Q4 2024 Alkermes PLC Earnings Call
Greetings and welcome to the Alchemy's fourth quarter 2024 financial results conference call. My name is Melissa and I will be your operator for today's call. All participant lines will be placed on mute to prevent any background noise. If you should require operator assistance during the call, please press star zero from your telephone keypad.
Speaker Change: Please note this conference call is being recorded. I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Thank you. You may begin.
Sandra Coombs: Thank you. Good morning. Welcome to the Alchemy's TLC conference call to discuss our financial results and business update for the quarter and year-ended December 31, 2024. With me today are Richard Pops, our CEO, Blair Jackson, our Chief Operating Officer, and Todd Nichols, our Chief Commercial Officer.
Sandra Coombs: A slide presentation along with our press release, related financial tables, and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the investor section of Alkermes.com.
Sandra Coombs: 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.
Sandra Coombs: Please see slide two of the accompanying presentation, our press release issued this morning, and our most recent annual report filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statement.
Sandra Coombs: We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we'll open the call for Q&A, and I'll turn the call over to Richard for some opening remarks.
Thank you. Thank you, Sandy.
Speaker Change: So 2024 was a year defined by commercial execution, efficiency and profitability, and pipeline progress.
Speaker Change: During the year, key achievements across each of these initiatives demonstrated the realization of our goal of becoming a pure play, highly profitable, fully integrated neuroscience biopharmaceutical company.
Speaker Change: This morning, we'll review our strong 2024 financial performance, we'll discuss our financial expectations for 2025, and provide our view of the key value creation opportunities for Alkari's in this year ahead. Blair and Todd are going to give you the details, but here's my view in the aggregate.
Speaker Change: 2024 was a banner financial year for the company. We exceeded $1.5 billion in revenue, primarily driven by our proprietary commercial portfolio of medicines discovered, developed, and commercialized by Alkerdes.
Speaker Change: We use the profits we generate to strengthen the balance sheet.
Speaker Change: We've repurchased approximately 8 million shares, retired all of our debt, and ended the year with $825 million of cash on the balance sheet.
Speaker Change: We take the same financial ethos into 2025, and we'll continue to manage the business with a focus on profitability.
Speaker Change: As we previously outlined on our last earnings call, we expect to generate over $200 million at EBITDA in 2025, while advancing the EREXON program as aggressively as we can.
Speaker Change: The financial expectations for 2025 that Blair will outline next reflect the line of sight we have into the current dynamics with customers and payers in the competitive markets where we operate.
Speaker Change: For our mature products, Vivitrol and Aristata, we expect flat to modest growth. And for our most recently launched product, Libaldi, continued growth and uptake in those markets.
Speaker Change: We'll take you through the specifics, particularly for Q1, so we can all start the year in alignment. As we prepare for key ALCS 2680 Phase 2 data readouts later this year, we're focused on delivering solid and predictable financial performance.
Speaker Change: All of that leads to what we think is the principal value driver for the company in 2025.
Key Data Readouts for our Lead Development Candidate, ALCS2680.
Speaker Change: which is currently enrolling two well-powered, randomized, placebo-controlled Phase II studies in patients with narcolepsy.
with planned cumulative enrollment of 160 patients.
Speaker Change: and expected completion in the second half of this year. We designed these studies to provide robust data sets.
Speaker Change: will highlight the key characteristics of this campaign and, along with that, the commercial opportunities and competitive positioning associated with it.
Speaker Change: I'll provide some additional insights into the 2680 development program later in the call. But for now, the point is that ALCS 2680 is on the threshold of revealing its medical and its commercial potential.
Speaker Change: We are a leader in the development of new medicines based on Erexin biology.
Speaker Change: which is one of the most exciting potential new therapeutic categories within neuroscience.
Speaker Change: and it represents the transformational opportunities for Alkermes in the years ahead.
Speaker Change: We've been laying the groundwork for 2025 for several years and we're well positioned heading into this eventful year
Speaker Change: So, with that as an overall introduction, I'm going to turn it over to Blair. Thank you, Rich. 2024 was Alchemy's strongest year of financial and operational performance to date. Financially, we generated more than $1 billion in revenue from our proprietary commercial product portfolio.
Blair Jackson: Delivered EBITDA from continuing operations of approximately $452 million Repurchased $200 million of the company's shares Retired $290 million of debt And ended the year debt-free with approximately $825 million of cash on the balance sheet
Blair Jackson: Operationally, we completed the sale of our manufacturing business in Ireland, which streamlined our manufacturing footprint and positioned the company to expand gross margins going forward.
Blair Jackson: We also made significant progress advancing our neuroscience development pipeline and are looking forward to important phase 2 data readouts this year for our lead candidate, ALCS2680 in narcolepsy.
Blair Jackson: In 2024, we generated total revenues of more than $1.5 billion,
Blair Jackson: which grew 18% year-over-year and generated more than $1 billion in net sales.
Blair Jackson: For the year, we recorded Vivitrol net sales of $457.3 million, reflecting 14% growth year-over-year.
Blair Jackson: Net sales of the Aristotle product family increased 6% year-over-year to $346.2 million in 2024.
Blair Jackson: And the Volvi net sales increased 46% year-over-year to $280 million.
Blair Jackson: Across the proprietary commercial portfolio, due to the timing of shipments ahead of the holidays, the fourth quarter included an extra ordering cycle to cover the first week of the year.
Blair Jackson: Inventory normalized to pre-holiday levels in early January, so you can think about this as pulling in one week of orders from Q1 into Q4. These dynamics resulted in year-end wholesaler inventory bills of approximately 20 million dollars and primarily impacted Vivitrol and Aristotle.
Blair Jackson: Our fourth-quarter results also reflected gross-to-net favorability primarily related to lower Medicaid and VA utilization and certain other credits.
Blair Jackson: These factors drove a one-time gross-to-net benefit of approximately $12 million for Vivitrol and approximately $3 million for Aristotle.
Blair Jackson: Taken together, these inventory and gross-to-net dynamics resulted in a proprietary product revenue tailwind of the product.
approximately $35 million C2-4.
Moving on to our Manufacturing and Royalty business.
Blair Jackson: For the year, we recorded manufacturing and royalty revenues of $474.1 million, primarily driven by royalties related to long-acting and vega products of $236.4 million and revenues from Bumerity of $134 million.
Thanks for watching!
Blair Jackson: Now I'll turn to our full year 2024 operating expenses and our financial results from continuing operations.
Blair Jackson: These results reflect the separation of our former oncology business, which was completed during the fourth quarter of 2023.
Blair Jackson: Cost of goods sold were $245.3 million compared to $253 million for the prior year.
Blair Jackson: R&D expenses were $245.3 million compared to $270.8 million in the prior year.
Blair Jackson: This consisted of focused investments in our neuroscience development programs, primarily related to the ALCS 2680 Clinical Program.
and support activities for our proprietary commercial products.
Blair Jackson: SG&A expenses were $645.2 million compared to $689.8 million in 2023 as we continue to invest in the growth of Lobaldi and focus on efficiency.
Blair Jackson: Overall, the business drove significant profitability from continuing operations, generating gap net income of $372.1 million.
non-GAAP net income of $494.4 million.
and Evita $452.4 million a year.
Blair Jackson: Turning to our balance sheet, we ended the year in a strong financial position. As I outlined earlier, during the fourth quarter, we prepaid approximately $290 million in our outstanding debt, ending the year debt-free with approximately $825 million in cash and total investments.
Blair Jackson: We continue to have $200 million of remaining share repurchase authorization, and going forward, we may opportunistically repurchase shares dependent on market conditions and the capital needs of the business.
Blair Jackson: In 2025, we plan to manage the business to deliver significant profitability and cash flow while investing in the growth opportunities that we believe will be the key drivers of shareholder value.
Blair Jackson: During our third quarter earnings call, we previewed our expectation to generate EBITDA greater than $200 million for 2025, and today I'll provide more detailed financial expectations.
Blair Jackson: In addition, given the transformation of our business over the last several years and feedback we have received from shareholders, we are transitioning to an adjusted EBITDA metric going forward in lieu of non-GAAP net income, as we believe adjusted EBITDA better captures the dynamics of our underlying business.
Blair Jackson: Our expectations were outlined in the press release and 8K issued this morning.
Blair Jackson: Starting with the top line, we expect total revenues for 2025 to be in the range of $1.34 to $1.43 billion, driven primarily by net sales of our proprietary products in the range of $1.09 to $1.15 billion.
Blair Jackson: As we've previously disclosed, in 2025 we expect manufacturing and Royalty revenues
Blair Jackson: to decrease by approximately $215 million compared to 2024, reflecting the expiration of the INVEGA-sustaining U.S. royalty in August 2024 and the conclusion of certain legacy manufacturing revenues following the sale of our manufacturing business in Ireland last year.
Blair Jackson: Turning to expenses, costs of goods sold are expected to be in the range of $185 to $205 million, reflecting our streamlined manufacturing program.
Blair Jackson: R&D expenses are expected to be in the range of $305 to $335 million.
Blair Jackson: This level of R&D spend is to accommodate our ongoing ALCS 2680 Phase 2 programs in narcolepsy and the planned initiation.
Blair Jackson: of the ALCS 2680 Phase II program in idiopathic hypersomnia and first in human studies for ALCS 4510 and ALCS 7290, our next Erexin II receptor agonist candidates.
Blair Jackson: SG&A expenses are expected to be in the range of $655 million to $685 million, which reflects investments in the expansion of our psychiatry sales team, targeted investments in the promotional support for our commercial products, and continued focus on operational efficiency.
Blair Jackson: We expect an effective tax rate of approximately 17% in 2025.
Blair Jackson: We are committed to maintaining a robust cash generating business and expect to deliver gap net income range 175 to 205 million dollars.
Blair Jackson: EBITDA in the range of $215 to $245 million and adjusted EBITDA in the range of $310 to $340 million.
Blair Jackson: As we look ahead to Q1, due to more pronounced seasonality related to the year-end ordering patterns in Q4, and the dynamics within our Royal Cane Manufacturing portfolio that I previously outlined, I'll provide some additional color on quarterly trending expectations to facilitate modeling.
Thank you for tuning in. We'll see you next time.
Blair Jackson: In the first quarter of 2025, we expect our net sales from our proprietary commercial product portfolio to be in the range of $220 to $240 million. This reflects our expectation of wholesaler inventory normalization related to the extra order cycle in Q4 and usual first quarter inventory drawdown patterns.
Blair Jackson: Typical Q1 patient copay and deductible reset dynamics and historical demand matters.
Blair Jackson: The royalty and manufacturing revenue will reflect the annual reset of the royalty tiers on the remaining long-acting Invega products.
Blair Jackson: the conclusion of certain manufacturing revenue streams, and typical Q1 end market seasonality.
Blair Jackson: We expect these factors will drive a sequential decrease of approximately $60 million compared to Q4.
Blair Jackson: On the expense side, we expect cost of goods sold in the first quarter of 2025 to be down sequentially from the fourth quarter, consistent with historical Q1 sales patterns.
Blair Jackson: For the first quarter of 2025, we expect R&D expenses to increase approximately $15 million sequentially from Q4, primarily driven by activities related to the ELKS 2680 Phase 2 programs in narcolepsy.
and study startup activities for the Idiopathic Hypersomnia Institute.
Blair Jackson: We expect SG&A expenses to be similar to the first quarter of 2024, reflecting investments in Levalvie promotional activities and expansion of our psychiatry field sales force during the quarter.
Blair Jackson: Taken all together, we expect Q1 to be closer to breakeven on an EBITDA basis.
Blair Jackson: with total revenues and profitability to increase significantly in the second quarter and remain fairly consistent overall in the second half of the year. These expectations for quarterly trending are reflected in the full year financial expectations that I outlined a few moments ago.
Blair Jackson: We enter 2025 well positioned financially with a strong balance sheet, a substantial commercial business, and a continued focus on operational efficiency and profitability.
Blair Jackson: We are investing in initiatives that we believe will drive the future growth of the company and significant opportunities to create value for shareholders
Todd Nichols: With that, I'll now hand the call to Todd for a review of the commercial volume.
Todd Nichols: Thank you, Blair, and good morning, everyone. 2024 was an important year of execution of our commercial strategy, and I am pleased that we achieved our expectations.
Todd Nichols: of Proprietary Net Sales in excess of $1 billion in 2024.
which reflected 18% year-to-year growth.
Blair Jackson: Blair is taking you through the net sales performance, so for my remarks I will focus on underlying demand trends in our strategic focus areas and expectations for 2025.
Blair Jackson: Starting with Vivitrol. In 2024, Vivitrol's net sales grew 14% year-over-year.
driven by 6% underlying demand growth.
Blair Jackson: This demand growth reflects strong traction in alcohol dependence indication, slightly offset by demand in the opioid dependence indication.
Blair Jackson: The Alcohol Dependence Indication represented approximately 75% of visceral volume and is where we focus our promotional efforts.
Blair Jackson: As we look ahead to 2025, we expect Vivitrol demand to grow at mid-single-digit rates and net sales to be in the range of $440 to $460 million.
Blair Jackson: Turn to our Psychiatry franchise, which includes both Aristotle and Leibov.
Blair Jackson: We are focused on delivering growth across the franchise and are making strategic investments that we believe will drive underlying demand and profitability.
Blair Jackson: For the Aristotle product family, in 2024, Aristotle net sales grew 6% year-over-year.
Blair Jackson: In 2025, we expect underlying demand to remain fairly consistent compared to last year and Aristotle net sales to be in the range of $335 to $355 million.
Blair Jackson: In 2024, net sales of Lee Baldy grew 46% year-over-year, primarily driven by underlying TRX growth of 39%.
Blair Jackson: with growth coming from both the schizophrenia and Bipolar I disorder indications.
Blair Jackson: Our promotional and direct-to-consumer advertising activities will continue to focus on driving adoption in both indications, utilizing tailored approaches to effectively target each segment.
Blair Jackson: During the year, we made significant progress in enhancing the access profile for the lobby and the commercial payer channel.
with additional plans taking effect in January of this year.
Blair Jackson: Looking ahead in 2025, we expect these improvements will lead to slight widening of gross net adjustments to the mid-30s as we previously outlined. We are pleased with LeBalvy's access profile today and will remain focused on additional opportunities to enhance our coverage going forward.
Blair Jackson: In 2025, we expect Lee Baldy demand to grow by approximately 25% year-over-year and net sales to be in the range of $320 to $340 million.
Blair Jackson: For both Livaldi and Aristotle, as we enter 2025, we will continue to focus on the competitive dynamics in the anti-psychotic space as we invest in and expand our psychiatry sales team.
Blair Jackson: in order to preserve a competitive share of voice for LaBalvie and re-accelerate growth for Aristotle.
Blair Jackson: With the expansion of the sales team, an enhanced access profile for Libalbi, and a strong value proposition for both brands, we believe we are well positioned to achieve our 2025 goals for Aerostatic and Libalbi. We look forward to sharing our progress with you.
Blair Jackson: With that, I'll pass the call back to Rich. Okay. Thank you, John.
Speaker Change: So, we operate in commercial environments that require particular capabilities and scale. Our strategy and our investments focus on growth and profitability while enabling broad access to our medicines.
We're well positioned there to be successful.
Our commercial business is the economic engine of the company.
Speaker Change: Its cash flows give us the non-dilutive capital to invest aggressively in our development pipeline while maintaining profitability.
Speaker Change: And that pipeline is now at a stage where it has the potential to be transformative for the company.
Speaker Change: We see that becoming clear in 2025 with planned Phase 2 data readouts for AFS-2680, Narcolepsy Type 1, and Narcolepsy Type 2.
Alex2680 is our novel erection to receptor agonist.
Speaker Change: From the outset, we designed it with a future competitive profile in mind.
Speaker Change: incorporating things that we've learned, making medicines for patients in the real-world setting. For OX2680, the goal has been to offer simple, once-daily dosing, and importantly, a range of doses to accommodate patients across narcolepsy type 1, narcolepsy type 2, and idiopathic hypersomnia.
Speaker Change: Advancing multiple doses would offer patients and physicians the potential to adjust dosing to individual needs and preference, which is an important feature across many CNS disorders.
And we spend a second on these hypersomnolence disorders.
Erekson is the master regulator of weight loss.
Speaker Change: Narcolepsy type 1 is characterized by the absence or loss of rexin neurons in the brain. In NT1, a rexin 2 receptor agonist has the potential to replace the missing neural peptide and restore normal wakefulness.
Speaker Change: Clinical data in NT1 provides strong evidence of this activity. Narcolepsy type 2 and idiopathic hypersomnia are associated with more normal orexin tone in the brain, but may also be associated with adverse signaling of the orexin system.
Speaker Change: A foundation of clinical data suggests that an Erectin-2 receptor agonist can promote wakefulness in these patients too.
Speaker Change: Data from our ALK2680 Phase 1b study and an early proof-of-concept study conducted by others both demonstrated significant improvements in wakefulness in these disorders.
Speaker Change: At sufficient doses, we believe, based on data observed, that Orexin 2 receptor agonists may have potential significant utility in NT2 and IH.
Speaker Change: From a regulatory and development perspective, we're advancing ALCS 2680 pursuant to a strategy designed with the end goal in mind, which is FDA approval and competitive position.
Speaker Change: With proof-of-concept data from a robust Phase 1b program in patients with narcolepsy in hand, last year we moved into well-powered, parallel design, confirmatory Phase 2 studies in NT1 and NT2.
Each study is designed to enroll 80 patients.
Speaker Change: These studies will represent a significant additional increment of data for the entire field. When we're done, we'll have 160 patients' worth of data, testing a range of doses over a multi-week period in the outpatient setting.
Speaker Change: These are studies of sufficient design and duration to more fully characterize safety, tolerability, efficacy, and dose response.
Speaker Change: These data will inform our ALCS 2680 Phase III design and also begin to elaborate our potential competitive positioning in the class.
Speaker Change: I'll give you a quick update on what the progress we're making with Vibrance 1 and Vibrance 2, our Phase 2 narcolepsy studies we initiated last year.
Speaker Change: We've made significant progress with site initiations and enrollment, and I'm pleased with our momentum.
Speaker Change: We're now enrolling patients in the U.S., EU, and Australia and we expect data from both of these studies in the second half of this year. As we exit this quarter, this first quarter, we should have sufficient line of sight to estimate completion time with more specificity.
Speaker Change: In idiopathic hypersomnia, we submitted an IND to the Division of Neurology at FDA, and we're expecting to initiate that Phase II study in the early spring.
Speaker Change: This study will be known as Vibrance 3 and it will share structural features of the narcolepsy study.
Randomized Placebo-Controlled Double-Blind Parallel Design for 8 Weeks
Speaker Change: The doses will mirror our NT2 study at 10, 14, and 18 milligrams.
Speaker Change: Consisting with pivotal studies of the support of approval in idiopathic hypersomnia, we'll use the F-worth sleepiness scale as the primary endpoint and the idiopathic hypersomnia severity scale or IHSS as the key secondary endpoint.
Speaker Change: So, in conclusion, for both our narcolepsy and NIH, we see the structure and execution of the Phase 2 program as the springboard for Phase 3 registration and commercial positioning.
Speaker Change: We are planning for success and preparing for the Quintville program with manufacturing, protocol design, and regulatory work streams all underway. It's going to be an exciting and a busy year. So with that, I'll turn the call back to Sandy for the Q&A.
All right.
Melissa, we'll open the call for Q&A now, please.
Thank you.
Speaker Change: If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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.
Speaker Change: In order to allow as many questions as possible, we ask that you each keep to one question and one follow-up. Thank you.
Speaker Change: Our first question comes from the line of Paul Matisse with CFL. Please proceed with your question.
Paul Matisse: Hey, thanks so much for taking my question. I appreciate it. I just had one on the EREXIM program. I was curious, with these things now well underway and specifically with the NC2 study, I was wondering how closely you guys are monitoring adverse events, retention, things like that on a blinded basis, especially as one of the questions of the class is how does tolerability look?
Speaker Change: in larger studies outside of NT1. So any color you could provide there, if it is applicable, would be helpful. And maybe just speak to your confidence, again, in the therapeutic index across broader populations. Thank you.
Speaker Change: Hey Paul, it's Rich. I'll take that one. So, obviously, these are blinded studies, multi-centered, multi-country, but we monitor safety on an ongoing basis and not just ourselves, our team, but we have a PSMB that meets regularly to look at that.
Speaker Change: Remember, the structure of the design is a six-week double-blind period with a seven-week extension thereafter. And we expect a high degree of retention throughout the whole program. And we haven't seen anything to dissuade us from that at this point.
Speaker Change: As I said in the previous remarks, I think that the logic and the data supporting NT2 is pretty strong, recognizing that you need slightly higher doses. What we saw in our Phase 1b program is clear dose response, notwithstanding the baseline variability that you might see in NT2.
Speaker Change: So, we're encouraged at this point and we look forward to completing the study.
Great, thank you.
Speaker Change: Thank you. Our next question comes from the line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.
Speaker Change: ©2012 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services
Speaker Change: Hey, good morning, Rich and team, congrats on a good year of progress. Wanted to ask a quick commercial question and then a follow-up on the pipeline. With regard to the commercial setting,
Speaker Change: I guess I'm wondering if you are, not if you're considering, what you're considering in terms of the competitive dynamics for the Ball B
Speaker Change: and Aristotle, given BMS and J&J becoming more active in the space. And I think Todd mentioned expanding the sales force. Can you give some color on, call it the magnitude of that expansion?
Thank you.
Speaker Change: Yeah, absolutely, Charles. This is Todd. I'll take that as well. You know, we look at the competitive dynamics all the time.
Speaker Change: The benefit to our portfolio would be market growth as more companies
Speaker Change: invest in the category, which we think is a good thing, but it doesn't really change the strategy that we have. We're going to, in 2025, our expectation is that we'll again show really strong demand growth for Laval. We have approximately 25 percent.
Speaker Change: We're also gonna be expanding our sales force, as I said in my prepared remark. That's been something that we've been watching and preparing for for a while. And that's really intended to make sure that we maintain a really strong competitive share of voice.
Speaker Change: and that we're able to not only compete effectively, but really maximize the portfolio. As I said in my prepared remark, it's about demand growth for us, but also profitability. And I think we're right on track for that in 2025.
I'm
Speaker Change: mentioned the size of the expansion. Yeah, absolutely. The size of the Salesforce expansion we're looking at, we're going to add approximately 80 representatives.
Speaker Change: They'll be online at the end of this quarter, and we expect them to be operational in Q2. All of my experience tells me it just takes a couple of quarters for that to play out. They get trained.
Speaker Change: they get into the marketplace, they start educating HCP. So our expectation is we'll start to see the benefit, you know, with that expansion in the latter part of the year.
Very good. That's helpful. Quickly on Vibrance 1 and 2.
Speaker Change: realize that by end of the quarter you'll give more guidance. But when you consider the NT1 patient population versus NT2, can you provide some color on the interest in the in the two studies and could they read out at the same time or is NT1 ahead of NT2 or reversed?
Speaker Change: It's hard to say. It's sort of jockeying for the lead as the two studies get up and running. NT2 started a little bit later, but with little competition in that, that ramped, the site initiations ramped really, really quickly.
Speaker Change: Vibrance 1, the NT1 study, now is open in multiple countries and coming out of the Christmas holidays we're enrolling aggressively in that one now. So it's too early to say but I think our hope is that they finish roughly at the same time in the second half of the year. I hope to give you more precision probably on the next call.
Excellent. Thanks.
Speaker Change: And Charles, let me just say, as a general matter, the interest in the community of the Afrexin-2 receptor agonists is extremely high.
Speaker Change: in NT1, NT2, and IH. And I think that that's the sea change we've seen over the last year or so. As more and more practitioners get aware of the developments that are happening in the field, I think the excitement level around the category is building.
Speaker Change: Thank you. Our next question comes from the line of Umar Rafat with Evercore ISI. Please proceed with your question.
Thank you.
Umar Rafat: Hi guys, thanks for taking my question. I have two here, if I may. First, a quick one on Rexxon. Rich, could you remind us if you're expecting...
Speaker Change: type 2 study, the narcolepsy type 2, to come before type 1 or not. I know you had commented on the recruitment rates on both trials.
Speaker Change: I'm just trying to work my way through this. If we stick to the current growths to net, and if we stick to the cadence of growth to net,
Speaker Change: On the flip side, we know there was a little bit of gross net delta as well as some inventory effects that were also helping. So if you could just walk us through some of that, that would be very helpful. Thank you.
Richard Pops: Good morning, I'm Richard. Well, let me start with the erection one. The NT2 study is enrolling well, and the NT1 study is enrolling well. And the big change since we talked about last, coming out of the holidays, is that a lot of our European sites in the NT1 study are up and running now in screening patients.
Speaker Change: So I think it's a horse race between the two of them. We'll have more precision on the actual completion date in a couple months' time.
Todd Nichols: Yeah, this is Todd. I'll comment on LaValvie. So if you look at the Q4 dynamics for LaValvie, we saw
Todd Nichols: approximately 5% TRX growth, which was relatively consistent with Q3, which is a healthy sign. That was really driven by
continued expansion with ACP BREATH.
Todd Nichols: Year-over-year, our customer breadth grew by approximately 27 percent. So it's a really good leading indicator on the health.
of the brand and how it's expanding. Going into 25...
We're going to continue to be strong.
Speaker Change: strong demand growth. There is going to be the typical demand patterns that Blair mentioned in Q1, so we would expect that.
Blair Jackson: But we expect building out of that in Q2, Q3, and Q4. And that's really gonna be driven by our Salesforce expansion. Once we do the Salesforce expansion, our total footprint will be approximately 400 sales representatives, which is a really good strong share of voice.
And that's going to be supported with expanded market access.
Blair Jackson: In Q1, we think the market access position for gross finance could expand to around the mid-30s, and then it will modulate down in Q2, Q3, and Q4, so the full year will be around that mid-30 range. And that's a really important attribute for how we see demand growth because...
Speaker Change: Thank you. Our next question comes in the line of Akash Tiwari with Jefferies. Please proceed with your question.
Speaker Change: Hey, this is Aimee. I'm for COSH. Thanks so much for taking your questions. So, on OX2, what's your confidence that OX2680 can differentiate on safety versus TAC861 in NT1? And what do you think the bar is? And another one, if we can, some of your competitors in the OX2 space are alluding to the ability to proceed into phase 3 trials with an expedited phase 2a. What do you think the FDA wants from their phase 2 studies when it came to dose exploration?
and thanks so much.
Hi, Angus Rich.
Speaker Change: I'm afraid I won't be able to give you a whole lot of information about other people's programs I'll just tell you about ours the whole point of our phase two design
is by this design, i.e. ED patients multi-week parallel design.
Speaker Change: with a primary endpoint of six weeks followed by an open-angle safety evaluation with dose ranging is to establish the safety, tolerability, efficacy dose response profile in a rigorous way.
Speaker Change: So when we complete those studies, we'll have a very, very clear picture of our drug. And then we'll be able to compare it to any other drug that is a similar stage of development.
Speaker Change: I think until we have the phase 2 data, we won't be able to say how we're in differentiation on the safety.
Speaker Change: But we believe that the program already differentiates a priori, given the range of doses that we've shown, the dosing flexibility, and the overall safety and tolerability that we've demonstrated in 1B. All that needs to be re-capitulated and expanded in Phase 2, and then we'll have a clear picture. But I'd say categorically.
Speaker Change: between ourselves and others in the receptor-ambulance class. It's striking that the overall tolerability we've all demonstrated is largely mild to moderate transient side effects with pretty significant...
in profound efficacy benefits for patients.
Got it. Thanks so much.
Speaker Change: Thank you. Our next question comes from the line of Jessica Fy with JP Morgan. Please proceed with your question.
Jessica Fy: Hey guys, good morning. Thanks for taking my question. A question on the 2025 guidance. What does that contemplate for in big a trenza as it relates to any risk of generic entry and where does that litigation stand? And can you maybe characterize how much it contributes to the royalty revenue line? Thank you.
Jessica Fy: Yeah, thank you for the question Jessica Spoyer. I think as we as we move into the beginning of the year we have a little bit of dynamics as it associates with the Invega.
recognizing that the U.S. royalty
Jessica Fy: expired in August of last year, so we'll be resetting to the lower rates as we move into Q1 of this year, and then we'll be achieving royalties moving forward, ex-U.S. through 2026, and then the rest of the Cabanuva and the longer acting through 2030.
Jessica Fy: So the INVEGA component of our overall, say, manufacturing and royalty line is typically in the range of about 40-50% depending on where you are moving forward.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Chris Shubitani with Goldman Sachs. Please proceed with your question.
Speaker Change: Thank you and good morning to maybe broader questions one in terms of thinking about
Speaker Change: Clinical development risks for assets for the neuroscience, we've certainly always known that it's very difficult. There's been some recent industry examples where it's been kind of precarious.
Richard Pops: Rich, you and your team have been no strangers to going through this, the journey has been long. What are you putting in place with the erection program that you think informs and helps mitigate some of the risk?
Richard Pops: And then second, more of a broad policy related question, which again you have had seats at some important tables thinking about the implications of healthcare policy on your business. And would really appreciate if you could opine on a couple of points, perhaps if I could touch upon.
Richard Pops: IRA, a couple of the big pictures which you have been helpful in the past, love to get your insights as it relates to alchemies and perhaps broadly to the industry. Thank you.
Good morning, Chris.
Sarah Schultz: and everybody else who has been working on this project. Thank you for coming out today, and I hope to see you again next week. I'm your host, Sarah Schultz. Have a great day. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.
First, on the clinical development risk.
Speaker Change: which is sort of endemic to, when we think about CNS drug development we think about clinical development risk and actually expansion of that risk between phase two and phase three that's part of the attractiveness of this this orexin program.
Sarah Schultz: That often, that condition that I just described is often what you find in psychiatric studies where the end points are things like PANS or HAM-D or Madras, where you're asking patients how they feel.
Speaker Change: on an ongoing basis with the primary analysis happening often at a time point.
Speaker Change: where you have huge placebo response as patients respond to care in the context of a clinical trial.
Speaker Change: If you contrast that in something like narcolepsy type 1, where patients are washed out of all of their medicines, they are highly symptomatic at the date of randomization. If they receive a really effective medicine, the placebo response is much more muted.
Speaker Change: if at all. So it's one of the reasons we are able to see a PU value with such a small number of patients in our 1B study. We expect that to continue into Phase 2 and into Phase 3. And for that reason, we see Phase 2 as being very, very positive.
Speaker Change: indicative of what we would expect to see in a replicate phase 3 study.
Speaker Change: And that's why we've powered them so much and make them look as much like pivotal studies as you would want to see in Phase II.
Speaker Change: The policy question is a long one and I won't bore you with everything about it, but the overall admonishment is that it's very fluid right now, as you would know.
Speaker Change: going down your list. NIH funding is something that I think is
and allocation of capital.
Speaker Change: Tariffs, you know, I think that we've done a tariff analysis in our own business, just given the way our supply chain is configured, we don't have a major exposure to tariffs.
Speaker Change: and I think they will all wait to see how significantly and how extensively those are implemented.
Speaker Change: Fixes to the IRA, I think, are going to be problematic. I think there are some rifle shot fixes that you could anticipate. But I think in the context of reconciliation and all the other moving parts, I don't think they're a top priority right now. But I think there are some rifle shots that are possible that you can almost characterize as...
Speaker Change: as fixes to the law as opposed to a complete rewiring of the law.
Speaker Change: that are there. So we want to make sure that in the event that Medicaid is being reconsidered or revamped, that our patients, those with serious mental illness and addiction, are not disadvantaged and we think there's a good chance of doing that given the public health.
As always, thanks for the thoughtful responses.
and Chris, take care.
Speaker Change: Thank you. Our next question comes from the line of Mark Goodman with Leary Partners. Please proceed with your question.
Speaker Change: Yeah. Can you give us any more color on what's going on with these next-gen erections or when are you going to give us more color on what indications or...
Speaker Change: just anything that you're willing to share, just incrementally, since we're on a live call here. And then, just secondly, I know I've asked you about business development quite often, and obviously we're spending a great deal of money on Erections, and everyone's excited about it. You should be spending the money. They're just curious.
Speaker Change: What's going on behind the scenes in business development? And if you know should we be surprised if there's a deal or not a deal for anything else this year to kind of add to the pipeline. Thanks.
More to mark.
Speaker Change: I'd love to give you more information on Next Generation Erections but I'm not going to because I feel like
Speaker Change: I feel like we're ahead of the curve on this. We identified the fact that we were going to go beyond narcolepsy a couple of years ago. We began a lot of investigative work of going through that panning, that filtration.
Speaker Change: to figure out where we think the smartest places are to go next. We gave you a little bit of a directional tease in the JP Morgan presentation where we showed you where we're looking categorically in ultra-orphan, orphan, as well as broader indications.
Speaker Change: And we'll give you more indications of where we're going precisely as we conclude.
complete the SAT and math studies.
Speaker Change: we can see early on whether we have signs of a signal to confirm the hypothesis.
Speaker Change: So on the BD side you can see the pipeline expanding naturally along this this orexin wakefulness hypercretin pathways and that's going to continue to enrich.
there are some degree of covariance between them.
Speaker Change: So, we're always looking for, particularly, clinical-stage assets that might broaden that portfolio. If we're going to stay an independent, pure-play neuroscience company with the financial resources we have, we will expand the pipeline.
So if you have a question about it, but...
leave me
We kiss a lot of frogs in the BDESA.
Speaker Change: and we do a lot of analysis and it's an exception rather than a rule when they get through the filter so it's hard to predict when that might happen. Also on the commercial side you've heard us talk about before we would love to be able to leverage this commercial infrastructure.
Speaker Change: and there's there's just not a whole lot of products but we're always investigating ones that are emerging or nearing commercialization as well as those in the market. So I don't feel like we have you know a gun to our head and urgency but we've got the financial resources and the instinct to do it.
Thanks.
Speaker Change: Thank you. Our next question comes from the line of Lee Ear with Missouho Securities. Please proceed with your question.
Speaker Change: You guys, yeah, thanks for taking our question. Rich, maybe just a follow-up on your brief comment about Medicaid funding.
Speaker Change: Let me just help us understand what the source is for...
Speaker Change: Vivitrol is these days given the shift from opioid to alcohol dependence and we just hope us to kind of think about you know if there isn't Medicaid cut how should we sort of think about the potential risk to this product
Speaker Change: And along that line, maybe just also help us understand the impact, I guess, from IRA, Medicare Part D redesigned for this year and potentially next year. Thanks.
Thank you.
Speaker Change: Good morning, I'll take some of the buttercups, feel free to chime in.
Speaker Change: So, Medicaid is an important source of business for all of our products.
Speaker Change: the Baldy Vivitrol, and Aristotle. But I don't want anybody to be panicky about this yet. This is all very notional. My overarching comments are that if one's ambition is to cut a trillion dollars from the federal government, at some point you're going to be looking at allocation of monies to states under Medicaid.
Now
Schizophrenia drugs
Speaker Change: Bipolar drugs and addiction drugs are not breaking the bank for in Medicaid There's a lot of other places in Medicaid
So our, to the extent that you do see...
Speaker Change: some type of Medicaid reforms, count on the fact that we will be in there advocating to maintain access to these types of medicines for patients. They're priced fairly, the gross nets are high, we're responsible participants in the overall ecosystem. We're not the bad actors. Not implying anybody's a really bad actor, I'm just saying we're not the big economic swing factor that's going to drive this. So I think we're going to have
Speaker Change: To the extent that people start focusing on Medicaid, we think there's an opportunity actually to focus on the benefits that medication can provide to chronic disease sufferers with addiction and serious mental illness.
Speaker Change: On the Part D side, on the Medicare Part D side, we qualify for the phase-in, so our exposure in 2025 is 1%. So that's a perfect example of how we use our positioning to drive policies that have protected companies like ours that were providing medicines at fair prices.
Speaker Change: Could you also maybe talk a little bit about the sources of funding for the patrol? Thanks.
Speaker Change: Yeah, absolutely, I can do that. So we look at the total mix. For Vivitrol, it's been relatively stable, about 50% is in the Medicaid channel, 45% or so is in commercial and that's growing with our focus on alcohol dependence, that's more of a commercial patient, and the remainder is within the PHS segment.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Troy Langford with TD Callum. Please proceed with your question.
Troy Langford: Hi everyone, congrats on the quarter and thanks for taking our question. Just really quickly on Alex2680.
Speaker Change: How quickly do you think you all can move into pivotal studies in G1?
Speaker Change: or NT2 patients upon positive data this year. I guess just what are the gating items to initiation of the phase three studies? And do you think we could see a pivotal study before the end of the year?
Speaker Change: Yeah, let's see how fast we finish up the phase twos, but I can tell you a lot of the phase two infrastructure build is anticipatory for phase three. And so our hope, the way we sequence is we top line result NT2, we schedule end of phase two meeting with FDA.
Speaker Change: as soon as we can figure out a time, you know, based on our completion to have that meeting.
Speaker Change: meet with review division, in this case it's DPP, Division of Psychiatry. Depending on the results, we will probably look to file for breakthrough designation in NT2. And that opens up the line for discussions about accelerated pathways to market.
Speaker Change: So, we're going to be preparing to start Phase 3 as quickly as we can after we complete that interface to meeting with FDA.
Great, thanks for the additional color.
Speaker Change: Thank you. Our next question comes from the line of Douglas Tsao with HC Wainwright. Please proceed with your question.
Douglas Tsao: Hi, good morning. Thanks for taking the questions. Maybe as a starting point, Rich, I think it'd be helpful to just provide some perspective on what you think your competitive advantages are in the reference space.
Douglas Tsao: Obviously, you have a head start in terms of clinical development.
Douglas Tsao: across some indications, and it indicates that in future broader ones outside of
Douglas Tsao: to sort of wake from a sleep category your head. But maybe just from a chemistry standpoint just because obviously we started to see other
Speaker Change: companies begin to focus on the Erection Space and maybe just walk through some of the challenges that others might experience and why you think that your sort of first mover advantage will prove to be durable. And then I have a follow up on all of these, thanks.
Hey Doug, good morning.
REXIN-2 receptors are G-protein couple receptors located in the brain.
Speaker Change: And so from a medicinal chemistry perspective, it's a high degree of difficulty challenge because you need to create small molecule GPCR agonists.
Speaker Change: Which requires a fair amount of structure generally. They need to be orally bioavailable
Speaker Change: They need to cross the blood-brain barrier. They need not to be a pump substrate so they get pumped out of the brain.
Speaker Change: And then, all that has to happen with a pharmacokinetic profile that's consistent with the natural sleep-wake cycle, so maybe once a day dosing.
So
Speaker Change: We know the specific amino acid residues one needs to bind in order to have agatives.
Speaker Change: We'll publish on the day it's in our patents, other people will see that more and more. So the question is, if you're coming behind us, how do you actually improve on what we and others are doing? In other words, if we have once-a-day dosing with a range of doses that are well-tolerated, that are used in NT1, NT2, and IH.
Speaker Change: There's not a lot of space there. Now, no drug is ever perfect, right? So until we fully elaborate the characteristics of this drug in the phase 2 study, you know, it remains theoretical. But right now we're quite pleased with the profile that we have.
Speaker Change: So I think our competitive advantage right now in the current horse race
is that we have positive data in all three differential
We have a range of doses, therefore showing dose response.
Speaker Change: and dose proportionality. And the dosing between NT1, NT2, and IH are adjacent. That is 4, 6, 8 milligrams being tested in phase 2 for NT1. It abuts immediately against 10, 14, and 18 milligrams in NT2 and IH.
Speaker Change: So if that turns out to be somewhere, you know, close to the ultimate commercial ranges, it allows those patients and doctors to flexibly adjust their dose to accommodate their own individual disease needs and or aspirational, life aspirations as well.
So I think that we like the position right now
Speaker Change: We also believe that as the field gets more extensively elaborated, others will come in.
Speaker Change: And if I feel like narcolepsy is going to be well taken care of if ours and other drugs meet their profile So then the action becomes in the other adjacencies, which you think are quite promising. That's why we're putting 40
Speaker Change: 4510 and 7290 into the clinic because we want to be ahead on that as well. So we're already anticipating success in narcolepsy, you're recognizing the risk that still exists, but operationally preparing now for narcolepsy from a commercial perspective and expanding into new indications.
capitalizing on the increasingly credentialed pharmacology.
Speaker Change: Richard, I have a follow-up in terms of your earlier comments. In terms of the multiple characteristics that are needed, the boxes you need to check in the erection space,
Speaker Change: you would be sort of cautious when you look at some companies that are purporting to have sort of preclinical data or in vitro assays.
Speaker Change: highlighting the sort of potency of their molecules relative to, you know, what you and Takeda have done, just given the sort of need to, or the challenges around PK and penetration into the brain. Is that fair?
Speaker Change: I think that's fair. I consider potency and selectivity to be sine qua non. You have to have high potency and high selectivity to play.
Speaker Change: It's a little bit like saying I have a great race car because it has great tires.
Speaker Change: But you've got to have an engine, too, and you've got to have some doors and some seatbelts and a helmet and all the other things to make it into a race car. So I think that all of those features, any one of those features, the deficiency in any one of those features is going to lead to some type of competitive disadvantage.
Okay, great. Thank you so much.
Speaker Change: The other comment I'll add to that is that, in our experience, nothing really matters until you get it to patients.
Speaker Change: because healthy volunteers, we found in our hands that even sleep-deprived healthy volunteers do not recapitulate the sleep pressure of an NT1 patient, for example.
So dosing is going to be indication specific.
Speaker Change: And along with that is tolerability because what you find is that healthy volunteers Tolerate different doses than NT1 patients. And so our view is always until you get into patients You really can't get a sense of where you are with respect to therapeutic index tolerability safety dose response
Okay.
Speaker Change: Thank you. Our next question comes from the line of Joel Beatty with Baird. Please proceed with your question.
Speaker Change: Hi, thanks for taking the question. For Vivitrol, what are the key dynamics that impact whether you'll be able to achieve the mid-single-digit growth rate in scripts that was mentioned earlier in the call?
Todd Nichols: Hi, Joe. This is Todd. I'll take that. You know, our key focus for Vivitrol is...
Todd Nichols: continued expansion in alcohol dependence. That's what drove the brand in 2024.
We actually saw
Todd Nichols: Demand growth for alcohol dependence of approximately 14 percent which kind of helped offset some of the headwinds that we've experienced with
Todd Nichols: with Opioid Use Disorder. So we really believe that the brand will continue to grow.
Todd Nichols: I think you have to keep in mind, too, that Vivitrol is a mature brand, so overall demand will be consistent with a mature brand, but we still believe that sub-nationally...
Todd Nichols: dynamics within the non-retail space such as in the VA, for example, will continue to drive growth.
Todd Nichols: So our two strategic areas are really, you know, the alcohol dependence indication, sub-nationally, making sure that we can continue to drive, you know, access and growth within the VA.
Thank you.
We have time for one more question.
Speaker Change: Thank you. Our final question comes from the line of David M. Salem with Piper Sandler. Please proceed with your question.
Speaker Change: Hi everyone. Thank you for taking my question. This is Alex on for David. Just one question for me. I know you touched earlier on competitive impacts associated with Zimbabwe. I wanted to dive more into that.
Speaker Change: Kevin's developing a law on acting injectable form of olanzapine. I believe that they're submitting an NDA later this year. How would that impact the Libaldi business and are you anticipating that as any sort of headwind? Also, have you seen any impact from Cobenfe yet or do you anticipate?
any as that product continues to ramp. Thank you.
Speaker Change: Sure, yeah, this is Todd. I'll take the last one first. So at this point we haven't seen any impact to Livalvi.
Speaker Change: with CoVemphi. In Q4, we saw TRX growth of 5% overall, which is very consistent with Q3, and we expect strong demand growth throughout 2025. I think it's just really important to remember with Abalve, it's a broad indication.
Speaker Change: So bipolar 1 disorder and schizophrenia versus Covfefe just in schizophrenia And we're actually in 24 we saw robust volume growth with both of those indications in fact
Speaker Change: we saw approximately 28% volume growth in the bipolar disorder indication so
Speaker Change: It's a broad indication, broad population, and we feel really confident with our plan for 2025, which is really underpinned with the expansion.
Speaker Change: of the sales force. In terms of the potential of Lanzapine LAI, that's obviously something we always watch competitive dynamics and you know we have a really strong capability with the Lanzapine molecule. It's something that we know really well and I think really the way that I would think about this is
Speaker Change: Historically, and it hasn't changed, the rate-limiting factor, regardless of delivery for the lansipine molecule, is really around weight gain and also around metabolics. That's the whole reason why we developed.
you know, of all of these.
Speaker Change: You know, Livaldi, we believe, will continue to show strong growth even in the face of any additional competition.
Speaker Change: The only thing I'd add to that, Todd, is typically an LAI interest doesn't affect the oral side of the market. The LAI has its own sort of rarefied aspect of that. We wish it were a bigger part of the market.
Speaker Change: Alright everyone, thanks for joining us on the call this morning. If there are any follow-up questions, please don't hesitate to reach out to us at the company.