Q1 2023 Alkermes Plc Earnings Call
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Greetings and welcome to the Alkermes first quarter 2023 financial results Conference call.
My name is Robin I'll be your operator for today's call.
All participant lines will be placed on mute to prevent background noise.
If you should require operator assistance during the call. Please press star zero on your telephone keypad.
Please note that this conference is being recorded.
I'll now turn the call over to Sandra Coombs Senior Vice President of Investor Relations and corporate Affairs Sandy you may begin.
Good morning, welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended March 31, 2023 with me today are Richard Pops, our CEO and Brown, our CFO and Todd Nichols, our Chief commercial officer before we begin I encourage everyone to go to the investors section of Alkermes com to find our press release related.
Tables, and reconciliations of GAAP to non-GAAP financial measures that we'll discuss today, we believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business.
Our discussions during this conference call will include forward looking statements actual results could differ materially from these forward looking statements. Please see slide two of the accompanying presentation. Our press release issued this morning, and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or.
Flight in the forward looking statements, we undertake no obligation to update or revise the information provided on this call R&D accompanying presentation as a result of new information or future results or development. After our prepared remarks, we'll open the call for Q&A and I'll turn the call over to rich. Thank you Stan and good morning, everyone. We have a number of important and positive.
<unk> to go through today, so I'm going to just get right into it I'm going to start with a brief update on the announcement, we made yesterday related to our arbitration with Janssen.
And then going to hand, it to Ian for a review of the financial results for the quarter and then Todd for an overview of our commercial products I'll come back then and close with an update on the progress we're making on the separation of the oncology business and our allergy 26, 80 Orexin program. So regarding the arbitration with Janssen recall that this pertains to royalties in the U S sales of <unk>.
Three long acting and Vega franchise products in Vegas, the Stena, Invega, <unk> and Invega, <unk>, which are antipsychotic medications.
Well as Cabot, Nova which is an HIV product.
In January we announced the Tri Bureau, which is a panel of three experienced arbitrators issued an interim award in which it agreed unanimously with alkermes on the central issue of the arbitration, which is that while Janssen had the right to terminate the license agreement. It may not continue to sell the products developed under those agreements without paying.
Royalties to alkermes.
Last week, we received the second favorable interim award from the panel, which address the outstanding economic issues first for 2022, we are due back royalties of approximately $194 million.
Second related to the 2023 and beyond the award provides that a separate royalty term applies for each of Invega Cisterna, Invega <unk> and Invega half here for in Vegas. The Stena, we would be owed royalties through August 20th 24, which is consistent with our previous expectations.
However for both Invega <unk> and Invega have here the panel agreed with our position that the royalty term extends beyond 2024 through the second quarter of 2030. This would represent an additional six years of royalty revenues for these two medicines in.
In addition, the award provides a royalties for <unk> in the U S are owed through the end of 2036.
So to summarize once final. This would result in payment for back royalties do reinstatement of royalties going forward and royalty terms for invega transient and Vega have euro and cabin over into the 2030.
This represents significant potential economic upside and provides strategic capital to the balance sheet and additional long term contributors to our P&L.
In terms of next steps the panel directed the parties to confer an adviser within 21 days as to whether either party believes that any issues remain for resolution by the panel prior to issuance of a final award.
We're gratified by this latest inner reward in support of our position and we look forward to the final award and resolution of this matter so with that I'm going to pass it to Ian for an overview of the quarter and then into two.
Todd go ahead, Ian Great. Thank you rich and Hello, everyone.
I'm happy to report solid financial results for the first quarter driven by the strength of our proprietary commercial product portfolio.
Continued focus on operating efficiency and the commercial leverage we have built into our business.
We are confident that we can continue to build on this momentum as we look ahead through the remainder of 2023.
As rich mentioned the anticipated outcome of the Janssen arbitration once final represents significant potential upside to our current financial expectations for 2023.
Our long term profitability targets for 2024 and 2025.
However, we will wait until we have further resolution of the dispute before revising any current or future financial expectations.
In the meantime today based on the performance of our core business and as we've continued to execute across our strategic priorities. We are reiterating our financial expectations for 2023, which were detailed in our press release and 8-K filed on February 16th.
Now for the first quarter, we generated total revenues of $287 $6 million, driven primarily by our proprietary product portfolio, which grew 25% year over year.
Starting with vitro net sales in the quarter were $96 $7 million, reflecting 14% growth year over year, driven primarily by the alcohol dependence indication.
Inventory in the channel was fairly stable and gross to net deductions within normal ranges for the quarter for.
For the full year, we continue to expect Vishal net sales in the range of $380 million to $410 million.
Moving onto the Irish startup product family.
For the quarter Aerostar net sales increased 10% year over year to $80 1 million.
Primarily driven by underlying prescription growth of 10% on a months of therapy basis.
Inventory in the channel and gross to net adjustments were relatively stable for the quarter and.
And for the full year, we continue to expect harvest out of net sales in the range of $315 million to $345 million.
Okay.
<unk> net sales for the quarter with $38 million up 9% sequentially.
Underlying prescription growth was 16%.
End market demand grew at a faster pace than inventory in the channel, which explains the difference between these two growth rates.
Gross to net adjustments in Q1 were 26, 4%, primarily reflecting a continuation of our disciplined contracting strategy in the commercial space.
We continue to anticipate that gross to net adjustments will remain fairly stable in the high 20% range during the first half of the year.
And then may increase in the second half if we determine there is a benefit to contracting in the commercial channel.
For the full year, we continue to expect La Bowlby net sales in the range of $180 million to $205 million driven primarily by strong underlying demand.
Moving on to our manufacturing and royalty business in the first quarter, we recorded manufacturing and royalty revenues of $72 9 million compared.
Compared to $105 2 million in the same period in the prior year.
Royalties from sales of the long acting and Vega products were $13 6 million.
Compared to $37 1 million for the first quarter of 2022.
This decrease was driven primarily by Janssen partial termination of the agreement.
Later to royalties on sales of these products in the United States, which is a subject of our ongoing arbitration with Janssen.
Revenues from <unk> were $28 $9 million compared to $30 6 million in the same period in the prior year and this decrease reflects the reduction in biogen's end market net sales of the product.
Turning to expenses.
Total operating expenses were $335 $1 million for the first quarter compared to $305 1 million in the same period in the prior year.
R&D.
Expenses for the first quarter decreased to $93 6 million <unk>.
Compared to $96 million for the same period in the prior year, reflecting focused investments in the <unk> clinical program.
<unk> lifecycle management studies in our Orexin two receptor agonist program.
SG&A expenses increased to $174 5 million.
From $145 1 million for the same period in the prior year, reflecting continued investment in the launch of <unk>, including the start of the digital direct to consumer campaign.
In addition to certain expenses related to the separation of the oncology business.
Our top line results combined with our continued focus on disciplined operating expense management resulted in a GAAP net loss of approximately $41 $8 million.
non-GAAP net income of approximately $2 $4 million for the quarter.
Turning to our balance sheet, we ended the first quarter with approximately $692 $5 million in cash and total investments.
Total debt outstanding of approximately $292 6 million.
A positive net cash position of approximately $400 million.
As rich noted earlier, a favorable resolution of the Janssen arbitration, which further strengthen our balance sheet.
Now today, we are reiterating our financial expectations for 2023 based on the solid performance of our commercial products and our continued focus on operational efficiencies.
As a reminder, our financial expectations reflect the combined neuroscience and oncology business for the full year as we work toward the planned separation, which we currently expect to complete in the second half of the year.
And as I mentioned earlier, our financial expectations for 2023, do not yet reflect the potential upside to the favorable resolution of the Anson arbitration is expected to provide.
By way of a framework, we would expect to record the back royalties related to 2022 of $194 million inclusive of interest as a lump sum.
Which would be adjusted out of our non-GAAP net income measure due to the onetime nature of that anticipated payment.
Separately for royalties earned related to 2023 net sales of long acting and Vega products, we would expect to record. These as royalty revenues in the normal course.
We estimate that this could be in the ballpark of approximately $250 million of incremental royalty revenue worldwide.
Over and above our current financial expectations for 2023.
Would flow through to both the GAAP and non-GAAP bottom line.
So <unk>.
Taking a step back over the past several years. The company has done significant work to drive operational efficiency and calibrate our cost structure to appropriately support the company's strategic priorities and growth opportunities.
Looking ahead, we believe that our core business is well positioned to achieve our current full year 2023 guidance as well as the accelerated profitability targets, we announced earlier this year.
As we plan for the separation of the oncology business, we will maintain our focus on the strengths and potential of the neuroscience business, which is characterized by its financial profile the quality of its commercial portfolio and its potential for enhanced profitability and long term growth pharma.
With that I'll hand, the call over to Tom Great. Thank you Anne and good morning, everyone.
I am pleased to share that we delivered strong growth across our proprietary commercial portfolio in the first quarter building off the momentum we generated in 2022.
Net sales from the portfolio increased 25% year over year and were driven by double digit growth for each of our three brands <unk> <unk> and Lee Bobby.
We are particularly pleased with the strong continued uptake of LIBOR IV and the oral antipsychotic market. So let's start there.
During the quarter Lee Bobby net sales were $38 million.
Total prescriptions grew 16% sequentially to approximately 33000 tier access for the first quarter.
As of the end of the first quarter nearly 24000 patients have been treated with lowball the since launch.
At this stage of the launch our focus continues to be on expanding prescriber breadth, which grew by 1700 prescribers to approximately 9300 health care providers, who have written a prescription since launch.
As we outlined earlier this year our strategy for laboratory in 2023 is focused on three key initiatives growing prescriber breadth.
Further leveraging our access profile and building awareness for <unk>.
Our direct to consumer campaign will be a key factor in accomplishing these goals.
DTC campaigns have been shown to be highly effective in driving brand growth in many therapeutic areas, particularly in psychiatry.
Our market research in prescribing patterns suggest that when patients to request a specific bran from their health care provider.
There is a high likelihood they will be prescribed the brand requested.
Our DTC strategy is grounded in deep patient and healthcare provider insights, including immediate consumption habits as well as a significant opportunity unmet need in schizophrenia and bipolar one disorder.
Our goal is to drive awareness and uptake for Labelle Avi through execution of a broad differentiated campaign across multiple media channels, including digital and television.
The digital portion of that campaign was initiated earlier this year and is highly targeted based on the media consumption patterns of people with bipolar one disorder and schizophrenia.
Early returns from our digital campaign have been encouraging as evidenced by quantitative increases in website traffic consumer engagement and brand awareness.
The TV component of our DTC program will launch next week and we'll be focused on bipolar one disorder. The campaign is designed to drive high levels of awareness among patients caregivers and health care providers.
Market access continues to play an important role for La ball, we like all brands in this space and Medicare and Medicaid. We currently have a pathway to access for all patients on.
On the commercial side, we have established a solid foundation looking ahead, we may look to strategically contract in the commercial space balancing volume and the profitability of each unit.
We believe Lee ball he is on a strong trajectory and look forward to sharing our progress with you.
Turning to the <unk> product family net sales in the first quarter were $80 $1 million driven by <unk> growth of approximately 10% year over year on a months of therapy basis. This performance was driven by aerostar is differentiated value proposition, including its once every two month dosing option and the aerostat initio initiation regimen.
Both of which are supported by clinical data from our Alpine study.
We are seeing encouraging signs of a continued market recovery for L. A is and believe that we are well positioned to continue to drive growth for the brand.
ARISTOTLE and Lee ball they represent important treatment options designed to address the real world challenges patients face and supported by proven clinical efficacy.
We believe this differentiated psychiatric portfolio together with our specialized commercial capabilities distinguishes alkermes among health care providers treatment systems, and payers and offers a platform for potential future growth.
Turning to Vishal net sales in the first quarter increased 14% year over year to $96 $7 million.
The alcohol dependence indication continues to be an important driver of growth and accounts for approximately 65% of the Vitol volume importantly.
Prescriber breadth for visit trial has continued to expand within the alcohol dependence indication, which has driven new patient starts over recent quarters.
The trial and our vigil Ando litigation with Teva took place in February and a decision is expected in the second half of the year, we remain confident in the innovation and bodies individual.
Regardless of the outcome of this litigation, we believe the nature of the product and the complexities and dynamics of the market in which it is commercialized make typical generic erosion unlikely.
Overall, we are very pleased with the performance of our commercial product portfolio in the first quarter and believe we are well positioned to achieve the goals. We outlined for the year ahead, we look forward to updating our progress throughout the year and with that I'll hand, the call over to rich.
That's great. Thank you Todd.
So at the beginning of the year, we outlined three strategic priorities driving the ongoing launch of <unk> advancing our Orexin program in narcolepsy and other hypersomnia conditions and executing on the planned separation of our oncology business.
Months in we're advancing on all three and believe that we can drive significant value for shareholders.
As you just heard from Todd we're executing our strategy for <unk> and we've established a strong platform for growth. The boldly clearly demonstrates the power of Alkermes science and the opportunity to leverage our commercial capabilities.
I'm going to focus now on where we stand with the separation of the oncology business and the <unk> 2680 or Orexin program.
We believe the separation of the oncology business, we will reveal the value of our neuroscience business, which has come more clearly into focus with the launch of the <unk> and at the same time provide shareholders and investors with an independent and more direct opportunity to realize value from the oncology investments that we've made.
The separation is expected to yield a number of benefits for each business, including driving sharper strategic focus simplifying capital allocation decision, making and increasing each business's flexibility to pursue growth and investment strategies more directly aligned with their respective goals.
We've made significant progress in the quarter toward launching what would be coming new independent public company named Neuro oncology plc.
Last week, we announced that we submitted a confidential draft form 10 registration statement with the SEC. In addition, we recently submitted a request for private letter ruling to the IRS to support the separation as a tax free distribution to alkermes shareholders for U S. Federal income tax purposes submission.
Submission of the form 10, and the DLR request represent too labor intensive and long lead time work streams in support of the separation with these two initial submission now and the review phase we believe we'll be well positioned to complete the separation later this year as expected subject to customary conditions, including final approval from our board of directors.
We're also advanced in our process to identify and recruit senior management to leading neuro oncology. We're pleased with the high caliber of candidates interested in the opportunity and we will look forward to sharing updates with you about the CEO role and other key leadership positions as they develop.
As a standalone company, we expect neuro oncology will be an attractive investment anchored by the potential of <unk>. Our novel Investigational engineered IL two variant that is a potential first in class cancer immunotherapy.
And then we're looking at is the most advanced IL two variant in development and is distinguished by data generated in the clinic, showing antitumor activity as single agent monotherapy and in combination with checkpoint inhibitors.
In addition, neuro oncology would have a pipeline of preclinical immunotherapy candidates are engineered tumor targeted IL 12, and the engineered IL 18 programs, both of which had been advancing in preclinical development and represent attractive oncology targets.
With a late stage asset and the potential to be first in class medicine preclinical pipeline assets and clearer developmental milestones ahead, we believe the separation in the oncology business represents an attractive opportunity for oncology focused investors.
So shifting the focus back to alkermes. Following the planned separation, we expect alkermes to become a profitable pure play neuroscience company with a clear and compelling investment thesis.
The <unk> launch success demonstrates our ability to leverage our commercial capabilities in complex addiction, and psychiatry markets with.
With Tom type of strong top line driven by the growth of our proprietary products, especially as commercial infrastructure and proven drug development capabilities. The Standalone neuroscience business would represent a significant opportunity to capture operating leverage to drive growth and profitability and advance new potential medicines for neurological disorders.
So on that final point, let's spend some time on the Orexin program. We're certainly aware of the intense investor interest in this area. So I'm going to give you a bit more detail than we might usually for a phase one program.
Our lead molecule is called out as 2680, it's a small molecule orexin two receptor agonist designed as a once daily oral tablet for the treatment of narcolepsy.
During the quarter our team made important progress in the ongoing phase one clinical trial.
With compounds of this type of early clinical data is highly informative, which is why we've structured the phase one program with several components a single ascending dose study followed by a multiple ascending dose study in healthy volunteers in a phase one proof of <unk> phase one proof of these.
It wouldn't be proof of concept study in patients structured this way, we can expeditiously cross multiple stage gates related to single and multiple dose safety and Tolerability pharmacokinetics and pharmacodynamics early in the program.
To date, we have successfully advanced our single ascending dose study two doses that exceed our expected therapeutic dose range in the multiple ascending dose study, we've now cleared sufficient dose levels, which we believe will be therapeutically relevant in narcolepsy to trigger the initiative the initiation of the phase <unk> proof of concept cohort in patients.
And our single ascending dose work all doses were well tolerated and we did not observe any dose limiting toxicities in.
In addition to these early indicators of Tolerability. The pharmacokinetic profile of <unk> thousand 600, <unk> has been consistent with our modeling, which is encouraging and important given the desired time course of therapeutic effect with a goal of promoting wakefulness during the day.
And sleep consolidation at night.
In the multiple ascending dose study healthy volunteers are receiving once daily dosing of <unk> thousand 680 for 10 days. The primary objective of the studies to further elaborate the safety and Tolerability profile of <unk> thousand 680, as well as to collect additional pharmacokinetic and Pharmacodynamic data in this study is proceeding as planned.
Taken together data from the single and multiple ascending dose cohorts have provided initial confirmation of Alex 2600, <unk> PK profile dose response, and potency and provide encouraging signals that it's driving central activity based on EEG and other clinical science. These data are highly informative and allow us to streamline.
The design of the next critical phase of the development program, which is getting the drug into patients with narcolepsy.
The proof of concept study will evaluate established clinical efficacy endpoints, including EEG based maintenance of wakefulness test in patients with narcolepsy type one narcolepsy type two and idiopathic hypersomnia.
In a crossover design subjects will act as their own control and received single doses of multiple dose levels as well as a placebo with a washout period in between.
With a small number of subjects per cohort. We believe this approach will allow us to efficiently assess dose response and inform dose ranges for potential future clinical studies.
Poised to commence subject enrollment in this cohort in the coming weeks following clearance from Ethics Committee and continue to expect data from this phase one b later this year.
The market opportunity the strong biological relevance of the Orexin pathway. The early term target validation work done across the space all of these underpin the high level of excitement surrounding the Orexin agonist class both in the treatment community as well as among investors. We will continue to focus on careful execution while expeditiously.
Advancing this program.
I mean in there. This is an exciting time at the company. We believe that the business is on the right track to create significant value for shareholders. We're confident in our strategy and will remain sharply focused on executing on our strategic priorities I'll look forward to sharing continued progress with you over the course of the year, so with that I'll turn it back to sandy for the Q&A.
Thank you we will open the call for Q&A. Please.
Thank you Sandy.
At this time, we will now be conducting a question and answer session.
You'd like to ask a question today. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
So that we may address questions from as many participants as possible. We ask you. Please limit yourself to one question and one follow up.
One moment, please while we poll for questions. Thank you.
Yeah.
Thank you and our first question is from the line of our cash to Ari with Jefferies. Please proceed with your question.
Hey, thanks, so much so on the Orexin your math that he started and said can you go over how many dosing cohorts you've tested at this point from an exposure perspective, and if you have cross levels that you think are therapeutically applications in narcolepsy NIH and have you seen any evidence of metabolite accumulation at this point and just on La <unk>.
<unk> grew 16% quarter over quarter on <unk> sales grew 9% heading into Q2 consensus is baking in 19% sales growth does that seem doable given gross to nets are likely to worsen as we get deeper into Q into 2023. Thank you.
Good morning, <unk>, it's rich I'll start then I'll hand, it hence the Orexin program as you can tell from my earlier remarks is really rolling now I'm not going to give specific information on the various dose levels other than to say that.
The programme now encompasses over 60 patients over 60 subjects and between the sad and Mad and we are above doses that we think are therapeutically relevant for narcolepsy.
And that's encouraging and that's why we're pleased to see the PK dose proportionality Tolerability all of those things with respect to metabolite profile. It says as we would've anticipated we've been able to characterize the principal metabolites and we feel comfortable with where we are with that.
Yeah, and I'll, just I'll just pick up on the evolving as well. The first thing is we're not going to guide on the quarter for Q2, but what I would say is that we are really pleased with the uptake of laboratory.
New patient starts new prescriptions.
<unk> as we said on the call to your excess grew 16%.
Quarter over quarter, we really believe that's a result of strong demand growth based on our expanding prescriber universe.
Which is growing quarter over quarter.
It is very supportive of the market research that we hear from from ACP as well. So we expect that to continue.
Yeah.
Thank you.
Our next question is from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your questions.
Alright, Thanks for taking my questions and congratulations on the progress maybe firstly for me just a light bulb and the launch of the broader DTC television campaign.
How should we think about the interplay of the broad DTC television campaign ahead of contracting and how should we think about the effect initial effectiveness of it and the interplay between perhaps a board.
Television DTC campaign, and contracting as the year unfolds.
Yeah, absolutely so.
As I said, we're really excited about the launch of our T. The television portion of the consumer campaign, which will actually kickoff next week.
It's a broad campaign the television portion it's meant to be supportive of the earlier launch we did with our digital component.
We've been we've been planning for this for a number of years, we've got deep patient insights HCP insights, we really understand what patients are looking for and we've tested this with.
With our enormous amount of actual patients and Dave or spin it responded very well to them.
Market access is in a good position at this point Medicare Medicaid there is a pathway to access there is there is a pathway to access for the majority of patients in the commercial space.
We're seeing encouraging trends across all three segments that we have utilization across all three segments and market access in today's U S. Health care environment is broader than just contracting is providing a pathway to access its providing support services. It's pushing through access it's also pulling through access.
And we're seeing good utilization.
As you know as we've talked we have a lot of support services available, we're seeing a very high utilization of our prior of our program, we're seeing a high utilization of our co pay program.
And physicians in Hcp's in this space are used to navigating the complexities of market access they know how to get these products and all of the products are somewhat treated very similar so we think we're in a good spot with where market access as patients can get access to the product our strategy as we've been planning work for a number of years as I said earlier.
As to drive demand, but also to build awareness and we've seen through our research that.
If a patient sees our campaign they liked the campaign. They will ask HCP is about the campaign and Theres, a very high likelihood that they will request will be granted so we're excited about that.
Great. Thanks, so much and just as a follow up.
Just given the news on the spin can you just update us on the latest on the alternative dosing. Some involution Elfa do you expect to make that data public ahead of the spin. Thank you.
Hey, Brian This is rich on that that's happening primarily in a study called artistry, three which is living in less frequent IV dosing regiments.
Including once every three week cycle and twice in a three week cycle.
Accumulate data in those cohorts right now we will present those data as they mature and I don't have the specific sense right now of what that looks like over the course of the year, but we can get back to you on that.
And the sub Q dosing rich sub Q is still underway I think the team's belief right now is that the the less frequent IV will probably be a preferred route versus the sub Q, but we can't say that definitively I think for some of these cytokines and you've seen from the previous data we've seen original response data.
With sub Q presentation, we see pharmacodynamics through sub Q <unk>. The question with <unk> would be durability of that response, because one of the hallmarks of the IL two pathway has been when people respond and get these nice durable responses for Proleukin. Originally same story. It was it was active sub Q, but it wasn't as durable. So that's what we're testing in <unk>.
The clinic as well.
Alright, thanks, very much and congratulations on all the progress.
<unk>.
Our next question comes from Omar Robot with Evercore ISI. Please proceed with your question.
Good morning, guys. Thanks for taking my question I have two here if I may 1st Richard can you remind us what's.
What's the key what's the key clinical Readouts, you guys will get visibility on and your ovarian study for <unk> as well as for the melanoma study.
This phase III trial.
The phase two trials and.
To what extent would those readouts determined whether or not you are absolutely moving forward with the spin point number one the second one is.
Can you speak to the <unk> ratio on your Orexin molecule and how that compares versus Takeda and what that would mean for the types of doses you guys think are clinically relevant or efficacious doses. Thank you.
More numerous.
Recognize that the so the.
Punch line to your question on on the clinical trials that we're going to spin while both artistry six in order to seven are still underway and blinded. So the key variable for us prior to spin is enrollment rate as we determined where we stand in the overall enrollment that will help us measure the.
The amount of time, we think.
We will need before we get to turn those cards over which will inform how we how we capitalize the spin that's been should happen in the Q3 timeframe enrollment in <unk> hundred seven <unk> six will be underway artistry seven the ovarian study.
Is a is a multi arm study that has all the appropriate controls that you would expect in a registration enabling studies so its.
It's a very well designed appropriately controlled study that will be that's why we described it as in a registration enabling study.
Wont comment on the on the numerical efflux ratio with respect to the Orexin Kennedy is obviously.
It raises a really important point, though with respect to these molecules and why I think all of them each of them are going to be different because it's not just about potency as in orexin two receptor agonists. It's about it's effective half life and it's effective target engagement.
In the human body over time over the course of the day. That's what happens is you take the tablet orally how it gets into the bloodstream have crosses the blood brain barrier, how it gets into the brain how reaches target concentrations at the target neurons and then how long it stays there or whether it's a substrate for any other types of pumps or are there other eplex mechanisms.
All of that stuff has been taken into consideration as we designed 2680, but.
As I always say.
None of it matters until you get into the species of interest, which as humans and now with the phase one work as well as long as it is now we're excited to actually get into <unk> patients, which is the next step and all systems are go leading into that.
Richard if I may clarify I'm thinking back in maybe.
Not recollecting properly I recall, we have discussed there will be a potential interim looks ahead of the spin on the oncology side are you, saying there is a change in plans I just wanted to make sure I understand it right because I thought that was a trigger to pull forward with the spin.
We have an ongoing data safety monitoring board with respect to the melanoma study that looks at.
Futility and risk benefit and we continue to pass those hurdles.
Got it thank you.
Youre welcome.
I'm looking to Sandy make sure Thats, an accurate statement, yes, okay. Good.
Our next question is from the line of Chris <unk> with Goldman Sachs. Please proceed with your questions.
Thank you very much good morning on $26 80.
As I think about how we should be interpreting the data that you'll have a phase <unk> proof of concept across the different subtypes of patients in tier one and I think the expectation is that potentially the potency of dosing level would be different for Andy to NIH. It seems perhaps that can maybe emphasizing IH over NTT.
And with such as modest denominator relatively speaking six or seven or so patients in each sub types can you help us understand how you're thinking about.
Our positioning of your development plan and whether ultimately next steps may be to pursue specific segments because of the potential differences in dosing required.
Yes, good morning, Chris.
Yes, that's a really important question because.
Please don't misinterpret any of our clients they were emphasizing IH over in narcolepsy. If anything is the other direction, particularly in the wake of the IRA I think this orphan indication as a single indication narcolepsy is really attractive because it's an orphan indication, but it's a larger orphan indications spanning in Tijuana and NTT. So if anything I think that our focus.
This is more likely to come down into the narcolepsy indications rather than.
Then the IH and excessive daytime sleepiness indications, which we will pursue.
As this biology gets more clearly elaborated with additional compounds I mean, we're not done here by any stretch in men's nation in the lab, we see 2680 as the first embodiment focused in narcolepsy, given a certain PK PD potency profile, but if this if this is really central to the sleep wake axis and circuitry is more.
And better elaborated theres other drugs to be developed here, but for the purposes of 2680 to phase one the proof of concept study is going to focus first on <unk>, one and Thats. The core of the Bullseye then we'll enroll the <unk> to patients in the IH patients you are right. We expect dosing differential based on previous clinical work, that's been done by others between <unk> and <unk>.
<unk>.
But that's why potency is such an important variable. If you think that you could go as high as several fold higher into <unk> two versus in Q1, you want to start with as low a potent as high potency drug in <unk> as you can get and so so far based on the modeling and the work we've seen in the clinic. So far the data are consistent with our hypothesis going.
In.
That makes sense.
Great and then yeah, no that makes sense and then as a follow up a broader strategic question given all the progress that youre, making the separating the companies Alkermes is domiciled in Ireland and.
Revenue in the commercial footprint has always been significantly if not entirely in the U S.
You think about the neuroscience business portfolio, particularly with the potential to expand with 2680, which has certainly vast potential market opportunity can you talk through the pros and cons and how you and the management team and the board are thinking about.
Ultimately aspiring to be more on the global commercial presence and if so how might you do that.
Yes, another good question, Chris So.
Alkermes plc will remain an Irish Topco company with significant operations in the U S and in Ireland, but we have a really strong foundation for expansion.
Interestingly, our psychiatry portfolio Aerostar vivid troll.
And in E leave always to some extent.
It really didn't have great opportunities outside the U S. Given the reference pricing in those markets 26, 80 is a completely different story.
Absolutely a global product and we think about it as such and so our registration strategy and our teams now are working through.
The strategy for our global presence given the size of the market on the order of couple of hundred thousand patients in the U S and about 3 million worldwide.
It's very attractive for a company with our infrastructure to go after and O U S presence with respect to 2680. So we'll we'll give you more information on that as it evolves.
Great. Thanks for the comments.
Yes.
Our next question is from the line of David <unk> with Piper Sandler. Please proceed with your question.
Hey, Thanks, So just a couple so on Lai ballsy.
You had talked about.
Potentially.
And in gross to net in the second half of this year to the extent that there is new commercial contracting.
In the past you you sounded more certain that there will be a wider Roe said or or due to the impact of commercial contracting. So is there anything has sort of changed in your discussions with commercial payers that.
Has driven the.
The revised commentary somewhat revised commentary if you will that's number one and then secondly, as you think about.
The cash that's coming in.
Yeah.
When can you talk about the extent to which that could be used to seed the oncology business and just also general you mentioned strategic purposes, how are you thinking about it.
Use of capital broadly to bill.
Buildup of the neuroscience pipeline. Thank you.
Yeah, I'll start first with <unk>.
Labov a market access I think the way to think about this what we've been thinking about this is the market access profile continues to be established and it will continue to be established.
The most important thing right now is to make sure that patients have a pathway to access across the three channels Medicare Medicaid and commercial and then and we built a solid foundation across all three of those channels.
I would say nothing has changed to your question. We are strategically managing gross to net to support our top line growth and our plan is to continue to determine over time, if we need to change our access position within commercial so we're actively discussing.
In discussions with all of the commercial payers.
Regarding the future of Lowball. The end, if we do make a decision that we need to change that profile. Our plan is to do so over time and we will keep you informed as things progress but to your question nothing has changed.
And then on the incoming cash assuming the final award reflects the interim awards with respect to the oncology business.
Would certainly be helpful in seeding the oncology business.
Not to say, we would change the amount that we believe the oncology business needs in order to reach its next data inflection point, which has always.
Being tied to the level of funding that we provide.
And then with respect to items beyond that.
<unk>, obviously is a strategic asset and we could look to potentially augment the pipeline will further leverage the commercial infrastructure.
With appropriate products, some point into the future, but we will provide more.
Information as things materialize in that direction.
Thank you.
Thank you. Our next question is from the line of Paul Matisse with Stifel. Please proceed with your question.
Thanks, so much.
I appreciate it I wanted to ask a question on the Bobby in your in your full year guidance.
If you assume that the sequential script growth.
Declines even a little over the next handful of quarters say, 1% to 2%.
Even at stable gross to net you get closer to the low end of your guidance. So I wonder if that's a realistic way to think about this or whether part of the assumption here is that the DTC is going to actually boost demand growth relative to what we just saw sequentially or whether <unk> was maybe just kind of a lighter quarter for for various.
Seasonality reasons. Thank you.
Yes, yes, I'll take that question as well our guidance has a range of scenarios.
From from as we've discussed earlier from demand gross to net and so forth.
We are very encouraged with what we're saying Q1. The story for Q1 was a demand story up 16%.
We've been at this launch now for for approximately 18 months, we continue to see strong uptake and expansion of breadth of utilization Thats, probably the best metric that we're watching at this point.
We fully believe that building awareness through a direct to consumer campaign will also support our demand aspirations over time typically what you see with broad campaigns such as this in other categories and also in psychiatry as it usually takes about six to 12 months.
Do you actually see some type of inflection we think it'll be gradual overall and so we do believe that this is going to support the long term growth aspirations that we have for the brand, but we're encouraged right now and we think this is about expanding prescriber breadth of building awareness.
And seeing the demand continue to grow quarter over quarter.
And I'll, just reinforce again as I answered earlier.
We are reiterating our guidance today, our range and we're confident in what those ranges are.
Can you say anything about what the top end of your guidance would assume or what would have to happen.
Now at this point I mean, we provided the outlook.
We've looked at a range of possibilities for market access demand also a direct to consumer so we're comfortable with where that range is right now.
Okay Alright.
Our next question is from the line of Jessica Fye with Jpmorgan. Please proceed with your questions.
Hey, guys. Good morning, Thanks, so much for taking the questions.
Just a couple on the can you remind me of the payer mix between government and commercial in the bipolar market.
And can you elaborate on what you mean by a pathway to access and commercial is where does commercial coverage stand and specifically I guess, how good the quality of access be improved via contracting.
I have one follow up on the erection.
Yes, absolutely so.
Overall, what you see across the category.
Cross all the channels is typically at its broken into thirds about a third commercial a third.
Medicaid third Medicaid you see a little bit of a change within the bipolar space Theres, a little bit more commercial.
And also a little bit more Medicaid and a little bit less Medicare. So the bipolar market is typically categorized by commercial.
And Medicare we think about a pathway to access is it's broader than just.
Just gross to net and doing contracting as well and that's really the dynamic in the U S health care system and keep in mind that it's a very large generic market.
All of these products all of the branded products have to step through generics. So that's not different from what <unk> is facing.
And providers in <unk> in the U S are very comfortable with managing.
Medical exceptions prior authorizations and steps there. So so our goal right now is to make sure that we're balancing and managing the access profile that would be across commercial Medicaid Medicare along with the programs that hcp's and patients would need to be able to get access and we also look very closely we do a lot of research.
With patients and also with providers and we hear really consistently that hcp's perceive that love. All these formulary access is on par with branded competitors and we see that in terms of of the access that's happening within the marketplace at large.
Over time, we will continue to watch what's happening in the commercial space, We watch product we watch our LTC block lives. We also have a number of lives that have open access and so it's a it's not a stagnant market I can tell you that it takes a lot of a lot of focus and attention and we put a lot of attention to this as well too.
So overall, we're going to be managing our gross to net its a big strategy for the company, making sure that we have the right access profile to support the long term growth aspirations and so we're in a good place with that right now we have a solid foundation.
Okay. Thanks for that and then for the erection.
Thanks for the additional color and prepared remarks should we expect a more detailed update on the.
Sad and Mad results prior to learning the phase <unk> results later this year.
Jessica it's rich.
I think that what we're trying to do is is move as quickly as we can and being mindful of some of the major scientific meetings that occur in the fall with the late breaking status would be so we're trying to present as much data as we can comprehensively and scientific fora, rather than just be a press release.
But I.
I think that the.
The primary goal right now is to finish off the sad mad get the fees will be.
Data, particularly with respect to the <unk> cohort as fast as possible. So that we get a real sense of the of the clinical profile of the drug and then we'll present those data as rapidly and as comprehensively as we can.
Great. Thank you.
Okay.
Our next question is from the line of Eric with Mizuho. Please proceed with your questions.
Thanks, Good morning, guys. Thanks for taking my question.
I know you probably can't say much but could you just sort of curious.
Walk us through sort of what needs to why at least the procedure for the arbitrations in order to sort of get B. The interim awards finalize is there anything else.
What should we expect.
Additional interim awards.
The first question I guess my follow up question is can you tell us like how much of the royalties come from trends.
And half here. Thanks.
Morning, It's rich.
The arbitration procedures has proceeded in a really deliberate and careful way and we have a lot of respect for the way. The panel is conducting itself because essentially theyre given the parties the opportunity to brief.
And make sure that the voices on both sides are heard throughout the process. So the first interim award in January as I mentioned ticked off the central issue, which is the ability for Janssen to continue to sell the products without paying us a royalty.
That that was that was adjudicated in our favor.
The next question was then okay, let's start seeing how that applies directly to the various products and the terms of those of those royalties and thats. What we just learned in the second interim award.
The numerical quantification of 2022, and then what 2023 looks like and the fact that each of the three products are being treated in the independently with different terms, that's check check thats now.
In this in the second interim panel came back and said the parties have 21 days to alert the panel whether there's any other things they want the panel we want the panel to to opine on.
So we're nearing the end of the runway here I think that I think that there's coning down now.
Any remaining issues from alkermes perspective, we really don't see any outstanding issues.
We'll wait to see if J&J has any other outstanding issues, but I think we're approaching the final the final award.
And then with regards to trends around half year. This is based on IQ via data in the U S. We would estimate that somewhere between 20% to 25% of volume is on a months of therapy basis is related to trends are in the <unk> era.
Okay. Thank you.
Okay.
Thank you.
Our next question is from the line of Jason <unk> with Bank of America. Please proceed with your question.
Hey, guys. Thanks for taking my questions. Most of my questions have been asked but I'll ask a couple.
Rich in the past just thinking about the whole vivid trawl generic threat in whatever shape. It takes you've talked about a lot of the commercial challenges to making our selling of generic or if a trial given the shift of the business to alcohol. I'm wondering is this becoming more of a conventional channel product versus now when there was more of an opioid components of revenue.
Starts were occurring in prisons and addiction clinics, maybe it was a harder product commercially to reach so just wondering if theres any change that's noteworthy there and then just as a follow up your comment about IRA and the Erections got me thinking obviously, two indications you lose the orphan drug shield.
Have you thought about adjudicating, two different and CES and the erection space one for narcolepsy and one for IH. Thanks.
Yes. It does executive question, absolutely, yes, that's what I think I was saying earlier, Jason I think this whole pathway.
<unk> important and fundamental too.
Weak the sleep wake cycle and.
I think our first our first embodiment is 2680, but we're already thinking about other other ways of of engaging that pathway.
I wish I wish you a ritual became more conventional with the with the advent of the alcohol side. It remains and I'll, let Todd comment. These are definitely different settings of care than your classic medical setting. So it remains incredibly idiosyncratic and incredibly bespoke.
With still a large overlay of public policy and government intervention in the way that patients get treated.
Just I'll add to that.
When we think about <unk> right now 65% of the contribution of the volume is coming from alcohol dependence.
We are hitting all time highs with utilization for alcohol dependence at this stage of the lifecycle, we're actually hitting all time highs with prescriber and account breadth as well and there is a very high receptivity to the story for the trial for alcohol dependence.
It's not a typical retail product.
So we've done a lot of models looked at analogs as well too.
Our.
Patients that regardless.
If there was a generic injectable naltrexone coming into the marketplace. We don't believe that it would resemble resemble low cost small molecule erosion and it really comes down to.
Kind of what rich said as well too it's a complex market overall and it's the way to think about the complexity of the market is theres various settings of care is just not one setting of care that you have to be able to commercialize theres various payer dynamics and there is also various fulfillment channels as well too which is different than your typical retail products. So.
We think it is really complex actually the product attributes, but the actual commercialization attributes. So we don't see this is as a typical generic erosion.
Got it thanks guys.
Thank you.
Our next question is from the line of Marc Goodman of SP SBB Securities. Please proceed with your questions.
Which obviously BD must be pretty important to you and I know that you're probably out there looking pretty actively for new molecules can you just talk about the.
The landscape right now I mean do you feel like some of these smaller companies are capitulating on valuations are you are you closer this year than last year on bringing in some new assets from the outside.
Thanks.
Hey, Margaret <unk>, Yes, I think that I think that there is.
You would have characterized this areas being.
Not very fertile for business development, a couple of years ago, and I think it's getting more so than the cost of capital for small companies is helping I must say, we have not been we've not been rabid about about expanding the pipeline and pipeline in the R&D spend over the last couple of years being so focused on the launch of <unk>.
And the.
Getting the Orexin program and its derivatives and other things in the labs that we havent discussed moving along.
So we've been in a nice position, where we feel like there's enough in the pipeline to prime the pump to get us going.
But we don't feel an urgency to do something so we're letting things play out obviously the business development team that we have a sophisticated and broad I mean, they're looking at things from from late stage commercial things all the way through two things at ideation negative consistent with our scientific capabilities, but.
Stay tuned I mean, we feel like as the neuroscience company spins it will want to augment its pipeline, but we want to do so in a really cost efficient way.
And erection derivatives is that referring to the previous question about potentially having multiple directions for the different channels of yes, yes.
Cataplexy without cataplexy IH economics.
And there is a lot to be done as we figure out how to how to create these small molecule orexin receptor agonists.
I think thinking that the full embodiment it would be in the first drug is probably naive. So we want to make sure. We're ahead of the curve on that.
Thanks.
Okay. Thanks, Marc I think we have time for one more question.
I asked that question comes from the line of Douglas Tsao with H C. Wainwright.
Hi, good morning, Thanks for taking my questions.
Most of my questions been asked and answered, but just in terms of the DTC campaign I'm. Just curious do you expect to have greater impact on the.
Demand for bipolar indication or do you think you would have more impact on the schizophrenia indication. Thank you.
Yes.
Doug the way, we think about that is it it works together.
The powerful thing about <unk> is that we have a very broad indication, which is not typical for launch product in the category.
This is a and what we've learned over the first 18 months is this is totally in efficacy driven market and thats, how really la <unk> is differentiated. So we believe that we have a campaign that is differentiated we know the media consumption patterns of patients with schizophrenia and bipolar we.
We know what their habits are the initial launch of our of our digital program was really focus specifically on schizophrenia and bipolar.
With the TV component of this the bipolar is a very large market opportunity, there's a lot of switching within the marketplace.
Switch therapies anywhere between five to seven times over there theyre spans. So we know this is a large switch opportunity. So this this program overall actually works together you have the digital component that hits, both indications, but then we're really going to activate the bipolar patients through TV.
Okay, Great that's very helpful.
Yeah.
Alright, well thanks, everyone for joining us on the call today. Please don't hesitate to reach out if you have any follow up questions. Thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.