ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) Q1 2023 Earnings Call Transcript May 8, 2023

ACADIA Pharmaceuticals Inc. misses on earnings expectations. Reported EPS is $-0.27 EPS, expectations were $-0.21.

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to ACADIA Pharmaceuticals’ First Quarter 2023 Financial Results Conference Call. My name is Corey and I’ll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s call. Please be advised today’s conference call is being recorded. I would now like to turn the presentation over to Mark Johnson, Vice President of Investor Relations at ACADIA. Please proceed.

Mark Johnson: Thank you. Good afternoon and thank you for joining us on today’s call to discuss ACADIA’s first quarter 2023 financial results. Joining me on the call today from ACADIA are Steve Davis, our Chief Executive Officer, who will provide an overview of our performance and a review of our business; Brendan Teehan, our Chief Operating Officer, Head of Commercial will provide updates on our recent launch of debut for the treatment of Rett syndrome, followed by commercial updates on our NUPLAZID franchise; Doug Williamson, our Head of R&D will provide an update of our pipeline programs; and Mark Schneyer, our Chief Financial Officer, will discuss our financial results before turning it back to Steve for final remarks and opening the call up for your questions.

In addition, Kathie Bishop, our Chief Scientific Officer and Head of Rare Diseases will be on the call and available for the Q&A session. I would also like to point out that we are using supplemental slides which are available on the Events and Presentations section of our website. Before we proceed, I would first like to remind you that during our call today, we’ll be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements including goals, expectations, plans, prospects, growth potential, timing of events or future results are based on current information, assumptions, and expectations that are inherently subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially.

These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today’s date. I’ll now turn the call over to Steve.

Steve Davis: Thank you, Mark. Good afternoon, everyone and thank you for joining us today. Please turn to slide five. 2023 is off to a great start with strong progress across our four strategic priorities: First, in March DAYBUE received FDA approval as the first and only treatment for Rett syndrome. Our team moved quickly to make DAYBUE commercially available by mid-April, and we will be sharing updates on our launch execution with you today. Second, we continued to deliver steady volumes in our NUPLAZID franchise in Parkinson’s disease psychosis. Our PDP business has generated increasing cash flows, year-over-year, every year, since turning profitable in 2019. Third, we expect to complete enrollment for our Phase 3 study of ADVANCE-2, evaluating pimavanserin as a treatment for the negative symptoms of schizophrenia around mid-year and we’ll have topline results early in 2024.

And fourth, we completed Phase 1 development of ACP-204, part of our next-generation 5-HT2A program. Our next steps are to meet with FDA to discuss the clinical development plan to evaluate ACP-204 as a treatment for Alzheimer’s disease psychosis. Let’s begin with a quick recap of our DAYBUE approval and subsequent launch on slide six. Since the approval of DAYBUE on March 10, we’ve been working around the clock to deliver this first-ever treatment for Rett syndrome to the patient community. Rett syndrome is an extremely debilitating rare genetic neurodevelopmental disorder that severely impacts the lives of patients and their families. We are beyond excited to be launching this first-in-class, first-to-market drug for diseases with such a high unmet need.

The treating community is also excited they’ve been extremely receptive and HCPs are moving quickly to prescribe DAYBUE, having waited a very long time for an FDA-approved therapy. In parallel, we are engaged with payers in our first post-approval discussion. As is typical with rare disease launches, we anticipate it will take some time for payers to adjudicate initial prescription requests. As you would expect, we are working diligently with plans to obtain insurance coverage for Rett patients, who have prescriptions submitted to our hub. Although we’re only three weeks into the launch, we are highly encouraged with the response we’ve seen so far and Brendan will provide additional color on our launch and execution today. Now, let’s turn to NUPLAZID on slide seven.

Our NUPLAZID franchise continues to deliver steady volumes and gain market share in a contracted PDP market. In parallel, we’ve optimized and reduced our NUPLAZID commercial expense base, which has resulted in a significant increase in profitability for the franchise, providing a meaningful contribution to our overall business. Our first quarter performance of $118.5 million in net sales was driven by a year-over-year increase in demand bottles of 2%. Sell-in volumes were down slightly year-over-year as a result of quarterly inventory fluctuations, which Mark will describe further in his section. We’re beginning to see early indicators that our discussions with healthcare providers on the real-world evidence publications are gaining initial traction.

This is evidenced by an increase in our market share of new-to-therapy patients for PDP. As we’ve laid out previously there are two catalysts, which we believe can contribute to top-line growth for our NUPLAZID franchise. One, as I just mentioned is the awareness and understanding by healthcare professionals of the three real-world studies that demonstrate the benefits of NUPLAZID relative to the off-label atypical antipsychotics. So far the initial feedback has been very positive on these datasets; and two is a return to growth for Parkinson’s medication prescriptions as well as in-person patient visits returning to pre-pandemic levels, which we’ve not yet observed. And now, let’s briefly review our clinical programs on slide eight. Doug will provide more detail in his section.

But beyond our two commercial programs, NUPLAZID and DAYBUE, we’re developing multiple programs, all focused on treating significant needs in CNS. A couple of quick updates. One, as we’ve noted before, the negative symptoms of schizophrenia has been an exceedingly difficult area with lots of industry failures over multiple decades and still no drug approved to treat this condition. With pimavanserin, we’ve achieved something very rare in this population, a positive pivotal study ADVANCE-1. So if our ongoing ADVANCE-2, Phase 3 study results are positive, we would be in a position to submit a supplemental new drug application shortly thereafter. Again, we expect to have the results of this study in early 2024. And two, as I mentioned, we’ve completed our Phase 1 development work for ACP-204, the lead molecule in our next-generation 5-HT2A program.

The key takeaway here is that the Phase 1 work continues to support our target product profile and we plan to initiate Phase 2 studies in Alzheimer’s disease psychosis later this year. I’ll now turn it over to Brendan to add additional insights on our DAYBUE launch execution and imply its commercial performance.

Brendan Teehan: Thank you, Steve. Please turn to Slide 10. We are thrilled to have launched our second commercial product DAYBUE, the first and only medicine ever approved for the treatment of Rett syndrome. As we’ve discussed throughout the development program Rett syndrome is a highly debilitating disease with patients requiring lifelong continuous care and assistance with all aspects of daily living. DAYBUE and patient enrollment forms became available on April 17 ahead of our initial expectations. As we’re only three weeks into the launch, we will not provide any specific metrics today, but we will share initial insights and color on our launch execution and the positive feedback we’ve received from the broader Rett community.

Let’s turn to slide 11. First, our launch execution is going very much according to plan. As expected, we are receiving enrollment forms representative of the broad FDA-approved label DAYBUE has received for the treatment of Rett syndrome. With a broad label received back in March, we are pleased to see patient enrollment forms for both male and female Rett patients, both clinical trial participants and de novo patients, patients from all ages above two to well above 20-years of age, patients from both clinical trial sites, centers of excellence, high volume institutions and from standalone neurology practices. Of the identified 4,500 diagnosed and treated Rett patients, as of today, our outreach proactively spends physicians treating well over 50% of the diagnosed Rett population.

This includes engagement with 100% of Rett centers of excellence and clinical trial sites, which treat about 25% of the total Rett population. In fact, over 90% of our patients remaining from our open-label extension studies have started the process of becoming paid patients. We also have engaged a large number of the 300 high-volume institutions, which represent 60% of the patient population. And we’re starting to engage the over 2,700 standalone neurology offices in the community setting. In addition, our launch execution includes development of key marketing materials, both print and digital, standing up and activating a speakers bureau to further educate the Rett treating community, engaging the community at medical congresses including branded DAYBUEs. Since approval, we’ve been actively engaging in a robust and productive dialog with the payer community, and as the process takes time, it’s too early to comment further today.

In addition to these payer engagement activities, our Acadia Connect Support Services hub along with our field-based family access managers are already providing meaningful support to both HCPs and families to provide the best financial assistance options, given the patient’s coverage to ensure timely access to DAYBUE. And finally, following our approval, we hosted our first Rett community caregiver-focused live webinar, sharing information about the product, how to enroll the loved one and obtain a prescription, the path to access and all of Acadia’s robust support services. The webinar was a big success with over 900 caregiver attendees, well above our internal targets. I’d like to reiterate that while we’re only three weeks into the launch, we are highly encouraged with the response we’ve seen so far.

We look forward to sharing more on our next quarterly call. Now, let’s discuss our NUPLAZID performance on Slide 12. In the first quarter of 2023, we grew demand bottles 2% compared to first-quarter last year. Our performance was driven by an increase in new-to-brand prescription share and new patient starts across both the office space and long-term care channels. Beginning in fourth quarter, and continuing now into the first, we have observed early indicators of growth in new patient starts for NUPLAZID. As you may recall, new patient growth was negatively impacted during the pandemic as a direct result of the reduction in the overall patient population, fewer patients coming into the office or being admitted to a long-term care facility, and a decrease in prescriptions of foundational PD treatments like carbidopa and levodopa.

Thus by maintaining steady volumes for NUPLAZID, we are actually continuing to grow share in an otherwise contracted PDP market. Furthermore, we are encouraged by the high level of engagement we are seeing from HCPs when presented with real-world evidence data highlighting the potential differences in treatment with NUPLAZID compared to off-label antipsychotics. These datasets on mortality, safety, and healthcare resource utilization create an important ongoing dialogs with physicians to further differentiate NUPLAZID as the first and only treatment option for their PDP patients. We’re pleased that our teams have grown market share and achieved early indicators of growth in new patient starts, all while continuing to optimize and reduce our NUPLAZID commercial expense base.

With a focus on both top and bottom line, I’m proud to say that the NUPLAZID franchise has continued to grow profitability each year since turning cash flow positive in 2019. And with that, I’ll turn it over to Doug Williamson to provide an update on our clinical programs.

Doug Williamson: Thank you, Brendan. Please turn to slide 14. Firstly, to support the DAYBUE launch efforts, we continue to set up important opportunities for scientific exchange and sharing of medical information, while also generating important new data for the Rett community. Our medical affairs team is off and running including our Medical Science Liaison team who have already delivered important scientific information and clinical education about DAYBUE to the Rett community. We continue to have a meaningful presence at key medical congresses that are central to the Rett community, including the American Academy of Neurology Congress or AAN in April and the upcoming International Rett Syndrome Foundation Conference in June.

At AAN, we’ve presented several posters, which included important clinical presentations and data as well as surveys on disease education. In addition, we’re excited for two very important clinical publications, which should be available in the coming months. One is the publication of the Phase 3 Lavender results and the other is a white paper on the best approaches to GI management associated with trofinetide. Finally, in the next month or so, we’ll be initiating a large-scale prospective, naturalistic study to learn more about how DAYBUE is best used in a real-world setting. Let’s move on to our clinical programs, starting with pimavanserin as a potential treatment for the negative symptoms of schizophrenia on slide 15. Persistent negative symptoms remain one of the largest unmet needs in schizophrenia, and as of today, there are still no approved treatments for these symptoms.

The negative symptoms of schizophrenia are characterized by social withdrawal, lack of emotion, or flat affect. Our adjunctive pimavanserin program is designed to treat the approximately 700,000 patients in the U.S., whose positive symptoms, the hallucinations, delusions, and other psychosis are adequately controlled, but who still suffer from persistent and uncontrolled negative symptoms inhibiting their ability to lead a normal productive life. Our second pivotal study ADVANCE-2 is almost identical to our positive ADVANCE-1 study, but with two key differences. First, a clear learning from the ADVANCE-1 trial was the optimal therapeutic dose for further evaluation of pimavanserin and negative symptoms of schizophrenia was the 34-milligram dose, and this is indeed the dose we’re evaluating in ADVANCE-2.

And second, it’s well understood in our industry as well as by the FDA that placebo responses have become less reliable in US schizophrenia trials over the past couple of decades. We also observed this in our US sites of our ADVANCE-1 trial. And so now that we have the US exposures we need, ADVANCE-2 is being conducted solely in sites outside the US. ADVANCE-2 is close to completing enrollment, which should occur around mid-year with topline results in early 2024. Please turn to Slide 16. I’d like to provide an update on our next-generation 5-HT2A program and specifically the lead molecule ACP-204, which we’re developing as a potential treatment for Alzheimer’s disease psychosis. Similar to pimavanserin, ACP-204 works primarily by blocking 5-HT2A.

We believe this mechanism is ideally suited for elderly populations and with ACP-204 are seeking to build on our learnings from pimavanserin. As Steve mentioned, we have completed our Phase 1 work for ACP-204. In these studies, in both healthy adults and elderly volunteers, we’ve focused on characterizing receptor occupancy and exposure and optimizing the doses we plan to evaluate in Phase 2 development. ACP-204 continues to demonstrate a very favorable safety and tolerability profile. In addition, we’ve confirmed that ACP-204 reaches steady state in less than half the time, so roughly five days, compared to around 12 days with pimavanserin, and this could potentially translate into our faster onset of action. Our work completed to-date also appears to support our target product profile of minimizing the risk of QT prolongation.

Our next steps are to meet with the FDA and discuss the future clinical development plan for ACP-204. Now, I’ll turn it over to Mark for a financial update.

Q&A Session

Mark Schneyer: Thank you, Doug. Let’s review our quarterly performance on slide 18. In the first quarter, we recorded $118.5 million in net sales, up 3% from the first quarter of last year. Our gross to net adjustment for the quarter was 29.3%. Year-over-year demand growth was up approximately 2% in the quarter, driven by an increase in new patient starts across both channels. As Steve mentioned, sell-in volume declined approximately 2% year-over-year as in-channel inventory declined in the first quarter of 2023, compared to an increase in in-channel inventory in the first quarter of 2022. R&D expenses decreased to $69.1 million in Q1 2023 from $128.9 million in Q1 of 2022. The decrease is related to a $60 million upfront payment for our Stoke collaboration, which we recorded in Q1 2022.

SG&A expenses increased slightly to $101.2 million in Q1 2023 from $96.7 million in Q1 2022. We continue to expect SG&A expenses to be essentially flat for 2023 versus 2022. This is a result of one, the optimization and reduction of our NUPLAZID commercial expense base; and two, making the right investments to execute a successful launch of DAYBUE. We ended the quarter with a cash balance of $402.9 million, compared to $416.8 million at the end of 2022. Our balance sheet remained strong and we are confident in our ability to execute on our current business plan with our existing cash resources. As you can see on slide 19, we are reiterating all guidance measures for 2023, including net sales, gross-to-net, and expense ranges. And now I’d like to turn the call over to Steve for closing remarks.

Steve Davis: Thanks, Mark. Please turn to slide 21. I’d like to end today’s prepared remarks focused on our execution across our four strategic priorities. First, DAYBUE was recently approved and launched only three weeks ago. We look forward to providing our first quarter net sales for DAYBUE and appropriate performance metrics on the next earnings call. Second, in our PDP commercial franchise, we look forward to continuing to driving share growth and profitability of NUPLAZID. Third, we plan to complete enrollment in our Phase 3 ADVANCE-2 study for the negative symptoms of schizophrenia mid-year with topline results expected in early 2024. And finally, we plan to meet soon with the FDA to discuss the clinical development plan for ACP-204. As always, I’d like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate life.

Operator: Thank you. At this time, we will conduct a question-and-answer session. Our first call comes from Ritu Baral of TD Cowen. Ritu, your line is open.

Ritu Baral: Good afternoon, guys. Thanks for taking the question. I will just ask one, it’s on your new payer discussions for DAYBUE, can you give us any more color on what those are focusing on specifically, are you seeing any unexpected pre-authorization — pre-authorization requirements or I guess restrictions to a certain patient population, patient age, patient size, say to the Phase 3 requirements or are they open to prescribing per label? Thanks.

Steve Davis: Thanks very much for the question, Ritu. Brendan, do you want to take that?

Brendan Teehan: Sure. Ritu, thanks for the question. And yes, we have been engaging payers ever since we got our final label. They’ve been very good and constructive encouraging discussions with payers. I think that they’ve largely demonstrated that they’re following the process we would have expected for rare disease — for rare disease products. We are working with them logistically to get early patients access through what would be considered a medical exception or a letter of medical necessity process, that is precisely what we expected and is going according to plan. We have not yet seen policy decisions. Those do happen — can happen in a relatively short period of time, as you know. Some can take 30 days to 60 days, more will take in the 60 days to 90 days range and some can take up to 180 days. But as of now, we’re really working in that interim period to get those first identified patients put on therapy while those policy decisions are being made.

Ritu Baral: And is there openness to reimburse, I guess, to the label versus clinical trial admission — I’m sorry, inclusion criteria?

Brendan Teehan: Yes. Thanks again for the question. We are — I guess, I’ll say we’re very pleased by, first of all, the breadth of the label that we’ve received — we are encouraged by the breadth of enrollment forms that we’ve gotten from clinicians from the youngest of patients to patients well over the age of 20, and we’ve also seen enrollment forms that have come from each of the different types of treatment settings from clinical trial sites all the way through to standalone neurology practices. And thus far, I think payers are working closely with us to gain — to provide access to those early patients. We have not seen a meaningful restriction in these early days.

Ritu Baral: Very helpful. Thanks.

Operator: Please standby for a next question. Our next question comes from the line of Charles Duncan at Cantor Fitzgerald. Charles, your line is open.

Charles Duncan:

Operator: Charles, you’re very low sir.

Charles Duncan: Okay. Let me turn to the speaker. Thanks.

Steve Davis: Charles, I’m sorry. We — on our end, we can’t hear you. We can hear you talking, but we can’t make out your question. Yes, much better. Yes, please go ahead, Charles.

Charles Duncan: Okay, sorry about that. Sorry for taking in from the call. In terms of the Rett registry, how will that help you to drive adoption for DAYBUE as well with the two upcoming publications, has there been a pushback on the use of DAYBUE and management of diarrhea? Thank you.

Steve Davis: Yes. Thanks much for the question, Charles. We’ve heard it this time. Brendan, I’ll let you take that.

Brendan Teehan: Sure, Charles. Thanks so much for the question. So in the real-world setting, we’ve been in the privileged position of being able to proactively communicate the benefits and tolerability profile of DAYBUE. We’ve been able to do that with clinicians and we’ve been able to do that with families as well. So I would say with the appropriate GI management plan, it’s been very well received. In fact, I would say that the feedback has been very positive, especially when we can reference the label itself that shows the clarity on discontinuing anti-constipation medicines as the FDA saw fit to put in the label. And then I guess beyond that, we learned so much from the Phase 3 program that we’re able to surround both clinicians and families with the type of support they need.

We have our field-based family access managers, 18 of them that are paired specifically with the caregivers and patients and HCPs to make sure that we’ve set the right expectations for the best of treatment plans. And I don’t know if Doug or Kathie wanted to speak about the real-world evidence piece — real-world side.

Steve Davis: Yes. Kathie, you want to comment on that.

Kathie Bishop: Yes, I’ll take this, and Doug, you can chime in if I miss something. So Charles, as I mentioned on the call, as we roll out the launch. In parallel with that, we’re offering patients the option and it’s just an option if they want to. Caregivers can choose to enroll their Rett patient into a real-world evidence study. Just as Brendan mentioned that we learned a great deal through conducting the clinical trials. We are launching this study to learn additional information about how DAYBUE would be used in the real-world both in terms of what over the long-term and as well how clinicians and caregivers choose to manage the diarrhea in the real-world, which I think is a lot easier to do outside the confines of the clinical trial where you’re maybe on placebo, you also are confined to study business and things like that. So that’s really the purpose of the study. It’s sort of an optional add-on for patients who will go on commercial job.

Charles Duncan: Very good. Thanks for taking the question and congrats on the recent progress.

Steve Davis: Thanks very much, Charles.

Operator: Thanks for your question. Please standby. While we bring on the stage our next question. Our next question comes from Tessa Romero of J.P. Morgan. Tessa, your line is open.

Tessa Romero: Good afternoon, Steve and team. Thanks for taking our questions. So beyond net revenues from sales of DAYBUE, what are the key metrics you will be providing the Street to gouge the health of the launch? And if you cannot provide those metrics to us today, qualitatively, how should we think about kind of what the key buckets or areas that you see as most valuable. Thanks so much.

Steve Davis: Yes. Thanks much for the question, Tess. Mark, do you want to take that?

Mark Schneyer: Yes, and thanks, Tess. As we mentioned, we’re only three weeks into launch. And at this stage, we just don’t think it’s constructive to share metrics today or even — or just to sharing specifically what we will share on the next call. What we can commit to you and the investment community is that not only will provide net revenue on our next call, but we will provide a reasonable set of metrics that we find will be meaningful at the time and going forward to give you insight in our progress on launch.

Tessa Romero: Okay. Thank you.

Operator: Thank you very much. Please standby for your next question. Our next question comes from Tazeen Ahmad at Bank of America. Tazeen, your line is open.

Tazeen Ahmad: Hey guys, can you hear me?

Steve Davis: Yes, yes, we can Tazeen.

Tazeen Ahmad: Okay, perfect. Hi, Steve. Just wanted to ask you about ACP-204. As far as the Phase 1 data, when exactly should we be expecting to see that? And what level of data should we expect to see? Thanks.

Steve Davis: Great. Thanks much for the question. Doug, do you want take that?

Doug Williamson: Sure. So in Phase 1, we explored and characterize the receptor occupancy and exposure and basically use that data internally to optimize the doses that we plan to evaluate in Phase 2. So we don’t plan to share details of the Phase 1 data, and it’s really more important for those internal decisions and for the Phase 2 plan going beyond that. So we’ll release more information once we’ve agreed on a development plan with the FDA and probably issue a press release after that meeting.

Tazeen Ahmad: Have you requested a meeting yet?

Doug Williamson: We have.

Tazeen Ahmad: Okay, great. Thank you.

Operator: Thank you very much. Standby for our next question. our next question comes from Neena Bitritto-Garg of Citi. Neena, your line is open.

Neena Bitritto-Garg: Hey guys, thanks for taking my question. So just on the trofinetide launch, you mentioned that about 90% of the patients that are expected to roll over, have initiated the process to get on commercial or paid drug. Can you just walk us through that extra 10%, why they haven’t been initiated yet? And then what the overall timeline is now for expected completion of rollover of the open label extension patients? Thanks.

Steve Davis: Brendan, do you want to take that?

Brendan Teehan: Sure. Neena, thanks so much for the question. And just to clarify, we have over — I would say over 90% of eligible open-label extension patients have begun the process to become paid patients. So we’re talking about a handful of additional patients that are also completing end-of-study visits with their trial investigators. At that point, the family is engaged with their insurance plans, of course, with ACADIA support where needed and we’ll help them with the completion of the adjudication process and converting to pay patients as soon as reasonably possible. And for those handful of families where they’re still in that process, I’m sure some of them just want to spend a little bit of time with their clinicians, take a look at the benefits that they’re seeing and then decide how best to proceed.

All in all, we will be pursuing support of 100% of those patients eligible for moving over. And we expect that, that process will take on average two to three months.

Neena Bitritto-Garg: Got it. That’s helpful. Thank you.

Operator: Thank you. Standby for our next question our next question. Our next question comes from the line of Marc Goodman at SVB Securities. Mark, you’re up.

Rudy Li: Thanks for taking my question. This is Rudy on the line for Mark. I have a question for NUPLAZID. Can you maybe talk about the current penetration of this product in the PDP population? And what are your current expectations for peak penetration? Thanks.

Steve Davis: Sure. Brendan, let you take the first part of that, and Mark for the second.

Brendan Teehan: Sure. So thanks for the question. we reported in our prepared remarks that we have increased our share of new patient starts in the first quarter. That was in both the long-term care setting and in the community setting. And we also increased our new patient starts overall year-over-year in both of those populations. We don’t provide guidance necessarily on where ultimately, we believe penetration will be. But we do know that on the — in the community-based setting, we’re well over 20% and continuing to move that north. As you know, we started in long-term care after we started in the community setting. So that is growing and growing more rapidly, but is still kind of making up that space. And overall, we’re over a 20% share for the entire NUPLAZID business across both channels. So Mark, I don’t know if you want to add.

Mark Schneyer: And I think you covered both parts of the question. Thanks.

Rudy Li: Thanks. Very helpful.

Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Gregory Renza at RBC Capital Markets. Gregory, your line is open.

Gregory Renza: Great, thanks. Good afternoon, Steve and team, congrats on the progress. Steve, maybe just a quick one for me as you’ve acknowledged the award of the priority review voucher on DAYBUEs approval. Just wondering if you could update us on your latest thinking there, as far as extracting the value and harnessing the value of the voucher either for you or for external parties. Clearly, I shared effort with Neuren, but also sponsors out there who are looking to accelerate their own programs before the FDA. Any color you have there would be great. Thanks so much.

Steve Davis: Yes. Thanks much for the question, Greg. I’ll just take a little bit of a running start. I can remind you that we share the value of that with Neuren. But the decision in terms of how to utilize that voucher is entirely rests with us. And so we haven’t determined yet whether we’ll sell it or use it in one of our internal programs. If we use it, we have to pay Neuren their share based upon the value and there’s an established market value for these things. And if we sell it, then we pay them their share of the proceeds from sell. So we haven’t made a firm determination yet, but obviously, we’re really happy to have it. These things are quite valuable and whether we ultimately use it for one of our programs or sell it will be a factor that will determine down the road.

Gregory Renza: Got it. Thanks, Steve.

Operator: Thank you. Please standby for our next question. Our next question comes from the line of Paul Matteis at Stifel. Paul, your line is open.

Unidentified Analyst: Hi, this is James on for Paul. Thank for taking our question. Maybe just a quick one on ACP-204. I guess as you’re thinking about subsequent clinical development plans, I guess, one, do you expect to be able to move right into pivotal studies? And two, are you thinking about running relapse prevention studies or in acute studies? I guess just any color on your clinical development plans would be great. Thanks.

Steve Davis: Yes. So as we stated earlier, based upon the profile of this drug, which is as we’ve said, closely enough related to pimavanserin to be in a space that we know what. We know the chemical space well, we know the biochemical space well. That puts us in a position where we have the opportunity to move aggressively with the program. So as Doug mentioned in his prepared remarks, we’re not quite ready to describe exactly what the Phase 2 to and beyond program looks like. I’ll simply say that once we’ve met with FDA, we’ll be in a position to go into that in much greater detail. And as Doug mentioned on the call, at this point, now having completed Phase 1, the target product profile that we — that we set as our goal in this continues to look extremely attractive.

The drug is in Phase 1 was very well behaved, very well tolerated. No safety issues clearly appears to get to a steady state and therefore, potentially a faster onset of action than pimavanserin. We’ve seen no indications of QT issues at this point. And this profile that we see with these 5-HT2A blockers appears to be carrying forward with 204 in providing a lot of the benefits that we see with ADVANCE or plus some based upon the design features that we set as our goal. So we’re eager to get to the point we can talk more about that, but the next step is to meet with the FDA and then we’ll go into greater detail.

Operator: Thank you very much. Standby for our next question. Our next question comes from Jason Butler at JMP. Jason, your line is open.

Jason Butler: Hi, thanks for taking the question. Just one on the PDP market dynamics. You’ve said now for a couple of quarters that you’re seeing early signs of growth in new patient starts. Can you maybe just give us a little bit more context there of where you think in the office space setting, we stand today versus pre-pandemic or where you think a future normalized level would stand? Thanks.

Steve Davis: Yes, thanks very much for the question, Jason. Brendan, do you want to take that?

Brendan Teehan: Sure. Thanks for the question. And yes, if we’re — if we look at it in context to, I’ll say, mid-pandemic, I think that there is a market dynamic in the community setting that is relatively consistent at this point. We still see fewer in-office in-person patient visits and we see a flat PD market in terms of use of carbidopa-levodopa. So essentially 0% growth year-over-year. As we’ve stated on previous calls, we’re focused on the real-world evidence data that exists to help us differentiate NUPLAZID from other atypical antipsychotics in terms of outcomes. Those three data sets have been important additions to, I think, the whole clinical discussion of this category. And I think they’ve been very well received by our audiences, both in the community and in the long-term care setting.

So for us, from a midpoint of the pandemic where new patient starts had slowed down, I think, along with the market. We’re encouraged to see that we’re able to increase new patient starts and increase share in what is otherwise contracted PD market. That, for me, is the best way to describe this, encouraging results on the NUPLAZID and for new starts in a market that has been a little bit sluggish in the early part of ‘23.

Jason Butler: Thank you.

Operator: Thanks very much. Next question standby as we queue it up. Our next question comes from Jeff Hung of Morgan Stanley. Jason your line is open.

Jeff Hung: Hi, thanks for taking my question. This is Jeff. Can you talk about your updated thoughts on business development? How important is it to you to be cash flow positive versus further expanding your mid- to late-stage pipeline, say, with M&A? Thanks.

Steve Davis: Yes. Thanks much for the question. So as we’ve stated previously, business development continues to be a very important part of our business. We have now an established franchise both in neurology and psychiatry, established franchises in rare disease and broad applications, and we have an opportunity to leverage those capabilities, and we’ll continue to do that. The question in terms of prioritization of profitability versus continuing to build the company for the future is — the answer is we’re going to do both. We’re going to continue executing on business development, particularly in an environment that is much more attractive today than it has been in any time in recent history. But we will continue to also be very judicious about the investments we’re making.

And as Mark mentioned in his prepared remarks and as you’ve heard us say before, with the PDP franchise as an example, that franchise became profitable and began throwing off cash in 2019. It’s become more profitable every year since then, and we’ll continue to have that as a top priority. So as we move forward, you’ll continue to see us exercising discretion as well as investment opportunities on both fronts.

Jeff Hung: Great, thank you.

Operator: Thank you very much. Standby for our next question. Our next question comes from Salveen Richter at Goldman Sachs. Salveen, your line is open.

Unidentified Analyst: Hey, thanks guys. This is Matt on for Salveen. We were just interested, is there a specific patient group where docs are more keen on using DAYBUE. Some of our checks with doctors suggested a preference to use the drug in stable early-stage patients versus late-stage ones. So I just wanted to see if that was in line with what you’re seeing. And then could you share what you view as the most important takeaways from the presentations. Thanks a lot.

Steve Davis: Yes. I’m sorry, we didn’t hear the second part of the question.

Unidentified Analyst: Just what you view as the most important takeaways from your AAN presentation.

Steve Davis: Got it. Okay. Brendan, do you want to take this question?

Brendan Teehan: Sure. Matt, thanks for the question. Obviously, we’re three weeks in and have been watching with keen interest to see what patient populations our audience would look to address. I’d go back to the prepared remarks, however, to show you that with a broad label, we’ve been very encouraged by the breadth of enrollment forms that we’re seeing. And it’s indicative, I think, of what we saw in the LAVENDER study, which demonstrated that regardless of age or severity of disease across the eight domains of the RSBQ, we’ve seen improvements, and that means that both clinicians and caregivers are going to look at their individual patients and say, I think there’s an opportunity to help improve this individual patients situation.

So as I’ve said, I wish I could point you to a particular patient type, but we’re very encouraged that there’s a broad range of patients that are being considered for DAYBUE both in terms of age as young as two and well above 20. We’ve seen male and female patients. We’ve seen patients that are across the disease severity spectrum. Some clinicians looking to start with patients that are maybe on the sicker end of the scale and others looking to intervene as early as they can in a younger patient population. So it’s still very, very early days to see. But in terms of the feedback that we’ve gotten from clinicians, we’re not seeing a particular interest in a subset, for example, of Rett patients. And Kathie, can you talk about AAN?

Kathie Bishop: I can talk about AAN. So on the clinical side, we had 2 main presentations from our clinical trial data. One was additional data from our LAVENDER Phase 3 study on the benefits observed with the view on communication, especially nonverbal communication end point. As we previously talked about, communication is one of the key aspects of the disease that caregivers and parents really would like to see improvement. Most patients with Rett syndrome lose the ability to speak and cannot even communicate non-verbally with things like eye gaze or pointing out what they want. So in the Phase 3 LAVENDER trial, we included a key secondary endpoint to assess non-verbal communication, the CSBS and then we actually had an additional functional task asking them to indicate preferences as a surrogate for non-verbal communication.

And in we saw a benefit with DAYBUE for both of these nonverbal communication endpoints compared to placebo. So the presentation at AAN focused on that, we actually will have a publication we’re putting together on that data. The second clinical presentation at AAN was in the study, which is the younger girls aged two to four who’ve been on open-label DAYBUE for all for over a year now. And with that, we saw a very consistent safety tolerability profile compared to the Phase 3 data, no new safety or tolerability outcomes in that study. And we’ve even had a lower discontinuation rate due to diarrhea with only one patient discontinuing over the year. And then in addition, we included some initial exploratory endpoints looking at efficacy. The younger girls are harder to study efficacy because they are in a period of regression is very variable, where they lose ability, but there’s a lot of individual variability in that what we are seeing steady outcomes as far as efficacy and some hints of improvement on DAYBUE.

In addition to those two, we did have a couple of other presentations on health economics outcomes just showing the burden of disease that Rett syndrome causes in these patients and these families.

Unidentified Analyst: Got it. Thanks a lot.

Operator: Thank you, Matt. Please standby for our next question. Our next question comes from Yatin Suneja of Guggenheim. Yatin, your line is open.

Yatin Suneja: Thank you for taking my question. Two real quick ones. With regard to the DAYBUE, could you comment on how should we model duration of therapy? That’s one. The second one on NUPLAZID. Second quarter generally is a stronger quarter. Past — should we look at the past or the last couple of years and predict how the second quarter is going to look like? Or are there any key changes this year versus, let’s say, last year? Thanks.

Steve Davis: Yes. Brendan, do you want to take the first question and Mark, the second one.

Brendan Teehan: Sure, Yatin. Thank you so much for your question. We’re not really providing internal estimates on this concept of duration and persistency, because there is, of course, going to be a range, but I’ll give as much color as I can as to what we’re thinking. First and foremost, as we said, we learned an awful lot from the Phase 3 study, LAVENDER. And as a function of that, we’ve known what to expect. You’ve heard in the last couple of calls where we’ve talked about all of the support systems we’ve put in place. And obviously, we want nothing more than for patients and families to see the long-term benefit that DAYBUE stands to offer from the work that’s been done in LAVENDER, the additional work that’s been done in the open label extensions and hopefully beyond.

So we’re — there are a couple of things that lead us to believe that we can be supportive in the real-world setting to get to those outcomes. But first, we were obviously very pleased with the label. The label allows us to speak to discontinuation of anti-constipation medications from the outset. That’s very important. It sets up the right treatment expectation with both clinician and family. The second is that we have proactively been able to work with the HCP audience and families to discuss educational efforts on GI management. Both of those set those audiences up for the appropriate expectations as they move into treatment with DAYBUE. And then we support them in the field with the family access manager team, which I said, these folks are parents with each patient and family so that we could be well positioned to hold their hands from the outset on the beginning of this treatment journey, both for the patients and caregivers.

So for us, we believe that sets up the best of all patient experiences, again, looking to get to the long-term benefit for DAYBUE. And while we’re in the very early days, the feedback we’ve gotten both from clinicians and families has been very positive about setting the appropriate treatment course, but more importantly, having the support necessary for them to begin and stay on that journey.

Steve Davis: Mark, do you want to take NUPLAZID seasonality?

Mark Schneyer: Yes. No, thanks for the question. As you know, we don’t provide quarterly guidance, but let me just share some additional color, which I think will be helpful. I think as we discussed on this quarter, there tends to be some seasonality as patients — for patients on as they go through the Medicare reauthorization process that happens for all patients in Q1. It’s just that process just happens for new patients as we move on later in the year. So you’ll have that dynamic tends to be more positive going forward Q2 through Q4. We also have the higher gross to net in the first quarter primarily due to the reauthorization process and our obligation for that for all patients. That will be lower again in the second quarter and third quarter, a little higher in the fourth quarter, typical with kind of the seasonality that you’ve seen in past years.

I’d just remind you, this year, we do have the impact of the Inflation Reduction Act. So our gross net will be higher year-over-year on a quarterly basis and consistent just with our overall annual guidance. And then as far as just seasonality between quarters, obviously, we’ll report results as we go through. Our revenues are obviously impacted by volumes, patient volumes, so how the results of patient volumes throughout the rest of the year will impact our sales on a quarterly basis.

Yatin Suneja: Thank you.

Operator: Thank you, everyone. This is all the time we have for today. I’ll now turn it over to Steve Davis, CEO, for closing remarks.

Steve Davis: Great. Thank you, operator. Thanks again, everyone, for joining us today. We look forward to updating you on our progress next quarter.

Operator: Thank you for your participation in today’s conference call. This concludes the presentation. You may now disconnect. Good day.