Greetings, and welcome to the Alkermes First Quarter 2020 Financial Results Conference Call. My name is Melissa, and I will be your conference operator today. At this time, all participants are in a listen only mode. Please note that this conference is being recorded. I'll now turn the conference over to Sandra Coombs, Vice President of Investor Relations.
Sandy, you may begin.
Thank you. Welcome to the Alkermes Plc conference call to discuss our financial results and business update for the quarter ended March 31, 2020. With me today are Richard Pops, our CEO Todd Nichols, our SVP of Sales and Marketing and Jim Frates, our CFO. During the Q and A session, we'll also be joined by Ian Brown, our SVP of Finance. Before we begin, I encourage everyone to go to the Investors section of alkermes.com to find our press release and related financial tables, including a reconciliation of the GAAP to non GAAP financial measures that we'll discuss today.
We believe the non GAAP financial results, in conjunction with the GAAP results, are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward looking statements. Actual results could differ materially from these forward looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this morning and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward looking statements. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments.
After our prepared remarks, we'll open the call for Q and A. Now I'll turn the call over to Rich to provide an update on the company's response to the COVID-nineteen pandemic.
Thank you, Sandy, and good morning, everybody. I hope everybody listening is well. So before getting to our Q1 results and an update on the business, I have to note the challenging circumstances caused by COVID 19. The acute and wide ranging impact that this virus has had on health and economic well-being of our communities is significant. We activated quickly and with compassion to navigate these difficult conditions.
And today, Todd will provide a detailed review of the commercial impact we've observed, particularly on VIVITROL in the 1st few weeks of April and our mitigation efforts. Jim will outline the potential implications for our financial results and discuss the impact on our ability to provide expectations for the balance of 2020. In the face of this pandemic, Alkermes has adapted our business practices so that we can continue to meet our public health responsibilities, which have become even more pronounced. People living with serious mental illness and addiction, conditions that are often stigmatized and marginalized in our society have an ongoing need for their medicines, yet many are facing challenges in accessing their caregivers and the healthcare system. We are an active participant along with many other stakeholders in efforts to ensure that the treatment system continues to function for these patients, for their families and their communities.
As we work together to navigate the rapidly evolving environment, our two main priorities are to protect the health of our employees and to help ensure that the healthcare providers and patients have uninterrupted access to our medicines. Our team organized quickly and our response has evolved over 3 distinct stages. In the first stage, we mobilized to change the way we do business to protect the well-being of our employees, implement physical distancing and maintain business continuity. This included adopting work from home policies for those who could do their jobs remotely and for our field based personnel transitioning to virtual healthcare provider engagement. We're the only manufacturer of several important medicines that patients rely on, including sterile injectables and complex solid oral dose forms.
For our employees who continue to work on critical tasks in our manufacturing facilities and in our laboratories, we instituted additional safety precautions, including increased protective equipment, sanitization and physical distancing practices. In the second stage of our response, our focus expanded to preserving our ability to supply for the foreseeable future, 1, commercial product to the patients that rely on VIVITROL and ARISTADA 2, 3rd party products that we manufacture and 3, investigational product for our ongoing clinical trials. At this time, we do not anticipate any supply interruptions. However, we and our critical supply chain partners are regularly assessing the situation and adapting as appropriate. Our focus extends beyond the manufacturer of our medicines.
It's more important now than ever that we support people living with schizophrenia, opioid dependence and alcohol dependence and help ensure that they have the information and the resources to help them access treatment. Todd will outline some of our efforts to support patients and healthcare providers in this environment. In the 3rd stage of our response, we're focused on how we can find new streamlined ways of working, eliminate unnecessary expenditures and gain a competitive advantage by being more agile in meeting the needs of our stakeholders. We have an opportunity to be creative and develop new best practices that can have a lasting and positive impact on the way we conduct our business. We recognize that this is a dynamic situation.
We're closely monitoring the latest information on COVID in order to make timely informed decisions designed to protect health of our employees, support uninterrupted access to our medicines and continue the advancement of our research.
So with that, I'll
turn the call over to Todd for a review of our Q1 commercial performance and response to COVID-nineteen on the commercial front.
Thanks, Rich, and good morning, everyone. Coming into Q1, our commercial organization was focused on starting the year strong with a heightened sense of urgency to drive revenue and to continue to adapt to patient needs. We made steady progress against our commercial strategy this past quarter and our Q1 results reflect the initial success of these efforts as we achieved all time highs in health care provider adoption for both ARISTOT and VIVITROL. As we entered the 2nd quarter, we began to see the impact of the COVID-nineteen pandemic on our commercial portfolio, with a more pronounced impact on VIVITROL than ARISTADA. In the 1st few weeks of April, VIVITROL factory shipments have been approximately 25% lighter than our pre COVID expectations.
However, it is too early to reliably extrapolate a trend forward given the dynamic situation. ARISTADA has not been impacted as much, but we have seen flattening in prescription data and factory shipments over the last few weeks. At this time, we can't predict with certainty what the duration or magnitude of the COVID impact will be across our commercial portfolio. But I will outline our efforts to adapt to the current environment following a discussion of our Q1 results. Starting with VIVITROL, net sales in the Q1 increased 14% year over year to $78,800,000 driven by 13% unit growth.
The number of healthcare provider accounts prescribing VIVITROL increased approximately 10% year over year as we work to expand the VIVITROL provider network. Due to the important overlay of policy and funding at the state level, VIVITROL's growth continued to be geographically driven. In the Q1, our top 5 states represented 42% of net sales. Year over year growth for Q1 was driven by continued strength and growth in California, New York and Florida and broad based growth in states with lower VIVITROL share with 20 states growing more than 25% year over year. Geographic diversification remains an important part of our long term growth strategy.
VIVITROL demand showed encouraging trends as we continue to diversify the business across alcohol dependence and opioid dependence, Particularly in states where VIVITROL has experienced strong recent growth like California and Michigan, we saw greater contributions from the alcohol dependence indication. Looking ahead, our strategy will continue to be guided by responding to patient needs, which is particularly important in the current environment as COVID-nineteen and efforts to contain its spread are disrupting access to care for some patients seeking addiction treatment services. For example, over the last 3 weeks, VIVITROL new patient starts have been under pressure. The more pronounced impact on new patient starts could be driven by a variety of factors, including the closure of certain addiction treatment centers, decreased access to detox services and a decrease in patients' desire to seek care and ability to engage with health care providers. Of note, certain areas hit hardest and earliest by the pandemic in the United States like New York, California, Massachusetts are also top VIVITROL geographies.
We believe this alignment is augmenting the impact that we have seen on VIVITROL over the last 3 weeks. We will be monitoring trends in these geographies carefully in the weeks months ahead. In response to COVID-nineteen challenges, we pivoted quickly to support the needs of our customers and protect the health and well-being of our employees. We rapidly transitioned our customer engagement strategy to a virtual model and focused on advancing our digital capabilities while continuing to support broad access to our medicines and the needs of healthcare providers and patients. To support providers, we are providing educational materials virtually, while helping them navigate reimbursement for telehealth services.
To support patients, we are highlighting our patient services resources, expanding our injection site network and updating our provider locators to reflect these additional sites of care where patients can receive injections. As an example, we recently engaged with Albertsons, which now offer access to injections at 900 of its on-site pharmacies, predominantly in the Midwest and West Coast regions. And we continue to engage with other potential injection providers to further expand patient access. We're monitoring the situation and we'll adopt additional measures to support access to treatment as appropriate. Turning to the ARISTADA product family.
Net sales in the Q1 increased 70% year over year to $51,000,000 This growth reflects underlying demand and the impact of inventory fluctuations in the Q1 of 2019. Underlying total prescription data for ARISTADA demonstrated solid growth of 43% year over year in terms of months of therapy. In March 2020, ARISTADA's market share for new prescriptions in terms of months of therapy achieved an all time high of 10% in the overall market for long acting atypical antipsychotics. Market share for new to brand prescriptions hit 13.2% in February 2020, the latest month of available data, which we believe is a useful leading indicator for the trajectory of growth for ARISTADA. The progress we are making reflects an intense focus on execution as we communicate the value proposition of ARISTADA and its differentiated positioning in the market.
Heading into 2020, we sharpened our focus on driving utilization of the 2 month 1064 dose in ARISTADA INITIO. Positive data from our Phase 3 ALPINE study, which we announced in the middle of last year and continue to roll out, is an important element of our strategy to drive awareness of the benefits of INITIO and the 2 month dose among healthcare providers, Particularly within the context of reduced personal interactions, we believe the 2 month dose offering along with ARISTADA INITIO has resonated with physicians. With a differentiated product family, a strong payer access profile and a compelling value proposition, we have a clear opportunity to drive the growth of ARISTADA in the future. As I mentioned, the impact of COVID-nineteen on ARISTADA has been less pronounced than that seen with VIVITROL, but we have seen a flattening of weekly prescription data and wholesaler shipments to date in April. As an injectable medicine, ARISTADA utilization relies on healthcare provider administration and it's too early to predict whether the pandemic and social distancing practices will have a measurable impact on patient access to ARISTADA going forward.
Similar to VIVITROL, we are implementing strategies to support patients and healthcare providers, including expanding our injection network and updating provider locators for ARISTADA. We're highlighting our patient access and support services and deploying virtual resources for HCPs and digital awareness campaigns. We believe these efforts will not only help mitigate potential disruptions, but also present an opportunity to develop new and more efficient best practices that can be translated into competitive advantages over the long term. Turning to our launch preparations for 3,831, which will be intensifying throughout the remainder of the year. We are planning for a spectrum of launch scenarios in the event that COVID-nineteen disruptions continue to present challenges and will work to navigate the evolving environment.
We expect the keys to a successful launch will remain awareness, sales force planning and meaningful market access. As we prepare for launch, we have an opportunity to drive awareness through disease state education campaigns and scientific exchange. This includes presentations of 3,831 data at a number of planned scientific congresses and some of which will take place in virtual formats. 3,831 represents an important opportunity to capture operating efficiencies and maximize the value of our commercial infrastructure. With capabilities already in place in terms of access and reimbursement, medical affairs and marketing, our primary investment as we prepare for launch will be expanding our psychiatry field sales organization.
Currently, our field team is right sized to address the concentrated universe of physicians driving utilization of long acting injectables. To accommodate the broader footprint of prescribers for oral antipsychotics across potential indications for both schizophrenia and bipolar 1 disorder, we plan to appropriately expand the field sales organization to meet the opportunity. We are evaluating a number of strategies and configurations and we'll be finalizing that sales force planning over the coming months. Establishing meaningful market access will be an important factor in driving early success of the launch. We have completed our contracting research, are updating our pricing research and are developing engagement plans for key payers.
Moving forward, we remain deeply committed to serving the vulnerable populations that suffer from serious mental illness and addiction. Across the commercial portfolio, we are focused on execution and building new capabilities in this dynamic environment and we look forward to sharing our progress with you. And with that, I'll hand this over to Jim to provide financial results for the quarter and an update on guidance.
Thank you, Todd, and good morning, everyone. I'm pleased to report solid first quarter results. We generated $246,200,000 in total revenues driven by year over year growth in our proprietary products and our diverse revenue base. We recorded a GAAP net loss of $38,700,000 and non GAAP net income of $1,700,000 I'll start with our key financial highlights for the quarter and then discuss the impact of COVID-nineteen on our business and financial outlook for 2020. VIVITROL net sales in the Q1 increased 14% year over year to $78,800,000 driven primarily by 13% unit growth.
Gross to net adjustments of 49% in the quarter were comparable to the Q1 of 2019. Consistent with seasonal patterns, VIVITROL net sales declined sequentially due primarily to the drawdown of the Q4 inventory build as well as slightly higher gross to net adjustments. At the end of the Q1, inventory levels were back within a normal range with just under 2.5 weeks of inventory at our wholesaler and specialty pharmacies. Turning to the ARISTADA product family, net sales in the Q1 increased nearly 70% year over year to $51,000,000 This increase was driven by strong underlying demand and also the significant inventory drawdown that ARISTADA experienced in the Q1 of 2019, which reduced ARISTADA net sales in the same period last year. As Todd mentioned, we believe ARISTADA total prescription growth 43% year over year in terms of months of therapy better represents underlying demand trends for ARISTADA.
Gross to net adjustments during the Q1 of 2020 were 51.8% as compared to 49% in Q1 2019, reflecting consolidation of certain Medicaid plans into broader buying consortiums. Sequentially, ARISTADA net sales declined due to the typical seasonal inventory patterns as well as slightly higher gross to net adjustments. Inventory in the wholesale channel remains at roughly 4 weeks, which is a typical level for ARISTADA. Moving on to our manufacturing and royalty business. In the Q1, our manufacturing and royalty revenues were $116,300,000 compared to $108,900,000 in the same period in the prior year, driven primarily by long acting injectable antipsychotics.
Revenues from Risperdal Consta, INVEGA SUSTENNA and INVEGA TRINZA increased 9% year over year to $82,200,000 driven by increased end market sales of INVEGA SUSTENNA and INVEGA TRINZA and the timing of manufacturing batches for Risperdal Consta. The growth in net sales of our proprietary commercial products and royalty and manufacturing revenues more than offset the decline in our R and D revenues as the reimbursement of the development expenses for Brumerti from Biogen largely ended in the Q4 of last year with the approval of that product. In the Q1 of 2020, we recorded $243,000 of R and D revenues as compared to $14,700,000 in Q1 2019. Turning to expenses, our total operating expenses were $283,600,000 for the 1st quarter, down from $299,100,000 in the same period in the prior year. Our R and D expenses for the Q1 were $93,300,000 compared to $102,600,000 for the prior year, reflecting the completion of the VUMERITY development program in 2019, which was somewhat offset by increased activity and patient enrollment in the ALKS 4,230 clinical program.
SG and A expenses for the Q1 were $133,400,000 reflecting investment in the strong start initiatives related to VIVITROL and ARISTADA growth and compares to $141,200,000 for the prior year. Turning to our balance sheet, we ended the Q1 with approximately $550,000,000 in cash and total investments compared to approximately $614,000,000 at the end of 2019. The decrease is reflective of normal seasonal patterns in cash flows and changes in working capital. The company's total debt outstanding was approximately $277,000,000 at the end of the Q1 related to our term loan due in March 2023. I'll shift now to the impact of COVID-nineteen on our financial expectations for 2020.
Today, we're withdrawing our previously provided 2020 financial expectations due to the uncertainty surrounding COVID-nineteen disruptions to the
healthcare system.
While our first quarter results were in line with our operating plan and slightly ahead of our financial expectations, as the realities of the pandemic and the efforts to contain its spread intensified around the country in mid March, as Todd mentioned, we began to see disruption in patient access to addiction treatment services and to a lesser extent treatment services for schizophrenia. We expect that the impact of the COVID-nineteen on Alkermes business will be driven primarily by the severity and duration of the pandemic. At this time, we're unable to reasonably predict the extent of the pandemic's impact on our future results as it crests across the country. We're monitoring demand on a daily basis and implementing mitigation strategies as Todd outlined. As we confront this pandemic, we're very focused on exercising financial discipline.
We'll continue to analyze our cost base, make adjustments as we better understand the impact of the pandemic on our top line and allocate our capital appropriately to areas where we see the highest potential return on investment. As we do our part in this evolving environment to protect the safety of our employees, support uninterrupted access of our products to healthcare providers and patients, and facilitate business continuity. We continue to be in a position of financial strength. With a diverse and well capitalized business, we believe we're well positioned to weather the impact of this pandemic with sufficient liquidity to advance our operating objectives and rebound when the public health responses allow. With that, I'll turn the call back over to Richard.
That's great. Thank you, Jim, and thank you, Todd. So as you've heard, we had a strong Q1 and we're adapting like everyone else to the COVID-nineteen environment. And while none of us has a clear sense of when the major disruptions will be behind us, we believe we have a resilient business and a plan to emerge from this even more focused. Our research and development activities continue to advance.
Our first priority is to support treatment continuity and ensure patient safety in our ongoing clinical trials. We're in frequent communication with investigators and like other biopharmaceutical companies, we are identifying ways to streamline study visits and enhance data collection to reduce burden on patients as well as on the investigative sites. Efforts like this have the potential to extend beyond the current environment and have a long lasting positive impact on how clinical trials are conducted in the country. Another priority is to keep advancing our most important programs, including initiating new clinical trial sites and protocols for our key investigational medicines. And I'd say that ALKS 4,230 in oncology is one of those.
The potential for ALKS 4,230 in both monotherapy and combination settings continues to be supportive as the clinical data accumulates across our intravenous and subcutaneous dosing studies. Across what we call the ARTISTRY development program, March was our highest enrolling month. We continue to enroll patients in both ARTISTRY 1 and ARTISTRY 2. We've seen a slowing of enrollment in April as some sites and investigators in our network have temporarily paused enrollment of new patients due to COVID-nineteen, which we expect will result in minor delays to those trials. Looking ahead, we expect activation of select ex U.
S. Sites, primarily in the Asia Pacific region and Europe this quarter, and we'll resume our plans to further expand our clinical trial network as soon as possible. With the resources and the capabilities to continue to advance 4,230 at this stage of its development, we are focused on building the data set that will lead ultimately to broad based collaboration. If 4,230 lives up to its promise, we see collaborating as a key to maximally exploring its therapeutic potential for patients and driving value creation for shareholders. For ALKS 3,831, our novel oral atypical antipsychotic, the NDA for schizophrenia and BIP-four zero one disorder is currently under review at FDA with PDUFA target action date in November of this year.
We have not been made aware of any potential delays in the review timeline. The FDA recently communicated to us their intention to hold an advisory panel, although they've not yet shared details regarding the focus or format in the current environment. Because this NDA contains a new molecular entity and involves 2 different review divisions, we plan for an AdCom and have been preparing since we submitted the application in November of last year. With the efficacy of olanzapine and a differentiated tolerability profile, ALKS 3,831 has the potential to be an important new treatment option, one that builds on the presence that we've built in schizophrenia with ARISTADA. The other area of intense scientific interest is our HDAC inhibitor platform.
That work largely remains on track. In order to maintain momentum and continuity of those efforts, our team has been innovative in geographically shifting work conducted by contract research organizations as COVID-nineteen has spread and peaked. Integration across research and early stage development has been critical as we prioritize the most high value experiments and continuously assess optimal internal and external sourcing options. Across the organization, the innovation being brought forward and our people's ability to be nimble and adaptive in this environment is remarkable. I'm proud to see all that continues to be accomplished and I'm grateful for the resilience and dedication of our employees as we navigate these challenging times together.
We're focused on delivering on the key operational objectives to advance the business and build the value of the company. In responding to this crisis, the biopharmaceutical industry has the opportunity to demonstrate and underscore our immense value to society. Diagnostics, therapeutics, vaccines, these are the first order priorities for taming the pandemic. At Alkermes, we're focused on some of the most important health implications that can be exacerbated by social isolation, economic hardship and fear. During and in the wake of the pandemic, care and treatment of serious mental illness and addiction will take on a new level of importance.
We are very proud of the role we play to help people struggling with these disorders. So I'll finish there and turn the call back to Sandy to run the Q and
A. Great. Thank you, Rich. Melissa, we'll now open the call for Q and A, please.
Thank Our first question comes from the line of Chris Shibutani with Cowen. Please proceed with your question.
Great. Thank you very much. Appreciate it. You described the adaptations that you're working on in terms of the sales efforts, including injection sites at places such as a pharmacy or Albertsons. Can you quantify a little bit in terms of the extent to which you see that as being something that could be a go forward option and particularly between opioid addiction versus the alcohol side, which I think has been a very relevant part of your mix shift efforts.
You had talked about maybe marketing more, putting more emphasis on the alcohol treatment side. Can you just maybe help put some shape for that? Thank you.
Yes, Chris, let me spend this is Todd. Let me spend just a few minutes on that. To your point, we've spent a great deal of time and put a lot of thought over the last couple of weeks, more so probably the last month or so, thinking about how do we expand access to injections, not only for VIVITROL, but also for ARISTADA. In one of those areas, clearly, there's an opportunity with pharmacists and we're seeing that across the healthcare spectrum as well too. There's a lot of energy right now, a lot of acceptance of allowing pharmacists at the state level to practice at the top of their license.
And so we're working very closely at the policy level, at the state level as well and also with a lot of the major retailers having discussions regarding how do we expand access to injections. It's very early, I will tell you, at this point right now. We're excited about the situation that we have with Albertsons right now. It is early that we're seeing some really nice encouraging signs at the state level from other customers that have that are open to discussions like this. And so what we think that this is going to be a big part of delivering injectables similar to the way that vaccines are delivered in the long term.
So although this is clearly
Hey, Chris, this is Richard. I want to add on that because it's a bigger conversation we can have. But I think this may be one of the fundamental changes that derives from the pandemic. And it's not just retail pharmacies and the use of pharmacies for injection. It's the idea of telemedicine as a way of deploying psychiatric services to patients across the country, particularly in rural America.
And I think an important we think an important component of telemedicine would be the availability of long acting injectables as a complement to the telemedicine that could be dispensed across the country in different sites of care. So this is one of those fundamental changes that we're interested in driving in both psychiatry and in addiction.
Got it. And then one quick question for Jim. You had talked about the mix shift in terms of payers and consolidation of Medicaid type payers, etcetera. Are we about to anniversary or done with that or where along the course of those transitions are we? Is that going to continue to be the case?
Or is there any chance that that lessens at all, particularly as
we get towards the midpoint in second half of this year? Thank you.
Yes. Thanks, Chris. And specifically, it affected our gross to nets this year compared to last year with ARISTADA. I think the major consolidation has BMS have gotten bigger and I think from a I mean, it's hard to The BMS have gotten bigger and I think from a I mean it's hard to predict what's going to happen in the future, but I think those impacts really are we've seen and we might see another point or 2 in gross to net through the course of the year for ARISTADA, but we don't see a major change. So I think we've seen the major impact of those consolidations on the ARISTADA side.
Great. Thank you. I'll get back in the queue.
You're welcome.
Thanks, Chris. Thank you. Our next question comes from the line of Jason Gerberry with Bank of America. Please proceed with your question.
Hey, good morning. Thank you for taking my questions. Just a follow-up on VIVITROL first. You mentioned new patient starts is being more negatively impacted. And I'm just curious, you mentioned closure of clinics.
I'm just curious how adherence is looking from your perspective with pre existing patients being able to come back. I know that you talked about the clinics being a longer term opportunity, but in the near to medium term, how are patients managing their follow-up treatments? And is that also being negatively impacted?
Yes. Hi, Jason. This is Todd. Yes, glad you asked that as well, something that we're watching very closely. A couple of different questions in that.
It's a little too early to determine if there's an impact on adherence. VIVITROL adherence is somewhere in the range of around 3.9 to 4 historically over time. So based on this situation, we don't have a good sense of that has actually changed at this point right now. A lot of the disruptions that we are hearing and seeing right now are really regionally based. And I think the best assessment that I would point you to is really the hotspot states.
As I mentioned in my prepared remarks, New York, California, Florida, Michigan, some of those areas, we are very close to our customers across the U. S. But in some of those areas, we are hearing more disruption than in other parts of the country as well. And so it really depends upon the state, the site of care that the physician is practicing in and also the patient profile. We do know that the VIVITROL patient is a very committed patient.
And so we're still very encouraged by that because that's a patient that's made a commitment to the product as well. And so we're going to be monitoring adherence. We're going to be monitoring closures at the state level and then also when the policies at the state level start to loosen up and we start to see patient flow start to increase more specifically, hopefully in the coming weeks months.
Great. And if I could just follow-up, the comment about closure of addiction clinics, is this something that you'd expect to be more temporary? Can you put any metrics around this? I'm just curious like dental offices, should you would we expect a reopening of these offices once the economy is reopened? And then my second follow-up to that is just thinking about sales and marketing that's more discretionary in nature of the spending, how you can potentially flex down spend during this period or do you have to actually step up your discretionary marketing spend because you don't have that physical touch point with the physician?
Yes. Listen, again, I'm glad you asked that as well too. I think the first thing to keep in mind how we think about this is that VIVITROL will continue to be a very important element of our nation's response to the opioid crisis. And we do see growth opportunities for VIVITROL in the future as well. So we do believe our going assumption right now is that this is an acute issue right now.
It's really being driven by the pandemic at this point as well. It's hard to tell. So your question on quantification is very difficult us to quantify that at this point. Hopefully in the future, we'll be able to provide more data on that as well. But we do believe that this is a little bit more of an acute issue as well.
And your point on discretionary spend and investment with our commercial resources and marketing dollars. As you heard from my prepared remarks and also from Rich as well, we shifted very, very quickly in the latter part of March to make sure that we were shifting our resources to support patient needs. And we really saw that in 3 areas. Number 1, the first area is around making sure that we're maximizing virtual engagement and that we're being relevant to our customers through the programs that we're offering them. Secondly is that we're expanding access to injections and we're doing a lot of work in that area right now and we're enthusiastic about that work.
And then thirdly is building new capabilities such as our digital presence as well. And so we have increased some resources in the digital domain to make sure that we're communicating the value proposition of both brands of VIVITROL and ARISTADA to healthcare providers, but also to patients as well.
Got it. Thank you so much.
Hey, Jason, it's Rich. I just want to build on something Todd said that while it's not something to focus on in Q2, we have had conversations with major providers and payers and public health officials about the aftermath of COVID-nineteen. And right now what's happening in homes around the country as the consequences of with the consequences of the way that people are living their lives right now. There's a serious concern and to Todd's point, VIVITROL is a mainstay medicine in the treatment of these conditions. So while we can't predict when this is going to over, there is going to be a tail to this sequestration period and it's going to be quantified in the rates of alcohol and opioid use disorders as well as other psychiatric manifestations.
Got it.
Thank you.
You're welcome.
Thank you. Our next question comes from the line of Cory Kasimov with JPMorgan. Please proceed with your
First one I wanted to ask is for the Q1, did you see any early pull through of either ARISTADA or VIVITROL that helped with the quarter? Or were there any other COVID-nineteen related tailwinds for the commercial businesses we've seen some other companies talk about so far this earnings season? And I have a follow-up.
Yes. Hey, Cory, it's Jim. We have not seen dramatic changes with the COVID tailwinds, let's say, in the beginning. Inventory levels actually came down as we would have expected from Q4 to Q1. So I think we can say that it was really the focused effort of Todd and the commercial teams and really nice underlying unit growth.
That 47% growth compared to last year that we saw in ARISTADA and the 13% growth that we saw in VIVITROL, I think we're off to a good start this year. And like many companies, I think in many people across the country before we got the surprise from the COVID pandemic. Okay. Yes.
Cory, if I could just add to Jim's comment as well too. We started our focus for the year was to start strong and really focus on commercial execution. And so we are seeing some encouraging signs and also some encouraging feedback from our customers around the value proposition for 1064, our 2 month dose offering as well. It's a major underpinning of our commercial strategy as well. So 1064 plus INITIO, it's a little early to quantify it, but we are seeing that the distribution of doses is directionally moving in the right direction with 1064.
And to Rich's earlier comment as well too, as we are seeing some encouraging, some signs and trends with alcohol for VIVITROL as well too. So we are optimistic about that.
Okay. That actually was going into what my second question was going to be in terms of the commentary around the 2 month dosing and that is not surprisingly resonating well, but if you're seeing I was curious if you're seeing an uptick in the actual adoption, but even maybe going a step beyond that, what's the feasibility, if at all, of implementing at home nursing to administer your products? And do you think payers would be receptive to something like
that? Todd, do you want to take that?
Yes, absolutely. Corey, so we're looking at the feasibility of a number of opportunities to expand injection for patients. Our number one focus obviously is to be patient focused, patient centric to make sure that patients have access to our medicines as well too. So we're looking at all kinds of alternate site injections as well too. I can't give you anything firm at this point on strategically where we go, but we are looking at a number of different options.
Okay.
Hey, Cory, it's Rich. I was beginning to answer that before, but I was on mute. So thanks, Todd, for jumping in. Yeah, it's a sign of the times, isn't it? We are having some really interesting conversation with large payers and others in this moment as we look around the country.
There are islands of best practices around the country where things like at home care for addiction are being implemented in pilot programs. And you can see that the data are being developed in certain of these pilot programs. And we're talking to major payers about consolidating these now anecdotal or even small pilot programs into what could represent a model of comprehensive care within a major payment system. So long answer to a simple question, but absolutely yes, there's an opportunity here over time to change the way that some of these conditions are treated across the country.
Okay. Thanks, guys. Appreciate the answers.
Thank you. Our next question comes from the line of Umer Raffat with Evercore ISI. Please proceed with your question.
Hi, thanks so much for taking my question. Maybe first on 3,831 and I had two follow ups. Richard, you mentioned FDA's
I just want
to make sure I heard it right. FDA has told you guys that there's an AdCom, is that right?
Yes. They told us, Umer, that we should plan for AdCom, but they haven't given us any specifics about the content or the format yet. So it's almost like a placeholder count on it. You're not having one as of now count on it.
Right. So I guess, Richard, I was just thinking about some of the recent approvals and ITCI intracellular was told they might need an AdCom given some of the preclinical things that they were looking at never ended up happening. But generally speaking, the trend has been not to have AdCom. And considering samodorphin was already reviewed as part of the 5,004sixty one review, I'm just trying to understand what the issue could be. Has an issue come up during the review?
No, there's been no issue come up in the review. As I mentioned earlier though, Umer, because it's an interesting label, right? Because it's a 505(2) off of leveraging olanzapine safety and efficacy information as well as B1 level of clinical trials that we ran ourselves. Yet we're looking for also a differentiated weight claim, because of obviously the profile Samodifferent. So metabolism and endocrine is in the review as well.
So when we put together the integrated summary of safety, integrated summary of efficacy, it's with the knowledge that will be reviewed by both of those divisions. So we don't know yet what if there is an issue or what the issue may be or if it's more of a labeling discussion. We just don't know yet. But we'll give you guys more information as we get more information through the review.
Got it. And Richard, maybe this is for you and Jim, both of you. As I look at and I was just trying to crunch the numbers and I guess what I'm arriving at is, if the revenues track around $1,000,000,000 total revenues in that scenario and let's say the cost track slightly lower than the loan of the guidance you guys previously gave out, the cash burn will be about 100,000,000 dollars If the revenues are lower and or the cash OpEx isn't managed more carefully, cash burn could approach $200,000,000 plus quite easily. So the question I have is, your net cash, cash minus debt right now is $273,000,000 right now. Do you have a number in mind of how much of your net cash balance are you willing to spend this year?
And I guess what I'm really getting at is your OpEx expectations because that's something you can control.
Yes, I'll give you the first answer and then I'll let Jim answer as well. You just have to be real careful right now projecting to the end of the year based on circumstances of COVID-nineteen. We think the economy is going to open back up and there's going to be a resurgence of access to our medicines and need for those medicines. With that said, we as Jim said in his remarks, we have to pay attention to that top line so we can modulate the spend to make sure that we don't burn significant amount of cash this year. But I'll let Jim give you a little bit more color on
that. Sure. Thanks, Umer. And I think that point is exactly right. We've seen 3 or 4 weeks of a dramatic impact in COVID with social distancing and shelter in place activities, particularly in New York and the surrounding regions.
But as we come back out, the treatment of addiction and serious mental illness, we don't think it's going to be affected long term and may in fact have a significant rebound. So the short term changes is why we've currently suspended guidance. And if we see those changes dramatically impact our revenue going forward, we'll absolutely be active in terms of managing the cost line. There's a lot we can do. Obviously, things are changing like travel in person meetings on the SG and A side.
There's launch costs and expectations around 3,831 and what we invest in that as we move forward through the course of the year. And then there's obviously going to be an impact on clinical trials as we mentioned. And we hope that's counted in the terms of months or weeks in terms of the delay those costs are going to be modulated as well. So we have a lot of things we can control and our target this year as you know was for a $50,000,000 positive non GAAP net income around the ranges of our guidance. We've been impacted by COVID in the short term and we're going to watch that very, very carefully and take active steps depending on what happens.
Right. But Jim and Rich, if I may, just to follow-up on that. Is it reasonable for us to assume that of the net cash balance of $273,000,000 there is a number in mind, there is a threshold in mind for both of you beyond which you're not willing to burn more. Like is it fair to assume you're not going to burn more than let's say $200,000,000 in cash this year?
Yes, I wouldn't put a number on it at this moment, but the answer to that is yes.
Got it. Thank you very much.
Thank you. Our next question comes from the line of Paul Matteis with Stifel. Please proceed with your question.
Great. Thanks so much for my questions. On VIVITROL and ARISTADA, historically, in the non kind of pandemic world that we lived in only a few months ago, what was the historical annual persistence rate for these medications? And I guess what I'm trying to get at is when you think about 2019 or 2018, how much were these medicines reliant on new patient starts even just to keep revenue stable, let alone growth? And I guess when you look forward to the later parts of this year, do you worry at all that given the kind of looming threat of a second wave that new patient starts from these medications could be more durably impacted given that while the oral alternatives in certain contexts aren't ideal, they are there?
And then I have one follow-up. Thanks so much.
Yes, Paul, this is Todd. I'll take the first part of that as well. So we watch the persistency curves pretty closely with both brands. As I said earlier, for VIVITROL, it's approximately 3.9 for ARISTADA, a little bit better than that around 5, which is pretty consistent, that you
start to see So average duration treatment a month, is that right?
That's right. That's right. Yes. Thank you for the clarification. Average duration of treatment a month, which is pretty consistent with what you would see with longer acting injectables.
In fact, we start to see a little bit of a move with ARISTADA as we start to get more utilization with the 10 sixty four, which is a 2 month dosing option as well. And that's in line with what our expectations are as well strategically. I think the big question you're talking about is just patient flows. What is the anticipation with patient flows? And for us, the way we think about that and across the organization is that we are in a short term disruptive period right now.
These are very vulnerable patients with serious mental illness and addiction. They need services, they need treatment, they need variable options as well too. So we fully believe that these patients will come back to treatment as soon as the social distancing practices are lifted, as soon as access is available to them as well too. To your earlier comment, VIVITROL is a little bit more vulnerable to new patient flows. The new patient flow for VIVITROL is approximately 20% to 25%.
For ARISTADA, it's around 9% to 10%. We watch that with NBRxs and also with NRxs as well too. And so we watch it very closely, but we think we're in a short term situation here. We also believe that a lot of the best practices that we're going to So companies and patients and healthcare providers will actually get we believe will get much better at how to manage patient flows, how to manage their offices, how to manage patient appointments and so forth as we move through this period of time right now. And that was one of the comments that Rich made earlier as well too.
We fully plan on leveraging the best practices and the capabilities that we're developing right now as a commercial organization. And we'll actually apply those even to the launch of 3,831 as well.
Got it. Okay. If I could clarify on your comments around VIVITROL. So average duration of treatment historically is 4 months. Does that mean half of patients discontinue by month 4, in which case you kind of need to keep returning over the patient base?
And I guess maybe one other way to think about it, because I wasn't sure the context around the other numbers you gave or the second percentages. But just maybe in 2019, I don't know if you can say this, but what percent of VIVITROL revenues were from new patient
I don't have that level of detail right now. But the way that I would say to think about this as well is we see the greatest drop off of persistency after the 1st and second month. Once a patient stays on therapy for at least 2 to 3 months, they tend to have a longer duration of therapy. So it's typically the 1st month that we see the greatest drop off. One of the predominant reasons why and you've heard us talk about this on previous calls as well is around continuity of care.
It's really important that the system is set up to treat these patients, these addiction patients that come through inpatient services that are in residential treatment centers as well too that they have a solid continuity of care plan as well too. So we do put a lot of emphasis and a lot of thinking around how do we support a strong continuity of care.
Okay, thanks. Maybe just one last question. For detoxing a new patient before they go on to VIVITROL, you talked about these specific addiction centers. I guess, is that largely the context in which this sort of is that largely the context in which the pre treatment detox occurs? Or is it ever occurring also just kind of in general hospital units where you might actually be competing for space from a COVID surge?
Yes, that's let me spend just a few minutes on that. You're thinking about it the right way. Predominantly, the detoxification prior to initiation with VIVITROL would happen in an inpatient unit. Typically that's where you see that. And so we do see ramifications that are very consistent with the broader healthcare landscape around social distancing, the surge in patients for COVID-nineteen that are in the hospital sector as well.
But I will also let you know that there is an emerging trend and some of the emphasis that we place is how do we establish the right environment for outpatient detox as well. And so, as we've talked about in the past, we have a strategic approach within our market access group regarding making sure there's a proper environment for reimbursement of outpatient detox and that is a strategic pillar for us. But to your point, the majority of the detox does happen in the inpatient setting as well too. And that includes various different settings of care, not only from inpatient hospital, but also in the criminal justice setting as well.
Got it. Okay. Thanks so much for the color. Appreciate it.
Thanks, Paul. Melissa, before we take the next question, I ask that, the remaining folks in the queue limit them folks to one question so we can get to as many people as possible in our remaining time.
Thank you. Our next question comes from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your
Maybe just quickly on VIVITROL. Given the COVID-nineteen pandemic, are you seeing any funding at the state level or potential funding you had eyed for 2020 being redirected towards COVID-nineteen versus addiction? And when do you think we get that bolus of funding for addiction post the COVID pandemic that you've talked about with these knock on effects?
So, hey, Brendan, I'll start and I'll ask Todd for any color he might be seeing. But no, the federal funding that's been allocated to address the opioid is flowing from the federal government appropriations and into the states. Then the states have, within the context of the statute, the ability to deploy those monies for the treatment of opioid and other addictions. So we don't see any interruption in that allocated funding, which is substantially coming from the federal government. On the front lines at the state level, we haven't seen it manifest itself yet.
But Todd, do you have any comment on that?
No, I think you've covered it, Rich.
Okay. Great. Thank you.
Thanks, Brandon.
Thank you. Our next question comes from the line of Biren Amin with Jefferies. Please proceed with your question.
Yes. Hi, guys. Thanks for taking my questions. On ARISTADA, you cited 43% year over year growth on prescriptions. Can you just provide in terms of that growth, what came from new patient starts versus switches?
And on patient switches, were these from other LAIs or oral psychotic?
Yes, Erin, this is Todd. I'll start with that as well too. So new patient starts, the way we think about new patient starts is really in 2 domains. NRXs are new prescriptions, which we're very pleased with hitting an all time high of 10%. But then more specifically, one of the metrics that we follow very closely is new to brand share.
These are patients that haven't been on the product for a certain period of time. And as I said in my prepared remarks, we've hit all time highs at 13.2% right now. And that's a it's an all time high for the brand at this period of launch as well, and we're very encouraged with that. Our sense right now, our data and even the qualitative feedback that we received through our research says that a substantial majority of that is now coming through 1064, which is right in line with what our strategy is at this point right now. So we feel really good about that.
Great. Thank you.
Thank you. Our next question comes from the line of Marc Goodman with SVB Leerink. Please proceed with your question.
Yes, morning. Can you just clarify one of your previous comments? I think someone asked about VIVITROL and ARISTADA sales in the first quarter and if there was any I guess the question is, was there any pull through into the quarter? We're hearing from multiple pharma companies that there's a huge amount of sales that they're booking in the Q1 that they for multiple reasons, obviously. And so it sounds like you believe VIVITROL and ARISTADA did not have any of that in the quarter.
And I was wondering if you could just comment on that as well as the manufacturing royalty revenues because obviously that has implications for how you're going to be booking revenues going forward. Just give us a sense of what J and J is telling you of INVEGA and all those products. Did they get pulled through? I mean, can you just give us a sense of what's going on there so we understand that trend? And could you just clarify your comment about the 25% below expectations on VIVITROL for April?
Below what expectations? Were you expecting it to be down 25% and it was worse? Or just maybe you could help us with that number? Thanks.
Sure, Mark. It's Jim. Good morning. Yes, and I think so what it's very hard to understand exactly what's happening, right, because we're 3 weeks in, we haven't had all the reports 3 weeks in April. So we haven't seen all the reports that we would look at.
Some of those are going to be coming out in early May in terms of demand sales and things like that. But as we look at our orders out to our wholesalers, again, the best we can do is compare it to Q1 of last year. And the trends that we saw through the quarter were pretty consistent for both VIVITROL and ARISTADA. And again, the inventory drawdown compared to where we sat at December of 2019 was strong and consistent. So we're down roughly 6,000 units in inventory from where we were with VIVITROL and roughly 3,500 units from where we were with ARISTADA.
So, we think that those orders out to the wholesalers were again, they were consistent through the months and we had a very strong Q1. As Todd was discussing the move towards the 2 months, I mean injection for ARISTADA, I mean, I think that's an interesting anecdote that we're hearing from the field is that perhaps the shift to a 2 month injection is part of the thinking. And again, the shift to a monthly injection, if you're not going to be able to see the patient for some period of time, actually the benefit of a monthly LAI either for a month or 2 months actually is a real one for patients and for physicians in this scenario. So, just want to make sure I get your questions. So, I think we saw consistent growth in VIVITROL and ARISTADA again, compared to what we saw last quarter.
From J and J, we really haven't had information that there has been a change in their growth rates with SUSTENNA. We saw consistent growth again with what they saw in the quarter. So we haven't seen any difference with the long acting injectable part of that business from J and J either. So I think we just had a strong Q1 as we headed into the COVID impact. And when it comes to our comments on the 25% decline with VIVITROL, that was based on our expectations at the beginning of the year for April.
So the growth we saw in the Q1, the Q2 is typically one of the strongest quarters we have. So we expected to see continued growth in VIVITROL and the trends there. And in the 1st 3 weeks in April, we've seen again that roughly 25% change in terms of orders. Very hard to predict how long that's going to last, what the duration will be. Again, we think it's very focused.
We know it's very focused in the Northeast around New York, New Jersey, Massachusetts, and we'll be watching those trends as we go through the rest of the year. So hopefully that's a little bit more clarity.
Thanks. You're welcome.
Thank you. Our next question comes from the line of Vamil Divan with Mizuho. Please proceed with your question.
Great. Thanks for all the color on the call. Thanks for taking my questions. Just maybe a couple to clarify in 4,230. You mentioned the activation of select ex U.
S. Sites in Asia Pac and Europe. I was just curious, is that a new sort of change because of the dynamics in the U. S. Right now that you're sort of expanding out clients or is that was that already sort of planned and you're just sort of highlighting that it's still taking place in the Q2?
And then you mentioned a data release later this year. I'm wondering if
you can just give a
little more expectations there. Obviously, things are fluid, but is that should we expect something around the SITC timeframe or any other third time point that we should be looking out for the next data set from that product? Thanks.
Good morning, Bahn. It's Rich. No, the Asia Pacific Europe site expansion has always been part of the plan, particularly as we look at the ARTISTRY-1 intravenous protocol for looking at monotherapy in renal and in melanoma, a lot of the expectation for that enrollment comes from the ex U. S. Side.
So Western Europe is still pretty much quiet right now, but Asia Pacific and other parts of Europe are starting to come back up. So we have ambitious plans for Q1 and Q2 site activations. Those have been shifted a little bit, but they're still very much part of the plan we came up with last year. And we'll see certainly, we expect to have data around the SITC in the September timeframe. And we'll present data.
We're all pretty fluid right now in trying to understand how these medical meetings are going to be conducted, when abstract deadlines are going to be firmed up, they're fairly flexible right now. So we're accumulating data across the program and we'll certainly by the fall be in a position I think to provide a significant update.
Thank you. Our next question comes from the line of Akash Tewari with Wolfe Research.
Can you give any more color on the 3,831 potential AdCom? How many patients in the 3,831 trial were on background opioids? And were there any serious adverse events related to opioid withdrawal caused by samodorphin that you observed? And just on TECFIDERA, given the TECFIDERA patent win, do you feel like there needs to be a reset on royalty estimates for VUMERITY going forward? It looks like consensus is baking in like a $400,000,000 VUMERITY drug next year.
So do you think maybe the launch expectations need to be a bit more temporary?
Thank you.
Hey, Akash, I'll take the beginning of that. The 3,831, no, I don't have the specific numbers on people on background opioids, but no, there's no issue in the NDA that is appearing in the data that says anything to do with Samurophine's opioid receptor antagonist properties contributing any safety signal. No, that's not the issue. I think it's more what I was responding to when I answered Umer's question about the new drug application. The VUMERITY, the Q1 sales of VUMERITY were de minimis and they are Biogen is obviously in charge of this.
We did the deal with Biogen because of their marketing and commercial prowess in MS. This drug has very nice features. And so we're going to be looking for more growth out of that. I'll let Jim and Sandy comment on the expectations, but I don't actually know what street models are for it this year. But we expect it to grow and then we think it's an important product and we're looking for more performance from Biogen as the year plays through.
Got it.
Yes. I think the models for most of the models that incorporate Verity are from Biogen's analysts. So we'll be looking to see their new models come in over the next few days. So I don't want to speculate on what that range looks like right now. We have time for one more question.
Please, Melissa.
Thank you. Our next question comes from the line of Douglas Tsao with H. C. Wainwright. Please proceed with your question.
Hi, good morning. Thanks for taking the questions. Just I know you spoke about some of the geographic impact on VIVITROL in terms of regions most affected by COVID. Just curious, are you seeing any regional trends on the impact for ARISTADA so far, just so we can think about how it might play forward as certain states start to use restriction? Thank you.
Yes, Doug, this is Todd. We're seeing some similar feedback from customers regarding social distancing practices, but there is a nuance, a difference. The difference that we're really watching with ARISTADA more so is the ability of clinics to still accept patients when they originate for injection. So watching the broader trends within psychiatry, psychiatry is one of the specialties that's adopted telemedicine more rapidly than other therapeutic areas. By some estimates, psychiatrists will report that they practice telemedicine at a rate of around 80%.
Our feedback, the qualitative feedback that we consistently receive is even though there is a practice of telemedicine, a lot of the sites that patients will originate to accept injections at the physician offices are still open and still available. And so right now, we don't see as dramatic of a geographic disruption for ARISTADA like we do with VIVITROL.
Okay, great. Thank you very much.
Okay, great. Thanks everyone for joining us on the call this morning. If you have any follow-up questions, please don't hesitate to reach out to us at the company. Thank you very much.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.