Akili Inc. Q1 2023 Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the <unk> Geely, Inc. First quarter 2023 earnings conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
Any time during this call the required immediate assistance. Please press star zero for the operator. This call is being recorded on May 11, 2023, I will now turn the call over to Julie Dicarlo Senior Vice President of Communications. Please go ahead.
Good afternoon, and thank you for joining us today for <unk> earnings Conference call for the first quarter of 2023. This is Julie Dicarlo and I'm joined today with my Achilles CEO , Eddie Martin <unk>, our President and Chief Operating Officer, Matt Franklin, Our Chief Medical Officer, Scott Collins, and our Chief financial.
<unk> Santo Shun back.
After the market closed today, we issued our earnings release, which can be accessed on the Investor Relations section of our website.
Additionally, we posted earnings slides on our IR website that we will reference during today's webcast. This call is being recorded and a replay of the teleconference will be available on our IR website at the conclusion of today's event.
During today's call, we'll make forward looking statements regarding future events expectations plans prospects or the financial performance of the company. These forward looking statements are based upon estimates and assumptions that while considered reasonable by the Companys management involve certain risks and uncertainties. The company's actual results may differ materially from those <unk>.
Perhaps or implied by any such forward looking statements as a result of various important factors factors that might cause such differences include but are not limited to those risks and uncertainties set forth in our Form 10-K filed on March nine as well as other subsequent filings with the SEC information.
Provided on today's call reflect our views only as of today may 11th and should not be relied upon as representative of our views as of any subsequent date, we explicitly disclaim any obligation to update or revise any forward looking statements or our outlook.
Also during today's call, we'll refer to certain non-GAAP financial measures management does not intend the presentation of these non-GAAP financial measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP, but as a complement to provide greater transparency.
A reconciliation of the historic non-GAAP financial measures to our GAAP financial measures is included in our earnings slides and in our earnings release if.
If you're following along with the slides please turn to slide four as I hand, the call over to Eddie for his prepared remarks Eddie.
Thanks, Julie Hi, everyone and welcome to our Q1 2023 earnings call.
We've been busy we had a productive first quarter growing endeavor Rx in the pediatric market and positioning ourselves to be able to access the even larger adolescent and adult ADHD markets and I'm excited to share our progress today and tell you more about some of our recent announcements.
In terms of Endeavour Rx in children with ADHD, we're seeing strong results in the second quarter of launch with our targeted sales force. We saw an increase over Q4 and essentially every sales metrics.
Especially positive for us as a return to quarterly growth in both new prescribers and new prescriptions, which shows that we're demonstrating an increase in control in the model.
Seeing more traction overall in the more doctors are integrating endeavor rx into their routine practice that has done a great job, leading the team to balance breath of new prescriber uptake with depth and existing prescribers showing that both of these can be growth areas for us going forward.
As we look to expand the number of addressable patients our team prioritized and moved quickly on our adolescent regulatory package, which I'm happy to report has now submitted to the FDA and.
And we've hit that important milestone well ahead of what we had originally anticipated.
This is excellent for our business as doctors, who see our current patients and children are eight to 12 years old also see adolescent patients, which means with approval, we should be able to quickly and easily access this larger pool of patients and it's really important for these adolescent patients who are struggling right now while we can't speak for Fda's review process obviously.
We're definitely hopeful that the agency will recognize the urgent need in teens and that we can move quickly to market authorization and that would double our current addressable market faster than we initially anticipated.
But what I'm most excited about right now is the top line data, we released last week from our adult ADHD trial.
While we've previously shown and published randomized controlled trials that the SME technology inside Endeavour Rx can treat cognitive dysfunction in adults with depression and MFS, we haven't explicitly completed a clinical trial in adults with ADHD.
Scott will go over the data from this pivotal trial and a bit but quite frankly I can say the results are astounding I've been in this field for more than a decade and the magnitude of these effects even surprise me give.
Given our historic under treatment of adults for their ADHD and their current struggle getting access to treatment. We think we can offer a meaningful treatment option and whats about what is a fast growing mental health demographics.
The adult market is unique from children and adolescence and we're currently looking at options to speed our ability to get this product into the hands of patients.
All in all our pediatric market plus adolescence and adults could allow access to at least 14 million patients in the U S, which is a huge jump from our current market today and helps Derisk our label expansion plans.
Okay.
Before we dive into the earnings details on all of these items I'd like to quickly address the questions that I know are out there about the health of the digital therapeutic industry.
And what I'd like to say is that as with all areas of medicine, we know that not all products are created equal, but the potential for success really comes down to specifics like the product mechanism. The clinical data the market. The product is entering all three of these for a Kelly are very different than many other digital therapeutics and give us a unique opportunity.
<unk> to scale like other established areas of medicine.
Our technology is the medicine, that's directly stimulating physiology, not just the mechanism to deliver human therapy in an app.
And we've seen recently in adults that this can have dramatic clinical impacts also our market is unique our adult ADHD are our ADHD market generally and our future mental health markets are broad they are large and they are comprised of activated patients who are hungry for new therapeutics. We think that's why we see a willingness to pay out of pocket.
And already about 10000 prescriptions written primarily by general practice pediatricians and specialty psychiatrist in every state in the country. These are the things that give me confidence that our products have the ability to grow and scale and we're well funded into Q1 2025 to do so.
So now to dig into the data from this last quarter and our plans going forward I'd like to turn it over to Matt and Tim Matt Alright. Thanks, Eddie we've previously outlined three strategic areas of focus for our business and these are outlined on slide five the.
First is driving awareness and adoption of endeavour acts through the addition of our direct sales force now in 25 priority territories, covering roughly 40% of the estimated U S market opportunity for our initial indication of endeavour racks.
The second is removing barriers to adoption by driving expanded coverage for endeavour Rx and third continually improving our treatment experience.
In the first quarter, we continue to grow adoption released several new features to improve the treatment experience and made modest progress with payers. So let's look at the highlights from each of these areas starting with adoption.
In the first quarter, we deployed the second wave of our sales team to 12 additional geographic territories, bringing us up to a total of 25 occupied territories.
Well, it's very early we are encouraged by the initial progress we've seen in these expansion territories.
In Q1, we saw double digit growth compared to Q4, 2022, and nearly all measures of demand.
The overall number of prescribers, new prescribers overall prescription growth, new prescriptions and refill prescriptions.
Finally, we are encouraged to see the number of new prescribers as well as repeat prescribers grow in short we continued to see strong correlation between direct sales engagement and accelerated growth across key adoption performance metrics.
Moving now to coverage in.
In Q1, we added to our payer coverage, but not as quickly as we added new prescribers and prescriptions.
We also continue to see families willing to pay out of pocket for Endeavour Rex and while this is encouraging we acknowledged that families need expanded access to new non pharmaceutical treatment options.
We did make progress in Q1 as <unk> was added to multiple formularies of note Kroger one of the largest and most innovative retailers in the U S is now covering endeavor Rx for its more than 400000 employees plus the estimated 6 million affiliated Kroger Health plan members of course formulary inclusion just the first step in a multistep reimbursement process.
But we are encouraged by the progress.
Finally on treatment experience, we continue to update and optimize the treatment experienced surrounding the products, including our companion application for caregivers endeavor ex insight.
In Q1, our enhancements we're focused on improving progress tracking features to provide caregivers and health care providers increased visibility into the benefits patients are realizing from endeavor racks and to track this progress throughout their treatment.
An important update I'd like to highlight.
We've added the ability within endeavour Rx insight app for caregivers to complete the Vanderbilt assessment, the standardized rating scale, commonly used by providers to diagnose and SaaS ADHD. This is now live and being used by caregivers. This is a critical addition that both hcp's and caregivers have asked for and provides a way to systematically monitor improvement during the <unk>.
Course of treatment.
Turning now to the numbers the full slate of quarter over quarter and year over year metrics are on slide six I'll highlight a few of the key metrics starting with prescriptions as.
As Eddie mentioned, we saw robust growth in number of new prescriptions with a 38% increase over Q4, 2022 and more than 190% increase over Q1 2022.
On refills, we continue to see positive trends in prescription refills reporting 23% quarter over quarter and more than 400% year over year growth.
On prescribers in Q1, we saw more than 900 unique prescribers write prescriptions, a 15% increase over Q4 of 2022 with new prescribers growing by 20% in the same time period.
35% of the new prescriptions written in Q1 were expense during the quarter down from 40% in Q4.
We believe this small decline was driven by the significant increase the number of prescriptions written in late March which we expect to be filled in Q2.
The number of annual prescriptions per patient a new metric we are providing that encompasses both new prescriptions and refill prescriptions that are spent for each patient in the prior 12 months was 1.7, a 17% increase over Q4 2022.
During Q1, we received payment for 95% of dispense prescriptions.
<unk>, 94% of dispense prescriptions were paid out of pocket by caregivers, 1%, we're reimbursed and 5% were provided free of charge to qualifying families under our patient assistance program.
Now I'll turn it over to Dr. Scott Collins, our Chief Medical Officer, who will provide an update on our clinical programs.
Thanks, Matt.
As you've already heard we've had a number of exciting updates from our clinical programs.
First and foremost as Eddie mentioned, we recently disclosed topline results from our clinical trial in adults with ADHD.
These are highlighted on slide seven we are even better than we had hoped we.
We saw changes on our primary outcome measure of potential functioning improved significantly from baseline to the end of treatment the <unk>.
Magnus <unk> of change seen in the tool in adults was more than twice as large as what we saw in our recent adolescent study and was nearly seven times greater than what we observed in our initial RCT in children, aged eight to 12 that led to the Fda's authorization of Endeavour Rx.
On the same validated measure of attention more than a third of patients scored in the normative range at the end of treatment, meaning they no longer had a measurable attention deficit after using our treatment for six weeks.
In comparison in our pediatric population, where we have FDA authorization, 11% of patients score to the normative range at the end of treatment.
We also observed significant effects on clinically meaningful outcome measures, including the inattention subscale and the total score of the ADHD rating scale, a widely accepted measure of ADHD symptoms.
Nearly one third of all patients had a clinically meaningful improvement of 30% or more on the ADHD rating scale. These are also greater than what we see what we've seen in both of our pediatric and adolescent studies.
Critically important from a clinical perspective for the first time in our ADHD studies, we measured quality of life. In this adult study with a validated ADHD specific measure we saw robust improvements with almost half of all participants meeting the pre specified criteria for clinically significant quality of life improvement.
We plan to present full data from the stores ADHD adult study at a future scientific meeting.
These findings could have significant implications for the millions of adults living with ADHD in the United States over the past several months, we've seen near constant reporting on both the increasing numbers of adults seeking care for ADHD as well as the barriers they are facing accessing that care.
This environment makes it even more important that we get our product into patients' hands as quickly as possible and we're currently evaluating regulatory strategies that will speed delivery of this effective and safe treatment to patients.
We will look forward to sharing more information about our plans in this regard soon.
In addition to these adult study results, which truly exceeded our expectations. We reached another important milestone on the path to access the full ADHD population.
Earlier this week, we submitted our label expansion request to the FDA to expand our endeavor Rx indication to children, aged 13 to 17.
This milestone along with the completion of the adult study I. Just described are both well ahead of schedule from what we initially projected.
As we shared in January we showed robust improvements in attentional functioning and related clinical outcomes and adolescence.
The mental health crisis is it teenagers hard and they too were impacted by difficulties accessing treatment is critical for teams to have as many choices as possible to manage their ADHD functioning and we look forward to being able to give them a new auction with endeavour Rx.
With respect to our other programs our pipeline can be found on slide eight.
Our phase III study in partnership with Shionogi in Japan, as well as our two other studies of cognitive dysfunction. Following COVID-19 infection are on track with timelines, we previous previously reported.
In summary, our progress toward expanding our opportunity in the ADHD market is accelerating.
Outcomes from our pivotal study in adults were better than expected.
Our pivotal trial results in adolescence had been submitted to F. D. A to expand our existing label in our pivotal trial in Japan is on track for an end of year readout.
We're excited about this potential to benefit a substantially greater number of patients across their lifespan and we'll be working hard to help ensure access to this treatment option in the midst of ongoing challenges for patients with ADHD.
I'll now turn it over to <unk> for an update on our financials.
Thank you Scott and Hello, everyone. As you just heard from Scott we have made incredible progress to address the vast majority of ADHD patient population here in the United States you can see on slide number nine we have updated the overall opportunity across ADHD to at least 15 million people here in the U S with the imminent launch of <unk>.
Agile product, we undertook a reappraisal of the market opportunity with the expertise of Doctor Collins and have updated our estimates for the total addressable market in adult ADHD.
With strong data in both the adolescent and adult ADHD population in this quarter our label expansion combined with our current population has the potential to reach more than 14 million people with ADHD and we are advancing these programs well ahead of schedule and helping Derisk our label expansion plans.
Now on to the financials on slide number three.
From a revenue perspective as you see on the slide in the first quarter of 2023 total revenues were $113000. It is similar to our revenues reported in the fourth quarter of 2022.
As a reminder, we recognize revenue upon dispense and activation and over a 30 day period, you will therefore noticed that our deferred revenue balance increased compared to the fourth quarter of 2022 in our financial statements in the press release today. This was mainly due to the timing of prescriptions dispensed in the quarter.
Moving on to expenses, we incurred approximately $19 million of GAAP total operating expenses and about $14 million of non-GAAP total operating expenses in the first quarter from any grade III, which represents approximately 30% reduction quarter over quarter. This was primarily driven by the impact of the actions taken earlier in the quarter and the support of <unk>.
2023 operating plan, including the reduction in our workforce.
And last but not the lease from a capital perspective, we ended the first quarter of <unk>, three with approximately $117 million of cash cash equivalents and short term investments.
This brings me to our cash runway, we continue to expect that our cash position at the end of the first quarter of approximately $170 million to be able to fund our current and planned operations into the first quarter of 2025.
I'll close on the financial update by reiterating that our current operating plan allows us to one focus our resources, primarily on endeavor robotics commercialization and ADHD label expansion and do Brazil's capital, especially in these current capital market conditions with that I'll hand, it over to Eddie Eddie.
Thanks, and I hope everyone consensus of things. We're excited about here on todays call on slide 11, we just have a quick summary for you all and never Rx has strong sales metrics along with our successful clinical trials in adolescents and adults.
Have significantly strengthened our position and help derisk, our plans to access the entire ADHD market.
We're well funded into Q1 of 2025 to pursue our goals and advance our growth.
I'd like to thank you all for joining us today, and we look forward to keeping you apprised of our progress.
And at this time I'd like to turn things back over to our operator, who will open the call to questions.
Thank you.
Ladies and gentlemen, we will now conduct a question and answer session. If you have a question. Please press star followed by the number one on your Touchtone phone you will hear a onetime prompt acknowledging your request.
Your first question comes from the line of Charles <unk> from D. D. Cohen. Your line is now open.
Hi, This is Lucas on for Charles I wanted to ask about the adult data just curious as to why you guys are seeing such improved results at the adult patient population as compared to pediatric and adolescence.
Comment a little bit on the last call, but I'd like to hear if you guys have had.
She has come to some more concrete solutions as to why adult populations seem to have better outcomes in the younger populations.
Yeah. This is Scott I'll take that and thanks for the thanks for the question.
Yeah, as we talked a little bit about this following the reported the adolescent data and I actually think it's some of our hypotheses were confirmed with the adult data.
These are patients who are they are taking control of their own treatment.
We think that there are likely to be more motivated.
In adult who's enrolling in a clinical trial is seeking care because their current treatment options arent working which is a different scenario than a 10 or 11 year old being enrolled into a clinical trial by their caregiver.
We are we're interested in exploring sort of more quantitatively and objectively.
We might confirm that hypothesis, but.
From from what from everything we've seen in the data that's our best guess right now.
Okay, Great and then can you remind us what the timeline for approval the label expansion is assuming it's Sean.
Hey.
And then obviously pending approval how quickly will you guys be able to watch the adult version of the product.
Kind of working on the assumption that you will be selling into.
Physician types.
Yeah. So.
Yes, therefore for our adolescence submission that we just had earlier this week that is.
The guidance from FDA has 90 days that doesn't include opportunities for us to respond to questions that they might have.
And of course, we they're not legally bound to that timeline and we cant predict what the FDA is going to do and then with respect to the adult.
David we are still evaluating our regulatory strategies for that and we'll have more information.
Later.
Alright, thanks for the questions.
As a reminder, if you have a question. Please press star one. Your next question comes from the line of Judah Frommer from Credit Suisse. Your line is now open.
Yeah, Hi, Thanks for taking the question guys and congrats on the progress maybe first could you just remind us.
How standard of care for ADHD compares in adults versus.
Adolescence and how those.
Sales calls could potentially be different.
Between the two physician and patient communities.
Yes, Sir.
Can take the first part there is a couple of pieces. There says how standard of care compares between adults and adolescents and kids.
A lot of as I alluded to in my comments a lot of what has been reported on is I think one article even referred to the treatment of adult ADHD is the wild west because.
It's not as well established.
Pediatricians manage the vast majority of pediatric ADHD.
Primary care docs in to take care of adults are not trained in the same way that pediatricians are to manage ADHD.
So there's a real gap in terms of who's able to so so that I can speak to the standard of care and in terms of the.
The sales call I'll turn it to Matt Yeah, I mean, I think initial thoughts for the adolescent expansion it fits seamlessly into our current call point. So we're extremely excited to get that I think it is.
Multiple as the opportunities we have on the adult market as Scott mentioned earlier, we're still looking at all the different regulatory strategies commercial strategy. So that work is still in progress today. This is Eddie what I'm excited about with what Scott mentioned in terms of the gap in care there is.
They're not a kind of standard singular treatment algorithm that is applied broadly, we believe theres, a real opportunity for endeavour Rx to fit in in a meaningful way.
As we go forward in terms of bringing the products to patients.
Okay got it and I think Santos mentions.
Kind of taking the opportunity to re categorize the addressable market specifically in adults correct me if I'm wrong. I think you guys had talked about the entire ADHD market as being about 11 million people prior and now it looks like there's about 11 million. Adults. So can you just help us with some of the analysis Youre K O L brought to.
Right and then separately I think we'd also talked about non stimulants being sort of a guide for where market share could head for <unk>.
Digital therapeutics in this space should we think of that bar the same way for adults as we do for kids in adolescence.
That's a great question I mean, the Kearl is sitting in the room, so I'm going to hand, it over to Scott. He can help US help you with that question on the market opportunity yeah. So on the market opportunity I'll say that.
So I came in December .
And.
In the midst of.
Getting the adult data, we took a hard look at our at previous assumptions and we concluded that our previous estimates were where.
They were supported but they were extremely conservative so we revised it based on just a fresh look at all of the available data.
Okay.
Got it and then just just non stimulants, I guess showing as a guide for market sharing in the adult population potentially.
Yeah.
This foundation in terms of market share in and how we think about it and I think it's a it's a little early right now Judah.
We would still we are still evaluating on regulatory strategies go to market strategies and I think once we.
Once we have a point of view on that we'll share that with you and that'll obviously inform how we think about the market share at that point in time.
Okay. Thanks, guys.
Thanks.
Your next question comes from the line of her held rocket from light side capital. Your line is now open.
Yes.
Thanks for taking the questions.
Wondering if you can kind of help us understand the retail dynamics that youre seeing.
Are you seeing patients we felt kind of month over month or are you seeing some gap between the scripts.
So given that you know we have a couple of quarters log between the limited commercial launch of a full launch.
Can you hear me speaking proportion of patients that you're starting to see repo more than once.
Yeah happy to address that so as we presented in sort of the key metrics we did see.
Continued growth quarter over quarter, and the overall number of refills.
It is interesting one of the strengths of Endeavour Rx is the flexibility that it can be incorporated into <unk>.
Various different treatment scenarios can really accommodate the unique needs of each child. So we see a wide range in the market today are with our customers today.
Some children as you mentioned use it every single month others are.
Just starting treatment there on their first experience with Endeavour Rx, we do see the majority of that new prescriptions that are written come with our refill prescription. So we do anticipate that the refills per patient will grow over time, we're not providing guidance on the pace of that that new metric early for us, but as we continue to.
To grow as our sales forces out engaging with clinicians educating.
We are we are hopeful that we'll continue to see that grow.
Got it that's helpful.
Especially out of the study.
Gary.
I explained it was there any particular reason why you guys extended that a treatment period for the adults.
Four weeks to six weeks.
And then are there any implications from there for adults in terms of how you guys are thinking about.
Prescribing patterns, how long a scrape nail can relax.
Sure Oh this is Eddie thanks for the question.
So as we've gone into different populations with the technology, we you've seen that the most the two most common paradigms are either four weeks or six weeks that we've tested.
And so this is true across different populations, we tend to work with key opinion leaders and investigators about what they think an ideal but minimal timeframe would be to see that.
The best benefits at least at an early at an early look at clinical and so that's how we took the approach we take each population differently kind of work with the experts there in so far.
For this study we chose the we chose the six week treatment period, we obviously don't have.
Ah.
Combinatorial studies, where we look at every different possible.
Option that we could run but that's how we designed this study prospectively.
Got it okay.
And I guess in a label expansion going into the adult population or do you expect that.
Of course of treatment.
So the four weeks I guess.
With the current population or would you look to kind of spread that out to a six week treatment.
Yes, I think again.
As we're evaluating all the different options and also further diving into the data will.
We will make that decision.
Got it.
And then last one for me I saw this morning, the DEA extended.
Yeah. The capability is to for telemedicine describe is controlled substances.
Given one that we're seeing increasing rates of diagnosis of adult and adolescent ADHD.
What are you guys expecting to see.
Some accounts tailwind from additional.
Patients kind of going off medications, keeping it was an opportunity there.
Are there for you guys as well.
Yes.
I can this Scott I can comment at least from a clinical perspective.
Okay.
I will just say there is there is a pretty dramatic need.
And that's what that's what Youre seeing.
<unk>.
And a lot of the popular press and create young are starting to see it into the in the scientific literature in terms of rate patients need options and <unk>.
They not only.
The existing options.
Kind of historically not all that effective.
Now those options are being even further limited, yes, I think what you're referring to as well or a whole really.
Shows that interestingly the concern around the use of stimulant medications.
Society seems to be even more acute the concern seems to be even more acute in the adult population. So as we bring our non pharmacological option into that population, we're very excited about that opportunity.
Got it I appreciate the color.
Okay.
As a reminder, if you have a question. Please press star one on your telephone keypad.
Okay.
There are no further questions at this time please continue.
Okay. Thank you so much everyone that wraps up the call and we will talk to later on thanks for the attention Bye bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.