're viewing 2019, and how you don't want to provide guidance on how things have changed a little bit with respect to prescriptions and paid prescriptions, I'm assuming. Because we're going to have prescriptions they're not just going to be paid prescriptions, right? And then second question is can you talk about the milestones for this year with respect to IP and what we're going to be looking for as the year progresses?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [31]

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Marc, thanks for both of those. Let's make sure I can remember them both. With regards to the contribution of the free trial program, we've been reporting only paid prescriptions since we brought GOCOVRI to the market. And so there's no question that a part of our belief today is driven off of how will that program roll out. How -- what percentage of prescriptions will use the free trial as a front-end to a paid prescription? And so that does affect our viewpoint, not of the long-term opportunity. We're taking this move because we believe based upon what we've seen, that we need to -- in order to expand physician experience with this drug, provide them this. We think it will perform better than the Quick Start program that we had in place for the first 12 months of commercialization. And so that definitely factors into what Q1 from a revenue and from a total of prescription -- paid prescription is going to play out because of how many, what percentage of folks received 28-day is unknowable at this point, having...

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [32]

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And how long will the program be going on?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [33]

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We -- I don't have any comments. Look, it's going to go on as long as it works. So as long as we can drive prescriber experience, we will continue to have it. We will evaluate it, of course, on an annual basis but we'll take a look at it as it's going on.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [34]

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Before we move on, I just want to make sure I'm just clear. So the donut hole everybody understands that. Plan changes, we all understand that that's across the industry. And then your third comment was about the free drug trial program. So that really is the only thing that's a little bit different from how you would view the first quarter if we went back 3 months or 4 months. Is that fair to say or is there anything else?

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

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Yes. Those really are major changes complemented with our efforts to drive TRx demand.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [36]

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And that's also the reason why you mentioned that it may have some impact into 2Q to because you may be keeping the program into 2Q as well?

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

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It will be in place for this calendar year and we will evaluate it at the end this calendar year for continuation next year. And then on the IP calendar, we obviously have 2 ongoing litigations: one with Osmotica, patent infringement; and one, Paragraph IV, with Sandoz. Obviously, not going to comment specifically on the litigation but the calendar is a midyear markman in the Osmotica litigation. And the markman in Sandoz litigation is in the first part of next year.

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Operator [38]

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Our next question comes from Ram Selvaraju with 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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So just very quickly, a few things for all of you, I guess. Firstly maybe the first set is for Alf. Could you give us a more clear breakdown of G&A versus sales and marketing spend as it pertains to the guidance you've given for 2019? And then, could you also give us an update on what the full current headcount is along with the current estimated headcount, specifically in administrative positions, please?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [40]

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Ram, we don't break out our expense externally beyond SG&A, so I can't really give you much beyond the SG&A bucket. SG&A and R&D are the 2 categories that we report by. So I think if you look at the guidance we're fairly consistent with last year. So the pattern of spending isn't going to be significantly different. I'd say, if anything, the change will be in the commercial piece rather than the administrative piece, but there's going to be some movement in both. So can't really give you any specifics on that. And with regard to headcount, we -- there is -- well, we do disclose that in the 10-K by certain categories. So I would refer you to that for those details.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [41]

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Okay. With respect to the free drug program, I know several other people had asked about this. But maybe you could give us some more color on whether we should be thinking about it in terms of you using it as a potential response to OSMOLEX or not? And also, if you have any color on how aggressively you're seeing Osmotica pushing OSMOLEX as a product at this point, that would be helpful.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [42]

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So with regards to the -- thanks, Rob. With regards to the free drug trial program, we launched with a Quick Start program, which allowed us to kick in free drug if the adjudication process on the claim had not progressed to completion by day 5. We could kick them over into Quick Start. And this was, I would say, a bit of a minority approach, but it worked actually extraordinarily well in the areas that we had uptake for the first 12 months of the launch. But we did observe, and we did listen to the field, that there were those physician's offices who were so accustomed to samples and other forms -- programs that would proceed their reimbursement experience, that we felt it prudent to put this in place and made that decision really without consideration and before considering anything with regards to the introduction of OSMOLEX. With regard to the introduction of OSMOLEX, we understand it has launched. We understand from our field that it is available. But we're not really seeing a whole lot of data at this point or getting a lot of feedback at this point that, that product is a hindrance to the adoption of GOCOVRI.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [43]

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Okay. That's very helpful. And then maybe a couple of questions for Dr. Patni. The dalfampridine-experienced subgroup that you alluded to in the context of the INROADS trial. I was just wondering, hypothetically, if the INROADS trial reports positive data in this subgroup specifically, could you potentially use that as a way to offset or preempt or get around potential prior auth requirements in MS? I'm just asking for a hypothetical. I understand it's conjecture at this point, but would appreciate your perspective on that since you mentioned that there's this subgroup in the trial.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [44]

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So allow me to speculate. If, in fact, the trial demonstrates an effect on those measures of walking that's similar or consistent in both those patients who were on dalfampridine and not on dalfampridine in the past, then I would posit that, that would be a very useful point for the payer community. And that's precisely why, from my prepared commentary, this was a prespecified subgroup analysis.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [45]

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Perfect. And then just on ADS-4101. Just -- because of the wording in your press release and your comments today, I was wondering if you could kind of either confirm or reject the hypothesis that if VIMPAT loses exclusivity before 4101 gets to the market, does this or does this not destroy the rationale for the program per se?

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [46]

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Does not, meaning we have always believed that the diurnal seizure pattern that we observed in our retrospective analysis of a large data set is real. That by tuning out a tolerability component of the lacosamide pharmacokinetic profile, we can obtain higher doses at comparable tolerability -- or better tolerability at comparable doses. And that thirdly, that VIMPAT, upon the loss of exclusivity, will grow disproportionately relative to other generic antiepileptics. So we'll be in a -- if we conduct, as Rajiv has described, one of the first head to head clinical programs of a novel time-dependent-driven profile versus the current generic standard of care that it is a positive value proposition on its own merits.

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Operator [47]

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And our next question is from Serge Belanger with Needham & Company.

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Serge D. Belanger, Needham & Company, LLC, Research Division - Senior Analyst [48]

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Just 2 questions for me. First one is have you noticed any changes to GOCOVRI coverage starting in January '19? And then the second one is you've kind of backed away from some guidance parameters here for the start of the year. Just wanted to know if the 20% to 30% peak market share that you've guided for in the past remains intact here?

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

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Serge, thank you for both questions. The answer to the first one is no. We have not noticed any differences in the beginning of the year with payer coverage. And we continue to monitor those carefully so that we are maximizing access to GOCOVRI for our patients in need. So that's number one. On your second question again?

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [50]

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The 20%, 30% peak.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [51]

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Oh. The 20%, 30% peak. On the second -- look, we believe very strongly, and are seeing it in the areas in which adoption has occurred early and deeply, that GOCOVRI can achieve a position as this ideal adjunctive to levodopa at the point patients enter this phase of the journey where the threat or occurrence of dyskinesia begins to limit physicians' use of all forms of dopamine: levodopa and other dopamine adjunctives. So we remain very excited about the long-term opportunity. I believe we've laid out in the call the steps we're taking to educate physicians both in their understanding of this (technical difficulty) mechanistically, how the time dependency of this glutamate hyperactivity affects every day in the progression of these patients. And it's our jobs here with the data set we have in place and further enrichment down the road to really bring this product to where it belongs, based upon the data that we've been able to generate for it. And that's really where we're driving forwards long term. So we will continue to evaluate how this grows quarter-over-quarter in its ascent over the next couple years. And I think have a better idea of where we're going to end up a couple years down the road here. But we remain excited in what we're seeing, and I think what folks are hearing on physician calls in those areas where adoption has occurred and is continuing is suggestive of a very strong benefit that we're going to be able to see well into the future.

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Operator [52]

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And our last question is from Irina Koffler with Mizuho.

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Irina Rivkind Koffler, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Analyst [53]

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I wanted to revisit prior guidance on the gross to net in the 25% to 35% range. So with this 28-day free drug program, are you going to jump into that range more quickly this year? And will you be able to stay in that range or do you think you'll go above the higher end of it? And also if you start contracting with Medicare Part D, do you think you'll exceed the higher end of the range, or is it all still within this range contemplated? I think that's the first question. And the second question, can you comment on the number of prescribers you have now? I believe you had about 1,200 the last time you reported. So correct me if I'm wrong on that and just let us know where you are.

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Alfred G. Merriweather, Adamas Pharmaceuticals, Inc. - CFO [54]

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So Irina, on the gross-to-net, that 25% to 35% was always intended as a sort of long-term framework, which would be at a point in time when likely we would have substantial contracting both on the Part D side and on the commercial side. So I think, long term, that's the framework laid out. I think it's -- wherever it ends up depends on the level of contracting that we get into and we'll just have to wait and see. So that was a long-term thing, not a short-term thing. I think we indicated on the Q3 call that we expect it to be kind of in the high teens to low 20s for this year. And that reflects the donut hole and all those issues that we saw last year, including the donut hole being a bit bigger this year than last year. So that's -- really no change in that gross to net framework for either near term or long term.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [55]

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And with regards to the number of prescribers, we ended up approximately 1,600 at the end of the year Irina. And a lot of what we've talked on, on the call today is really taking the subset of those who've got large practices and really dragging the GOCOVRI message home and delivering greater depth of prescribers in that area in those centers as well as increase prescribers in 2019.

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Operator [56]

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And ladies and gentlemen, this concludes our Q&A session for today. I would like to turn the call back to our CEO, Greg Went, for any final remarks.

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Gregory T. Went, Adamas Pharmaceuticals, Inc. - Co-Founder, Chairman & CEO [57]

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Thank you, everyone, for your time today. We look forward to seeing you at conferences over the spring, and our -- giving you an update on our continued progress on our next call in May. Thanks very much.

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Operator [58]

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And with that, we thank you for participating in today's conference. This concludes the program, and you may all disconnect. Have a wonderful day.