Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals second quarter 2017 financial results conference call. My name is Imani, and I will be your coordinator 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 zero, and a coordinator will be happy to assist you. I would now like to turn the presentation over to Lisa Barthelemy, Senior Director of Investor Relations at ACADIA. Please proceed.
Thank you, Imani. Good afternoon, and welcome to ACADIA's second quarter financial results conference call. This call is being recorded and an archived copy will be available on our website at www.acadia-pharm.com through August 22, 2017. Joining me on the call today from ACADIA are Steve Davis, our President and Chief Executive Officer; Michael Yang, our Executive Vice President and Chief Commercial Officer; Todd Young, our Executive Vice President and Chief Financial Officer; and Dr. Serge Stankovic, our Executive Vice President and Head of Research and Development.
Before we proceed, I would first like to remind you that during our call today, we will be making a number of forward-looking statements, including statements regarding our strategy, the timing, results, or implications of clinical trials, other development efforts or regulatory approvals, the benefits or advantages to be derived from future approval of and the future development or commercialization of our products and product candidates, in each case, including NUPLAZID or pimavanserin, and future commercial and financial results. During our call today, we may use words such as anticipate, believe, could, expect, intend, may, plan, potential, predict, project, should, or the negative of those terms, and similar expressions that convey uncertainty of future events or outcomes to identify these forward-looking statements.
These forward-looking statements 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 from those contained in the forward-looking statements. 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. ACADIA disclaims any obligation to update these forward-looking statements. I'll now turn the call over to Steve Davis, our President and Chief Executive Officer.
Thank you, Lisa, and good afternoon. Today, I'll comment on the continued growth of NUPLAZID together with an update on our program in Alzheimer's disease psychosis, or AD psychosis. Following my remarks, Todd will review our second quarter financial results. Michael will highlight our commercial results and priorities, then we'll open it up for Q&A. By the way, Serge is also on the call today, and he will also be available to answer questions. Today, we're focused on delivering on strategic priorities that we believe will drive long-term value. Our highest priority is the continued successful commercialization of NUPLAZID. Our goal for NUPLAZID is to be the standard of care for patients with PD psychosis. Our second key priority, of course, is the advancement of NUPLAZID in the five additional indications we are currently pursuing.
This includes advancing our AD psychosis program into phase III in the next couple of months, together with execution of ongoing studies in schizophrenia inadequate responders, schizophrenia negative symptoms, Alzheimer's agitation, and major depressive disorder. Turning now to NUPLAZID. A little over one year post-launch, we have a great appreciation of the significant needs that exist for PD psychosis patients, and that understanding reinforces our confidence in the market potential and the ability for NUPLAZID to address those needs. In the second quarter, we saw strong performance. NUPLAZID pro forma net sales in the quarter were $26.9 million. With the change to the sell-in accounting method, we also booked a one-time $3.6 million in deferred revenue. Thus, we are reporting aggregate net sales of $30.5 million in the second quarter. Let me briefly note some key NUPLAZID highlights.
We are seeing positive momentum across our business, both with new and continuing patients and the addition of new prescribers. Michael will comment a bit further on this in his remarks. We increased our penetration into long-term care with the deployment in early Q2 of 25 additional sales reps. Physician awareness and the intent to prescribe continues to grow, and we made important inroads on caregiver and patient education about PD psychosis. Access and reimbursement remains strong for NUPLAZID, with full Medicare coverage and commercial coverage now over 94%. We are developing a single 34-milligram capsule that we plan to introduce into the marketplace in the second half of 2018. As you know, 34 milligrams is the approved dose. This will replace the two 17-milligram tablets that we launched with. We're seeing what appears to be very good duration of therapy with NUPLAZID.
Although we see some fall off in patients in the first month or two after starting therapy, which by the way is quite typical of CNS drugs, once we get past this initial period, the continuation rate is looking very encouraging. Overall, patients are having a positive experience with NUPLAZID. They like the way the drug works. They're tolerating the medication very well, and the distribution network is relatively easy. As a result of the positive dynamics we're seeing, we believe NUPLAZID will continue to experience good growth for the remainder of the year and expect net sales for the full year 2017 to be in the range of $105 million-$115 million. Let me turn now to our program with pimavanserin in AD psychosis. Pimavanserin is, of course, the generic name for NUPLAZID.
Based on the positive phase II data announced last December, we're excited about the potential of pimavanserin to address psychosis in patients with Alzheimer's. Currently, there is no drug approved by the FDA for this disorder. We previously stated that we would hold an end-of-phase II meeting with the FDA around mid-year, and we've now done that. We went into the FDA meeting with data from our phase II work and a thoughtfully constructed clinical plan for completing development. I'm pleased to report that we came out of the meeting with the same plan that we went in with, and we feel like we have a very clear path toward registration. We plan to commence the phase III program in the next couple of months and look forward to sharing more details about the program at that time.
Our abstract on the phase II study of pimavanserin in AD psychosis was recently accepted for presentation in a symposium at the Clinical Trials on Alzheimer's Disease, or CTAD annual meeting. This meeting will be in Boston in the first week of November. At the CTAD meeting, scientific experts will address the importance of serotonin in AD psychosis. They will also discuss data from our phase II study, and they'll review these results in the context of historical Alzheimer's disease psychosis trials. As we look ahead, we're excited to share more data on AD psychosis, and we're also excited about continuing to advance our four other CNS programs in development. With that, I'll turn the call over to Todd, who will discuss our second quarter financial results.
Thanks, Steve, and thanks, everyone, for joining our call. I'll discuss our second quarter financial results as well as net revenue guidance for the full year 2017, plus expense guidance for Q3. For first half results, please see today's press release or our 10-Q filing. For the second quarter of 2017, we recorded $30.5 million of net product sales using the sell-in accounting method. We transitioned to the sell-in method in Q2, which means we are now recognizing revenue at the point of sale to our specialty pharmacy and specialty distributor partners rather than waiting to recognize revenue when a specialty pharmacy dispenses NUPLAZID to a patient or when a specialty distributor sells NUPLAZID to a long-term care pharmacy or government facility.
Our change to the sell-in accounting method from the sell-through accounting method required us to recognize the $3.6 million of deferred revenue that we had accumulated on our balance sheet as of March 31, 2017. This one-time catch-up amount will not occur in future quarters. In our press release this afternoon, we provide a table that states what our net revenues would have been if we'd been in the sell-in method since launch. As the table shows, our Q1 net revenue would have been $16.8 million. Our Q2 net revenues under the sell-in method was $26.9 million, excluding the one-time adjustment for the accounting method change.
The $10.1 million increase in net sales under the sell-in method was driven by the following items: the underlying demand growth for NUPLAZID from both new patients and continued refills from our existing patient base, a one-time benefit from the change at the start of Q2 in our free drug program from 30 days to 14 days. The price increase we implemented at the start of Q2 and improvement in our gross to net adjustment from approximately 26% in Q1 to approximately 18% in Q2. As noted on our last call, we expected Q1 to have the highest growth to net adjustment of the year as Medicare patients renew and go through the donut hole starting at the beginning of each calendar year. As we move to the second half of 2017, we feel good about our current cash and investment securities position of $417 million.
From a cash flow perspective for the second quarter, cash used in operations was approximately $50 million. On the expense side of the P&L, total operating expenses, including cost of goods sold for the second quarter of 2017, were $98.9 million. This amount includes $18.2 million of non-cash stock-based compensation. Our R&D expenses increased to $34.2 million in the second quarter from $20.5 million in the second quarter of 2016. This year-over-year increase in R&D was driven by the expansion of our CNS development team and the initiation of clinical studies in four new CNS indications. Our SG&A expenses increased to $61.5 million in Q2 2017 from $50.8 million in the second quarter of last year. This year-over-year increase has been driven by the timing of the NUPLAZID launch in the second quarter of last year.
As Steve noted, for the full year of 2017, we expect net revenue to be between $105 and $115 million, which includes the Q2 impact of the one-time $3.6 million adjustment associated with the change to the sell-in revenue recognition method. In the third quarter of this year, we expect our R&D expense to be in the low $40 million range
Our SG&A expense to be in the high $60 million range as we continue to invest in the lifecycle management of pimavanserin and the continued growth of NUPLAZID in PD psychosis. As a reminder, all expenses provided in our press release and in the call today are US GAAP amounts that include non-cash stock-based compensation. With that, I'll turn the call over to Michael.
Thanks, Todd, and good afternoon, everybody. As Steve and Todd mentioned, we saw strong quarter-over-quarter growth and good uptake in underlying demand. Our goal for NUPLAZID is to be the standard of care for PDP patients by adding new patient starts at a healthy rate while keeping patients on treatment longer. We continue to focus significant effort on working with physicians to identify appropriate new patients. In addition, we have strengthened our commercial effort on caregiver and patient engagement, as well as optimizing our approach in the long-term care market segment. I would like to thank our commercial and medical teams for their tireless efforts in educating physicians on the appropriate use of NUPLAZID to benefit patients with PDP. We're making great strides in our promotional efforts for NUPLAZID. For example, we have observed in our most recent survey of physicians we target a very healthy trend.
Between March and June of this year, the number of these targeted physicians indicating that NUPLAZID is becoming their first-line pharmacological choice for treating PDP increased from 18% to 30%. Among movement disorder specialists, this increase was up to 33%. As I highlighted in the past, the caregiver is a key stakeholder in the dialogue and treatment process for PDP. While there is broad awareness among physicians that Parkinson's disease is a chronic and progressive disorder in which symptoms such as psychosis may emerge over time, the market research shows that patient and caregiver awareness of psychosis as a condition of PD is actually quite low, with awareness percentages hovering in the single digits. We need to change this. During the last quarter, we executed well over 150 programs executed at caregivers and patients designed to raise awareness of the hallucinations and delusions associated with Parkinson's disease.
Pre and post-program market research suggests that these programs are beginning to bear fruit. Unaided consumer awareness of psychosis increased significantly following participation in these programs, with around 70% of consumers indicating that they initiated the conversation with their physician about PDP symptoms and NUPLAZID as a treatment choice. We knew at launch that long-term care, or LTC, would be an important segment of our business, and we quickly assessed that we were not resourced with enough scale to capitalize on that opportunity. In the second quarter, we trained and deployed an additional 25 people to this important channel, bringing our total number of LTC reps to 50. As a reminder, we now have a total of 155 sales reps.
As we've commented before, Parkinson's disease patients presenting to an LTC facility often have psychotic symptoms, which is a common reason for admission, and as a result, represent a high potential source of new patient starts. I'm pleased to report that CMS released new nursing home interpretive guidance, which for the first time recognizes PDP. This is an important development, as recognizing PDP as an enduring progressive disease will help our efforts to advance the appropriate use of NUPLAZID for residents in the LTC setting. This guidance will go into effect later this year. Initially, we estimated our specialty distributor channel, which includes LTC, the VA, and TRICARE, would represent about 20% of our business. Today, it represents a quarter of our business.
Given the favorable access and reimbursement for NUPLAZID at the beginning of the second quarter, we moved to a 14-day free product program from our original 30-day program. I'm pleased to report that this transition went smoothly. In addition, we saw a favorable patient response to our additional staffing of nurse educators at Acadia Connect, who can help guide patients through the drug and patient access process. In summary, we continue to make significant progress towards making NUPLAZID the standard of care for patients with PD psychosis. We are encouraged by the enthusiasm for the product and the positive impact NUPLAZID has had on patients and their families. With that, I'll now turn the call back over to Steve.
Great. Thanks so much, Michael. I may have missed it, but I just wanted to clarify that cash use in operations was approximately $59 million in the second quarter. Going to closing, we continue to make significant progress toward achieving our top priority of making NUPLAZID available to every PD psychosis patient who can benefit from it. NUPLAZID's unique mechanism of action and pharmacological profile represent a transformational innovation in the treatment of psychosis in PD and make it a strong candidate to reduce the burden of the other major CNS disorders we are studying. We expect 2017 will be another important year of progress and growth for ACADIA.
Thanks, Steve. At this point, we will begin the Q&A portion of our call. We ask that each person limit themselves to one question and then re-queue with any additional questions. Operator, please open the call for questions.
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. Press star one to begin. Please stand by for your first question. Your first question comes from the line of Tazeen Ahmad.
Hi, thanks for taking my questions. Maybe a quick one modeling first. I'm just wondering if you could tell me, I know that the gross-to-net for this quarter was 18%. Are you expecting that to be the going run rate, or could it still fluctuate? You're still relatively early in your launch. Want to get a better sense of that for the model. Also, Michael, can you just give us a sense of comparison-wise, the steepness of this launch trajectory relative to some of the other products that you've managed in the CNS space? Also, what changes, since you've come aboard, have you seen the most impact on sales from? Thanks.
Todd, do you want to take the first one?
Let me grab the first one, Tazeen. We expect gross-to-net for the back half of the year to be in the mid-teens range.
Okay. Would that be your go-forward number?
Yeah. As we've mentioned in previous calls, it's going to fluctuate over the course of the year. Q1's always going to be the highest quarter of the year, just given the resetting of the donut hole on an annual basis for patients. All patients that we have on product at the end of the year will all start over. Just given the installed base of patients, that will always drive up the gross to net percentage in Q1. The flip side of that is by the time we get to Q4, typically the patients will have gone through the donut hole, except for new patients that we're acquiring during that quarter. It will fluctuate over the course of each quarter, but that's the guidance for the rest of this year and embedded in the financial sales numbers we gave for the rest of the year.
Right. Okay.
Hey, Tazeen. Listen, I think that we're real pleased with the rate of patient and physician acquisition we're getting. We're still getting new patients every week, every month, and moving more of those physicians from trial and dabblers into stronger adopters. A lot more that we can still accomplish. Of course, the rate of growth is somewhat a function of patient identification for new patient starts. Obviously, there's a high degree of patients who are treatment experienced, and we're trying to convert those, but also getting more and more treatment naive or patients who are newly diagnosed is really important. That's just blocking and tackling, which is really one of the things I think we're seeing is from a commercial playbook perspective, really sharpening our focus on the kind of who, what, where's and when's of what we're doing commercially.
Obviously, the long-term care investment that we're making, we're still on the growth curve there. I think we're optimistic about that. As I mentioned, we're seeing pretty good traction with our caregiver and patient engagement strategy.
Okay. Then maybe the last question, Steve, is when should we expect to see details, not only for the Alzheimer's programs, but some of the other programs that you've talked about that are entering the clinic?
Yeah. Let me take the Alzheimer's program first. You'll see more details on that when we commence the phase III program, which as I mentioned, we expect to be in the next couple of months. Then you'll see even more details at the CTAD meeting in Boston the first week of November. I think in terms of the other programs, we're continuing to prosecute the enrollment of those programs, they all started at the end of last year, we indicated at the time that while we need to get some enrollment history ourselves to more precisely predict this, most of these kinds of studies in this space and of this size take two to two and a half years to enroll. That gives you a general idea of when you might expect to see data from those studies.
Okay, in terms of the next data readout for any of these studies, it wouldn't be until 2018, second half the earliest, correct?
Yeah, I think that's right. I think that's right.
Thanks.
At the moment, the depression study is probably looking like the most likely study to read out first. Serge is nodding his head. We would expect the earliest to be in the second half of 2018.
Thanks.
Your next question comes from the line of Ritu Baral.
Hi, guys. Thanks for taking the question. Just some questions about the sales force effort right now. Steve, early in your prepared remarks, you mentioned that there was a sort of an early discontinuation phase. What are you seeing as the main reason for these early discontinuations? Then second question about the new reps, the 25 long-term care reps. Would you guys say that they're sort of running at full speed right now, driving the long-term care business? If not, how long it would take to sort of get there? I have a follow-up.
Yeah, I'll take the first one, then I'll pass the second one about long-term care reps onto Michael. I think, as is the case with any drug in the CNS space, which is a little bit different than, for example, an enzyme replacement therapy for ultra-rare life-threatening disease or oncology. In the CNS space, typically the most common reason that patients discontinue is they just don't have an adequate response to therapy. In our phase II studies, although we had highly significant and very compelling efficacy, even with our drug and even with those kinds of results, we had about 26% of patients that did not respond to therapy. Our drug has a very favorable safety and tolerability profile, particularly relative to other antipsychotics. Even with that very favorable profile, we still had about 8% of patients that discontinued due to adverse events.
You're going to have a certain fall-off rate, and that usually happens a lot steeper in the first month or two with any drug of this sort. I would say ours looks a lot like the other drugs from that simple perspective. The thing that we're very encouraged by is once we get past that initial phase of drop-off, the drug appears to be very sticky, and I think that's just a reflection of what we believe is the very high performance of the drug in this patient population. It works well, it's very well-tolerated, and I think, as a result, patients, it looks like they're staying on therapy very well.
Hi, Ritu .
Hi, Michael. Thanks for taking the question.
No problem. In regards to LTC, operationally, we're fully staffed, trained, management team's in place in the second quarter. We, I would say, operationally are at full strength. Obviously, we're working through call lists and targeting and demand generation and sharpening our executional focus as we go into the second full quarter and the third quarter. In the second quarter, they were fully deployed and making an impact.
Have they worked their way through those call lists? From our last conversation, from what I understand, there's multiple call points within a single long-term care facility. Do you think that your reps have worked their way once through? How many times do they have to go through the call lists before they really start moving the needle at a certain center?
Yeah, that's a great question. I would think that the way to think about it is it is a system sell on a lot of cases where there are multifactorial call points, whether it's the consultant pharmacist, the consultant physician, the nursing staff, the specialty distributor, and all of those things are a complex and evolving ecosystem in each system. You should know that we, if you recall, we had about 25 reps in the field. Some of those geographies and systems are existing and were well oiled, and then some were transitioned and some are new. It's kind of a challenging thing to answer on a macro basis as to where we stand on all those systems. Typically, it takes more than one rotation through to make an impact.
I think we're very encouraged by the signals we're seeing in the second quarter, and I expect those signals are going to continue as it relates to the impact on LTC.
Got it. Last quick question. Can you address the current status of any recent sales force turnover and open positions?
Yeah, sure. I'm real pleased to report that we're full strength. I don't think we have any lingering problem areas, opening areas, we're at full strength.
Great. Thanks for taking all the questions.
You bet.
Your next question comes from the line of Piper Jaffray. I'm sorry, from Charles Duncan.
Good afternoon everyone. First of all, congratulations on the successes in the quarter. Steve, quick question for the commercial side. If you thought about the success in the quarter, are you most impressed with the number of new patients or the number of patients who are filling refills or even more broadly, the number of new prescribers?
Let me take a first stab at that. Then I'll ask Michael if he'd like to add any additional color. We're seeing positive growth in dynamics on all three of those fronts. It's kind of hard to say what we'd be most excited about. I think the thing that it's been a pretty consistent theme from the beginning in terms of growth on all those parameters. The one thing that we just didn't really have much clarity on was kind of the duration of therapy or the days of therapy element, because you need a certain amount of time to observe these patients on kind of a cohort type of basis. We still need more data on that front, but we're looking at patients now that have been on therapy for over a year. That's really encouraging.
I guess that's maybe the newest insights that we have that we haven't had in the past. Again, I just want to stress it's early. We'll continue to monitor that. We're not surprised by it because, again, I think it's reflective of what we see in the market research we do with very high levels of satisfaction, both with physicians as well as patients. This kind of corroborates that market research and is consistent with those results. Michael, anything else?
Yeah. I would just add that, to Steve's point, the real-world experience that we're seeing with the product is one where there is a high degree of satisfaction. We continue to hear stories of both physician and patient satisfaction with the kind of efficacy and response they get. We find the drug. The physicians find the drug to be well-tolerated. That is overcoming one of the most important elements when we look at our market research. On one hand, there's a high degree of future expected use in almost all of our segmented cohorts. On the other hand, lack of familiarity and comfort with the drug is one of the reasons why they haven't decided to use or haven't used more. That's just a function of how many times you turn the turnstile on patient usages and getting comfortable, and that's where we are.
We're trying to spin the meter so that patients get on it, physicians get comfortable, the drug performs, and it's a virtuous cycle. To Steve's point, all those indicators are going green. It's just a matter of processing it through the process.
That's helpful. Just one quick pipeline question. Realize we're going to get a lot more details in the future, but I'm excited to see pimavanserin move forward in ADP. I'm wondering if you could provide any additional color on that plan. Is it two studies in the phase III program? Then, kind of rough order of magnitude, given the size of AD versus PD, is it going to be a much larger program?
Great. I'm going to let Serge answer that.
Hi, Charles. Let me first say that, as we said earlier, we now have met with FDA, presented our phase II data, and presented our proposal for the phase III program. I'm happy to say that they align very closely with our proposal. Essentially, the proposal we put in front of them was accepted, and we are quite encouraged with that. Also, I would say that brought us closer to the initiation of the program because we started many activities at risk prior to the FDA meeting. Their acceptance of our proposal enabled us to really initiate this program earlier than that ordinarily would be the case. Also, we look at that discussion we had with FDA as another external validation of the data, our phase II data.
In the process of preparation for the program, we had a multiple discussion with KOLs, experts in Alzheimer's disease psychosis, and they saw the data in very much the way how we interpreted the data as a strong signal and as a good indication. We will be releasing the full detail on our phase III program once we initiate the program, as Steve said, in a couple of months. I'm looking forward to present all the detail of the program and also the details on the phase II study results.
Appreciate that, Serge, Michael, Steve. Thanks for the added color.
Great. Thank you.
Got it.
Your next question comes from the line of Cory Kasimov.
Hey, good afternoon, guys. Thanks for taking my question. First one I have for you, as you alluded to in your comments, at the time of launch, you thought LTC might represent about 20% of the PDP opportunity, and now I believe you said it's already accounting for 25% of your business. I'm curious where you think this can go as you look out at the evolution of this marketplace. And since we're already clearly off the one question request, I have a couple of quick follow-ups for you after that.
Yeah. Michael, do you want to take that question?
Yeah. Thanks, Cory. Yeah, just to be a little bit more precise, we're calling this our specialty distributor channel that includes VA, TRICARE, and LTC. LTC is the largest component of that. All sum of those business elements comprise now 25%, and at the time, we thought it was 20%. Nevertheless, they're all kind of systemic sales. They go through a specialty distributor, and it is a growing segment of our business. We're optimistic that we can penetrate it even further, but of course, the penetration or percentage of the specialty distributor is also a function of how fast and rate of growth for the other side of the business. Conceptually, I would like it to be 25% and grow all segments of the business equally, and we'd get to a higher place together.
Okay. All right. Now that you're a year into the launch, I'm curious how you've seen pill utilization evolve. I believe you initially expected patients taking roughly one of two pills per day to start off, and that would be the norm for a product or an indication like this. I'm wondering if that was in fact the case, then what happens once that 34 milligram tablet is available. Will you still leave the 17 mg formulation on the market, or will it just be the 34?
Yeah, great question. As you know, neurology in general is a very conservative specialty. Their mantra often is start low, go slow. We have a significant cohort of physicians that do start on one pill, as we've discussed. However, a vast majority of those physicians do titrate up in a month or so to the full dose. That's the best experience that we can offer a patient. If you recall, the half-life is fairly long, and we get to a steady state in 12 days with NUPLAZID. It effectively is almost like a built-in go low, start slow drug for neurology. We believe that the 34 milligram for the vast majority of physicians won't be a problem. Through extra education and different programmatic elements, we think we can get everyone around the bend on using the 34.
Our intent is to eliminate the 17 milligram from the market.
Okay. That's very helpful. I just one very quick question on expenses, I'm just curious if you can talk a little bit more about the trends we saw in 2Q and broadly help us understand the outlook from here. I appreciate the color you gave us on your 3Q expectations, it was a little surprising, I thought, to see when you look at it sequentially, that R&D was flat in 2Q with all of these new trials ramping up. Especially seeing a sequential drop in SG&A despite the larger marketing organization with those 25 new reps. Anything to speak to in the sequential second quarter drop, or is that just the seasonal trends of the business? How do we think about this longer term? Thanks.
Yeah, Cory.
With respect to the SG&A, there is just dynamics in timing of different discretionary marketing programs, timing of charitable contributions, as well as different programs the sales force is running. Overall, we kind of expected to be flattening out on this Q3 number we've provided in Q4. There is going to be variability between quarters, I'd expect every year. With respect to the R&D, major bit here in Q3 is regulatory filings for this 34 milligram capsule, which is sort of a one-off jump in expense, as well as some formulation work associated with it that are both pushing up the R&D spend in Q3 versus Q2. Obviously starting the phase III program for Alzheimer's that we've discussed.
All right. Terrific. Thanks a lot. Appreciate you taking the questions.
Your next question comes from the line of Jason Butler.
Hi. Thanks for taking the questions. Just first one on the AD psychosis program. I know it's too early to talk about details, can you maybe speak to how we should think about and ultimately think about the label? Should we think about it in the same kind of way that the Parkinson's psychosis label is written to speaking directly to the symptoms that the drug is treating?
Yeah. Serge, do you want to take that question?
Yes. In regard to the label is most likely will look similarly as how the Parkinson's disease psychosis. In other words, for treatment of hallucinations and delusions associated with Parkinson's disease psychosis, that is our current label. We do anticipate that in a similar way that will be managed following our phase III program and approval.
Great. Just one follow-up, and this is another look-forward question. Is there any opportunity in the Parkinson's psychosis market for a long-acting injectable formulation like there is for the traditional atypical antipsychotic market?
Michael, you want to take that question?
Well, I think that having been involved in a long-acting, as Serge has as well, antipsychotic marketplace, the principal reason for the long-acting injection is, first of all, the schizophrenic patient is a younger patient, the lack of adherence is one of the fundamental problems for psychotic breaks that require hospitalizations. That's kind of the market proposition of long-acting. Parkinson's patients are on a whole host of medications, and most of them are taking a lot of medications, adherence isn't so much the issue because they're very compliant, obviously, with their other medications. In the long-term care setting, a nursing home facility is providing the medication. I don't think the proposition personally for long-acting is as strong as it is in the antipsychotic field. Serge, I don't know if you had an opinion on that.
Yeah. I would agree, Michael, that there is a different rationale for use of long-acting injectables in schizophrenia as opposed to Parkinson's disease psychosis or Alzheimer's disease psychosis. I wouldn't completely exclude it because there are some benefits coming from that. Of course, it will depend a lot on the nature and the characteristics of the product, per se.
Okay, great. Thanks for taking the questions.
Your next question comes from the line of Paul Matteis.
Hi, this is Jeffrey Lind on for Paul Matteis. Congratulations on the quarter, and thanks for taking our question. I have two. For the revenues for the second quarter, how much of this revenue could be attributed to inventory? For the guidance for NUPLAZID for the remainder of the year, the lower end would imply you should see relatively flat sales for the third and fourth quarter. Is the guidance more conservative, or could you provide more granular guidance for the third or fourth quarter?
Todd, do you want to take those questions?
Sure. With respect to the revenue, our specialty distributor and pharmacy partners generally carry two to four weeks of revenue on hand. There was not a significant channel impact, more so than any of the other quarters that we showed from a pro forma basis in the press release today. That's certainly, obviously a factor now that we are recognizing revenue that we've sold to the channel that hasn't gone on to a customer patient, but not a significant change. That's the reason we went with providing that background information in the press release. With respect to the guidance, we feel comfortable with the guidance range we've provided. The one-time benefit that we called out of the $3.6 million is a one-timer, and some of these other adjustments that occurred in Q2 will affect the growth rates going forward.
Overall, we feel comfortable with the range we've provided today.
All right. Thanks for the color on the quarter.
Your next question comes from the line of Alan Carr.
All right. Thanks for taking my questions, a couple of them. An easy one around gross margin, can you give us a sense of the COGS, which way that might be going? Then also, around long-term care setting, I wonder if you can comment a bit more about how it's being used there. At this point, has your experience maybe one or two patients where it's being tried, or are you seeing a pattern where an institution is using it more regularly across a greater number of patients? Thanks.
Todd, do you want to take the gross margins question?
Yeah. For Q2, gross margin was just under 90%. Very happy that we've gotten the gross margin up where we expect it for a small molecule, and we'd expect it to be in that high 80%, low 90% range the rest of this year.
Michael?
Yep. Hey, Alan. Regarding long-term care, the process there is less homogeneous, as you might think. Just give you some example. There might be a consultant geriatric physician, psychiatrist, or neurologist who has 30 facilities that have, let's just say, 50 patients in each. There may be, in each of those facilities, one or two Parkinson's patients. To the degree that that physician is sold and bought into NUPLAZID and can identify the appropriate patients, we get an appropriate penetration in that population. In other facilities, they're huge, and they may have a lot more patients, and that's a little bit more concentrated.
I think every pattern of patient acquisition at this point is a little hard to comment on, except for the fact that there's a lot more concentrated opportunities because patients who have Parkinson's, as I mentioned earlier, often are in the facility because they already have psychosis, as opposed to the general neurology office, where there is a good significant chunk of Parkinson's patients who do not have psychosis yet. That's a little bit different of a diagnostic game there for us versus LTC.
With the understanding that you wouldn't promote for it, do you all have a sense of whether or not there's much off-label use for this drug?
Of course, I have to start by saying we would never promote off-label use. My sense is there's probably very little. I think it primarily comes down to getting the drug reimbursed. We knew from the payer research we had done before we launched the drug that the number one thing that payers wanted to try to protect against is off-label use and making sure that the drug's used on label. My sense is we're probably getting very little off-label use because we don't have any way of measuring or quantifying that. I think it's probably very little.
All right, great. Thanks for taking my questions.
Yep.
Your final question is a follow-up from Ritu Baral.
Hi, guys. Thanks for taking the follow-up. Another one for Michael. Any change in how you strategically think about targeting the neurologists versus the psychiatrists in the forward effort? Then one for Serge. Serge, what are your thoughts on the competitive schizophrenia landscape going forward, particularly as you think of potentially the evolution of negative symptom drugs and the competitive landscape there?
Hey, Ritu. Great question. There are kind of a different nuance. As it relates to just the global characterization of a neurologist versus a psychiatrist as it relates to PDP. A psychiatrist is trained to eliminate psychosis. That's their main functional perspective. Neurologists are trained to eliminate movement, and psychosis is kind of a side element, a secondary issue, what they call a non-motor symptom of the disease, and there's a varied degree of engagement around eliminating or treating that in an appropriate way. We do a lot more education with the neurologist around the psychosis elements, the neurodegenerative effects, the benefits of NUPLAZID. They have a lot of patients, and the discerning of patient profiles can be a lot more enriched in the neurology office. In the psychiatry office, of course, they're easier to persuade around the benefits of NUPLAZID.
Because their main thing isn't necessarily Parkinson's disease, we have to find the right physician with the right amount of ballast or concentration of Parkinson's patients. That's why we focus heavily on geriatric psychiatry, of which there's about 1,500 of those people. That's a primary source of enriched targeting for us. Evolving out from that are various degrees of segmentation around psychiatrists that have more of a neurologic or geriatric flavor to their practice. There's 40,000 psychiatrists. Many of them are in the depression game. They're in a different kind of community. Those are not where we're going to probably find the best pond for us to be fishing in.
For that follow-up, Serge?
Sorry, Ritu, I might just add to that a lot of the geri-psychs, a lot of their patients are in the long-term care setting. We're addressing that population both through our long-term care force as well as our normal neuroscience sales specialists.
Got it.
Hey, Ritu. Serge here. Related to your second question, obviously, schizophrenia, the market is saturated with a number of antipsychotics that are currently in use. Many of those obviously are now generic. However, the adjunctive treatment of schizophrenia, inadequately treated or treatment-resistant schizophrenia, as well as negative symptoms, represent a yet unmet need in schizophrenia. We are playing in that arena. I believe that there is certainly space and place. We are aware of competitors being in that field, in adjunctive treatment or treatment-resistant schizophrenia. Lundbeck has a development effort. GW presented some of the data in that regard. On negative symptoms, obviously, Minerva had recently presented data, and we are aware of their work in that arena.
I would say we are, at least in terms of our progression of the program, in later stages of development and certainly see quite the opportunity for pimavanserin in that arena.
Got it. Thanks for taking the follow-up.
There are no further questions at this time. Mr. Davis, please proceed to closing remarks.
Great. Well, thanks again, everyone, for joining us on today's call and for your continued support. We look forward to updating you on our future progress.
Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.