Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q3 2023 Earnings Call Transcript

Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q3 2023 Earnings Call Transcript November 6, 2023

Axsome Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-1.32 EPS, expectations were $-1.24.

Operator: Good morning and welcome to Axsome Therapeutics Third Quarter 2023 Financial Results 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 is being recorded. I would now like to turn the conference over to your host Mark Jacobson, Chief Operating Officer at Axsome Therapeutics. Thank you. Please go ahead.

Mark Jacobson: 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 third 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 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 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, Product Strategy.

Herriot will provide an overview of the company and progress made in the third quarter of 2023, as well as key upcoming milestones. Following Herriot, Nick will review our financial results, 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 third quarter 2023 financial results and business update conference call. In the third quarter, we advanced our differentiated commercial products as well as our broad late-stage neuroscience pipeline. The strong progress in the quarter positions us well to continue delivering potentially life-changing new medicines to patients with serious brain disorders and to their healthcare providers. Total net product revenue in the quarter was $57.8 million, representing significant year-over-year and quarter-over-quarter sequential growth. The quarter’s strong showing reflects contributions from both Auvelity and Sunosi. Auvelity, our first-in-class oral NMDA receptor antagonist and sigma-1 receptor agonist has now been on the market for one year.

Its commercial performance to date reflects its fast onset and lasting efficacy as demonstrated in clinical trials. Later in the call, Nick will provide additional details on our quarterly financials, and Lori will go into more detail on our commercial performance. While we are proud of the positive market reception for Auvelity to-date and the progress we have made with Sunosi, we believe that we have barely scratched the surface of these opportunities. We look forward to continued commercial execution to realize the tremendous potential for these two differentiated medicines. Our commercial success to-date has been enabled by strong clinical profiles for Auvelity and Sunosi and by our efficient, effective, and innovative digital-centric commercialization or DCC approach.

We will continue to deploy this platform with our expanded Auvelity sales force to further drive business performance. In addition, we intend to fully leverage the DCC platform for the potential commercialization of our broad late-stage pipeline. I will provide a brief update on the pipeline progress, including some anticipated upcoming clinical and regulatory milestones. Starting with our two NDA stage products. For AXS-07, for the acute treatment of migraine, we are on track to resubmit the NDA for this product candidate in the first half of 2024. In parallel, we are also working on the NDA submission for AXS-14 for the management of fibromyalgia, which is on track for submission in the first quarter of 2024. Moving on to our Phase III clinical programs, the Phase III SYMPHONY trial of AXS-12 for the treatment of narcolepsy is on track to complete enrollment this year, with announcement of top line results expected in the first quarter of 2024.

The Phase III ADVANCE-2 trial of AXS-05 for the treatment of Alzheimer’s disease agitation is on track for completion in the first half of 2024. In July, we initiated the FOCUS Phase III trial of solriamfetol in ADHD, and we anticipate completion of this trial in the second half of 2024. We previously announced that we intend to develop solriamfetol for the treatment of binge eating disorder and for the treatment of excessive sleepiness associated with shift work disorder. These are two new potential indications with significant patient populations and limited treatment options. We are on track to initiate Phase III trial of solriamfetol in binge eating disorder by the end of this year and in shift work disorder in the first quarter of 2024.

Further details about these clinical programs will be provided at the Solriamfetol Investor Day planned to be held before year’s end. Overall, the third quarter saw us make significant progress with our commercial performance and development pipeline. We expect a closeout this year with continued strong execution setting the stage for productive 2024. I will now turn the call to Nick who will provide details of our financial performance.

Nick Pizzie: Thank you, Herriot, and good morning. Today I will discuss our third quarter results and provide some financial guidance. Total revenue in the third quarter of 2023 was $57.8 million, representing year-over-year growth of 244%. Revenue consisted of net sales of our two commercialized products Auvelity and Sunosi and royalty revenue from Sunosi sales in out-licensed territories. Revenue for the comparable period was $16.8 million comprised only of US Sunosi sales since Auvelity was not launched until October of 2022. Auvelity net sales in the quarter were $37.7 million, representing 36% sequential growth with no net sales in the comparable 2022 period due to the timing of launch. Sunosi net revenue for the quarter was $20.1 million, representing 20% year-over-year growth.

Sunosi net revenue consisted of net sales of $19.4 million and $0.7 million in royalty revenue from sales in the out-licensed territories. Sunosi net revenue for the comparable period was $16.8 million. Cost of revenue was $6.5 million in the quarter compared to $1.9 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 $28.8 million for the third quarter versus $14.9 million for the comparable period in 2022. The increase was primarily related to the FOCUS trial of solriamfetol in ADHD. The advancement of ongoing trials of AXS-05 and AXS-12, CMC costs associated with the NDAs for AXS-07 and AXS-14 post-marketing commitments for Auvelity and Sunosi and higher personnel costs including non-cash stock-based compensation.

Selling, general and administrative expenses were $83.2 million for the third quarter versus $40.9 million for the comparable period in 2022. The increase was primarily related to commercial activities for Auvelity and Sunosi and higher non-cash stock-based compensation expense due to the build-out of both commercial teams. Net loss for the third quarter was $62. 2 million or $1.32 per share versus a net loss of $44.8 million or $1.07 per share for the comparable period in 2022. We ended the quarter with $416.6 million in cash and cash equivalents compared to $200.8 million as of December 31st, 2022. We believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on the current operating plan.

I’ll now turn the call over to Lori who will provide a commercial update.

Lori Englebert: Thank you, Nick, and good morning, everyone. [Technical Difficulty] up to 12 months, all with a favorable tolerability profile. We remain focused on accelerating demand growth [Technical Difficulty] and we expect continued growth in quarter four and beyond. Q3 represents only the third full quarter post-launch for Auvelity. In the quarter, approximately 69,000 prescriptions were written for Auvelity, representing 30% quarter-over-quarter growth. This performance is in contrast to a decline of 1% for the overall antidepressant market during the same period due to market seasonality. In the third quarter, HCPs wrote prescriptions for more than 16,000 new patients, bringing the total number of new patients to start Auvelity since March to approximately 55,000 at the end of Q3.

Prescription growth came from both an increased depth of prescribing with HCP adopters, as well as an increased breadth of new prescribers. In the third quarter, we added approximately 3,200 new first-time prescribers of Auvelity, increasing the cumulative total of prescribers since launch to 13,000. As mentioned during our Q2 earnings call, in response to our early launch success and growing demand, we are expanding the Auvelity field force by about 100 sales representatives to a total of approximately 260. We are on track to complete the hiring of the expanded team by the end of Q4 with completed training and full deployment in the first quarter. The expansion will increase our reach from 26,000 prescribers to approximately 44,000 prescribers.

These 44,000 HCPs write approximately 90% of new-to-brand prescriptions and will substantially increase our potential to reach and help more patients. With regards to payer coverage, we currently have coverage established for 70% of all covered lives. In the commercial channel, which represents the greatest source of volume for Auvelity, coverage is now at 48% of covered lives. In the Medicaid and Medicare channels, approximately 100% of lives are covered. Active discussions with payers continue as coverage expands and evolves. Turning to Sunosi. Total prescriptions for Sunosi in the US grew 16% year-over-year and 5% sequentially. Like Auvelity, Sunosi experienced meaningful demand growth in the third quarter despite the expected overall market decline due to summer seasonality.

The steady growth of Sunosi can be attributed to our focused promotional investments and Sunosi’s differentiated clinical profile. Since Q3 of last year, Sunosi have added 14,000 unique new patients, which represents an increase of [40%] (ph) in cumulative unique patients over the past year. The field team continues to work on driving both depth within the current prescriber base and breadth by adding new prescribers. Since Q3 of last year, we have increased unique new riders of Sunosi by 23%. Payer coverage for Sunosi remains broad, with 95% of commercial lives and 83% of total lives covered. We expect our promotional efforts to drive continued growth for the product in the current indication. In addition, Sunosi has significant growth potential in new target indications, including ADHD, binge eating disorders, and shift work disorders.

Overall both Auvelity and Sunosi deliver strong performance in the quarter. We remain focused on commercial execution to maximize the potential of these clinically differentiated treatments, which address patient populations with high unmet needs. 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?

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Q&A Session

Operator: Thank you. The floor is now open for questions. [Operator Instructions] Our first question today is coming from Charles Duncan of Cantor Fitzgerald. Please go ahead.

Charles Duncan: Hey, good morning, Herriot and team. Congratulations on a really nice quarter. Thanks for taking our question. I had a couple. One is commercial. One is pipeline. Perhaps for Lori or whoever wants to answer it. Regarding Auvelity, I’m wondering about the drivers of demand in terms of, well, I’m wondering about the drivers of revenue. Are you seeing, are you still seeing more new patient ads versus persistence, or are you starting to see persistence? Because it would seem to me that the product profile would result in patients being on the drug longer than you might expect for an antidepressant?

Lori Englebert: Hey, Charles, I’ll take that question. So it’s a really astute question, so thanks for asking. It is one that we’re still working through. We have just hit our one-year mark, so it’s still a bit hard to comment on the long-term persistence rates for Auvelity. We’re not seeing anything particularly different than what you would expect from the therapeutic area. Feedback, though, from an anecdotal feedback as well as what we’re seeing in refill prescriptions. anecdotal feedback, you know, the product is working per the label. Early on, all we really heard about was the rapid onset of action. But now that we’re just tick past the one-year mark, we are starting to hear about the durability of the effect. So the product is fast and it lasts, which is consistent anecdotal feedback from both HCPs and patients.

And we’re starting to see that through, you know, just the healthy number of refill prescriptions. You know, that’s evidence that clinicians and patients are seeing a response in our continuing treatment.

Charles Duncan: Very good. That’s helpful.

Lori Englebert: Sorry, I was just going to answer the driving of new patients. We’re still very pleased with the number of new patients acquisition that we’re getting on a weekly basis.

Charles Duncan: Okay. That’s a positive. Appreciate it. For Nick, now that you’re through a year, are you contemplating giving guidance next year or is that not yet? Do you feel like you’re not yet there?

Nick Pizzie: Yeah, I think we’re still a bit early on. We’ll continue to ponder that as we get closer towards the end of the year and into 2024. But there’s so many variables at this point that giving guidance is difficult at this point. So, standby, but I hear the question, Charles.

Charles Duncan: Okay. Regarding maybe to Herriot, regarding the pipeline, I had a question about 05. You know, I’m really intrigued with ADVANCE-2 in Alzheimer’s disease agitation. I’m wondering, you sound pretty bullish about being able to read that out in the first half. And I’m wondering if you could characterize the patient sample that you’re enrolling on, obviously, on a blinded basis thus far. How are you confirming Alzheimer’s disease diagnosis or is a symptom presentation across neurodegenerative disease not all that different and so you don’t really need to confirm diagnosis of Alzheimer’s. Thanks.

Herriot Tabuteau: Thanks for the question, Charles. The patient sample that we’re enrolling should match or is matching the patient sample that we enrolled in the ADVANCE-1 trial. And the way that we confirm diagnosis are through validated scales for both Alzheimer’s disease as well as for agitation. Well accepted scales and the same ones that we used in the ADVANCE-1 trial and also that is used in other studies in Alzheimer’s disease.

Charles Duncan: Okay. But you’re not doing imaging, correct? You don’t feel that’s necessary?

Herriot Tabuteau: No. Imaging and —

Charles Duncan: Or biomarkers?

Herriot Tabuteau: And the type of studies is — we are not doing imaging.

Charles Duncan: Okay. Nor blood-based biomarkers?

Herriot Tabuteau: We are not doing imaging or biomarkers for enrollment into the trial, and that’s pretty standard for studies of Alzheimer’s disease that look at cognition or behavioral symptoms.

Charles Duncan: Yeah, thanks. So clinical diagnosis. Okay. Thanks for taking the questions.

Operator: Thank you. The next question is coming from Marc Goodman of Leerink Partners. Please go ahead.

Rudy Li: Hey, morning. This is Rudy on the line for Mark. Thanks for taking my questions. So just a quick follow-up to the ADVANCE-2 questions. So can you talk about your expectations for that coming readout and what data do you think will be adequate to support and identify for this indication? Thanks.

Herriot Tabuteau: So I assume that question has to do with Alzheimer’s disease agitation. And in terms of data from upcoming readouts, we do have the ADVANCE-2 trial. We expect that to complete and readout in the first half of 2024. And that along with the results from our prior studies as well as the ongoing open label safety trial will be will form that the basis for the SMDA filing.

Rudy Li: But do you still need like additional efficacy data from ADVANCE-2 in order to file for that indication?

Herriot Tabuteau: The three studies which are efficacy trials, which will be in the package are the ADVANCE-1 trial, the ACCORD study, as well as the ongoing ADVANCE-2 trial.

Rudy Li: Okay. That’s helpful. Thanks.