And welcome to the Alkermes Plc First Quarter 2019 Financial Results Conference Call. My name is Rob, and I'll be your operator for today's call. Please note that this conference is being recorded. I'll now turn the call over to Sandy Coombs, Vice President of Investor Relations. Sandy, you may begin.
Thanks, Rob. Good morning. Welcome to the Alkermes Plc conference call to discuss our financial results and business update for the quarter ended March 31, 2019. With me today are Jim Frates, our CFO Craig Hopkinson, our Chief Medical Officer and Richard Pops, our CEO. 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 and our most recent annual report 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 Jim for a review of our financial results.
Thank you, Sandy. Good morning, everyone. Overall, our Q1 results reflect the strength and diversity of our business as we generated total revenues of $223,100,000 driven by net sales of our proprietary products. Our first quarter results are typically affected by seasonal trends related to inventory fluctuation and commercial insurance plan resets. In particular, this year, we saw a significant impact in ARISTADA inventory during Q1.
I'll review the details in a moment, but underlying demand growth remains solid and within our expectations. We're confident in our outlook for the year and today we're reiterating the 2019 guidance we provided in February. I'll start with our key financial highlights. VIVITROL net sales in the Q1 increased 10% year over year to $69,200,000 driven by underlying unit growth of 8%. Sequentially, VIVITROL net sales declined due to the drawdown of year end inventory build and the impact of commercial plan deductible resets as expected.
Gross to net adjustments of 49.4 percent during the Q1 increased sequentially, but were slightly below the Q1 of 2018. Looking ahead, we expect quarterly net sales growth to resume and gross to net adjustments to be approximately 50% for the remainder of 2019. So today, we're reiterating our expectation of VIVITROL net sales in the range of $330,000,000 to $350,000,000 for 2019. We continue to see positive activity with federal funding and state policy changes, which we believe will lead to increased access to medications for patients suffering from substance use disorder. VIVITROL net sales continue to be concentrated with our top 5 states representing 44% of volume in the Q1, while new funding and initiatives to improve access to treatment continue to be rolled out across the country.
States like California, Texas, Pennsylvania, New Jersey and Kentucky are adopting more targeted policies in criminal justice and community settings and have removed certain access barriers to medications via legislation. We believe the progress being made in these areas will diversify VIVITROL's growth. VIVITROL operates in a fragmented system where each state is unique in how it activates to address the opioid crisis. And as we've seen in prior years, individual states can have a significant impact on overall VIVITROL net sales. Our annual guidance is based on current trends.
As the confluence of expected new funding, treatment guidelines and policies alter the status quo treatment paradigm, we see potential for VIVITROL to become an increasingly utilized treatment option for patients. Turning to the ARISTADA product family. Net sales in the Q1 declined sequentially to $30,300,000 reflecting the impact of larger than expected seasonal inventory fluctuations. To put this into context, more than 3 weeks' worth of total inventory was drawn down from the distribution channel during the quarter. Inventory levels at the end of March were at the lowest we've seen since the end of 2017.
In dollar terms, the impact of this inventory drawdown was approximately 10,000,000 dollars during the quarter. Q1 ARISTADA net sales were also impacted by higher gross to net adjustments of 49%, an increase from 44% in the Q4 of 2018. This reflects a higher proportion of government sales in the quarter and other typical quarterly fluctuations. Looking ahead, we expect gross to net adjustments to normalize to around 47% for the remainder of the year. Importantly, this impact of inventory fluctuations and gross to net adjustments masked underlying growth in total ARISTADA prescriptions, which rose by 5% sequentially during the quarter, surpassing the overall atypical LAI market, which rose by 1%.
Looking ahead, there are a number of potential new growth drivers that we expect to benefit ARISTADA as we move toward the second half of the year, including the impact of our recently expanded commercial team, important new data from the ALPINE study and a recent national formulary addition. Starting with our commercial organization, we recently expanded our ARISTADA commercial field and hospital organization by approximately 60 sales reps. Half of those were onboarded and trained in the Q4 of 2018, while the other half joined the company during Q1. We expect to see an impact from these additions starting in the second quarter. 2nd, we recently announced positive results from our ALPINE study that evaluated the efficacy, safety and tolerability of ARISTADA and the current market leader INVEGA SUSTENNA.
We believe the results of this study are an important addition to the body of data supporting the efficacy of these two medications and could help drive broader adoption of long acting injectables in the atypical antipsychotic market. The study also highlighted the unique attributes of the ARISTADA product family, in particular our ARISTADA INITIO and 2 month dose offerings. Craig will take you through these top line data shortly. The last potential growth driver that I'll highlight today is the addition of ARISTADA due to important national formulary. The U.
S. Department of Veterans Affairs recently voted to add the ARISTADA product family, including ARISTADA INITIO to its national formulary at parity with INVEGA SUSTENNA. This addition facilitates access to an important and substantial pool of patients and we're excited to help address the unmet needs of veterans struggling with schizophrenia. Over the long term, we believe our expanded hospital and field commercial teams will help to drive ARISTADA's market share in the long acting atypical market as the overall market continues to grow at double digit rates year over year. And today, we're reiterating our expectation of ARISTADA net sales in the range of $210,000,000 to $230,000,000 for the full year of 2019.
Moving on to our manufacturing and royalty business, we saw revenues of $108,900,000 in the first quarter compared to 100 and $14,600,000 in the prior year. These results reflect a $17,900,000 decline in revenues from AMPYRA following generic market entry near the end of 2018, which was partially offset by revenues from Risperdal Consta, INVEGA SUSTENNA and INVEGA TRINZA, which increased 10% to $75,600,000 In the Q1, we also recognized R and D revenues from our collaboration with Biogen of $13,900,000 related to the reimbursement of development expenses for diroximel fumarate. As a reminder, the PDUFA date for diroximel fumarate is expected to occur in the Q4 of this year. Turning to expenses. Overall, our expenses for the Q1 were in line with expectations.
Our R and D expenses for the Q1 were $102,600,000 compared to $108,300,000 for the prior year, driven by spend on our pivotal programs for ALKS 3,831 and diroxyl fumarate, as well as the expansion of our ALKS 4,230 program. Our first quarter SG and A expenses of $141,200,000 compared to $118,100,000 in 2018 and reflects investments in our commercial organization in support of both ARISTADA and VIVITROL. Looking ahead, we expect SG and A expenses to step up in the second quarter and then remain fairly stable for the remainder of the year. Of note, during the quarter, we also recorded a non cash charge of $22,600,000 related to IV meloxicam, a product we sold to Recro Pharma in 2015 and for which we carry a contingent value on our balance sheet for expected future milestones and royalty payments from Recro. The non cash charge we recorded was due to a decrease in the fair value of this contingent consideration as a result of Recro Pharma's receipt of a second complete response letter from the FDA in March related to the NDA for IV meloxicam.
While this non cash charge impacts our GAAP results, it does not impact our non GAAP results. So for the quarter, we recorded a GAAP net loss of $96,400,000 and a non GAAP net loss of $26,000,000 Turning to our balance sheet, we're in a healthy financial position and ended the Q1 with approximately $625,000,000 in cash and total investments, compared to approximately $620,000,000 at the end of 2018. The company's total debt outstanding was approximately $279,000,000 at the end of the Q1. Overall, we're well positioned as we enter the 2nd quarter. Given the growth opportunities from our proprietary products and anticipated progress in our pipeline candidates, we believe we have an important platform to drive long term revenue growth, pipeline expansion and profitability.
And I look forward to updating you as we deliver on our strategy throughout the rest of the year. With that, I'll turn the call over to Craig for a closer look at our recently presented data and an update on our pipeline.
Thank you, Jim. This morning, I'm going to focus primarily on important new data we recently presented for both ARISTADA and ALKS 3,831 at the 2019 Congress of the Schizophrenia International Research Society or SIRS. Of note today, I'll be referring to slides as part of my prepared remarks. These slides are available on our website and in the webcast viewer. For ALKS 3,831, we presented new data from ENLIGHTEN-two, a pivotal 6 month study comparing weight gain for head to head versus olanzapine, and new data from an interim analysis of the ongoing open label extension study.
The full presentation of the data set is available on our website and I encourage you to take a look at it. Today, I will highlight a few of the key takeaways. As background, you will recall that our scientific and clinical development goals for ALKS 3,831 were to limit the serious weight gain associated with olanzapine, while preserving its antipsychotic efficacy. The data from ENLIGHTEN-two completed development program that suggests we have met these goals. In ENLIGHTEN-two, ALKS 3,831 met its co primary weight related endpoints with a high degree of statistical significance.
The study also provided a wealth of data in addition to the primary assessments. For example, in addition to assessing the weight gain profiles the patients that completed the 6 month study, we also looked at the profiles of those who did not. As you can see on Slide 13, the weight gain trajectories were different for the patients who discontinued olanzapine versus ALKS 3,831. The majority of patients in the Olanzapine group who discontinued prematurely gained a greater percentage of baseline weight than Olanzapine completers. This pattern is consistent with historical data that suggests that olanzapine associated weight gain is typically underrepresented in controlled settings.
In contrast, this pattern was not observed for ALKS 3,831 suggesting that the observed weight difference between Olanzapine and 3,831 while significant may have been underrepresented in the study. We also presented the metabolic parameters measured in the study. As seen on Slide 14, in ENLIGHTEN-two, we observed changes from baseline for both groups in lipid and glucose lab parameters were generally small and not clinically meaningful. This is not surprising to us given the duration of the study. Data from previous olanzapine studies have shown variable metabolic parameter findings in studies of this duration depending on study design and patient population.
We believe that olanzapine significant metabolic liabilities derived from the significant and sustained accumulation of weight central adiposity that patients experience over a longer period of time, which is why the plateauing of the weight curve for 3,831 is so important. Importantly, in the 52 week safety extension study, all lab parameters remained stable with long term treatment of ALKS 3,831 and we saw the early elevation in triglyceride lab measurements observed during ENLIGHTEN-two return to baseline. Weight circumference data captured in ENLIGHTEN-two provide more insight. Change in waist circumference is a measurement of central adiposity and is well established prognostic variable that can be an indicator of metabolic risk. Data have shown that the mean changes of even a few centimeters can have significant impacts on metabolic syndrome and other cardiometabolic risk factors.
As you can see on Slide 15, ALKS 3,831 demonstrated a clinically meaningful and statistically significant difference from olanzapine in waist circumference very early in ENLIGHTEN-two with continued separation for the entire 6 month period. Notably, this separation occurred earlier than the separation in weight curves. Turning to the interim data from the ongoing open label safety extension study on Slide 16. Importantly, for patients who continued on 3,831, weight remained stable for the duration of the 52 week extension and for patients who switched from olanzapine to 3,831, the previously ascending weight curve stabilized and remained flat during the extension period. These data demonstrate 2 important findings.
1st, our 3 of 831's effect on weight was durable and sustained following the 1st 6 weeks of the study. This is in contrast to what we know about long term olanzapine use, where weight gain may continue for many months years. 2nd, our SKRE-one stabilized weight gain for patients that switched from olanzapine at 6 months, but did not result in weight loss for these patients. As the weight story becomes more clear, the most important attribute of ALKS 3,301 will become its robust antipsychotic efficacy. Recall that each of ALKS 3,031 and olanzapine demonstrated statistically significant improvements in positive and negative syndrome scale scores or PANSS compared to baseline in ENLIGHTEN-one.
In ENLIGHTEN-two, patients entered the study stabilized on oral medication, however, still moderately ill as based on the entry PAN scores. As you can see on Slide 17, by the end of ENLIGHTEN-two, both groups had experienced clinically meaningful improvements in PANSS scores with the patients considered to be mildly ill based on these scores. The continued and sustained improvement in symptoms in the stable population is important as it reinforces the potent efficacy of olanzapine and ALKS 3,831 demonstrated in ENLIGHTEN-one. Collectively, these new data further underscore ALKS 3,831's attributes and potential for ALKS 3,831 to be a meaningful new treatment option for patients. We are preparing the new drug application and plan to submit the file later this year.
Our first presentation wasn't just about ALKS 3,831. We also presented newly unblinded top line results from the ARISTADA ALPINE study, which we believe will have a high clinical relevance for physicians. ALPINE was the first of its kind 6 month study evaluating the efficacy, safety and tolerability of ARISTADA and the market leading atypical LAI INVEGA SUSTENNA when used to initiate patients experiencing acute exacerbation of schizophrenia in the hospital and then maintain their treatment in the outpatient setting. The ALPINE study follows positive data from the an open label study presented at Fife Congress in 2017, in which patients with inadequate response or intolerance to SUSTENNA were switched to treatment with ARISTADA for a period of 6 months. The purpose of the ALPINE study was twofold.
First, to provide real world clinical evidence of the efficacy, safety and tolerability of the ARISTADA initiation regimen together with the ARISTADA 2 month dose in the context of a rigorous randomized study as the regulatory approvals for both ARISTADA INITIO and the 2 month ARISTADA dose were based on pharmacokinetic evidence. Together, INITIO and the 2 month dose provide a compelling new for patients initiating long term treatment in the hospital and as they transition to an outpatient treatment setting. The second objective was to provide clinicians with data that may help them make treatment decisions for their patients. To that end, ALPINE was designed to demonstrate robust antipsychotic efficacy of these 2 LAIs and to answer the question of whether ARISTADA INITIO together with the ARISTADA 2 months could demonstrate clinically meaningful reductions in PANSS total scores from baseline throughout the total treatment period and whether these reductions would be similar to those seen with INVEGA SUSTAINNA treatment group. ALPINE was a multicenter randomized double blind study in 200 subjects experiencing an acute exacerbation of schizophrenia.
The study included a 2 week inpatient phase during which all subjects were initiated on either ARISTADA or SUSTENNA followed by an outpatient phase for a total of 6 months. Patients randomized to ARISTADA were initiated using the ARISTADA INITIO regimen followed by ARISTADA 2 month dosing for the duration of the 6 months. Patients randomized INVEGA SUSTENNA received a loading dose of INVEGA SUSTENNA followed by monthly INVEGA SUSTENNA. The study's pre specified primary endpoint was the change from baseline in PANSS total scores at week 4 within each treatment group. Pre specified secondary endpoints included the change from baseline in PAMs total scores at week 9 week 25 within each treatment group as well as between treatment group comparisons at week 4, 9 25.
We also conducted exploratory analyses regarding treatment retention as literature has shown us that adherence is critically important in preventing relapses and improving treatment outcomes for patients with schizophrenia. As you can see on Slide 22, the study met its pre specified primary endpoints demonstrating that both ARISTADA and INVEGA SUSTENNA had statistically significant and clinically meaningful reductions in PANSS scores from baseline at week 4, both with a P value of less than 0.001. PANSS total scores continue to improve for both groups at week 9 and week 25, the study's prespecified secondary endpoints. As you can see, the results were similar and the confidence intervals overlap at each assessment point during the study. As seen on Slide 23, we saw numerical differences in the overall retention rates between groups with 56.6% of patients in the ARISTADA treatment group completing the study and 42.6% of patients in the INVEGA SUSTENNA treatment group completing the study.
Slide 24 shows the most common AEs for each treatment group and the rates at which they were reported. These are different agents with different tolerability profiles. These top line data underscore that ARISTADA INITIO along with the 2 month dose of ARISTADA together represents a novel approach to the treatment initiation and a compelling clinical option for patients and healthcare professionals. These data show that a product with ARISTADA safety and tolerability profile does not require trade off in terms of antipsychotic efficacy and we believe this will be important to physicians making treatment choices for their patients with schizophrenia. We look forward to publishing the data from the ALPINE study and presenting full study results, including interesting additional findings on prolactin, sexual side effects, sedation and other safety and tolerability measures at upcoming scientific meetings.
Before I turn the call over to Rich, I'll provide a brief update on diroximel fumarate and ALKS 4,230 and I'll be happy to take questions later. For niroximal fumarate or BIIB098, a novel oral fumarate being developed in collaboration with Biogen for relapsing forms of multiple sclerosis, the FDA's review of our NDA is ongoing with regulatory action expected in the 4th quarter. EVOLVE MS1, our open label safety study of diroximel fumarate has demonstrated low rates of gastrointestinal adverse events and discontinuations related to tolerability below 1%. We expect to complete our EVOLVE-two study, which is evaluating the gastrointestinal tolerability profile of diroximel fumarate head to head against TECFIDERA later this year. For ALKS 4,230, our novel immuno oncology candidate, clinical studies are progressing in 3 different domains.
The first is monotherapy, where our hypothesis is that given the cell expansions we're observing clinically, there's a potential for monotherapy efficacy in tumor types where IL-two has shown efficacy. The dose escalation stage of the study is ongoing. And once we've identified the optimal dose, we'll expand into the next stage evaluating 4,230 in patients with renal cell carcinoma or melanoma. Second is evaluation of ALKS 4,230 in combination with the checkpoint inhibitor pembrolizumab, which is currently enrolling patients with a variety of tumor types. And the 3rd, during the Q1, we initiated a new Phase III study to explore the safety, tolerability and efficacy of ALKS 4,230 administered subcutaneously once weekly and once every 3 weeks.
So the 4,230 program is very active with a number of potential data readouts later this year. With that, I'll turn the call over to Richard.
That was great. Thank you, Craig. I will be brief. I'll just say these new data are important. They underscore Alkermes growing scientific and clinical presence in schizophrenia.
They also demonstrate our commitment to developing new treatment options for patients that provide both robust antipsychotic activity and patient focused safety and tolerability attributes. This is true for both ARISTADA and for 3,831. ENLIGHTEN 2 and ALPINE are not typical studies. Both test Alkermes medicines alongside efficacious standards of care. This is an example of the type of innovative study designed to provide useful information to clinicians making treatment decisions for their patients.
Alkermes is focused on addiction and serious mental illness at a time when these are among the most important public health issues facing the country, areas of significant unmet need driving enormous cost to the health care system and to society. There are real challenges to this business because these are areas of health care that are subject to intense price pressures, generic substitution, complex reimbursement and fragmented treatment systems. Those challenges, however, are balanced by the vast number of patients needing new medicines and the dearth of companies innovating in this area. We've assembled a collection of commercial capabilities and infrastructure designed specifically to navigate these complex treatment systems and to operate in an evolving health care environment. We are well positioned to drive expanded utilization of VIVITROL and ARISTADA in this environment.
As we look ahead, ALKS 3,831 in schizophrenia, if approved, could further build on and leverage the commercial infrastructure and capabilities that we've been putting in place. Building on that point, I'm pleased to announce the appointment of Todd Nichols to the position of Senior Vice President of Sales and Marketing at Alkermes. Todd brings more than 20 years of biopharmaceutical industry experience across a variety of leadership roles at major commercial organizations and has been involved in the launch of 14 pharmaceutical products including multi $1,000,000,000 franchises. So Todd joins us from Celgene where he was responsible for developing and managing all aspects of U. S.
Commercial planning, strategy development and launch execution for ozanimod for multiple sclerosis. Todd's commercial expertise, leadership and insights will be assets to us as we continue to drive expanded utilization of VIVITROL and ARISTADA and prepare for our next commercial opportunity with ALKS 3,831. So the basic hydraulics of the business are driven by the growth of VIVITROL and ARISTADA and we see ALKS 3,831 as our next major potential revenue growth driver. We're focused on executing our business strategy both commercially and in our development pipeline. With the planned submission of the NDA for ALKS 3,831 midyear, the PDUFA for VUMERITY in the 4th quarter and the first indication of 4230's antitumor activity expected this year.
We have important catalysts ahead and look forward to updating you on our progress. So with that, I'll turn the call back to Sandy for the Q and A.
Thank you very much. Rob, we'll now open the call for Q and A, please.
Thank you, Sandy. We'll now be conducting a question and answer Our first question is from the line of Chris Shibutani with Cowen. Please proceed with your question.
Great. Thank
you very much. Could I ask you about what you're thinking about in terms of investment, particularly from the standpoint of the pipeline. I think investors we speak with would appreciate more visibility on how you're prioritizing what you're doing, particularly as you think about the portfolio going forward. I realize that there's been a lot of work that you guys have done in very challenging areas and you've articulated this very clearly. But can you give some perspective on sort of what are the targets in terms of is it more balanced towards shifting towards oncology?
Are you still thinking about expanding in the addiction space? How are you thinking about internal work versus external BND, business development. It's anything that you can help us. Is it thinking about novel compounds or sort of further iteration of the expertise that you have to improve existing compounds through validated markets? Just something about the shape of what we can think about when we think about all of investment and investment more broadly speaking to shape your future.
Good
morning, Chris. Sure. So you've actually proposed a number of different trade offs and I'll address them holistically. One trade off is between internal and external. The other trade off is between psychiatry addiction and non psychiatry addiction.
And the third is between novel compounds and derivations of old compounds. And I think that the way we see it is as follows. On the internal external, we have a very, very active internal R and D organization that's been operating relatively quietly from external perspective for the last 2 or 3 years. And compounds are moving through that process and those will become more visible to you in the months ahead. We're quite excited about that.
Work tends to occur in 2 domains and now I'll move to that answer about psychiatry versus non psychiatry. We are definitely interested in pushing the edge of the scientific frontier in addiction as well as in schizophrenia and other mood disorders. So we have so much presence there and so many adjacencies to the work that we've done. Think we're going to be there for a while. With that said, our cytokine work that began with 4,230 on the biologics has led to other programs that derive from that lineage, both cytokine driven biology as well as oncology.
And so we're seeing more interesting oncology opportunities beginning to emerge on our own laboratories. So on the external front, we're looking at similarly both. The goal on the external we're definitely a bias toward new. I mean, I think in the world we are right now, the threshold for innovation is so high in order to drive reimbursement and utilization in the clinic that I think that we and anybody who's paying attention in this game has to move to highly differentiated new approaches.
Thanks for that commentary. And just
a quick follow-up with the
appointment of Todd Nichols, I couldn't help but notice that the wording explicitly mentioned his leading global commercial activities. Now if we think about tangible revenues, it's mostly a domestic business for you guys. Can you elaborate about that global? How are you thinking about possible future opportunities to expand outside the U. S.
Commercially? Thank you.
Well, as you know, Chris, the U. S. Business has been really front and center for our current portfolio, VIVITROL and ARISTADA. There's 2 vectors that take us potentially into the European world. 3,031 is 1 and so we'll be seeking scientific advice in Europe based on the results of ENLIGHTEN-two and ENLIGHTEN-one and the strength of that package.
And the second is 4,230 because 4,230 is clearly in the oncology world accessing OUS markets is much more straightforward. So we have both of those thoughts that are in the planning stages. Great. Well, the street will look forward
to meeting with Todd. Thanks. I'll get back in the queue.
All right. Thanks, Chris.
The next question is from the line of Cory Kasimov with JPMorgan. Please proceed with your question.
Hey, good morning, guys. Thanks for taking my questions. I guess first one is, I'm curious how much ARISTADA volume growth is factored into your 2019 guidance? And are you modeling any sort of uptake in ARISTADA on the heels of the ALPINE study results for this year?
Hey, Corey, it's Jim. Good morning. So the volume growth that we included in our guidance, if you look at the midpoint, it's about I think it's 48.9% or roughly 50%, which is very similar to volume growth that we saw in 2018 versus 2017. So we're kind of following that same practice. Even though ARISTADA is in the growth mode, we think that the new data that we're seeing and the full year of INITIO are really the drivers for the growth that we expect for ARISTADA through the rest of the year.
I think ALPINE data, obviously, when we made our expectations, we didn't know what those results would be. So those are things that would actually help us on top of that. And we'll certainly before we get out and educate the whole market on that, that's going to take some time. And that is a potential upside for us as we move forward.
Okay. And then a follow-up on ARISTADA from the clinical side and with regard to that ALPINE study, are you able to provide a little bit more color on the different withdrawal rates that were defined as by subject that was seen between the two arms. I think it was 20% for ARISTADA and 31% for SUSTENNA. Curious about the primary reasons for this is the adverse event dropouts were pretty similar between the groups?
Yes. I mean, Corey, as with any clinical trial, as a difficult portion of the withdrawal by subject is at subject choice. So for a lot of those, you don't land up having a clear reason as to why patients came off of the study. But it often relates to the differentiated safety profile as well because patients don't always give clear reasons for coming off the study. So invariably, the 3 largest groups are always going to be adverse events, withdrawal by subject and loss to follow-up.
And so we don't often have color on the loss to follow-up or the withdrawal by subject because those are often just personal reasons for subjects coming off a study.
Okay. And then just to squeeze one more and I have a follow-up on Chris' question regarding Todd's appointment. I guess I'm curious how you see the commercial strategy evolving in the U. S? I know he was asking internationally, but in the U.
S, if at all?
Well, I think we have the basic architecture of the U. S. Commercial strategy in place. And I think that as it relates to VIVITROL and ARISTADA, the structure, the sizing, the positioning and now with these new data for ARISTADA and just the basic things that are happening in the nation with respect to VIVITROL, we feel like there are some fundamental trends that are going to start to move our way. With the admonishment, I always give that things happen slowly in both addiction and psychiatry, notwithstanding the amount of data that's mounting in support of use of medicines like ours.
The change the step function is with the approval of 3,831 if that happens because that does a couple of things for us. 1, it provides another, I think, what you could argue is leading medicine, in this case gives us an oral compound, which will expand the footprint of psychiatrists that we'll be calling on for schizophrenia medicine, which has positive feedback loop for ARISTADA as well. And the other thing is, as you know, we're building hospital presence with ARISTADA because of the INITIO initiation regimen because so many patients are initiating in the hospital. So the ability to be in the hospital and many patients switch their medications, oral or otherwise, during that inpatient stay. So I think that we're going to start seeing for the first time real commercial synergies with the launch of 3,831.
Okay. Thanks for taking my questions.
You're welcome.
Our next question is from the line of Jason Gerberry with Bank of America. Please proceed with your question.
Hi, good morning. This is Chi Fang on for Jason. Thanks for taking my question. I have 2 on VIVITROL. Just curious, given recent DOJ indictment filed against the makeup of SUBOXONE, do you see any positive commercial read across to VIVITROL?
And secondly, related to your original guidance, thanks for providing color on reaffirming the VIVITROL guidance earlier in the remark. Wondering how is VIVITROL and the broader market shaping up against the original plan? Do you feel more or less confidence about your ability to come in the high end of the guidance range? And just curious, do you expect to see a similar second half weighing as you saw in 2018 in terms of inventory revenue contribution? Thank you.
Yes. Hi, good morning. It's Jim. And could you just repeat that the third part of the question? I didn't hear that.
On VIVITROL, do you expect a similar second half weighting as revenues skew to second half as you saw in 2018? Thank you.
Weighting, okay. Sorry, of course, yes. Well, I think VIVITROL is doing well. I think we are as you mentioned, we reiterated guidance this year and we're off to a start as we expected in the Q1. I think it's a little too early to give more color about where we're going to end up ultimately with those ranges.
And I think that the overall we are starting to see as we're out there at more medical meetings, etcetera, the idea that detoxification followed by medications like VIVITROL that can protect against relapse and focused on relapse prevention are gaining more understanding in credence and discussion, because they fit an important niche for patients who want to lead a life without taking opiates any longer. So I think, again, we're confident about the future of VIVITROL, but we won't give any more color on the perspectives. We do see generally that there tends to be a seasonal pattern with the 2nd and third quarters being quite strong for VIVITROL. And those are patterns we expect through the course of the year, but we'll continue to update you. And then I guess the other thing I would say, as I mentioned in the call, we are seeing a broadening the growth, which is important.
That concentration, we used to talk about the top 5 states being over 50% of sales. That's slowly ticking down and now they're 44% of sales. So as we're seeing over 20 states with growth rates over 20%, and that's an important breadth of the business that's going to be important for us to continue through the course of the year. So I think we're optimistic about where VIVITROL is, but we have our work cut out for us, because there's still people who don't understand that there's an option for a non opiate treatment for opioid dependence.
And Chi, this is Rich. I'll just make a brief comment on that indictment. I don't think it has much of an impact in the short term certainly, but it does underscore that just the enormous position, the dominant position that buprenorphine occupies in the treatment landscape in the U. S. And I think to the extent it gives people pause to say, are there alternatives other than buprenorphine?
Of course, there are. And just last week at the prescription drug and opioid summit, you saw the Assistant Secretary of Substance Abuse and Mental Health Services, Elie McCann's Katz, get up and talk to a large audience and talk about how now it's established that patients undergoing detoxification should be put on to long acting injectable naltrexone, I. E. VIVITROL without exception. And you never would have heard talk like that even a year or 2 ago.
So we Jim and I always say it on these calls, which we maintain this very, very strong optimism, but we temper it with our inability to translate it into forecast that we can give you guys on calls like this. But the general feeling is that there's a tendency toward the use of more and more VIVITROL over
time. Thank you. The next question is from the line of Biren Amin with Jefferies. Please proceed with your question.
Yes. Hi, guys. Thanks for taking my questions. Rich, on the opioid addiction market, given the DOJ's focus on Suboxone film, do you expect any derivative benefits to VIVITROL sales as a result of increased focus on how SUBOXONE Film has been marketed?
I can't really add a whole lot more to what I just answered, Biren, which is I think that you can if you were to draw a diagram of the U. S. Opioid use disorder treatment market, you draw a giant circle that represents the Suboxone, buprenorphine, methadone world and you draw a very little circle, which is VIVITROL. And the overlap between the two circles of the doctors who prescribe both is very, very small. Yet the epidemic continues to rage out of control in the U.
S. And policymakers and public health officials and criminal justice officials are mobilizing to make changes. So it seems to us that there's so much logic to the increased use of detoxification plus VIVITROL, not for all patients, but certainly for a much larger fraction of patients that are currently getting it. And I think that the focus on the policy around buprenorphine, Suboxone, Methadone and VIVITROL is only good for VIVITROL.
Got it. And then, just on ALKS 4,230, can you just maybe go over what type of data sets we should expect, later this year from that program?
Yes, sure. So in terms of our dose escalation phase, we definitely expect to complete our dose escalation for monotherapy that's in the IV study. And we'll be able to determine what our Phase 2 dose is going to be. And then in parallel, we've got the combination arms enrolling actively at the moment with pembrolizumab and we expect that those arms will start maturing and we'll be able to have data readouts from that arm of the study towards the end of this year as well. So I think the combination arms are really optimized.
That's the patient population, which is really optimized to demonstrate responses, both because they're better prognostic patients, they patients not as sick and so they've got a better chance of responding. And then obviously, we also believe that we'll be able to initiate our monotherapy arm in renal cell carcinoma as well as melanoma as soon as we've got our established Phase II dose. And then the other study is really looking at subcu and we hope to establish our subcu regimen towards the end of this year as well.
And so the subcu regimen, you're hoping to go forward with a Q2 or Q3 week profile. Is that correct?
Yes. It's 1 week and 3 weeks of the 2 arrangements we're looking at.
And how do you how do you, I guess, come to Q week or Q3 weeks, given the IVPK profile?
It was basically modeled off of a lot of our preclinical data, as well as the profile of the compound. And we I think some of those data were presented last year at SITC. And based on that, we modeled out our sort of 1 week and 3 week regimen.
Got it. Thank you.
The next question is from the line of Liav Abraham with Citi. Please proceed with your question.
Good morning. Just a quick follow-up on 3,831. When will you start be starting to invest in the commercial infrastructure for the launch of that drug? Will that actually start in 2019? And can you put any numbers around that at this point?
Good morning, Liav. Our 2019 plans do not include commercial or field people related to 3,831. Some of the increase in the spend that we're expecting later in SG and A are for the market research and continuing education programs about the broader needs in schizophrenia, market preparation work as it were, but we really don't have any major commercial spend in the plans in 2019. Given that the NDA will go in mid year, that launch will be more built into the 2020 plans.
Thank you. And then a follow-up on VIVITROL. Can you comment a little further on where you're seeing the greatest legislative and access activities outside of the states that represent the majority of revenues? And how do you anticipate that concentration of revenues on a state basis to evolve over 2019 and potentially beyond to the extent that you have visibility? Thank you.
Sure. I think the evolution to that will I think continue to remain steady. We've seen maybe a few percentage points as the states broaden out their usage. I think we have a lot of states, as I mentioned, over 20 that are growing at over 20%, but they're from a smaller level. So the major states of Ohio, Pennsylvania and Massachusetts still make up the bulk of the sales.
And I think when it comes to so again, as best we can predict, I'd say that evolution will be steady. Although, as we saw in 2016, a single state like Ohio really changing drove much larger growth rates than we've seen in the last few years. So one state can have a major impact. I might point to work in California and Michigan, as being areas where last year we saw some changes in reimbursement in California with the state Medicaid opening up easier access to VIVITROL. Now that doesn't change practice overnight, but access is improved, I think education improves, physicians begin to use the product and those both county, city and state level programs can then start to grow.
And so we have high expectations for California as we move forward. Last year, Michigan, for instance, created a program where folks with 2 instances of DUIs on the alcohol side would be referred to further medical treatment under a state based program. And we find that as an interesting opportunity, for instance, for VIVITROL. So, there's also a number of states like Kentucky, West Virginia, New Jersey that are also involved in expanding drug court programs. So, I think that broader group of states is poised to continue to grow.
And as we see those accelerating, we'll update you through the quarters if any of those warrant particular highlights that might be changing the growth trajectory that we've outlined for our plans for 2019 at this stage.
Thank you.
You're welcome.
The next question is from the line of Umer Raffat with Evercore. Please proceed with your question.
Hi, this is Alex Brant on for Umer. Two questions for the quarter. The first is, IMS is implying a sequential decline from Q4 to Q1 in VIVITROL. Is that consistent with the data that you're seeing internally? And the second question is, you're flagging these 5 new states like California, Texas, etcetera in your slides.
Should we expect an acceleration in VIVITROL trends like we saw a few years ago, sort of kind of following up on the last comment as well?
Yes. Well, I think again the expectations that we have for VIVITROL are built into our guidance, which is consistent I think with what we saw last year. I think why we outlined those particular states given people's interest as we've just were discussing, those I think are where we see the opportunities for growth to accelerate. So that broadening of the states needs to occur for us to hit our plans, but I would say that no particular state expansion is included in our anticipated guidance for 2019. As we said numerous times and Rich reiterated as well today, what we do with VIVITROL is take our current growth trends, use those as our current expectations and seek to drive change in various states.
And if that change takes hold, we'll probably see accelerations in growth trends. As for the IMS decline quarter to quarter, we're not really seeing that in our own broader trends in terms of unit sales throughout the states. And that's generally related to the fact that the IMS is really in a retail channels and VIVITROL sales are so much through government programs and slightly broader distribution channel that IMS doesn't pick up. We tend to really see only kind of 70% -ish range of the cartons that are picked up by the IMS data. So that's always been a little spotty and I think you need to look at a broader trend in a single quarter to really understand what's happening with VIVITROL.
Thank you. The next question is from the line of Paul Matteis with Stifel. Please go ahead with your question.
Hi, thanks so much. This is Ben Burnett on for Paul. Just one question on ARISTADA. Could you provide a little color as to which types of physicians or hospitals have been early adopters of INITIO? And I guess, were these practices in hospitals, I guess, specifically, were they are they converting from INVEGA SUSTENNA?
Are you seeing utilization among practices that are new to the long acting market? Thank you.
Ben, this is Rich. I'll try to answer that. And I actually don't have all the answers to that. But I will say that the INITIO has provided more of, I think, an entree into hospitals. And I think on our last call, we mentioned that there were 70 or 80 or so hospitals that already opened up for use and it's now Jim tells me greater than 100 hospitals.
They might have been using only the other long acting aripiprazole product, but with the Aventa INITIO in 2 months, those hospitals are now opening up for the use of ARISTADA, the entire ARISTADA family. So that's really encouraging. We don't really see that ARISTADA is a substitute for INVEGA SUSTENNA. We see and that's what's so important about the ALPINE data is that we really see these two medicines and recall that INVEGA SUSTENNA incorporates Alkermes technology as well. We think these should be the 2 leading long acting injectable atypicals and different patients have different needs and the patient who might benefit from ARISTADA and aripiprazole might be a different patient that might benefit from paliperidone and INVEGA SUSTENNA.
So I think that what we're emerging is now that there are 2 of the LAIs that have the features and the data that should drive long term utilization in the hospital and in the community. And I think those are ARISTADA and SUSTENNA.
Thank you. The next question is from the line of Brandon Folkes with Cantor. Please proceed with your question.
Hi, thanks for taking my question. Firstly, can you help us think about the size of the Veterans Affairs opportunity for ARISTADA? And was this when expected when you gave initial guidance on your 4Q call? Thank you.
Yes. Thanks, Brandon. It's Jim. The size is a great question. There's roughly, I think, 110,000 over the course of a year, 110,000 months of therapy as it were in the VA, which works out to about 6% of the overall market.
And this is a market that we really haven't had any we've got a few 100 cartons in the VA so far for ARISTADA. So, it's really quite a substantial opportunity for us. And we included growth in the various markets and market growth is part of our guidance for 2019, but we didn't know exactly when the VA formulary change would occur. So I would say that, again, with everything with ARISTADA, it's going to take some time, but this is a really a new opportunity for us in the VA. But it is going to take some time because we're on the formulary now as of this week, but each individual hospital and each individual business is going to then have to go through the paperwork of adding ARISTADA to the formulary.
So what it does really now is allow our team to get out there, and get into the VA and we expect that we'll be able to bring the VA up to our overall market share, which is right now hovering around 7%. So there's a real opportunity for us to increase ARISTADA penetration there.
Great. Thanks very much. And maybe one follow-up, if I may. Post SIRS, is there any update you could give us on feedback that you received regarding the use of ALKS 3,831 from a pharmacoeconomic proposition perspective?
Hey, Brandon, it's Rich. I'll let Craig answer just because he was at SIRS and he got a lot of feedback from physicians and I'll probably mention on the pharmacoeconomic side. Go ahead.
Yes. So on the clinician front, there's a lot of excitement around the 3821 data. We had folks come up to us straight after the presentation asking when this would be available, how long they would have to wait, what the regulatory process would be. So I think we're getting a lot of traction. I think the next step is for us to really educate our investigators on the data and to present additional data at upcoming meetings.
So we'll be presenting data at the ASCP conference coming up as well. And ultimately, the next step would be for us to publish our data. So it's all about education. So I think on the payer front as well, once there's excitement within the clinical community, the next step is to start educating payers over the course of the year as we go through the regulatory process as well. But I'll hand the rest of it over to Rich.
Yes.
The only thing I'll add is that we all know that the challenge ahead of us which we've been prepared for from the outset is to introduce a branded product in a generic sized marketplace. It's a government pay marketplace. Well, guess what? We've been doing that for quite a while with ARISTADA. ARISTADA is a branded medication at a significantly higher price point in a patient population that is forced to progress through multiple failed generics.
So that's almost table stakes coming into schizophrenia. You know that your patients are not going to get access to branded medicines right away. But with that said, given the average length of therapy on any antipsychotic, it's so brief that the churn is so significant. And that I phrase that in business terms, but in human terms, it's really horrible. There are better medicines that should be used earlier in these patients' journey and that's part of the policy aspect of it.
On the pharmacoeconomic side, these patients are extremely expensive. They're expensive for two reasons. Number 1 is in the short term based on non compliance relapse rehospitalization. And those are out of pocket costs that payers are dealing with all the time. They're within health treatment systems.
They're also within the criminal justice system. The second is the long term sequelae of non treatment and or treatment with weight gaining or other agents with significant weight metabolic sequelae. And those are quantifiable. And so as we put together the dossier now to support our interactions with payers, these are all elements of that comprehensive work.
Great. Operator, I think we just have time for one more question this morning.
The question will come from the line of Marc Goodman with SVB Leerink.
Good morning. You talked about SG and A a little bit for the rest of the year. Can you talk about R and D, which seemed to be a little light in the quarter and why that was and how that's going to ramp up throughout the year and the 54, 61, is that still being moved forward? Where are we on that? Second question is on 3,831, in the past you've given us a flavor for how many reps you're going to put on the ground and I was just curious if you could just reconfirm and we're still thinking somewhere in that 250 kind of rep range.
And from an advertising and promotion spending, I know you don't want to give us any type of numbers for when you start spending next year, but should we be thinking that this is going to be a spend that's going to be like an ARISTADA, like a VIVITROL, more or less, Give us a sense of just as much as you can just how relative the spend is going to be from that perspective? And have you started to have the conversations with the payers in 3,831? You started to talk about that a little bit, but I was just curious how much you've really gotten into that? Thanks.
Mark, I'll start with some of the financial questions and then I'm sure Rich will provide some color. So from an R and D perspective, yes, we are going to ramp through the course of the year. I think generally that can be put on the addition of as we talked about on the annual call in February, roughly a $75,000,000 ballpark increase in spend on 4,230 through the year. So Craig outlined really the 3 broader initiatives that we have with the combo study, the monotherapy as well as the subcu program. And those are really get started.
They're started now, but they'll be increasing in rate and spend through the course of the year. So I think a pretty steady increase in R and D spend through the rest of the year to put us into our guidance range is how I'd model it from an R and D perspective. We still are enrolling and running Study 2 17 for 5,461 And until we figure out our long term strategy with the agency, we think that study is important, and has important data for us. So we'll continue on through the course of 2019 2020 until we update otherwise with 5,461. And then in the 3,831 area in terms of the number of reps, I don't think we really have an update now.
I think as we are understanding our data, we're doing the work in the background in terms of the sales force sizing and the overlap with high prescribers in the oral side, and we'll make those decisions as we get through into next year. But from a launch perspective and spend, I think that I'm not sure ARISTADA or VIVITROL are the right analogies. This is an oral agent. This has, I think, blockbuster potential, and will, I think, invest as the logic would dictate for an opportunity this size with a Olanzapine related compound without the metabolic issues. I think there are some really exciting opportunities that await us as people get educated about that data and see that market opportunity and understand the value and the use of Zyprexa even with all its liabilities today.
It's a compound that people use and find a lot of benefits from even with its liabilities that we think we've dealt with the 3,831 data. Rich, I don't know any more perspectives from you? Mark, all I
would say is on the payer side, we really wanted to get the ENLIGHTEN-two data because that actually gives us the information to go talk to payers. So we're just starting that work now and we're looking forward and I'm going to challenge you to really take a closer look at the 3,831 data because I want to underscore something that Craig said on the call, which is there's so much focus on the weight data by necessity and correctly to establish that this agent has a different weight profile than olanzapine. Once that's done, once that's settled matter, the value proposition to patients with schizophrenia is the efficacy. And I think that schizophrenia is the efficacy. And I think that tracing that you saw in the slide deck of patients who were stabilized in oral medications to go into ENLIGHTEN-two, they all improved on both olanzapine and 3,831.
There is a differential efficacy benefit for this medicine. And when we talk to clinicians, once they're satisfied that the weight differential is real, then what drives the utilization is the efficacy. And I think that's the hole we're filling in the marketplace and that's why we're so excited about it. So, I think we'll leave it there.
Great. All right. With that, we'll end our call this morning, but please don't hesitate to reach out to us at the company, if you have further questions that we can be helpful with. Thank you.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.