Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q2 2023 Earnings Call Transcript

Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q2 2023 Earnings Call Transcript August 7, 2023

Axsome Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-1.54 EPS, expectations were $1.24.

Operator: Hello, and welcome to the Axsome Therapeutics Second Quarter 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, Chief Operating Officer at Axsome Therapeutics. 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 corporate update and details of the company’s financial results for the second quarter of 2023. The release crossed the wire a short time ago 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 nonclinical plans, our plans to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plan, future research and development plan, our commercial plans regarding the 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 report. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today’s date. 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 second quarter of 2023, as well as key upcoming milestones. Following Herriot, Nick will review our financial results, then Lori will provide a commercial update, who 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 second quarter 2023 financial results and business update conference call. In the second quarter, we continue to execute across whole areas of our business. We drove continued success in the commercialization of Auvelity and Sunosi, advanced our late stage product pipeline and further solidified our financial foundation to the public equity offering that provided us significant operational flexibility and strength. Total net product sales in the quarter were $46.7 million driven by strong performances from both Auvelity and Sunosi. Based on the growing Auvelity prescription trends to date, and positive feedback from clinicians, we are increasing the Auvelity feel force by nearly 100 representatives.

In conjunction with our Digital Centric Commercialization or DCC platform the expansion should nearly double the number of prescribers we are able to reach. Later in the call, Lori will comment further on our commercial performance and Nick will provide additional details on our financials. In conjunction with the commercial performance, our first in class development pipeline continues to expand and advance. With respect to solriamfetol, our dopamine and norepinephrine reuptake inhibitor and TAAR1 agonist we recently initiated the focused Phase 3 trial in ADHD. Today, we’re pleased to announce the launch of two new high value potential indications for solriamfetol. Binge eating disorder and excessive sleepiness associated with shift work disorder.

Binge eating disorder is the most common eating disorder affecting approximately 2.8% of U.S. adults. There is currently only one FDA approved product for this indication. We recently received positive pre-IND meeting feedback from the FDA for this program and are preparing to initiate a Phase 3 trial in patients with binge eating disorder before the end of this year. Turning to shift work disorder, an estimated nearly one-third of Americans perform shift work, of whom 10% to 43% are diagnosed with shift work disorder. There are currently only two FDA approved products for the treatment of excessive sleepiness associated with a shiftwork disorder. We also recently received positive pre-IND meeting feedback from the FDA for this program and are preparing to initiate a Phase 3 trial in shiftwork disorder in the first quarter of 2024.

The target indications of ADHD, binge eating disorder, and shiftwork disorder, have the potential to dramatically increase the number of patients solriamfetol could help successful in clinical testing. Further growing are already first in class CNS pipeline. Stay tuned for more updates on these programs, and the rest of our leading late stage CNS pipeline. We are excited by the number of value creating opportunities that lie ahead of us. We anticipate completion of the Phase 3 SYMPHONY trial of AXS-12 for the treatment of narcolepsy in the fourth quarter of this year. We continue to see study enrollment in the Phase 3 ADVANCE-2 trial of AXS-05 for the treatment of Alzheimer’s disease agitation and we remain on track to complete ADVANCE-2 in the first half of 2024.

We are making progress towards initiating the plan Phase 2/3 trial of AXS-05 on smoking cessation, which is scheduled to start in the fourth quarter of this year or the first quarter of 2024. Additionally, the team is nearing finalization of the work for the resubmission of the NDA for AXS-07 in migraine. This work has moved at a slower pace than anticipated. And as a result, we now expect to resubmit the NDA in the first half of 2024. With respect to the plan NDA submission for AXS-14 for the management of fibromyalgia, we are making good progress and are working to finalize the content and datasets that will complete the submission. We are tracking to an NDA submission in the fourth quarter of this year to the first quarter of next year. Each of these potential milestones, builds value for our stakeholders and we continue to make strategic decisions to maximize the potential for future growth.

Lastly, we recently closed an underwritten public offering of common stock that resulted in $258.8 million in gross proceeds, fortifying our financial foundation, and providing additional flexibility to execute on multiple fronts. Not only expanding commercial activities by strategically expanding our field force, but also by adding the aforementioned new indications for solriamfetol that may serve to maximize the product’s potential. Lori and Nick will each discuss in further detail how the financing amplifies our ability to read value across our portfolio. All in all, we expect a productive second half of 2023 that sets us up for multiple milestones over the next 12 months. I will now turn the call to Nick who will provide details of our financial performance.

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Nick Pizzie: Thank you, Herriot, and good morning. Today, I will discuss our second quarter results and provide some financial guidance. Total revenue in the second quarter of 2023 was $46.7 million consisting of net sales of our two commercialized products Auvelity and Sunosi and royalty revenue from Sunosi sales and out-licensed territories. Revenue for the comparable period was $8.8 million comprised of U.S. Sunosi sales beginning May 9 of 2022. Auvelity net sales in the quarter were $27.6 million, representing 76% sequential growth. There were no net sales in comparable 2022 period due to the timing of the launch. Sunosi revenue for the quarter was $19.1 million, U.S. Sunosi sales were $17.8 million, International Sunosi revenue was $1.3 million, including approximately $700,000 in royalty revenue from Sunosi sales in the out-licensed territories.

Sunosi’s net sales for the comparable period were $8.8 million consisting of U.S. sales beginning May 9 of 2022. Cost of revenue was $4.6 million in the second quarter compared to $1 million in the prior year period. The increase reflects the higher product volumes for both Auvelity and Sunosi in the current year. Research and development expenses were $20.6 million in the second quarter versus $50.8 million for the comparable period in 2022. The increase was primarily related to higher personnel costs associated with supporting ongoing clinical trials, post marketing commitments for Sunosi and Auvelity and noncash stock compensation expense. Selling, general and administrative expenses were $78.9 million for the second quarter versus $31.2 million for the comparable period in 2022.

The increase was primarily related to commercial activities for Auvelity and Sunosi and higher noncash stock compensation expense due to the build out of both commercial teams. Net loss for the second quarter was $67.2 million or $1.54 per share versus a net loss of $41.4 million or $1.06 per share for the comparable period in 2022. We ended the quarter with $437.1 million in cash and cash equivalents compared to $200.8 million as of the previous year-end. Our second quarter cash balance reflects the net proceeds received from our common stock public offering completed in June. In connection with this public offering in July of 2023, the underwriters fully exercised their option to purchase an additional 15% of the offering, resulting in additional gross proceeds to Axsome of $33.8 million.

Inclusive of this event, the pro forma June 30, 2023, cash balance was $469 million. I will now turn the call over to Lori, who will provide a commercial update.

A -Lori Englebert: Thank you, Nick, and good morning, everyone. In the second quarter, both Auvelity and Sunosi delivered strong growth results. For Auvelity, we are still early in the launch phase and focused on executing our commercial strategy. With that said, early adoption by prescribers is robust and a promising indicator of future success. For Sunosi, the second quarter of 2023 marked one full year of Sunosi being commercialized by Axsome. We have begun to see the results from the relaunch of Sunosi, which is resulting in healthy growth quarter-over-quarter. We expect a strong performance for both brands to continue in the second half of 2023. The second quarter represents only the second full quarter for Auvelity, and we are pleased with the progress we are making with the launch.

Important key indicators of the success of our launch our script growth, new patient starts and HCP adoption. In Q2, approximately 53,000 prescriptions were reported to Auvelity, representing a growth of 72% quarter-over-quarter. In the second quarter, HCPs wrote prescriptions for 17,000 new patients, bringing the total number of unique patients on Auvelity to over 38,000 at the end of Q2. This prescription growth came from both an increased depth of prescribing with our early HCP adopters as well as an increased breadth of new prescribers. In the second quarter, we added approximately 3,700 new first-time prescribers of Auvelity, increasing the cumulative total number of subscribers since launch to over 9,700. About 40% of our initial target universe has written Auvelity, after only two full quarters.

In response to this early success, we are expanding the Auvelity sales force from 162 to 260 specialty account managers. The expansion is expected to significantly increase our reach from 26,000 prescribers to approximately 44,000 prescribers, who currently write more than 80% of branded antidepressant prescriptions. We believe that the expansion will help build on early success and accelerate launch uptake. With regard to payer coverage, we currently have coverage established for 68% of all covered lives. In the commercial channel, which is expected to be the primary channel for Auvelity, coverage is now at 46% 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 covered.

Major depressive disorder, or MDD, is highly prevalent and a major public health concerns with the mental health crisis that the U.S. is currently facing. We are proud that Auvelity is providing an important and clinically differentiated therapeutic options for patients living with this chronic and devastating condition. Turning to Sunosi. As mentioned previously, the second quarter of 2023 marked one full year of Sunosi being commercialized by Axsome. In the second quarter, we launched our Pull an All-Dayer campaign for Sunosi, which was a complete redesigned and updated promotional campaign. We significantly invested in HCP and DTC directed media with the updated campaign and are seeing immediate results from these promotional efforts. Total prescriptions for Sunosi in the U.S. grew 15% year-over-year and 8% quarter-over-quarter, with net revenues that exceeded expectations.

Since Q2 of last year, we have added greater than 13,000 unique new patients, which represents an increase of approximately 30% in cumulative unique patients over the past year. The field team is working to drive, both depth within the current prescriber base and breadth by adding new prescribers. Since Q2 of last year, we have increased unique new writers of Sunosi by 24%. Payer coverage for Sunosi remains broad, with 95% of commercial lives and 83% of total lives covered. The growth potential for Sunosi in the currently approved indications remain substantial, as well as its growth in potential new target indications such as ADHD, binge eating disorder and shift work disorder. 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 wakefulness through nine hours. Sunosi is the only branded therapy available for patients who suffer from EDS and OSA and we expect our increase in enhanced promotional and disease education efforts to drive continued growth for the product in 2023. Q2 of 2023 saw the continuation of a strong launch of Auvelity and the continued execution of the relaunch efforts of Sunosi. Both products are clinically differentiated and address patient populations with high unmet need. We remain focused on commercial execution and expect continued commercial success for both products in the second half of the year. 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 questions.

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Q&A Session

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

Charles Duncan: Yes, hi. Good morning Herriot and team. Thanks for taking our questions. Wanted to, first of all, start off with a congratulations, and the strong revenue performance as well as a broadening of pipeline progress. So nice quarter. A couple of quick questions. First of all, with regard to an approval of a product candidate in postpartum depression, but not major depression disorder. I guess, I’m wondering if that changes your views on the competitive environment for Auvelity? And if you can give us a sense of what most interest prescribers in its clinical profile, Auvelity’s clinical profile and why they’re really prescribing the drug?

Herriot Tabuteau: Thanks, Charles for the question. In terms of what it changes for our business in terms of what we’re doing, it does not change our plans at all. As a reminder, major depressive disorder is highly prevalent. There are 22 million patients out there. What we’ve seen with the launch thus far of Auvelity is that the clinical need is really great. And while we anticipated that there would be space for multiple players. And as – we’ve said in the past, we also think that it’s good that a lot of different drugs are being developed for these depressive disorder, because we want to make sure that patients get served and the clinicians have options. So that’s our passion. And I know why you’re asking the question, and I know that – the sell side, likes to take accompany against each other.

Like they’ll just say that we hear [indiscernible] folks that other companies and assess colleagues, we commend the safe team for their work to provide a new treatment to patients with postpartum depression. We know from experience that – so that development of the new drug and getting approved is really cyclical, especially in CNS. It takes the hard work and dedication and passion, a lot of talented individuals. That’s what brings us in every day to work. And to that end, we are going to continue our work to ensure that we provide new treatments to patients, not just with depression, but also with other CNS limitations. So if you look at the expansion of our pipeline thus far that we announced today, it brings the whole number of patients that we can help, 252 million patients in the U.S.

Charles Duncan: That’s helpful. And if I could ask just one follow-up regarding Axsome-007 or AXS-007 in migraine. I’m just wondering if you could provide any more color on the work streams required to enable the NDA filing? And also just remind us on the target product profile that you envisioned for the candidate that will serve an unmet need in migraine.

Mark Jacobson: Charles, this is Mark. I’ll answer the first question about the work streams for the NDA resubmission. So just to be clear, this is just taking us longer than expected, and it’s not as though there were some setbacks since the last call that’s going on behind the seat. So we’re taking our time to get this right. And what it is that we need to get right or finishing in additional batches that were requested of us by the FDA. As a reminder, the drug substance and drug product are new. The manufacturing it is a [indiscernible] with external ring stabilized with the buffering system. This is an active innovation that it is the mosaic technology. So that’s as FDAs asks for additional data to support the package. So that work is on its way, right. It’s just taking longer than expected, and we remain confident that we’ll be able to get it done. And then I’ll pass on for the product profile.