Everybody, thanks very much for joining us this morning at the Bank of America Healthcare Conference. I'm Tazeen Ahmad. I am a Senior Biotech Analyst here at Bank of America Merrill Lynch. It's my pleasure to introduce our next presenting company, ACADIA Pharmaceuticals. With me is Steve Davis, CEO. We also have other members of the management team, including Michael Yang and Todd Young, for anybody who might have any questions. In this 30 minutes, we'll talk about some questions that we've received about upcoming catalysts, as well as the NUPLAZID launch. Maybe, Steve, you can give us a two-minute elevator pitch on where ACADIA is today and where you're hoping to take the company.
Great. Thanks much, Tazeen, and thanks much to each of you for coming out this morning. I need to start by just recognizing that, as I think everyone in the room is aware, the pharmaceutical business has certain inherent risks and uncertainties, so please see a copy of our most recent SEC filings for a description of how those risks relate to our business. At ACADIA, we are transforming the treatment of Parkinson's disease psychosis. Just for the benefit of those of you in the room that maybe haven't heard this story before, I'll really quickly hit a couple of foundational points here. One is, before the approval of NUPLAZID about a year ago, the treatment of Parkinson's disease psychosis was historically done through the use of atypical antipsychotics used off-label. These drugs are not approved for the disorder.
They have significant side effect tolerability baggage, such as very meaningful sedation. They also work by blocking dopamine, the very thing that Parkinson's patients need more of. We have a situation where of about 1 million Parkinson's patients, about 400,000 of them suffer from Parkinson's disease psychosis, and those that are treated historically have been treated before the approval of NUPLAZID, were treated with these drugs that block dopamine and have the potential to interfere with the in this business. This is truly an entirely new drug. It's an entirely new class of drug. It's the first SSIA, or selective serotonin inverse agonist, approved by the FDA for any disease. We work through blocking serotonin, so we don't interfere with the dopamine therapy that Parkinson's patients are receiving.
In addition, I should just quickly note that we have a very, very favorable tolerability and safety profile that we observed in the clinical studies. While this doesn't always happen, we're very pleased to report that the experience that we have with community physicians is very similar to what we saw in the clinical studies, both on the safety and efficacy side, I should say. Commercial footprint, again, we'll get into a lot more of this, I'm sure, in the Q&A, but just really quickly, we target about 12,000 neurologists and psychiatrists. Many more neurologists than psychiatrists treat PDP. We have a sales force of about 155 sales reps. We're now on all Medicare Part D formularies and 94% of commercial covered lives at this point in time.
Of course, through the launch of the drug, you do many things to educate the medical community, educate patients, and in the case of PDP, educating caregivers is also very important. There's a certain sequencing of things you need to go through. You need to educate the medical community first, at a certain point, you can begin to pull levers for other things, such as direct-to-patient activities, which we announced we initiated a significant campaign at the beginning of this quarter. We're at a point in the launch now where we can begin pulling some of these very meaningful levers to activate and educate patients and caregivers now. As I think most of you know, pimavanserin represents an opportunity in many other disorders other than Parkinson's disease psychosis. This is just a brief synopsis of the other significant studies that we're running.
Just a couple of high-level comments here. One is antipsychotics frequently are approved for multiple indications. We think we've got very, very attractive opportunities here. These are all very substantial markets, very substantial unmet needs. Just really quickly, I'll just click through these. Of course, we're approved in Parkinson's disease psychosis. We reported in the fourth quarter of last year positive results from a phase II Alzheimer's disease psychosis study. We also initiated last year a study in Alzheimer's disease and agitation. Just one quick comment about these three indications. These three indications are all monotherapy indications. In all cases, before the approval of NUPLAZID in PDP, there was nothing approved to treat these patients. ADP, I should just quickly note, is very similar to PDP in many respects. There are two off-label atypical antipsychotics you use to treat these patients.
While you don't have these patients taking dopaminergic therapies, the primary symptom of Alzheimer's, of course, is cognition. These atypical antipsychotics have a cognitive impairing effect on these patients, which unfortunately then makes the principal symptom these patients suffer from worse. In that sense, it's very similar to the situation in PDP where when patients develop psychosis, you can worsen the primary symptom of the disorder. Same applies to Alzheimer's disease agitation, where atypical antipsychotics are often also frequently used off-label. On the other side of the slide here, these are all adjunctive therapy applications that we're exploring. Schizophrenia, inadequate response. Of course, there are a lot of drugs approved to treat schizophrenia. They're mostly generic now. However, about a third of patients don't adequately respond to this.
About a third don't respond at all, about a third don't respond adequately, about a third do adequately respond to monotherapy. We have a situation today where patients are taking multiple atypical antipsychotics in many cases, these drugs are all brothers, sisters, and cousins of each other. You have a situation where you take one drug, later on another drug that's very similar to it. While it's questionable whether you're getting added efficacy, you're definitely getting added side effects. We think with our very unique mechanism of action that works very differently than any other antipsychotic, we have an opportunity where we don't have to displace cheap generics, but we can go on top of these generics. We think we have an opportunity to address this unmet need. Schizophrenia negative symptoms, here too, adjunctive therapy.
In this case, there is nothing approved for the treatment of negative symptoms of schizophrenia. We think this is certainly a very vast and dramatic unmet need, and we think pimavanserin may provide a very unique solution there. Major depressive disorder is the last major indication that we're presenting today. Here, when we speak to physicians, they often talk about the use of atypical antipsychotics, which are approved as adjunct therapy. Many of them are for the treatment of depression. You have all of the side effect baggage those drugs have. In addition, when we speak to key opinion leaders in the space, we frequently hear that they would like to push the dose higher. They feel like they could get greater efficacy, but they have concerns based upon the safety and tolerability profile of those drugs. Really quickly, we're headquartered in San Diego.
We have about 400 employees. We ended the first quarter with $469 million in cash, we have a very strong balance sheet. Key priorities for the year are first and foremost to continue the successful execution of the launch of NUPLAZID in the United States, to advance our Alzheimer's disease program now into phase III. We'll do that in the second half of this year. Then to continue to advance these other major programs that we initiated last year. One final footnote on these programs. While some of them we characterize technically as phase II or phase III, we designed these studies all to be registrational quality studies, and they're very substantial studies. I think the distinction between phase II and phase III is a little bit misleading here.
They're all very substantial studies, we're making a significant investment where we see great opportunity.
Okay. Thanks for that overview. Let me start by asking you this question. You are relatively still early in the launch, in PDP. We're modeling that you've got sales of, let's say, $90 million-$100 million this year, ramping pretty aggressively after that. Based on your experience of following CNS launches, and Michael, we'd love to hear your thoughts on this topic as well, what do you say to people who will say, "You're only going to do, at best, let's say, $100 million of revenue this year. Your market cap is, let's say, $3.5 billion." Why is this a good time to invest in ACADIA? I guess, are you having a launch that's within your expectations?
Yeah. Let me start with the last question. I mentioned to a group this morning that every time I say this, I pause and think about it to make sure it's still true. In fact, it is. The thing that's been most remarkable about this launch is how closely it has followed our plan. We've continually exceeded the plan, but it has really tracked very close to our plan, what we expected to happen. Of course, there's some course corrections you make along the way with any launch. In terms of the experience physicians have with the drug, our market research tells us they're highly satisfied with the drug. They like the drug. The drug works really well. The safety and tolerability profile is very similar to what we saw in the clinical study. There's no new news there, and that's good news.
From the payer side, the payer reaction has been almost exactly what we expected. From a fundamental perspective, all that's gone very well. Most importantly, we said when we launched, we do care about revenues in the first quarter, the second quarter, third quarter of sales, but that's really not our primary objective. Our primary objective is sales in 2018, 2019, 2020, and beyond. Anytime you have a paradigm shift, such as that represented by NUPLAZID, it does take some time. You need to build a foundation. Physicians segment out into different characteristics. Some of them are early adopters. Some of them are very resistant to changing what they learned in medical school. It does take time and repetition of message to get physicians thinking in a different way with new available therapy, and then actually impacting their behavior.
As I mentioned, there's a certain sequencing you go through in terms of launching a drug, and we're at a point now where we've got more and more levers to pull. Activating patients and caregivers through the direct-to-patient campaign that I mentioned is one of them. We feel great about the launch, and we're really thrilled with how things have gone up to this point in time.
Maybe Michael, you are new to the company, but you come with a wealth of experience in the CNS space from Janssen. Can you talk to us about your thoughts about the launch so far? Would you describe this launch as being a slow launch? Can you give us examples of other CNS launches which have turned out to be quite successful? Do they start off with the hockey stick ramp, or is it something that happens gradually?
I think that the first thing to consider, as Steve mentioned, is this was a paradigm shift, not only just in regards to a non-dopaminergic drug for psychosis, which normally they would use antipsychotics, but also Parkinson's physicians are highly focused on movement disorders and have not been as focused on non-motor symptoms, of which psychosis is one of those. A year later today, we sit in a great place from an awareness of not only NUPLAZID, but also the importance of treating non-motor symptoms. I think where we are now is we've established, as Steve indicated, a nice foundation of awareness and education about what the drug can do. Certainly those that have moved from trialists to adopters are getting a really robust experience with it. Clearly, our commercial priorities are to increase the people going from trialists to adopters.
In addition, I think we can accelerate the awareness of the conversation in the office by activating the voice of the caregiver. There's kind of a tripod here between the physician, which we spent a lot of effort on, the patient who may not have the insight that they're having the problem, and then there's the caregiver. If we can bring that language into the office, I think we can unlock more potential for the brand to be used. Principally because our research shows that physicians are pleased with the product and would grant the product if discussed. That's kind of a really robust formula for increasing the sense of urgency and awareness about the disease.
Do you think you've tapped into the low-hanging fruit already, or is there much more left?
Well, I think in any new product at launch, physically, you're always going to source patients really from the existing base of patients that are unsatisfied or not doing well. Certainly, the majority of our patients to date have been switch therapies. That's the low-hanging fruit, if I heard you say it right. Newly diagnosed patients who are what we would call disruptive symptomology, we're getting a more than fair share and probably a preferential share with NUPLAZID there. Our ratio is about 70/30. The newly diagnosed patients are a function of the presentation rate into offices. As we unlock that unmet need, hopefully we can stimulate more of that conversation.
How are physicians being made aware of the drug? Outside of going to medical meetings, how is your sales force kind of trying to educate them?
Well, as Steve indicated, we're targeting 12,000 physicians, obviously really focused on high Parkinson's potential physicians, movement disorder specialists. We made an investment in long-term care to penetrate that market. One of the principal reasons why a Parkinson's patient is admitted to a long-term care facility is some of the more hallucinations and delusions. That's a rich area for us to penetrate, and we're working on that commercially. Of course, our medical affairs and our publications and our awareness campaigns are all very active and proving to be efficacious.
The 20 or so reps that you've hired to focus on the long-term care market, are they now in the field promoting?
Yep. They're through training. They're in the field, moving beyond account transfers, and actually starting to operationalize. It's about 25 people. We have a total footprint of about 50.
Any anecdotal feedback you can share?
Well, I would say this. We had a fairly robust long-term care success rate. What I mean by that is oftentimes a neurologist in a regular community setting is the consulting neurologist for long-term care. We were hearing positive stories. Now that we've put these people in place, we're getting more of what I would call institutional protocols, and I don't mean protocols clinically, but getting the drug stocked, making sure we know where the consultant pharmacy is. There's an ecosystem in long-term care that is quite different than the normal ecosystem. We're engaging in that now.
Do you think, based on your previous experience, that it's easier to have durability or continuation of use in a patient population that's more long-term care versus those patients that may not necessarily be hospitalized or being visited by a nurse?
I think it's a little too early to tell. I think anecdotally, I would report that those patients that were previously having hallucinations and that are on our product, anecdotally, we're hearing early evidence that it's a pretty sticky experience. The patients are tolerating the medication. They like the effect they're getting. Our distribution network is pretty easy. That's on, I would call, the retail or community side. Your question with regards to long-term care, obviously there's a built-in adherence mechanism because the patients really are being monitored by a nurse and a pharmacist. There's a built-in compliance. I can't say that we have evidence yet on how that's going to play out. Obviously, those are sicker patients, so there are a lot more complications, and they actually do have a shorter lifespan. We have to really trade those two off right now.
Uh-
Maybe just to echo something that Michael mentioned. We get asked a lot about persistence and compliance. It's a little bit too early, I think, for us. We just don't have enough data yet to have a real good bead on that. What we can say is with drugs in general, particularly when you go through a launch, there's a certain number of patients that if you're distributing through retail distribution, are never going to make it to the pharmacy or never pick up the script. There's a pretty high abandonment rate with those patients. We don't have that because we're distributing through specialty pharmacies, so when the physician writes a script, it goes directly to the pharmacy.
Nonetheless, you'll have some patients who, even in that type of model, who just won't be as committed to therapy, the same patient that wouldn't have picked up their script at a retail pharmacy. After that, you have for the first month or two, you have a certain degradation. Our drug didn't work for every patient in clinical studies, and it doesn't in practice either. It worked for about three-quarters of the patients. Then some patients will have early AD. There's a certain degradation through those first couple of months.
Beyond that, our sense, at this very early stage, is we're pretty sticky once we get past that early degradation that every drug has. Our sense is that those curves continue to degrade because ultimately, every patient dies or comes off the therapy for some other reason. Our sense is once we get to that level of getting through the early degradation, that it's pretty sticky.
We had done a doctor survey of 50 physicians now a couple of months back that was based on use of, let's say, first six months since launch. The discontinuation rates that were cited in that survey were about 12% at the time. Can you talk about what the discontinuation rates are for the antipsychotics that are currently being used?
I thought you were going to ask our discontinuation. We haven't commented on that. I will tell you, we have looked at other antipsychotics and tried to get as close an image as we can to our situation. It's not uncommon. Let me go back to that patient journey I was referring to. It's not uncommon for patients to abandon 30% of the scripts, that again, they just never make it to the pharmacy or they never pick up the script. Once they go on therapy, you have about another 30% usually that fall out during that first month or month to two. Again, that's just the natural patient journey that patients go through for these kinds of drugs, and that is what we typically see with the other antipsychotics.
I would just caution any comparison between the antipsychotics and NUPLAZID if you're looking at antipsychotics in their primary treatment for schizophrenia.
Right
Which is a completely different patient population.
Right.
Having some experience in that, there's a whole set of different reasons why patients don't adhere. It's one of the reasons why we even innovated on long-acting therapies. Antipsychotics in the Parkinson's patient versus ours, I would venture to say that a lot of those are the very disruptive patients who are seeking sleep or chemical, almost restraint. They're not modifying maybe in the disease, not modification, but the way we treat hallucinations and delusions with NUPLAZID is slightly different.
Okay. One other update that you made on your call recently was that you announced that you're moving away from 30-day free trial samples now to 14-day ones. Steve and maybe Michael, how did you come to that decision? Well, still early in the launch. What are you seeing that gives you confidence that you don't need to offer that length of free trials anymore?
Yeah. I'll hit it at a high level. Michael, feel free to jump in. I think when we launched, we wanted to make certain that there was no disruption of therapy. Once a patient left a physician's office, we wanted to get them on therapy as quickly as possible, and wanted to make sure there would be no disruption of therapy. That's still true today. What we found, though, is we've gotten on more and more formularies. The time to get through the adjudication process is now down to a point where we don't need to give a 30-day trial today. We felt like continuing to do that would put a little bit too much slack in the system.
We do want to make sure we are conscious of the amount of time between the moment a patient leaves the doctor's office and the time they get on paid therapy coming from the specialty pharmacies. The intervening time is the period of time that's managed more by the hub in getting free drug to them. I think it's at a point in time now where 14 days gives us the right balance between making certain that we have enough time, but keeping a little bit of positive tension in terms of getting them onto paid drug. I should also mention, like we did with the 30-day program, we have a bridging strategy. If 14 days is not enough, we have an automatic 14-day that's already pre-approved by the physician on the treatment form, and we'll institute that if needed.
How many times can that 14 days be renewed for one patient?
Well, on the treatment form itself, one time.
They can get a 14-day supply, they can get another 14-day supply that's pre-approved. If we have a patient that would be an exception to the rule and they're still not on therapy, we would simply go back to the physician's office, get them to authorize another extension, and we would keep them on therapy. At a certain point, if it's clear that this patient just is not, for some reason, this would be an extraordinarily rare thing, but for some reason, they're just not going to be covered, then we'd have to do a financial assessment and see if they qualify for one of our free drug programs.
Okay. Maybe just switching gears in the last couple of minutes. You've got some relatively large-sized trials that are enrolling for indications beyond PDP. Can we talk about Alzheimer's disease agitation and Alzheimer's disease psychosis? Why do you think those are good fits for NUPLAZID, and how do you think about the competitive landscape? Because unlike PDP, there are multiple other companies trying to pursue those indications as well, and how do you see the ACADIA strategy in the midst of all that?
Yeah. I will try to do it quickly since we're running short on time. Alzheimer's disease psychosis, we announced the 019 data. We're very bullish on that disorder. I think we've got a great opportunity there. I think there are more commonalities than differences between PDP and ADP. Quite frankly, as I mentioned earlier, we're just a vastly different drug. We just don't have the sedation, the side effect baggage that these drugs have. Michael mentioned many times they're referred to as kind of chemical restraints or chemical straightjackets. They kind of numb your personality. They can be very sedating. Daytime sedation is just a big issue with these drugs.
We're very different from that perspective, and we've got clinical evidence of a very robust antipsychotic effect in that patient population. In Alzheimer's agitation, we don't have that clinical data yet. We've got a lot of supporting data, a lot of really positive indicators suggesting that's a very good disorder to go after, but it suffers from all of the same issues today that Alzheimer's disease psychosis suffers from, and most of the other therapies being pursued are more similar to the existing antipsychotics than different. We're very different.
Which do you think could be the bigger indication for you, agitation or psychosis?
Yeah, it's a great question. They're both very substantial. They're fairly distinct. There is about a 25%-30% comorbidity.
They're fairly distinct, and I think they're both very significant unmet needs. Again, the agitation we're talking about is not the kind that you might experience if you miss your flight today. It's a very pervasive.
You never know.
Yeah. Well, it could be that severe, but it's a very pervasive-
life-altering type of agitation.
I know we're basically taking one at a time, Todd, can you give us an idea about your cash? How far does it take you based on expectations for expenses?
Sure. We finished the quarter with just under $470 million in cash. Overall, we feel very good about our balance sheet. Obviously, we'd expect sales to continue to grow over the course of the year. As mentioned, the SG&A expense here in Q2, we're going to get to kind of full run rate as we have added the long-term care sales force, which is the differentiation between Q1. On the R&D side, obviously, the back half of the year will continue to go up incrementally as we launch our phase III trial for the Alzheimer's disease psychosis, but feel like we're approaching the right levels on that from sort of the material jumps we've made in 2017 versus 2016.
Okay. I think we're out of time, so thanks everybody for coming, and thanks very much, Steve, for presenting.
Yeah. Thank you.
Appreciate it.
Thank you.