Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q1 2023 Earnings Call Transcript May 8, 2023

Axsome Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.26, expectations were $-1.04.

Operator: Hello and welcome to the Axsome Therapeutics First Quarter 2023 Financial Results Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Mark Jacobson. Please go ahead, Mark.

Mark Jacobson: Thank you, operator. Good morning and thank you all for joining us on today’s conference call. This morning, we issued our earnings press release providing a corporate update and details of the company’s financial results for the first quarter of 2023. The release crossed the wire a short time ago and is available on our website at axsome.com. During today’s call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our investigational agents, our clinical and non-clinical plans, our plans to present or report additional data, the anticipated conduct in the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity and our pipeline products, revenue projections and possible intended use of cash and investments.

These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today’s date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; and Lori Englebert, Executive Vice President of Commercial and Business Development.

Herriot will provide an overview of the company and progress made in the first quarter of 2023 as well as upcoming milestones. Following Herriot, Nick will review our financial results and then Lori will provide a commercial update. We will then open the line for questions. Questions will be taken in the order they are received. And with that, I will turn the call over to Herriot.

Herriot Tabuteau: Thank you, Mark. Good morning, everyone and thank you for joining Axsome Therapeutics first quarter 2023 financial results and business update conference call. We saw strong performance in all areas of our business in the first quarter, which included advancing the commercialization of Auvelity and Sunosi, progressing our late-stage product pipeline, out-licensing ex-U.S. rights for Sunosi and strengthening our financial position. Total net product sales in the quarter were $28.8 million driven by strong performance for Auvelity and solid performance for Sunosi. Based on the current prescription trends, we are pleased that our two marketed products are now helping a growing number of patients living with depression and with excessive daytime sleepiness.

Later in the call, we will provide further details on our commercial performance for Auvelity and Sunosi. The first quarter was an important milestone for Axsome as it was the first full quarter of sales for Auvelity. We have also had control of the U.S. rights to Sunosi for about 1 year. Earlier in the quarter, we announced the out-licensing of our ex-U.S. marketing rights for Sunosi in Europe, the Middle East and North Africa to Pharmanovia. Pharmanovia shares our excitement and commitment to maximize the potential of Sunosi for patients worldwide. We continue to see significant potential for Sunosi both in the current indications as well as in potential new indications. With regards to new indications, we remain on track to initiate a Phase 3 trial of solriamfetol, the active molecule in Sunosi in ADHD in adults in the second quarter.

In addition to Solriamfetol for ADHD, the rest of our leading CNS pipeline includes AXS-07 for migraine, AXS-12 for narcolepsy, AXS-14 for fibromyalgia, and AXS-05 for Alzheimer’s disease agitation and for smoking cessation. OAXS-07, our developmental candidate for the acute treatment of migraine, manufacturing activities are moving forward to enable the resubmission of this NDA, which is slated for the second half of this year. With AXS-12, our product candidate for the treatment of narcolepsy, we continue to expect top line results from the pivotal Phase 3 SYMPHONY trial in the first half of this year. With AXS-14, our product candidate for the treatment of fibromyalgia manufacturing and other activities related to preparation for the planned submission of an NDA are continuing and we expect to be in a position to submit the NDA for this product candidate in the second half of this year.

With regards to AXS-05 for the treatment of Alzheimer’s disease agitation, enrollment in the Phase 3 ADVANCE 2 trial is progressing and we anticipate completing this trial in the first half of 2024. In addition, we plan to initiate a Phase 2/3 trial of AXS-05 in smoking cessation in the fourth quarter of 2023. In sum, we expect the next 12 to 18 months to be eventful as we drive the commercialization of Auvelity and Sunosi and as we advance our research and development pipeline. I will now turn the call over to Nick who will provide details of our financial performance.

Nick Pizzie: Thank you, Herriot and good morning. Today, I will discuss our first quarter results and provide some financial guidance. Total revenue in the first quarter of 2023 was $94.6 million, consisting of net sales of our two commercialized products, Auvelity and Sunosi, the revenue from the Sunosi Europe and MENA out-licensing agreement signed with Pharmanovia and royalty revenue from Sunosi sales recorded by Pharmanovia. Auvelity net sales in the first quarter were $15.7 million. There were no net sales in the comparable period. Sunosi revenue for the quarter was $13.2 million. U.S. Sunosi sales were $11.2 million. International Sunosi revenue was $2 million, including approximately $300,000 in royalty revenue from Sunosi sales in the out-license markets.

As a reminder, there was a change in the distribution model during the quarter, which negatively impacted Sunosi net sales by an estimated $3.3 million. There were no net revenues in the comparable period for Sunosi. Cost of revenue was $7.6 million in the first quarter compared to none in the prior year. In addition to the manufacturing cost for Auvelity and Sunosi, cost of revenue includes a one-time charge of $5 million in licensing, sharing fees from the upfront payment received in the first quarter. Therefore, cost of revenue, excluding this one-time charge, was approximately $2.6 million. Research and development expenses were $17.8 million for the first quarter versus $12.6 million for the comparable period in 2022. The increase was primarily related to higher personnel cost associated with supporting the ongoing clinical trials, post-marketing commitments for Sunosi and Auvelity and non-cash stock compensation expense.

Selling, general and administrative expenses were $74.2 million for the first quarter versus $25.7 million for the comparable period in 2022. The increase was primarily related to commercial activities for Auvelity and Sunosi and higher non-cash stock compensation expense due to the build-out of both commercial teams. Net loss for the first quarter was $11.2 million or $0.26 per share compared to a net loss of $39.6 million or $1.03 per share for the comparable period in 2022. The decrease in net loss for the first quarter versus the comparable period was primarily due to product sales from Auvelity and Sunosi, offset by higher selling, general and administrative expenses related to these commercial activities and license revenue received from Pharmanovia.

We ended the quarter with $246.5 million in cash and cash equivalents compared to $200.8 million as of year end. During the first quarter, we did not utilize our ATM facility. In January of 2023, we amended our loan agreement with Hercules Capital to increase the size of the facility to $350 million to reduce the interest rate and to extend the maturity in interest-only periods, while accessing a $55 million tranche. We believe that our current cash balance, along with the remaining committed capital from the $350 million term loan facility with Hercules Capital, is sufficient to fund anticipated operations into cash flow positivity based on our current operating plan. I will now turn the call over to Lori who will provide a commercial update.

Lori Englebert: Thank you, Nick and good morning everyone. We are off to a great start for 2023 and Q1 marked another exciting quarter for Axsome, with continued commercial growth for both Auvelity and Sunosi. We are pleased with the early metrics on Auvelity, which all point to a strong launch with significant long-term potential and with how the relaunch efforts on Sunosi are progressing. I will share key metrics from our commercial efforts for both brands, starting with Auvelity, followed by Sunosi. The end of Q1 represents the first full quarter of sales for Auvelity and only 5 full months post-launch. We are still early in the launch, but remain highly encouraged by the consistent feedback from patients and HCPs. Approximately 31,000 prescriptions were reported in Q1 for Auvelity, representing a growth of 298% in Q1 versus Q4.

We saw prescription growth accelerate through increased depth with our early HCP adopters as well as increased breadth of new prescribers. At the end of Q1, Auvelity’s prescriber base grew to over 6,000 unique HCP riders versus 2,200 unique HCPs at the end of Q4. HCPs wrote prescriptions for over 15,000 new patients in Q1, bringing the total number of unique patients on Auvelity to over 21,000 at the end of Q1 versus 6,000 at the end of Q4. Our highly experiential sales force continues to drive adoption by educating HCPs on the product profile of Auvelity, through high-impact engagements, such as detailing peer-to-peer speaker programs, our sales force has reached over 22,000 HCPs since launch. With regard to payer coverage, coverage for Auvelity across all channels is currently approximately 65% of all covered buys.

In the commercial channel, which is expected to be the primary channel for Auvelity, coverage is now at approximately 40% of covered lives and we look forward to additional formulary decisions in the coming months. In the Medicaid and Medicare channels, approximately 100% of lives are now covered. Overall, payer coverage for Auvelity is proceeding as expected during the standard 6 to 9 months post-launch period and we expect additional formulary decisions in the coming months. We remain pleased and extremely encouraged by the initial launch progress and are steadfast in our commitment to our launch focus of driving HCP adoption, empowering patients and enabling quality access. Major depressive disorder, or MDD, is highly prevalent in a major public health concern with a mental health crisis that the U.S. is currently facing.

41 million U.S. adults were diagnosed in 2020 and there is a reported significant increase in prevalence as a result of the pandemic. Auvelity is an important new therapeutic option for patients living with this chronic and devastating condition and we are proud of our efforts to make Auvelity available to patients living with MDD and their physicians. Turning to Sunosi, in the first quarter, total prescriptions for Sunosi in the U.S. grew 13% year-over-year and 4% quarter-over-quarter. Sunosi generated this growth despite a flat overall market and typical Q1 challenges. Payer coverage for Sunosi remains broad with 96% of commercial lives and 83% of total lives covered. The growth potential for Sunosi in the current approved indications, remain substantial.

As a reminder, Sunosi is the first and only DNRI for excessive daytime sleepiness and obstructive sleep apnea and narcolepsy and the first and only wake-promoting agent proven to improve weightfulness through 9 hours. Sunosi is the only branded therapy available for patients who suffer from EDS and OSA and we expect our increased and enhanced promotional and disease education efforts to drive continued growth for the product in 2023. We recently launched our new all day campaign for Sunosi. The new campaign includes updated creative content, additional HCP and patient support tools and new educational resources. Launching this new campaign is an important next step in the relaunch of Sunosi and I look forward to updating you on our commercial efforts and results related to the Sunosi relaunch in the coming quarters.

Our key commercial products, Auvelity and Sunosi address serious, highly prevalent conditions and bring meaningful innovation to millions of potential patients. I will now turn the call back to Mark to lead the Q&A discussion.

Mark Jacobson: Thank you, Lori. Operator, may we please have our first question?

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question is coming from Charles Duncan from Cantor Fitzgerald. Your line is now live.

Operator: Thank you. Next question is coming from Jason Gerberry from Bank of America. Your line is now live.

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Operator: Thank you. Next question today is coming from Vikram Purohit from Morgan Stanley. Your line is now live.

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Operator: Thank you. Next question is coming from Joseph Thome from TD Cowen. Your line is now open.

Operator: Thank you. Next question today is coming from Graig Suvannavejh from Mizuho Securities. Your line is now live.

Operator: Thank you. Next question is coming from Myles Minter from William Blair. Your line is now live.

Operator: Thank you. We have time for two more questions. Our next question is coming from Matt Kaplan from Ladenburg Thalmann. Your line is now live.

Operator: Thank you. Our final question is coming from Raghuram Selvaraju from H.C. Wainwright.

Operator: Thank you. We reached the end of our question-and-answer session. I’d like to turn the floor back over to management for any further or closing comments.

Herriot Tabuteau: Well, thank you again for joining us on the call today, and we saw strong performance in all areas of our business in the first quarter. We are executing on the commercialization of Auvelity and Sunosi, and we are advancing our late-stage pipeline to key milestones in multiple indications. Our marketed and development portfolio positions us to have potentially at least five marketed products by 2025, targeting brain disorders that affect tens of millions of people. And also, these are conditions where there is still a great unmet medical need. So we look forward to updating you on our progress during the rest of the year. Have a great rest of your day. Thank you.

Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.