Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals' fourth quarter and full year 2018 financial results conference call. My name is Christy, and I'll be your conference operator for today. At this time, all participants are in listen only mode. We will be facilitating a question and answer session towards the end of today's call. If at any time during the call you require assistance, please press star followed by the zero and a coordinator will be happy to assist you. I would now like to turn the presentation over to Elena Ridloff, Senior Vice President of Investor Relations and Interim Chief Financial Officer at ACADIA Pharmaceuticals. Please proceed.
Thank you, Christy. Good afternoon, and thank you for joining us on today's call to discuss ACADIA Pharmaceuticals' fourth quarter and full year 2018 financial results. Joining me on the call today from ACADIA Pharmaceuticals are Steve Davis, our Chief Executive Officer, who will provide a brief overview of our strategy, recent achievements, pipeline opportunities, and financial performance. Michael Yang, our Chief Commercial Officer, will provide updates on our commercial initiatives with NUPLAZID, and Dr. Srdjan Stankovic, our President, who will discuss our pipeline progress. I will then discuss our financial results before turning it back to Steve for his final remarks and opening the call up for questions. I'd 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 like to remind you that during our call today, we will 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 Davis, our Chief Executive Officer.
Thank you, Elena. Good afternoon, everyone, thank you for joining us today. In 2018, our team executed on all three of our strategic pillars. First, to grow. Grow NUPLAZID as the only FDA-approved treatment and standard of care for patients with Parkinson's disease psychosis, or PDP. Second is to leverage. Leverage the potential of pimavanserin in additional indications with unmet need. Third is to expand our pipeline further through focused business development in CNS disorders, again, with high unmet needs. Let's take a look at the progress we've made in advancing each of these pillars on slide six. We continued to grow NUPLAZID in PDP and achieved $59.6 million in net sales in the fourth quarter of 2018, a 37% increase over the same period in 2017. Net sales for the full year 2018 were $223.8 million, which represents a 79% increase year-over-year.
This growth was fueled by our commercial initiatives, including the launch of our 34 milligram capsule in August. In late November, we launched our direct-to-consumer TV ad campaign and expect this to benefit new patient starts in 2019. Based on our execution and the growth we're seeing in 2019 as we enter the year, we are providing NUPLAZID net sales guidance of $275 million to $300 million for the full year 2019. Last year, we continued to leverage pimavanserin in clinical development for additional CNS indications. This was highlighted by our positive phase II CLARITY results in adjunctive treatment of major depressive disorder. In addition, we recently completed our end of phase II meeting with the FDA and will be initiating 2 phase III trials in the first half of this year.
In our end of phase II meeting, we confirmed with the FDA that our phase II CLARITY trial can be submitted as one of two pivotal trials to support a supplemental NDA filing. We will need at least one of the 2 phase III trials we're conducting to also be positive. We also strengthened our balance sheet with the success of advancing in the fourth quarter. We ended 2018 with approximately $474 million of cash and are well positioned to continue executing on all three pillars of our business strategy. Slide seven represents what I think is probably the most underappreciated aspect of our business. On this slide, you see the addressable population for both the indication we're currently approved in, Parkinson's disease psychosis, together with the other indications that we're pursuing with pimavanserin. There are three take home messages I think are important here.
Point number one is we are pursuing very large markets. These are markets with either no FDA-approved treatment or markets in which patients continue to experience significant disease burden due to the inadequacies of existing therapies. In aggregate, the additional indications you see on this slide represent an approximately 40-fold increase over the PDP addressable population. Point two is because we're advancing the same molecule, pimavanserin, in all of these indications, and of course, we're already approved in PDP, we know the safety and tolerability profile of the drug. We know the drug-drug interactions. We know how to make it. Point three is we have evidence of clinical efficacy in each of these indications. We have substantially de-risked these programs, and as said before, we love to make these kinds of investments. With that, I'll now turn it over to Michael to discuss our commercial performance.
Thank you, Steve. Please turn to slide nine. Today, I would like to provide you with an update on the progress we're making with our commercial activities that are driving continued growth of NUPLAZID. First, we are in the process of completing the transition to the 34 milligram capsule from the 17 milligram tablets. The single 34 milligram capsule was launched to provide patients with a single dosage form to achieve the once-daily 34 milligram dosing recommendation for the treatment of PDP with NUPLAZID. The introduction and adoption of the 34 milligram capsule has gone very well. The commercial team has successfully facilitated smooth healthcare professional and patient transition to the single 34 milligram capsule, and we believe this has resulted in a more positive patient experience.
We are focusing on driving new commercial initiatives across the business, leveraging the introduction of the 34 milligram capsule in Q3 and the FDA reaffirmation of the positive benefit risk profile. As Steve mentioned, we launched a branded direct-to-consumer campaign at the end of November, an important time of year when extended families gather together and would be expected to notice any changes in their loved one. We look forward to seeing this positively impact new patient starts and revenue in 2019, along with our other commercial initiatives. Beyond these efforts, I'd like to point out that the Movement Disorder Society recently published an update to their recommendations for treatments for non-motor symptoms of Parkinson's disease. Within this update, NUPLAZID is the only treatment listed as both efficacious and having an acceptable level of safety risk without specialized monitoring for the treatment of psychosis.
This conclusion adds to the level of confidence we have been establishing with physicians that their patients suffering with PDP should try NUPLAZID first. Of the roughly 125,000 patients who receive treatment for PDP, currently a low double-digit percentage are taking NUPLAZID. As the only FDA-approved therapy for PDP, NUPLAZID addition to these recommendations is an important validation of the product's position in the treatment paradigm. Slide 10 highlights our recent growth trends in the long-term care channel. As you can see, we've seen continued growth in total bottle demand throughout 2018. The long-term care channel represents roughly 25% of our total business, as you can see from the pie chart on the right. Over the past two quarters, we've seen our channel-specific long-term care commercial initiatives gain traction and create momentum.
This has delivered a higher growth rate in the long-term care channel as compared to our specialty pharmacy channel. Now, I would like to turn your attention to our specialty pharmacy channel and why we're encouraged by recent growth trends in new patient starts, as shown on slide 11. In the specialty pharmacy channel, which represents two-thirds of our business, we are now seeing a nice return to sequential growth and new patient starts in the fourth quarter of 2018 compared to the third quarter. We have seen this momentum continue into the new year with average weekly new patient starts up quarter to date sequentially. The growth in new patient starts is supported with both the launch of the 34 milligram capsule and the FDA's public statement of the positive benefit risk profile of NUPLAZID, as well as the launch of our branded DTC campaign.
For the overall business, we achieved sequential growth of approximately 6% in total bottles in the fourth quarter. In addition, our refill rate has remained consistent. On slide 12, we outline a typical patient journey, starting with the time they or their caregiver recognizes their symptoms to when they are motivated to take action. Once patients feel compelled to take action, it typically takes weeks to months before they have that next visit with their physician to talk to their physician about their symptoms and seek treatment. Following these appointments, the majority of these prescriptions are then sent to our patient access hub, which assists patients with the prior authorization and reimbursement process.
The majority of our NUPLAZID patients typically start on a free trial period during this time. As a result, there's typically a lag between our marketing efforts and when a new patient starts to contribute to revenue. We believe with our current commercial initiatives taking hold and the promising growth trends we have observed in new patient starts, that we are back on track. We will significantly increase our market penetration over the next several years. I'll now turn it over to Srdjan to provide R&D updates on our pipeline.
Thank you, Michael. I'm extremely pleased with our R&D progress in 2018. Equally, I'm really looking forward to the next several quarters as we will be reporting results from a number of our ongoing late-stage clinical trials. Let's start with slide 14. Pimavanserin is a first-in-class selective serotonin inverse agonist. All other antipsychotics work primarily by blocking dopamine. That's particularly problematic in Parkinson's patients who suffer from the lack of dopamine. In addition to PDP, pimavanserin has already shown indication of efficacy in all four clinical categories we are pursuing and are currently evaluating in late-stage programs. Given our expertise in drug development for CNS, we licensed the rights to trofinetide in August. Trofinetide is a novel synthetic analog of the amino terminal tripeptide of the IGF-1 insulin-like growth factor. Trofinetide has positive phase II data in its target indication of Rett syndrome.
In total, we have five late-stage programs that we are advancing this year. On slide 15 are just a few recent and near-term highlights I wanted to share with you. First, we recently completed our end of phase II meeting with the FDA to discuss pimavanserin as adjunctive therapy for major depressive disorder. I'm happy to report that, as we expected, the FDA agreed that the CLARITY trial would serve as one of the two pivotal trials for our supplemental NDA submission. As always is the case, the end of phase II matters are ultimately subject to NDA review. We will initiate our phase III program as planned in the first half of this year. Second, we confirmed with the FDA our study design for phase III trial with trofinetide, which we will initiate in the second half of 2019.
Third, we remained on track to announce top-line results from our ongoing phase III ENHANCE trial in schizophrenia inadequate response mid-year. Starting with slide 16, we will now discuss our ongoing programs in a little more detail. Dementia-related psychosis affects about 1.2 million patients in the U.S. and has very serious consequences, including repeated hospital stays, early progression to nursing home care, more rapid progression of dementia, and an increased risk of morbidity and mortality. There is no FDA-approved treatment for DRP. As highlighted on slide 17, our program in dementia-related psychosis is leveraging the benefit we observed in two previous studies, our PDP pivotal trial study, as well as our phase II study in Alzheimer's disease psychosis. Following these two studies, we had an end of phase II meeting with FDA and agreed on our phase III plan. It's represented on the next slide.
As a reminder, this development program also received breakthrough therapy designation from FDA. Our phase III HARMONY study is a relapse prevention study. We have agreement with the FDA that robust results from this single study can serve as the basis for an sNDA submission. We anticipate final results of this study in 2020 with an interim read in the second half of this year. There are substantial unmet needs today in the treatment of major depressive disorder, as outlined here on slide 19. On the right-hand side are the observed results from our phase II CLARITY study, testing pimavanserin as an adjunctive therapy for SSRI to SSRI or SNRIs. We had very promising overall study results. Our primary endpoint, improvement in the 17-item Hamilton Depression Rating Scale, was achieved with a p-value of 0.039.
Our key secondary endpoint, improvement in the Sheehan Disability Scale, was achieved with a p-value of 0.004. It is well known that disability represents a significant burden for patients with depression. We also observed positive results in seven additional pre-specified secondary endpoints. Our results were very impressive given the high unmet need that exists in the treatment of MDD today. We believe these results are clinically and commercially meaningful as we seek to develop pimavanserin as a potential best-in-class treatment for adjunctive MDD. In stage 1 of the CLARITY study, where all study patients are analyzed, we observed unequivocal efficacy results and achieved our primary endpoint, shown here on slide 20, with a p-value of 0.0003 and an impressive effect size of 0.63.
As I mentioned, we recently completed our end of phase II meeting with the FDA. As we expected, the FDA confirmed that our CLARITY study could be submitted as one of the two pivotal studies in support of an sNDA for the adjunctive treatment of major depressive disorder. Slide 21 shows our phase III development program for MDD. We plan to conduct two six-week phase III parallel design placebo-controlled trials, thus substantively de-risking our MDD program. Our CLARITY study, combined with at least one of these phase III trials, will be the basis for an NDA submission. Moving on, I would like to discuss our schizophrenia inadequate response program. Data from our early phase II study with pimavanserin added to low dose of risperidone provided supportive evidence and proof of principle for further development of pimavanserin in this indication.
As such, we initiated our ongoing phase III ENHANCE study in 380 patients. We remain on track to announce top-line data from this study in mid-2019. Slide 23 highlights the trial design for our ENHANCE trial. This is a six-week study evaluating patients who had an inadequate response to their current antipsychotic treatment for schizophrenia and are receiving either pimavanserin plus background antipsychotic therapy or placebo plus background antipsychotic therapy. The primary endpoint is the change from baseline on the Positive and Negative Syndrome Scale total score. Turning to slide 24, there is no FDA-approved treatment for the negative symptoms of schizophrenia. We are conducting a 380 patients phase II study and expect to complete enrollment in the second half of this year. Turning now to Rett syndrome and trofinetide on slide 25.
Rett syndrome is a debilitating neurodevelopmental disorder that occurs predominantly in females following apparently normal development for the first six months of life. Currently, there are no approved medicines for this rare disease, which affects approximately six to nine thousand patients in the U.S. After recent interaction with the FDA, we have finalized our phase III trial design for trofinetide. This three-month study will evaluate approximately 180 females aged 5 to 20 with Rett syndrome. If our phase III trial is positive, there is a potential to submit an NDA in 2021 based on this single phase III study. Slide twenty-seven provides a summary of our upcoming clinical milestones for 2019 and beyond. It is going to be an exciting time, and I look forward to updating you on our progress.
With that, I will now turn the call over to Elena to discuss our financial performance.
Thank you, Srdjan. Today, I'll discuss our fourth quarter and full year 2018 results and our financial outlook. Please turn to slide twenty-nine. In the fourth quarter of 2018, we reported $59.6 million in net sales, an increase of $16 million or 37% compared to the $43.6 million of net sales in the fourth quarter of 2017. The gross net adjustment for Q4 2018 was 16.8%. Level of inventory in the channel at the end of Q4 was consistent with Q3. Moving down the P&L, total operating expenses, including cost of goods sold, for $126.8 million in the fourth quarter of 2018, compared to $113.6 million for the same period in 2017.
These amounts included $20.4 million and $22 million of non-cash stock-based compensation expense, respectively. GAAP R&D expenses increased to $48.2 million in Q4 2018 from $43.2 million in Q4 of 2017. Fourth quarter R&D expense benefited from the timing of certain clinical trial-related costs, which will now be realized in the first quarter of 2019. GAAP SG&A expenses increased to $74.3 million in Q4 2018 from $66.7 million in the fourth quarter of last year. The increase was primarily due to an increase in marketing expense related to our branded direct-to-consumer advertising program.
For the full year of 2018 on slide 30, we recorded $223.8 million in net sales, an increase of $98.9 million or 79% compared to the $124.9 million of net sales in 2017. The gross to net adjustment for the full year 2018 was 16.6%. Total operating expenses, including cost of goods sold, for $471.3 million in 2018 compared to $417.3 million in 2017. These amounts included $81.6 million and $75.5 million of non-cash stock-based compensation expense, respectively. GAAP R&D expenses increased to $187.2 million in 2018 from $149.2 million in 2017.
The increase is primarily due to additional clinical study costs incurred as we continue to invest in additional pipeline programs for pimavanserin, as well as an upfront payment of $10 million to Neuren Pharmaceuticals for trofinetide in the third quarter of 2018. GAAP SG&A expenses increased to $265.8 million in 2018 from $255.1 million in 2017. The increase was primarily due to an increase in marketing expense related to our direct-to-consumer advertising program. Please turn to our 2019 guidance on slide 31. As Steve mentioned, for the full year 2019, we expect continued strong growth for NUPLAZID with net sales between $275 million and $300 million.
At the midpoint of this guidance range, this represents an approximate 28% growth in revenue year-over-year and approximately 20% volume growth year-over-year. We expect a growth to net adjustment in the range of 18%-19% for the full year. We project this to be higher than the full year 2018 adjustment as a result of an increase in manufacturer's donut hole obligation to 70% in 2019 from the previous 50%. With regards to the first quarter, there are three factors to consider. First, we're forecasting a growth to net adjustment of 20%-30%. As a reminder, growth to net is typically highest in the first quarter due to the annual reset of the donut hole manufacturer obligation for Medicare Part D patients.
Second, our ongoing DTC campaign initiated towards the end of last year, therefore, the positive benefit to volume will largely be realized starting in the second quarter, with only partial benefit in Q1. Third, as we complete the transition to the 34-milligram capsule from 17-milligram tablets this quarter, it is possible that our channel partners may experience a temporary reduction in inventory as they sell through the remaining 17-milligram inventory in the channel. On the expense side for 2019, we expect GAAP R&D expenses to be between $250 million and $265 million. The increase compared to 2018 is a result of our planned progression of five late-stage clinical programs in 2019. We expect the bulk of these investments to occur in 2019 and 2020.
We expect GAAP SG&A to be between $280 million and $295 million for the full year, and we expect non-cash stock-based compensation expense to be between $80 million and $90 million in 2019. We ended the year with $473.5 million in cash and investments. Inclusive of our 2018 equity offering, we model approximately 144 million fully diluted shares for 2019. With that, I'll turn the call back over to Steve.
Thank you, Elena. Please turn to slide 33. In closing, our team is focused on executing on all three of our strategic pillars in 2019. One, growing NUPLAZID in Parkinson's disease psychosis. Two, leveraging pimavanserin in additional large market CNS indications. Three, potentially expanding our pipeline through disciplined business development. As always, we appreciate the dedication and hard work of all of our employees who are committed to improving the lives of the patients and caregivers with CNS disorders. I'll now open up the call for questions. Operator?
Ladies and gentlemen, if you wish to ask a question, please press star followed by one on your touch tone telephone. If your question has been answered or you wish to withdraw your question, press the pound key. Please limit yourself to two questions. Press star one to begin. Please stand by for your first question. Your first question comes from the line of Cory Kasimov with J.P. Morgan. Your line is open.
Hey, guys. Thanks for taking my questions. This is Matthew on for Cory. My first question is on the phase III MDD program. Can you discuss your decision to run both the U.S. and an EU trial, and how these might differ in respect to each other and the phase II CLARITY study in terms of patient enrollment criteria?
Sure. Srdjan, do you want to take that?
Yes. Thanks, Matt. Both phase III trials are essentially identical in design and match very closely, almost identically, to our stage 1 phase II trial that we just performed. In terms of the patient population that we are addressing, in terms of the measures, outcome measures, it's a very similar design.
Got it. Thanks. Turning to schizophrenia for the ENHANCE study, curious to get your general level of confidence going into this readout, and curious to what you are seeing so far with the proportion of patients that are either dosed up or dosed down with the flexible dosing.
Yes. I have to say, I have always a very high level of confidence with every trial I do, otherwise I probably would not do that. I do have a conviction that pimavanserin can bring a benefit to patients with schizophrenia, in an adjunctive treatment paradigm. Of course, I've been long in this business to know that each clinical trial has its own challenges. I would say that I'm reasonably optimistic about the outcome of this trial. From the perspective of what we see in the trial in a blinded fashion in terms of the dose, one thing I can say that majority of patients are ending up on a 34 mg dose, on the higher dose, with a smaller proportion of patients on the lower doses.
I would also say that we are seeing a nice retention, which gives us quite a bit of confidence in terms of the quality of trial and execution of the trial.
Great. Thanks for taking my questions. I'll hop back in the queue.
Thank you. Our next question is from Ritu Baral with Cowen. Your line is open.
Hi, guys. Thanks for taking the question. Apologies for the background noise. Srdjan, can you discuss a little bit on the conduct of the HARMONY study? I know we've had the discussion about the alpha split for the interim, but how should we think about the probability of success at the interim, especially given the positive KOL feedback that at least we've gotten in our checks?
Sorry, did you hear the question? I did not understand the last part of your question, Ritu. If you can just repeat, please.
Yeah. Just how I should think about probability of success at the interim. KOLs have had good things to say about pimavanserin and the indication, and seem reasonably confident. It all depends on how you're splitting the alpha.
Right. Again, a couple of comments in that respect. I will just reiterate my general optimism about the trials that we're conducting and potential of pimavanserin in this indication. There are a couple of consideration one has to take here. As we previously mentioned, the interim analysis alpha threshold is fairly high. We did not want to have a high alpha spend at the interim analysis. We put that threshold rather high. Although quite possible, it's something to consider when thinking about the probability of success at the interim analysis. The second consideration is, of course, there are not too many precedents. Although there are a lot of precedents in schizophrenia and depression in terms of the relapse prevention trial and the rate of success at the interim analysis, which is fairly high.
This is, to my knowledge, only a second relapse prevention trial in the area of dementia, psychosis, or psychosis with agitation. Previous trial, Devynar trial, was with risperidone with psychosis and agitation. From that perspective, we don't have a long historical record to assess probability of success. Having said all of that, I think it's reasonable to expect that there is a fair chance that this trial is going to end at that point.
Trial conduct and dropout so far?
The trial is progressing very well. As you know, one thing we can certainly see, because the first three months is open-label trial, and we here see quite a nice success in terms of the ability of pimavanserin to stabilize these patients and their ability then to meet criteria for randomization. We are quite pleased with those results. Due to that, trial is progressing quite well in terms of the planned enrollment as well as randomization.
Got it. My follow-up is on the DTC program. Are we going to get, or are you guys tracking any metrics that will measure success of the DTC program?
Michael, you want to take that?
Yeah. Thanks for the question. I would just say that we're really pleased with the early indicators we're seeing, and I think that is reflected in our guidance. We're hearing consistent reports that patients are requesting NUPLAZID by name, and we're seeing a significant amount of increased traffic on our consumer and our physician websites. We are tracking a number of different early indicators. Of course, you're starting to see some reflection of that maybe perhaps in the new brand.
Got it. Thanks for taking the question.
Thank you. Our next question is from Tazeen Ahmad with Bank of America Merrill Lynch. Your line is open.
Hi. Good afternoon. Thanks for taking my questions. The first, Steve, if you can give us some color with regards to what, if any, impact you're seeing from last year's media articles. I don't know if you could comment on what your sales force is hearing from physicians and whether or not you're seeing any questions coming in from insurance providers. I have a second question.
Yeah. Thanks for the question, Tazeen. I think if we just go back to 2018, when we had some media articles, we said at the time that we do not anticipate any long-term effect on the brand. We said that we're very confident in the safety profile of the drug, and that we have the best information available to assess that. The FDA did a thorough evaluation as I think everyone's aware of last year, and they concluded three things. One, they saw no additional safety concerns. Two, they reminded patients, if you're taking the drug, you should keep taking it under the advice of your healthcare professional. Three, they reminded physicians that this is the only drug approved for the treatment of PDP. What we thought in 2018 holds through today. We continue to have high confidence in the growth of the brand.
When we launched the drug, we said, expect to see more of a linear progression. That's what we've seen generally throughout the course of the drug. We remain very highly confident in the longer-term prospects of the drug. As we discussed on this call and on the last call, we're seeing some really encouraging indicators of new growth.
When you're-
Sorry, Tazeen. I think Michael wanted to just-
Go ahead, Michael.
Tazeen, I just wanted to address your question around payers and the sales force. We've not seen any change in our payer status. At this juncture, the sales force, obviously, as I mentioned, is positioning the FDA reaffirmation of our safety profile. That's being well received by the physicians in terms of confirming what they already suspected and already knew. No change in the attitudes of the physician nor the guidance by payers.
Okay. Thanks, Michael. Maybe another one for you. As the launch is progressing, you've had some time to take a look at prescribing trends. I guess based on what you know so far, are you making any changes to your targeted physician list? Is it becoming longer? Is it becoming shorter? Do you have a preference on whether you'd like to see prescriptions from as many doctors as possible, and they don't necessarily need to be multiple prescriptions, or would you rather have certain physicians be prescribing the drug to more of their patients?
Great question. First of all, I think we have seen quarter-over-quarter, and we saw it in the fourth quarter, significant growth in new time prescribers, first-time prescribers. We are still seeing additions to our breadth. As a priority, we are now, I think, moving to a period where we want to get more depth. There's still a cohort of physicians that we'd like to reach, but we're starting to get into a situation where many people have dabbled with the product, and we're working deeper. I think these guidelines we just talked about will help drive further confirmation of the use of NUPLAZID first line. That's where we are, is kind of moving more physicians deeper into a first-line usage with NUPLAZID.
Okay, thanks.
Thank you. Our next question is from Charles Duncan from Cantor Fitzgerald. Your line is open.
For taking the question. Congrats on a good year of progress. Quick question, commercial. Then one on R&D. With regard to guidance $275 versus $300, could you give us a sense of kind of what the pressure points are around that are key determinants of that range? Then if you have any certain success goals that you'd like to share with us with the branded DTC, I'd love to hear them.
Charles, I think we heard the first question. Could you repeat the second question regarding DTC?
Yeah. It was if you have any certain success goals w ith that, if you could outline those.
Sure. Got it. Okay. Elena, do you want to take the first question?
Charles, with regards to the guidance range, obviously it's early in the year, so we account for a number of potential scenarios within our range. If you think about the range we've provided today, at the low end, it assumes mid-teens annual year-over-year volume growth, and at the high end, mid 20%, as I mentioned previously, around 20% the midpoint. We obviously incorporate a range of expectations with regards to growth, both in the specialty pharmacy channel and the long-term care specialty distribution channel, and as well as possible considerations with regard to price. As I think you know, we took our price increase for the first time in a year at the end of December 2018.
Okay.
Yes. Charles, just to follow up on your question on DTC. The first step that we do when we evaluate the campaign is, can we execute the media target that we have? We have a certain amount of reach and frequency and media weight. We are executing on that with our campaign. That moved then to building the awareness with the target audience, and then that's call to action. The first step to call to action is investigation, and that's what I referred to with the significant traffic we've had intentionally on our websites and our digital properties. Importantly, an important component of that is what we call high-value actions. More than just regular hits, but people who have downloaded videos, discussion guides, seeking their physician, et cetera.
We measure that in terms of action in the office, and from there, we convert that action into patient support. We're hearing, as I mentioned, more physicians indicate that patients are asking for NUPLAZID by name. Those are just some of the kind of goalposts along the way. Ultimately, our evaluation of this campaign and its success will be in its ability to arc the business in terms of paid starts.
Okay. Well, we'll look forward to seeing that over the course of the year. Just a quick question for Srdjan. I'm wondering if you could share with us what you'd like to see out of schizophrenia inadequate response trial, kind of the effect size that would be clinically meaningful. Also just kind of share with us on the DRP study, why would you do an interim read? What is really the practical implications of that?
Yes. Thanks, Charles. On the schizophrenia, if you look at the meta-analysis of the effect sizes for all of the current antipsychotics that are all in monotherapy treatment paradigm, the effect sizes are anywhere from as low as 0.3 to a majority of the effect sizes that we see are about 0.5, with a couple of exceptions above 0.5 going up to 0.8, notable exception being CLOZARIL. Where I would be in adjunctive paradigm, quite excited if we see that level of average effect size of around anywhere between 0.4, 0.5, would be quite exciting for us to see that effect size. Obviously, that depends on many elements, and there are other data that we will be looking at the overall results of the trial to determine the overall benefit.
One of the benefits that we don't particularly discuss often is that in this combination, we may see some benefit on the safety and tolerability side in this combination, and that's something that we will be also looking when we look at the overall results of the trial.
Sure.
On the DRP side, first of all of the randomized withdrawal trials, because of its nature of the design, where patients are stabilized on an active treatment and then that treatment is withdrawn for at least half of the patients in the design. There are some ethical considerations and concerns not to prolong the implementation and execution of the trial if you already reached the evidence of efficacy. From that perspective, interim analysis is sort of a mainstay in the design of the randomized withdrawal or relapse prevention trials. The second is the power of the trial is such that, as I mentioned earlier, at least in schizophrenia trial and in depression trial, this happened more often than not. From that perspective, historically, it is also expectation that interim analysis makes whole lot of sense.
Okay, there are no changes that could occur with the interim analysis, such as numbers of patients involved or statistical analysis plan changes?
Absolutely not. What will occur is interim analysis will be performed, and that will be done by a firewall group that will report to our Data Safety Monitoring Committee, and they will inform us whether the interim analysis yielded positive results, in which case we will stop the trial and unblind, analyze the data and report the data. If the criteria for stopping at the interim analysis for efficacy are not met, the trial will continue without any changes.
Okay. Thanks, Srdjan.
I think as Srdjan mentioned earlier, the right way to think about the interim read is the study's got power for an interim read, of course, because we're using a very small part of the alpha there. If we hit that very high bar, right, the study's over. We'll move to a submission. The only reason we would stop the study is on a positive read for the interim read. If we don't stop the study at the interim read, that's fine. We'll just continue executing the trial as planned, and the bar at the end of the study, of course, is much lower, and we're powered for that.
Okay. Very good. Thanks for the added color, Steve and Srdjan and Michael and OU.
Thanks.
Thank you. Our next question is from Salveen Richter with Goldman Sachs. Your line is open. Please check your mute button.
I'm sorry. This is Andrea on for Salveen. Thanks for taking our questions. Our first one is, in light of your fiscal year 2019 guidance, which reflects about 28% year-over-year at the midpoint, can you help us think about drivers of growth? I know you've mentioned a couple. On the forward, do you see this more as a reflection of true organic growth or a consequence of increase in pricing?
Yeah. Michael, you want to take that question?
Yeah. We see this as a reflection of organic growth.
Can you speak a little bit more about those core drivers then?
Yeah. Of course, the ones that I mentioned. We see great enthusiasm and greater ability to penetrate our long-term care channel, and we're seeing great traction with that and we'll continue to drive on those levers. The other would be the extension of the 34 milligram launch, which is in itself a put up, obviously, but it's a way to refresh the efficacy and safety benefit message, combined with the FDA reaffirmation statement and fueled by external resources now citing NUPLAZID as being a drug of choice in the category for PDP. We'll be leveraging that. Of course, then, and it all is tied together with our large lever, which is closing the PDP awareness gap, of which DTC is one lever of it. We're doing a number of other things to reach consumers and patients to educate them around the symptoms.
Those are the core kind of drivers for creating organic growth in 2019.
Great. Just as a follow-up to that, for your direct-to-consumer campaign, I think previously you had mentioned that there was a skewed effect in the specialty channel that you were observing. Is this still the case, and how do you better target the long-term care channel?
I didn't quite hear the first part of your question.
Just in terms of the effect of your direct-to-consumer campaign, previously you had mentioned that there was a greater effect observed.
Right
For your specialty channel. I was just wondering if that is something that is still the case and how you would go about targeting the long-term care channel.
Right. Great question and good memory. Yes. The first campaign that we had, which was the disease awareness campaign, our research indicated we didn't really see much effect from the long-term care channel. We're evaluating that now on the branded side, and there may be evidence that we could share later that it might be impacting the long-term care channel, but a lot of data we have to still assess that. Our strategy for long-term care is, in terms of increasing penetration, is mainly at the institutional education level. These are systems of care. They're delivery networks, and we are largely integrating NUPLAZID into treatment protocols and it's a highly regulated environment, and so we're working within those regulations to increase the selection of NUPLAZID as a preferred agent in PDP for patients in long-term care. That's going to be more of an education
Kind of systems sell and we're doing other things in regards to patient identifications in long-term care.
Maybe just-
Thank you so much
stated differently. One very significant opportunity in PDP in the specialty pharmacy is the normal doctor office channel of the business, is that there's this very large information gap between patients recognizing symptoms and having a discussion with their physician. There's less of a gap in the long-term care channel. That's why in the long-term care channel, we have other mechanisms for continuing to educate the community on NUPLAZID.
Great. Thanks again.
Thank you. Our next question is from Danielle Brill with Piper Jaffray. Your line is open.
Hi, everyone. This is Niraj Gilat on for Danielle Brill. Apologies in advance if you have already covered this. I hopped on a little late. I just wanted to get a little bit of information about the DTC campaign. Specifically, how long it will be running to and when the full-on effect should be taking place.
Sure. Michael?
Yeah. Well, as I mentioned, we launched a campaign on Thanksgiving Day, and our campaign is going to be running through the first quarter. That's kind of where we're going to stop and assess the program and the effects. We believe we've given it a very large four-month weight on the campaign, and it's a significant investment.
Great.
Just to echo Michael's thoughts. What we'll do when we complete the campaign that we're committed to funding now is we'll assess, of course, as we draw closer to the end of that, what the return on investment is from the campaign, and that some of that assessment will roll past the end of the campaign, and then we'll determine what options we want to pursue going forward for the remaining year.
Got it. Okay, that's great. The last question I had, and this is just sort of for myself, just to remind myself is, when will the ENHANCE trial data be expected?
ENHANCE trial? Yeah, our schizophrenia inadequate response trial will report mid-year.
Perfect. Okay. Thank you so much.
You bet.
Thank you. Our next question is from Alan Carr with Needham & Company. Your line is open.
Hi. Thanks for taking my questions, a couple of them. One of them around the pattern with new starts in your specialty pharmacy. You've had particularly strong first quarters for a little while here. I'm wondering if you can comment on that. Also with respect to Europe, I think you've said in the past that you wanted to wait until you had more data on more indications or at least phase III data on more indications. At what point do you make a decision around Europe? Is it after a second indication or a third one? Thanks.
Yeah. Alan, I'll take the second one then I'll ask Michael to respond to your first question. With respect to the second question, there's no change in terms of our plans for filing outside the U.S. As we indicated earlier, we have frame shifted the filing. The objective is to try to get data on more indications. As we said, as we get more and more data, we'll continue to reassess that. At this point in time, we're continuing to frame shift our strategy outside of the U.S.
Yeah. Thanks, Alan. In regards to the first quarter, I don't think there's any, so to speak, magic with the first quarter versus other quarters, except to say that when we ran the last campaign a year ago and when we ran this campaign, it is important for us to leverage that family gathering in the fourth quarter. That tends to, I think, create more enthusiasm or more patient identification opportunities when we run our campaigns. We've not run a campaign outside of the late fourth quarter or into the first quarter, so I really can't comment on how that would affect other quarters in a comparison basis. Obviously the first quarter is super important for this business in a chronic nature basis because the more patients we can acquire early in the year, the more impact it has to a positive benefit on our revenue.
I just have a little bit of additional color there. I think last year, the first quarter of 2018, we had made a number of adjustments which we spoke to previously in the second half of 2017. I think those adjustments, we were not surprised with the first quarter we had in the first quarter of 2018 because of the adjustments we'd made and the early indicators that we'd seen leading into that. It's a little bit different situation as we're coming into the first quarter of 2019 where we're seeing some really encouraging early indicators of growth, but they're frame shifted a little bit from the indicators that we'd seen last year.
Great. Thanks for taking my questions.
Thank you. Our next question is from Paul Matteis with Stifel. Your line is open.
Hey, this is Nate on for Paul. Thanks for taking our questions. Maybe first, you mentioned you took, I think in December, you took a price increase for the first time this year. How are you thinking about approaching pricing as you start to move into some of these potentially much larger indications?
Michael, you want to take that question?
Yeah. Well, obviously we think there's great potential in the, let's say, largely indications like DRP or MDD and the benefit that NUPLAZID can provide these patients, given the clinical profile, is substantial. If you take MDD, we believe commercially that could be best in class adjunctive therapy for the reasons Srdjan already described. If you take DRP, there's no asset approved there. There's a significant unmet need for patients with psychosis that is not going to have dopaminergic cognitive impairing therapies. We believe that in both categories, significant unmet need.
Conversely, we're talking about payers and looking at situations where large patient populations. We believe in our early work that we've done with payers, given the clinical profile and our ability to use pricing mechanisms with the payers, that we believe we can find that right price point for those different audiences that would be sequenced from PDP to DRP to MDD, potentially. We believe that we can work with the payers to get the right access points for those patient populations. It's important to note, on the MDD side, that would be an expansion of our audience to a more commercial/younger population. In that setting, we have more ability to negotiate in the context of not having a Medicare patient population. That's a different nuance.
Got you. That's helpful. Maybe one more. Can you just elaborate a little bit on the end of the phase II conversation with the FDA in terms of getting alignment on CLARITY as a pivotal? Specifically, I'm interested in how much discussion there was around its SPCD design and in particular, the stage 2 results. Thanks.
Going into the end of phase II meeting, we already knew the position of the division in regard to how they consider the SPCD design and trials and what are the really important elements of that trial that they are particularly looking as an evidence of the efficacy of the drug. All of that came very clearly in the outcome of its advisory committee meeting. We had a very good sense where their position is, considering that our trial was positive overall SPCD design, as well as very robustly positive stage 1, which FDA really consider as the real evidence of efficacy for the drug in the context of SPCD design. There was very little discussion, actually, about use of our phase II trial as one of the pivotal trial. That alignment existed almost before the meeting. That wasn't a subject of any particular exchange.
Thanks.
Thank you. Our next question is from Roy Buchanan with JMP Securities. Your line is open.
Hi, I'm in for Jason Butler. Hopefully one quick question. Just wanted to know how you guys are thinking about the regulatory path forward in negative symptoms of schizophrenia. Thanks.
Great. Srdjan, you want to take that question?
Yes. Well, as we stated, there is nothing approved for negative symptom schizophrenia at this point, there is nothing in an adjunctive paradigm for that. We are obviously considering variety of options in terms of the regulatory path forward, a lot of that will depend on actual data and results when we read out our phase II trial. Based on the strength of that data, we will determine the exact path forward in terms of our regulatory approach.
Okay. Makes sense. Thank you.
Thank you. Mr. Davis, please proceed to closing remarks.
Great. Thank you, operator, thanks to each of you for joining us today. We look forward to updating you on our progress next quarter.
Thank you for your participation in today's conference call. This concludes the presentation, you may now disconnect. Good day.