Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q1 2024 Earnings Call Transcript

Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q1 2024 Earnings Call Transcript May 6, 2024

Axsome Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-1.44233 EPS, expectations were $-1.2. Axsome Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Axsome Therapeutics Conference Call. Currently, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to your host, Darren Opland, Director of Corporate Communications at Axsome Therapeutics. Please go ahead.

Darren Opland: 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 2024. 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, amongst 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 and the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity, and our other 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; Mark Jacobson, Chief Operating Officer and Ari Maizel, Executive Vice President and Head of Commercial.

Herriot will provide an overview of the company and progress made in the first quarter of 2024 as well as key upcoming milestones. Following Herriot, Nick will review our financial results, then Ari will provide a commercial update. We will then open the line for questions. The 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, Darren. Good morning, everyone, and thank you for joining Axsome Therapeutics’ first quarter 2024 financial results and business update conference call. The first quarter of 2024 was marked by strong financial performance for our on-market products, which are delivering important and differentiated treatment options for patients living with depression, narcolepsy and obstructive sleep apnea. Total net product revenue in the quarter was $75 million, representing year-over-year growth of approximately 160%. We will share additional details on our financial and commercial performance later in the call. We also significantly advanced our innovative neuroscience pipeline in the quarter, including announcing positive topline results for AXS-12 in narcolepsy, advancing AXS-07 and AXS-14 towards NDA submissions, initiating pivotal trials in new indications with solriamfetol, and advancing and expanding our Alzheimer’s disease agitation program for AXS-05.

We expect to continue the commercial and pipeline momentum in the balance of 2024. I will now provide a brief update on our industry-leading neuroscience pipeline and expected milestones. Starting with our two NDA stage products. AXS-07 for the acute treatment of migraine is on track for an NDA resubmission this quarter. Additionally, we are conducting the EMERGE study, a multicenter, Phase 3, single-group trial evaluating the efficacy and safety of AXS-07 in adults with a prior inadequate response to an oral CGRP inhibitor. We anticipate topline results from this trial in the second half of 2024. For AXS-14, which we are developing for the treatment of fibromyalgia, resubmission activities for the NDA for this product are nearing completion.

We continue to target submission later this quarter. In March, we announced that the Phase 3 SYMPHONY trial of AXS-12 in narcolepsy achieved its primary endpoint and significantly reduced the frequency of cataplexy attacks as compared to placebo. AXS-12 also reduced excessive daytime sleepiness severity, improved cognition and reduced overall narcolepsy severity. An open-label safety extension trial for AXS-12 is ongoing with results expected in the fourth quarter of 2024. We are excited about the potential of AXS-12 to provide a differentiated treatment option to patients and HCPs for this debilitating condition. Moving on to AXS-05, we continue to anticipate completion of the Phase 3 ADVANCE-2 trial in the treatment of Alzheimer’s disease agitation in the second half of 2024.

Today, we announced that we launched the ACCORD-2 study, a double-blind, placebo-controlled, randomized withdrawal trial, to evaluate the efficacy and safety of AXS-05 in the treatment of Alzheimer’s disease agitation. This study is similar in design to the completed positive ACCORD-1 trial. With ACCORD-2, the clinical development program will now include four controlled efficacy trials. Importantly, ACCORD-2 further increases the robustness of our clinical program in Alzheimer’s disease agitation without impacting our overall development timeline. Enrollment in ACCORD-2 is very far along, and we expect enrollment completion around mid-year. With respect to solriamfetol, our dopamine and norepinephrine reuptake inhibitor and TAAR1 agonist, in addition to continued commercial performance, we launched the Phase 3 PARADIGM trial in major depressive disorder and the Phase 3 ENGAGE trial in binge eating disorder in the first quarter.

Results from both trials are expected in 2025. We are on track to initiate a Phase 3 clinical program in shift work disorder this quarter. Solriamfetol is also being evaluated in the FOCUS Phase 3 trial in ADHD, for which we continue to anticipate topline results in the second half of this year. Overall, our innovative neuroscience portfolio encompasses five late-stage, patent-protected product candidates targeting 10 serious psychiatric and neurologic conditions with substantial market opportunities. Each product candidates have the potential to transform the treatment landscape for serious and difficult-to-treat CNS disorders, which affects more than 150 million people in the U.S. I will now turn the call to Nick, who will provide details of our financial performance.

Nick?

Nick Pizzie: Thank you, Herriot, and good morning. Today, I will discuss our first quarter results and provide some financial guidance. Total product revenues were $75 million for the first quarter of 2024. This consisted of net product sales of $74.1 million and royalty revenue of $900,000. Total product revenues for the comparable period in 2023 were $94.6 million, which consisted of net product sales of $28.6 million, royalty revenue of $300,000, and $65.7 million in one-time license revenue received from the out-licensing of Sunosi in certain ex-U.S. territories. Auvelity net product sales were $53.4 million for the first quarter of 2024, representing year-over-year growth of 240%. Auvelity net product sales for the comparable period were $15.7 million.

Sunosi net product revenue was $21.6 million for the first quarter of 2024 and consisted of $20.7 million in product sales and $900,000 in royalty revenue associated with Sunosi sales in out-licensed territories. Sunosi net product revenue for the comparable period in 2023 was $13.2 million, consisting of $12.9 million in product sales and $300,000 in royalty revenue. Total cost of revenue was $6.3 million for the first quarter of 2024. Total cost of revenue for the comparable period in ’23 was $7.6 million, which included $5 million in Sunosi licensing transaction fee sharing expense. Research and development expenses were $36.8 million for the first quarter of 2024 compared to $17.8 million for the comparable period in 2023. The increase was primarily related to the initiation of the solriamfetol paradigm trial for major depressive disorder, the solriamfetol ENGAGE trial for the binge eating disorder, the advancement of the solriamfetol FOCUS trial for ADHD, the ongoing trials of AXS-05 and AXS-12, manufacturing costs associated with the anticipated NDAs for AXS-07 and AXS-14, post-marketing commitments for both Auvelity and Sunosi, and higher personnel costs, including non-cash stock-based compensation.

Selling, general and administrative expenses were $99 million for the first quarter of 2024, compared to $74.2 million for the comparable period in 2023. The increase was primarily related to commercialization activities for Auvelity and Sunosi, including sales force and marketing expenses, and higher personnel costs related to organizational growth, including non-cash stock-based compensation. Net loss for the first quarter of 2024 was $68.4 million, or $1.44 per share, compared to a net loss of $11.2 million, or $0.26 per share, for the comparable period in 2023. The net loss in the first quarter of 2024 includes $21 million in non-cash charges, of which the majority is comprised of non-cash stock-based compensation expense. The 2023 comparable period included approximately $62 million in net gain from the Sunosi out-licensing.

Q1 typically has a negative seasonality effect on GTN, which we saw on both Auvelity and Sunosi versus the prior quarter. Auvelity GTN discount for Q1 was in the low- to mid-50%s, and Sunosi GTN discount was in the mid-50%s. We ended the first quarter of 2024 with $331.4 million in cash and cash equivalents compared to $386.2 million as of year-end. We believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on the current operating plan. I would now like to turn the call over to Ari, who will provide a commercial update.

Ari Maizel: Thank you, Nick. Axsome delivered solid brand performance in the first quarter of 2024. Auvelity demand trends in Q1 once again outpaced growth rates for the market and branded competitors with approximately 95,000 prescriptions, representing 12% quarter-over-quarter growth and 206% growth compared to the first quarter of 2023. Nearly 18,000 new patients started Auvelity in the quarter, bringing the total number of unique patients treated with Auvelity since launch to more than 89,000. Our sales team continues to activate new prescribers at a consistent rate, with more than 36,000 first-time Auvelity prescribers in Q1, illustrating strong underlying demand for the product and expanded use among depression treaters in both psychiatry and primary care offices.

We’re especially proud of this performance in light of seasonal dynamics, which were compounded by the industry wide Change Healthcare cyberattack. Payer coverage was stable in Q1 as Auvelity remains accessible to patients representing approximately 70% of covered lives. As noted in our press release this morning, we just contracted with a large group purchasing organization for potential formulary coverage of Auvelity, laying the groundwork for future increases in covered lives. Pharmacy benefit managers and health plans under this GPO are now able to make coverage decisions for Auvelity based on the contracted terms. With this agreement, Axsome is now contracted with two of the three largest GPOs for potential coverage of Auvelity. We are very pleased with the strong commercial foundation we have created to support Auvelity performance, including our expanded psychiatry sales team, a recently enhanced sales and marketing campaign, and expansion of digital capabilities to maximize reach to targeted HCPs. Of note, we observed an inflection in weekly new patient starts or NBRx in March, a positive signal of both the impact of our optimized commercial footprint and continued adoption of Auvelity as a go-to treatment option for adults with major depressive disorder.

Transitioning now to Sunosi. Total prescriptions were just over 41,000, representing a 1.6% decline versus Q4 2023 and 14% growth versus Q1 2023. Demand in the first quarter was impacted by typical seasonality in the [EDS] (ph) market, as evidenced by the 3% decline observed in the weight-promoting agent market this quarter. Approximately 3,700 new patients started Sunosi treatment during the quarter, bringing the total number of unique patients treated with Sunosi to approximately 68,000 since launch. More than 400 new writers were activated in Q1, resulting in a total cumulative prescriber base of more than 12,600 since launch. Payer coverage for Sunosi in Q1 remained 83% of lives covered across channels. In closing, Q1 was a very positive start to 2024 for both Auvelity and Sunosi, with leading indicators such as trends with new patient starts and newly activated prescribers reinforcing our confidence that Axsome will deliver strong commercial performance in our second year as a commercial company.

We continue to receive compelling feedback from healthcare professionals and patients about the positive impact our products are having in real-world settings, and we are proud of Axsome’s growing reputation as a leader in the CNS space that delivers differentiated and impactful products for serious psychiatric and neurological conditions. I will now turn the call back to Darren for Q&A.

Darren Opland: Thank you, Ari. Operator, may we please have our first question?

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Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

Charles Duncan: Hey, good morning, Herriot and team. Congrats on a great quarter, and appreciate you taking our questions. I had a commercial question and then one on the pipeline. Regarding the commercial question, I’m not sure if I heard it, Ari was speaking fast. Can you give us a sense of new-to-brand versus refill rates for Auvelity? Thanks.

Ari Maizel: Yeah, thanks, Charles. New-to-brand, at the moment, accounts for roughly 25% to 30% of weekly prescriptions. That’s a healthy number at the moment. We expect new-to-brand to continue to grow, but TRx obviously should outpace just based on the existing patient base and the refill rates, which, at this point, we feel very comfortable with. We’re seeing good adherence and persistency generally. So hopefully, that answers your question. Let me know if there are any specific follow-ups.

Charles Duncan: Yeah, just a little more color on persistency. I know it’s probably too early, but how do you feel about that so far with Auvelity?

Ari Maizel: Yeah, I feel really good. In fact, we recently were engaged with a group of KOLs to receive feedback, and this is anecdotal. We don’t have specific claims data to prove this out, but they’re seeing adherence as roughly twice what they have seen historically with SSRIs, which bodes very well for the brand. Just showing that the impact of the clinical profile is meaningful for patients, and they’re sticking with it longer than other antidepressants from the past.

Charles Duncan: Okay. And then, in terms of development, perhaps for you, Herriot, can you provide us any information on the percent responder rate that you anticipate out of the first part of the ACCORD-2 study? And then, a sense of how you feel brexpiprazole has changed that unmet need? Would you anticipate AXS-05 to become frontline, or would it — I guess, would it sequence after brexpiprazole used in those patients? Thanks.

Herriot Tabuteau: Thanks for the question. With regards to the responder rate in ACCORD-2, I don’t want to misspeak in terms of the exact responder rate, but it is exactly what we modeled or what we included at the inclusion criteria in ACCORD-1. So, the studies are very similarly designed. And as a reminder, the ACCORD-1 trial was able to very effectively detect a signal. In terms of brexpiprazole and unmet need, we don’t view that brexpiprazole has changed the need for a safe and effective long-term treatment for Alzheimer’s disease agitation. So, as a reminder, patients were being treated off label, necessarily, with atypical antipsychotics, brexpiprazole does fall into that class. And so, we don’t view the opportunity for AXS-05 is changing materially based upon that approval.

And then, in terms of their frontline usage, assuming that we continue to generate data that replicates what we saw in ADVANCE-1 and also in ACCORD-1, we would fully expect that AXS-05 could be a frontline treatment and would be a frontline treatment for Alzheimer’s disease agitation.

Charles Duncan: Makes sense. Thanks for taking the questions.

Operator: Our next question comes from Leonid Timashev with RBC Capital Markets. Please proceed with your question.

Leonid Timashev: Hey, guys. Congrats on the quarter — good quarter, and thanks for taking my question. Can you guys talk about the price volume impact you’d expect from this latest GPO add? And should we expect some acceleration in scripts with an impact to gross to net in the near term, or would it be more incremental, gradual change? And then maybe just related to that, with two out of the three major GPOs in hand, can you talk about maybe the progress with the third that you’ve made? Thanks.

Ari Maizel: Yeah, thanks, Leonid. This is Ari. So, regarding price volume trade-off, it’s a little premature to talk about impact on gross to net for this particular agreement. And obviously, part of the effort right now is to ensure that we’re effectively pulling through the contract terms with the PBMs that are underneath the GPO umbrella. But we do expect there to be volume growth once we are able to expand coverage, and we’ll provide updates on the impact of the gross to net when appropriate. Regarding your question around the third GPO, what I’d say is, we’re having very fruitful discussions with all of the major payers and PBMs, including the GPOs, and these are complicated negotiations. Obviously, it’s important for us not only to expand coverage, but also be mindful of profitability over the long term, because we have a growing portfolio that we need to plan for.

So, no specifics on the details of the negotiation, but we feel very good about the nature of the dialogue, and look forward to future updates.

Leonid Timashev: Thanks.

Operator: Our next question comes from Ash Verma from UBS. Please proceed with your question.

Ash Verma: Hi, thanks for taking our questions. Congrats on the progress. So, I had two. One was just on this last comment that you had about the GPO win. And can you maybe elaborate like, what percentage commercial lives are covered through this GPO? You have 48% coverage prior to this, I believe. And then second, regarding this new study for AD agitation, can you remind us, like, is that something that you need for a regulatory package, or do you think that the ADVANCE-2 study would be sufficient? Like, why do this study now versus you already have another study going on and you had a successful randomized withdrawal study earlier. So, just wanted to get your thoughts on that. Thanks.

Herriot Tabuteau: Sure. Thanks for the question. So, two questions there. I’ll take the last one, and then I’ll turn it over to Ari to answer the first question. So, with regards to the ACCORD-2 trial, no, we do not need it for a regulatory submission. This was an opportunity for us to increase the robustness of the program while also not affecting at all the timing of an NDA submission. So, it just makes sense. We want to have the most robust package, the strongest package going into an NDA review. And this is such an important indication. It’s always helpful to generate additional data, which may also, not just in terms of a regulatory submission, but also in terms of future publications, be useful from a commercial perspective. So, we think it was the right thing to do. It’s very efficient. It allows us to leverage the large number of patients who are experiencing stable responses in the current safety open-label safety extension trial.

Ari Maizel: Yeah. And Ash, this is Ari. Your question around percent of lives with new GPO, obviously, as you know, the GPOs represent a pool of PBMs. And so, because we — each of the PBMs has a different number of lives covered, and has the ability to make their own coverage decisions, I can’t give you a specific number of the incremental percentage of lives covered, but it is meaningfully above the 48% that we have publicly stated today. And so, part of our focus moving forward is to ensure that the majority of the PBMs underneath those GPOs are accessing the rates that we’ve agreed to. So, it is a meaningful percentage increase if we were successful with all of the PBMs underneath the umbrella.

Operator: Our next question comes from Ram Selvaraju with H.C. Wainwright. Please proceed with your question.

Ram Selvaraju: Thanks so much for taking my questions. Just very quickly on the commercial front, I was wondering if there are specific factors that you expect to impact discussions with the third of the three largest GPOs that you are currently looking to secure contracting for Auvelity with? And if so, what those factors might be? And then, on the development side, I was wondering, Herriot, maybe if you could comment on the profile of AXS-12 relative to the existing approved marketed agents, and whether you believe the impact on cataplexy is likely to be the most significant selling point? And if you anticipate that the impact on sleepiness is going to be sufficient for AXS-12 to be positioned commercially in a competitive way in this indication? Thanks.

Ari Maizel: Sure. I’ll start with the first question. So, factors that impact negotiations, generally speaking, are the demand growth that we’re driving in the marketplace. And in fact, all of the recent access discussions we’ve had really focus on how quickly the brand is growing. And so, the best way to secure access is to show volume growth in the absence of formal coverage. I think it’s important to note that, as a rule, while we negotiate for coverage with major plans and PBMs, one of the areas of focus has been to optimize our patient savings and reimbursement support services to support continued demand growth within the existing access paradigm. And our ability to drive growth is the primary factor in driving interest with the GPOs and major plans and PBMs. And so, we’re really proud of the growth that we’ve seen to start-off the year.

I mentioned on my opening comments that we’ve seen about a 30% increase in weekly new patient starts, March compared to December. And that’s with the existing access we have. So, that only strengthens our ability to negotiate and ultimately have meaningful discussions with the insurance companies.

Ram Selvaraju: Have you started doing DCC promotion of Auvelity? And if so, to what extent?

Ari Maizel: Well, we have DCC largely in the digital space at the moment. We do not currently have a TV or video ad that’s running, but that is something that is under consideration at the moment and we’ll share updates when appropriate.

Ram Selvaraju: Thanks.

Herriot Tabuteau: So, Ram, with regards to your question on AXS-12 and the profile, so what we saw in the SYMPHONY trial, which was a replication of what we saw in the CONCERT study was pretty important and significant impact on cataplexy. So, not only was there a large percent reduction in cataplexy, but if you looked at remission of cataplexy, which is total elimination, the results were very stark. So, a third of the patients had 100% reduction cataplexy attacks versus less than 10% of patients in the placebo group. And we also did see an effect on excessive daytime sleepiness severity as well as cognition. So, we like the profile, and the profile as it relates to agents that are currently on the market is incredibly favorable.

We know that of the agents that are on the market, not all patients, in fact the minority of patients, actually tolerate them. So, there is a significant unmet need. We did conduct also a very large patient survey of NT1 patients in conjunction with Narcolepsy Network. And what that showed was that even on current treatments, 77% of patients continue to experience cataplexy. As it relates to your question around whether — around the EDS data that we generated, if that would be enough for clinicians and patients to think about adopting the product, we — what we saw in the study were a clear impact on excessive daytime sleepiness, and we also saw a clear impact on overall narcolepsy severity. So, AXS-12 reduced excessive daytime sleepiness severity, also improved overall narcolepsy severity, as well as quality of life.

So, the way that we think about it is, should this product be made available to clinicians and to patients, that profile will be very apparent to patients and to clinicians when it’s treated based on the patient-reported outcomes as well as the Clinician Global Impressions outcomes. So, we really like the profile and we think this will be an important treatment for patients.

Ram Selvaraju: Thank you very much.

Operator: Our next question comes from Marc Goodman with Leerink Partners. Please proceed with your question.

Marc Goodman: Good morning. Nick, can you talk about was there any inventory for Auvelity in the quarter, anything unusual that may have helped sales? And second, can you talk about gross to net, how you’re thinking about the rest of the year? And with these contracts that are now being put in place, how should we be thinking about it over the next couple of years? And then, Herriot, can you just talk about on AD agitation for one second? Obviously, last quarter you delay by — we’re not exactly sure, but into the second half, the completion of ADVANCE-2. Maybe you can just give us a little more color there, like are we now back on track? Is this going to be something that’s going to happen early in the second half of the year?