Good morning. Welcome to the Alkermes PLC third quarter 2018 financial results. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session during which you can dial star one if you have a question. Please note this conference is being recorded. I will now turn it over to Sandra Coombs, co-head 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 September 30, 2018. With me today are Richard Pops, our CEO, James Robinson, our President and COO, and James Frates, our CFO. 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 two of the accompanying presentation and our most recent annual and quarterly reports 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. Today, James Frates will discuss our financial results. James Robinson will share his perspectives on our commercial portfolio, and Richard will provide an update on the company. After our remarks, we'll open the call for Q&A. I'll turn the call over to James Frates for a review of our financial results.
Thank you, Sandy. Good morning, everyone. This morning, I'll provide a review of our 2018 third quarter financial results and share a few updates to our full-year guidance. The fundamental elements of our business are performing as planned, with additional upside from AMPYRA. Today, we're adjusting our financial expectations for 2018 to reflect increased revenues due to delayed generic entrants for AMPYRA, which has now occurred. The increase in expected revenues will also flow through to our bottom line with improved GAAP net loss and non-GAAP net income for 2018, which I'll detail more fully in a moment. Turning to the quarter, we delivered strong results highlighted by total revenue growth of approximately 14% year-over-year to $248.7 million and non-GAAP net income of $11.6 million.
These results were driven by 24% growth of our proprietary products year-over-year and the continued strength of our base royalty and manufacturing business, including the higher than expected AMPYRA revenues resulting from a delay in generics entering the market. During the quarter, VIVITROL net sales increased approximately 15% year-over-year to $79.9 million, driven by unit growth of approximately 18%. Sequentially, VIVITROL net sales grew approximately 5% compared to the second quarter, driven by favorable gross to net adjustments, which were approximately 47% for the third quarter, down from 49% in Q2. There was also a modest increase in inventory in the channel, which stood at approximately two and a half weeks at the end of the quarter, well within our normal ranges.
We continue to expect VIVITROL net sales to be in the range of $300 million-$330 million for 2018, though likely toward the lower end of that range. Turning to ARISTADA, net sales increased approximately 48% year-over-year to $36.1 million in the third quarter and grew approximately 8% sequentially. Gross to net adjustments for ARISTADA were 47% for the quarter, up from 43% during the second quarter, as expected, due to the continued shift in volume toward the largest Medicaid accounts. Today, we're reiterating our expectation for net sales in the range of $140 million-$160 million for ARISTADA in 2018. Moving on to our manufacturing and royalty business. We saw revenues of $116.4 million in the third quarter compared to $122.7 million in the third quarter of last year.
RISPERDAL CONSTA, INVEGA SUSTENNA, and INVEGA TRINZA continue to be important drivers of our diverse portfolio of manufacturing and royalty revenue streams. During the quarter, we recorded revenues of $77.2 million compared to $79.4 million for the same period last year. This reflects continued growth of INVEGA SUSTENNA, which was offset by the timing of manufacturing revenues for RISPERDAL CONSTA during the quarter. Overall, the long-acting injectable atypical market in the U.S. has continued to demonstrate solid year-over-year growth. For AMPYRA and FAMPYRA, we recorded manufacturing royalty revenues of $20.3 million during the third quarter compared to $24.5 million for the same period last year. This was stronger than expected as generic entrants were delayed coming to market. We expect revenues from AMPYRA and FAMPYRA in the fourth quarter to be approximately $20 million.
Due to the recent launch of generic competition in the U.S., we expect our AMPYRA revenues will be substantially lower during 2019. In the third quarter, we recorded R&D revenues of $16.3 million, primarily related to the reimbursement of development expenses for diroximel fumarate, or BIIB098, from our collaboration with Biogen. We continue to expect a consistent level of R&D activity around BIIB098 in Q4. In terms of expenses, our total operating expenses for the third quarter of 2018 were $285.9 million compared to $255.7 million for the same period last year. This year-over-year increase was largely driven by investments in the commercial organization in support of VIVITROL and ARISTADA. Our investment in SG&A decreased slightly compared to the second quarter, primarily driven by the timing of launch activities for ARISTADA INITIO in Q2.
Overall, our expenses for the full year of 2018 are expected to be within our previously provided guidance ranges based on increased investments in our commercial organization and R&D in the fourth quarter. Let me turn now to our improved financial expectations for 2018. We now expect total revenues in the range of $1,015 million-$1,045 million, reflecting an increase of $30 million, driven primarily by upside from AMPYRA during the second half of 2018. This increase in total revenues flows through to the bottom line, resulting in a $30 million improvement to our GAAP net loss expectations to a range of $180 million-$210 million, and a corresponding improvement to our non-GAAP net income expectations to a range of $20 million-$50 million. Our complete financial expectations are outlined in our third quarter results press release issued this morning.
Turning to our balance sheet, we are well-positioned and ended the third quarter of 2018 with approximately $579 million in cash and total investments, compared to approximately $561 million at the end of the second quarter. The change in cash during the quarter was driven primarily by our operating results and fluctuations in working capital. The company's total debt outstanding was approximately $280 million at the end of September. Overall, we are pleased with our solid third quarter results and our strong financial position heading into the fourth quarter. Our diverse business is well-positioned to support the opportunities that lie ahead in the next stage of the company's evolution as we approach the important catalysts in our development portfolio over the next few months. With that, I will turn the call over to James Robinson for additional updates on VIVITROL and ARISTADA.
Thank you, Jim. Good morning, everyone. Let's start with VIVITROL, an important medicine that continues to grow in the market. As Jim stated, in the third quarter, net sales of VIVITROL increased approximately 15% year-over-year to $79.9 million, driven by underlying unit growth of 18%. We continue to increase access and awareness at both the state and provider level while improving continuity of care for patients. These elements are fundamental to our long-term success and provide a platform for the growth of VIVITROL. The opioid epidemic is a central theme in our national political dialogue, with every community across our country affected. Important pieces of legislation are gaining bipartisan support, and progress is being made. We continue to collaborate with federal, state, and local policymakers to expand the availability of treatment. The President is expected to sign the SUPPORT for Patients and Communities Act soon.
This piece of legislation includes numerous provisions that have the potential to be impactful to VIVITROL, and we will engage with policymakers throughout the implementation process. In particular, we are encouraged by the provision for comprehensive opioid recovery centers, which provides funding to develop federally qualified treatment centers that utilize the full range of FDA-approved medications. This is an opportunity to establish centers of excellence to address the tremendous need for comprehensive treatment and recovery systems, similar to comprehensive cancer treatment centers in oncology. Importantly, the federal legislation also extends funding for state-targeted response grants for an additional three years, with $500 million to be distributed annually between 2019 and 2021. Ensuring consistent availability of funding will be key as long-term investments are made in building new treatment infrastructure and programs.
At a state level, we continue to see strong growth of VIVITROL in a number of states, driven by a variety of policy initiatives, both in the community and the criminal justice setting, as well as improvements in access to VIVITROL. While the top five states represent approximately 45% of VIVITROL volume overall, growth is widespread across the country. Year to date, 27 states have demonstrated more than 25% growth year-over-year, and we are particularly encouraged by the growth of VIVITROL in states like Pennsylvania, California, Florida, Michigan, and Kentucky. Many of the initiatives being implemented today across the country will serve as a foundation for increased utilization of VIVITROL over the long term. Internally, we continue to refine our approach and organization in order to best serve healthcare providers and patients, as well as increased utilization of VIVITROL.
We are expanding our capabilities to respond to the evolving market dynamics, including through the addition of key account managers and field-based reimbursement managers. These initiatives are designed to improve patient and provider accessibility to VIVITROL. Underlying all of our efforts is our commitment to ensuring that patients in need of treatment are provided with options that best fit their recovery journey and treatment objectives. Now turning to ARISTADA. Again, as Jim stated, in Q3, we recorded net sales of $36.1 million, driven by unit growth of 44% year-over-year. The quarter was highlighted by the launch of our new initiation product, ARISTADA INITIO. With the new ARISTADA INITIO regimen, ARISTADA is now the first and only long-acting atypical antipsychotic in the market that can be fully dosed on day one, providing patients with up to two months of coverage.
The value proposition of the ARISTADA offering is resonating with physicians. In particular, the two-month dose in combination with ARISTADA INITIO is differentiated in the market and offers important real-world utility across treatment settings, including hospitals and crisis stabilization units, where many patients initiate long-acting treatment. Following the launch of ARISTADA INITIO, we have seen an acceleration in the sequential growth of the two-month dose which grew 26% and accounted for 15% of ARISTADA's volume in the third quarter. We also continue to gain traction with ARISTADA's market share for new prescriptions in terms of month of therapy in the long-acting aripiprazole market, which was approximately 28% in September. We are encouraged by our customers' positive response thus far, especially key hospitals and health plans, as evidenced by the addition of both ARISTADA and ARISTADA INITIO to formularies at more than 30 hospitals during the quarter.
To put that into context, this increases the number of hospital formularies, including both products by nearly 30%. We expect that ARISTADA INITIO coverage will continue to expand, including its addition to the SilverScript Medicare Part D formulary in the fourth quarter. Additional formulary decisions will be made into next year as part of payers' annual review cycles. To support the ongoing launch of ARISTADA INITIO, we are strategically providing samples to hospitals and physicians in order to foster more experience using INITIO. With the complete ARISTADA product family now available, we are positioning ARISTADA to compete against the current leader in the overall long-acting atypical market. To support this effort, we are conducting a study evaluating ARISTADA and INVEGA SUSTENNA. This six-month study recently completed enrollment ahead of schedule, and we are looking forward to sharing top-line data in the first half of 2019.
We will continue to make additional investments in ARISTADA to match the opportunity ahead. During the fourth quarter, we will further expand our field and hospital-based sales force by approximately 50 sales representatives based on the opportunities we are identifying and the encouraging trends that we are seeing. Finally, in addition to our investments in VIVITROL and ARISTADA, we continue to engage in the necessary work to support future commercial opportunities in psychiatry as we prepare for the regulatory decision of ALKS 5461 for major depressive disorder and pivotal data for ALKS 3831 for schizophrenia. With that, I'll turn the call over to Richard.
That's great. Thank you both, and good morning, everyone. Our results this quarter demonstrate the strong and resilient business that we built, with important in-market products driving an expected top line in excess of $1 billion and a diverse portfolio of late-stage assets, each with the potential to change the growth trajectory of the company. As we head into the important regulatory and data readouts expected in the fourth quarter, the business is well positioned for future success and for growth. With that, let me share some updates on the pipeline, and I'll start with ALKS 5461. As you know, 5461 is our novel opioid system modulator that we're developing for the adjunctive treatment of major depressive disorder. With a PDUFA date of January 31st, the regulatory review is well underway.
The next milestone in the review process will take place next week, on November 1st, with a joint meeting of the Psychopharmacologic Drugs and Drug Safety Advisory Committees at FDA. We've been preparing for the AdCom for a number of months. We're looking forward to a productive discussion on the efficacy and the safety of this important medicine. You've heard me say time and again, we believe the data generated in this large program support registration and that 5461 has the potential to provide benefit to patients through a new mechanism of action. At the same time, we're presenting FDA with an application that differs from what they're used to seeing, including new study designs and analyses. The AdCom will be an important determinant of the approvability of 5461. We're ready to go.
We'll have a lot more to talk about with 5461 in just the next couple of weeks' time. Moving to 3831, our novel oral atypical antipsychotic for the treatment of schizophrenia. 3831 is designed to provide the antipsychotic efficacy of olanzapine while mitigating its associated weight and metabolic liabilities. We're approaching the end of the pivotal development program. In April, we completed enrollment of our second phase III study, ENLIGHTEN-2, a six-month head-to-head study evaluating weight gain in patients receiving olanzapine or ALKS 3831. We're on track for top-line results later in the fourth quarter. The goal of this study is to replicate and extend the findings from the successful three-month phase II study that evaluated weight gain in a similar manner, head-to-head against olanzapine. If positive, these data would complete the registration package, which is planned for submission in mid-2019.
Next is diroximel fumarate or BIIB098, our novel oral fumarate in late-stage development for relapsing forms of multiple sclerosis, intended to provide a differentiated gastrointestinal tolerability profile. We're developing it in collaboration with Biogen. The exciting news here is that while so much attention has been focused on 5461 and 3831, we continue to make great progress, and we're on track to submit the NDA by year-end. This would position Biogen for a potential commercial launch in early 2020. In addition to the required clinical elements of the registration package, enrollment in EVOLVE-MS-2 is ongoing. Top-line from this elective head-to-head GI tolerability study versus TECFIDERA are expected in mid-2019. While not required for registration, data from EVOLVE-MS-2 may be useful to clinicians and patients considering their treatment choices for relapsing forms of MS. I'll finish with an update on 4230, our novel immuno-oncology candidate.
ALKS 4230 is a distinct molecular entity, which differs from other approaches being used in the IL-2 space. In the case of 4230, we designed a novel fusion protein comprised of IL-2 and its alpha receptor in a single molecule. Intended to preferentially bind to intermediate affinity IL-2 receptors while being permanently hindered from binding to the high-affinity IL-2 receptor. It's administered in its active form and does not require metabolic conversion and does not metabolize into native IL-2. It has its own distinctive pharmacology, which is now being demonstrated in the clinic. During the quarter, we initiated our first evaluation of 4230 in combination with the checkpoint inhibitor pembrolizumab in a variety of tumor types. That enrollment is now underway.
Separately, in the ongoing monotherapy dose escalation part of the phase I study, we're in the process of implementing the protocol amendment we discussed last quarter and expect to reopen enrollment of the fifth cohort next month. Once we complete dose escalation with the identified optimal dose of 4230, we will advance into monotherapy dose expansion in patients with renal cell carcinoma or melanoma. In the meantime, next month at the Society for Immunotherapy of Cancer meeting, we'll present data from the four initial dose escalation cohorts. Data from these cohorts demonstrated dose-dependent pharmacodynamic effects on circulating CD8 positive T cells and natural killer cells with minimal and non-dose dependent effect on immunosuppressive regulatory T cells and provided evidence of 4230's pharmacologic and biologic activity. In addition, at SITC, we'll be presenting data from two preclinical studies comparing subcutaneous administration of 4230 to IV administration.
These data underlie our decision to evaluate sub-Q administration of 4230 as an alternative to IV dosing. During the third quarter, we submitted the new clinical protocol to the 4230 IND for a subcutaneous dosing phase I study, and we expect to initiate that study early next year. 2019 will be an important year for the 4230 program with expanded clinical activity and the potential to generate initial antitumor efficacy data in a range of tumor types. In the meantime, separate from the programs I've just outlined, we've continued to invest in our internal research and discovery efforts and expanding our capabilities in biologics. We're making good progress here, and we look forward to nominating new candidates into the clinic and sharing our progress with you as we approach the finish line for our late-stage development programs over the coming year. Drug development is challenging work, particularly in psychiatry.
We carry on because of the significant opportunity we see to use our scientific insights to positively impact the lives of patients and families. Both the ALKS 5461 Advisory Committee and the ALKS 3831 phase III data readout are important catalysts for the company, and we're planning for success. We have a resilient and diverse business and many opportunities for growth. The cards will be turning over soon, and we'll look forward to updating you on our progress and the opportunities that lie ahead. With that, I'll turn it back over to Sandy.
Thanks, Richard. We'll now open the call for questions.
Thank you. We will now begin the question and answer session. If you have a question, please press star one on your telephone keypad. If you'd like to be removed from the queue, please press the pound sign or the hash key. There may be a delay before the first question is announced. If you're on a speakerphone, please pick up your handset first before dialing the numbers. Once again, if you have a question, please press star one on your telephone keypad. From Bank of America, we have Jason Gerberry. Please go ahead.
Good morning. Thanks for taking my questions. Just two on 3831. Rich, maybe just first one, have discontinuation rates on a blinded basis tracked in line with your assumptions? I know that in the past you've commented on that. Secondly, just a question about as we think about patients in this study who are getting Zyprexa and maybe outliers with the largest weight gain, do you have a sense when these patients tend to discontinue therapy? Just trying to get a rough sense of how to think about when those patients could potentially drop out. I guess my last question, just on BIIB098. As you guys approach the NDA filing or Biogen does, I'd be curious just to get your thoughts on the proportion of TECFIDERA patients that you actually think are switch candidates.
The reason I ask is when we hear from some physicians, patients' GI tolerability issues on that drug tend to become more manageable and subside after the first couple of months of treatment. I'd be curious just to get a sense of how much of the market you think is up for grabs. Thanks.
Sure. Good morning, Jason. I'll take those in turn. Yeah, actually, I'm interested in the inverse of the discontinuation rate, which is the retention rate. That's what you've heard us talk about before, because our thesis has always been with ALKS 3831 in a setting like this ENLIGHTEN-2, if we can keep patients in the study on olanzapine, they'll continue to gain weight, and conversely, if we can keep the people on ALKS 3831 in the study, their weight differentiation will accentuate over time. Retention is a critical part of this study. The answer to your question is yes, on a blinded basis from what we see, it looks about what we would have modeled.
I didn't completely understand your second question about the profile of patients on Zyprexa who might discontinue, the general consideration is that we tend to pick sites and centers that have the ability to keep people in the study. Even with that said, we would model for something on the order of 40% loss to follow-up in these types of studies because these are patients with schizophrenia. That's all built into our powering calculations. On BIIB098, obviously Biogen are the experts on this, I can tell you that my own view is that patients who get through the GI tolerability challenges in the beginning and are stable on TECFIDERA wouldn't seem to me to be the most likely patients to switch.
This is all about as people initiate on new medicines. The whole offering for BIIB098 with a favorable GI tolerability profile and equivalent efficacy seems to be the logical starting place. I'll refer you to Biogen. I will say that as we approach NDA submission and the data come together from the program, and we have the benefit of the open label safety study now, has been running for a couple of years. We see a GI AE discontinuation rates below 1%. We saw this really excellent efficacy. We hear anecdotes from patients in the clinic. I think the whole aura around this program is getting stronger and stronger as we move into the NDA phase.
Great. Thank you.
You're welcome.
From JP Morgan, we have Cory Kasimov. Please go ahead.
Hey, guys. This is Matthew on for Cory, thanks for taking my questions. Just a couple questions. First on 4230, on the subq dosing, just curious to get your thoughts about how quickly you can escalate this, if we should expect to see data in 2019 from this program.
Yeah, I would expect to see data in 2019. We're still experimenting here to see what the actual regimen may be, how infrequent the dosing may be. Because we have the comparative controls from the IV daily times five, we can see how the expansion of CD8 positive lymphocytes as well as natural killer cells compares to what we see with IV. I expect, everything's driven by how fast you can enroll folks in the study, but I think we should get information fairly quickly.
Okay, great. Then, just on the announced sales force expansion for ARISTADA. Any, overlap here with either a potential 5461 or 3831 sales force?
Yes, on both accounts. The expansion not only supports ARISTADA today, but also can be used to support the launch of 5461 and 3831.
Okay, great. That's it for my questions. Thank you.
From Credit Suisse, we have Uy Ear. Please go ahead.
Hi, this is Uy Ear. On ALKS 5461, the AdCom is soon. Just wondering if you would be able to share with us any info or any sort of exchange you might have had with the FDA, such as have you seen the briefing documents and the type of questions that you are expecting the FDA to ask?
Hi, this is Rich. I think the questions going to the AdCom are the ones that have been obvious or self-evident from the very beginning when we made the submission, which is number one is the substantial evidence of efficacy. Is the committee comfortable with the efficacy data that we've shown throughout the program, which incorporates using new study designs and new methods of analysis to confirm that efficacy? We obviously feel quite strongly about it. You've seen those data presented, and you'll continue to see it published. We obviously believe that that's a compelling story, and we're looking forward to telling it.
The second piece of it is almost a more general point, and you can see is by the fact the FDA's convened both the Psychopharmacologic AdCom as well as the Drug Safety AdCom, which is because 5461 is an opioid system modulator, what are the issues about launching an opioid modulating compound, even one directly designed to address the addictive potential of buprenorphine into the midst of an opioid crisis? What's the right labeling? What's the right information? What's the right setting or presentation of this drug for education purposes and for making sure that it gets to the patients it needs to get to. I think those are the two major issues for the AdCom.
Okay. I think you also said that you're looking to move new candidates into the clinics. Would you be able to share with us whether it's the kind of molecules, whether it's small molecules, biologics, and the therapeutic categories you're looking at, whether it be further in CNS or more in oncology or others?
Yeah. I won't make any new disclosures today other than highlight what I said earlier, which is we have a historic strength in our small molecule drug discovery, in our small molecule chemistry, and I think that's getting stronger and stronger. It's been augmented, and it was triggered by the 4230 program at the beginning by this increasing interest in and expertise in biologics. We're actually advancing programs in the labs now that are both small molecule based as well as large molecules. We're interested in oncology as an area, particularly 4230 may be foundational for a number of types of combinations. Obviously we have deep expertise in CNS and in psychiatry. Those are natural lanes that we'll progress along.
Okay, that's all for me. Thanks.
You're welcome.
From Cowen, we have Chris Shibutani. Please go ahead.
Thank you very much. Can you just confirm for us that for 5461, the data that will have been reviewed and discussed in the briefing documents as far as the overall clinical profile, efficacy, and whatnot, has substantially or entirely been presented already? Should we anticipate that there's anything additional that was part of the NDA filing that perhaps hasn't been disclosed?
Morning, Chris. Yeah. You've seen the data from the pivotal efficacy studies as well as the 202 study, which is another efficacy study, the phase II study. What you probably haven't seen yet is the human abuse potential data. I know it's in publication. I don't think it's been presented yet.
There was a poster at APA.
There was one poster at APA. We'll have more of the human abuse liability or human abuse potential data, which we think is very strong as well. There may be some long-term data that is supported that you might not have seen. I can't say you've seen all of it, but I think that everything that you haven't seen will be consistent with what you would have seen before.
Great. It's difficult sometimes to think about approaching an event like an FDA AdCom, not as a binary event, thumbs up, thumbs down, but there frequently is a question of what potential alternative scenario might we see. In particular, I'm asking this in the context of the phase III-B study, which I believe you call Study 217, which was commenced a while back, and I believe is a study that theoretically could be framed as an additional phase III type study. In a scenario, for instance, where if the advisory committee does not recommend for approval, is it realistic to believe that there's a path forward that you would be committed to Study 217 and that we'd be looking to continue development, sort of beyond thumbs up, thumbs down?
Are there other scenarios based upon the work you've been doing and your point of view on it? I realize that the team is obviously looking to be optimistic and need to prepare, but nonetheless, we do have kind of these different paths. Is there a path three that 5461 could continue on so that we could think about implications of the outcome beyond November 1st?
I think that's a thoughtful question. Indeed, we believe deeply in the mechanism and the value of 5461 as a medicine for patients with major depressive disorder and potentially other indications as well. 217 is underway, you're correct. It's one, as you know, from the outset, we were interested in exploring quantitatively some of the other clinical features of 5461 different than what might be captured in the classic MADRS or HAM-D scales. In the event that the advisory committee comes back and says, "We need another study, we need more data," we have the ability to tune that study in order to provide those data. With, of course, the caveat or the admonition always being, we know that in studies of major depressive disorder, active agents often don't separate from placebo due to the high placebo response.
Depending on what we learn coming out of the advisory committee meeting, how definitive or not it is, we'll make further decisions about whether we initiate any other clinical trials, whether we run out 217 as designed, or whether we make modifications to 217 itself. We'll make that call in a couple weeks' time on the other side of the AdCom and on the other side of our completion of the review with FDA, because there's a space of time between November 1st and January 31st where quite a bit happens as well, where the review actually gets completed, and you really figure out what the deficiencies, if any, are, or you then prepare for the launch of the drug.
From Evercore ISI, we have Umer Raffat. Please go ahead.
Hi. Thanks so much for taking my questions. Rich, first, as we head into the AdCom, something that's been on my mind is, why shouldn't FDA make the same request as they were making in the RTF letter for multiple trials? Secondly, on your IL-2, we saw Roche put up single agent monotherapy responses, as you saw with the FAP, and I was curious how you think that ties into 4230, what we've seen to date, as well as plans going forward in terms of the types of tumors you're looking at. Then finally, strategically, it seems like given all the Alkermes expertise in the long-acting injectables, presumably the concept of developing an injectable buprenorphine could have potentially been very much doable.
I'm curious, as you guys internally thought about whether or not to have an injectable buprenorphine offering, what was sort of the thought process, and is that still something of consideration? Thank you.
Morning, Umer. Good questions as always. The first one, just to be clear, in the refuse to file last March, the FDA didn't request multiple trials. The reason your RTF was reversed because it was actually just a misunderstanding. What we've talked about before, facial deficiencies are the basis for an RTF. Once we cleared up that the things that FDA was asking for were actually in the application, we got it back on track, and since that time, the review has been normal course. I was interested in the Roche data, because we've long posited for 4230 that if we've done what we set out to do, the specific design intention of minimizing expansion of Tregs while preserving binding to intermediate affinity receptors and getting the appropriate cellular expansion, we should be able to recapitulate the single agent efficacy that you see with IL-2.
That's why we carry on with our monotherapy dose escalation. I think it's an important checkbox, and I'm hopeful that we can check it as well, but I think that you'll see us continue to do that. With that said, with establishing monotherapy efficacy, I think that's a foundational piece, and then you can continue to explore, obviously, combinations that make sense. The long-acting injectables in the addiction space, I don't think anybody in the world has more experience in the injection space than Alkermes. I'm sorry, in the addiction injection space than we do. You'll hear us say to policymakers and to the media and to you all, the major impediment to new drug development and launching in the addiction space is the fact that this treatment system is outside of the medical system.
New agents are not adopted with any speed at all because the treatment systems are ossified. They use the approaches they've used forever. We're going to fight our way into success with VIVITROL as we've been doing step by step, and we continue to be incredibly optimistic about the role of a long-acting injectable antagonist in this world. We're interested in long-acting injectable buprenorphine products, but you can even see from the launch, it's a slow growth. I think we'll have plenty of time to play there if we choose to do so.
Rich, just to sort of confirm on the IL-2, I noticed you guys mentioned monotherapy dose expansion will be in renal and melanoma.
Correct.
The Roche response
The two responses were in squamous cell types. I was curious if that's of consideration as well as you think about the dose expansion tumor response.
Yeah, I thought that was interesting too. We'll talk about that. I don't have a formal answer to that, Umer, but of course, we noted those data with interest, and the team will be talking about that as well.
Thank you.
From Stifel, we have Paul Matteis. Please go ahead.
Great. Thanks much. Appreciate the questions. A couple on 3831. One, I was wondering if you could opine on what might be a clinically meaningful or commercially meaningful benefit on weight gain outliers. Just separately, if you think that the mean weight gain analysis in this study does have commercial relevance or if it's more of a regulatory relevant endpoint. I just have one follow-up question. Thanks.
Morning, Paul. It's a good question because there's the matter of statistics and regulatory confirmation necessary for NDA submission. There's the whole clinical relevance of it all. We often hear people, I think, inappropriately characterize it, say, "Well, it's just a few pound difference, who cares?" You've heard us say many times before that primary analysis, a co-primary analysis, which is mean weight change, so the center of the bell curve shifting to the left, as well as the categorical determination of patients who gain more than 10% of their body weight. Those are two co-primary points. They're both statistically important. They correlate. I think you've heard us say many times, the most important thing I think is the shape of the 3831 curve.
If we see what we saw in phase II, which is essentially a zeroing out of the slope, a flattening of that slope after a few weeks' time, compared to an ascending slope for olanzapine over time, we hear from clinicians that that's really important. The two statistical measurements of that flatness will be the mean change and the categorical change at greater than 10%. I think the meaningfulness of the data will be have we essentially arrested that weight gain after a short period of time.
Okay. Got it. Thanks. Appreciate it. Just one more follow-up on ALKS 5461, not to beat a dead horse, but I guess just taking a step back, I think in the hypothetical scenario that is more relevant, I think, to interrogate is if it doesn't get through on the first try, would it make sense to start a second phase III study, given just that for antidepressants that do work, you can have half the studies fail, and we know in this case, you were functionally 1 out of 3 in phase III. I guess, would you consider starting another phase III is really my question, if you end up getting a CRL so that if you go 1 out of 2 the next time around, maybe then it's more clearly approvable.
Yeah. We'll make the call after November 1st. Let's see the whites of the eyes of the FDA and the AdCom. I think we'll have a lot more information to make decisions on. As you've heard me say before, we really believe this drug is helping patients. We want to figure out a way to get it to patients. If the regulatory hurdles are insurmountable, then if it's a fool's errand, then you don't do it. We think we're far from that. You'll see at the AdCom, as we finish off preparing for the presentation, it's a strong case. You can make your own determination when you watch it, but we'll see where we land on the other side of it.
Okay. Fair enough. Thanks, Rich.
You're welcome.
From B. Riley FBR, we have David Buck. Please go ahead.
Yes, thanks. Just a couple of questions. First on VIVITROL, can you talk a little bit about what you see in 2019 as the effect of new money from the opioid bill, how you see that filtering down into treatment and potentially growth of your product? Can you talk a little bit about, Richard, for any questions that you've seen for the AdCom that were surprising to you and anything that we should be aware of just in terms of other types of questioning that you haven't mentioned? Thanks.
I'll start with VIVITROL. It's Jim Frates. I think we see very much the opportunity for continued growth for VIVITROL, right? As Rich mentioned, the treatment system has been slow to change. You're seeing the federal dollars come as well as legislative initiatives, both at the federal level and state levels that are moving more towards a quality improvement in the system. I go back to the amfAR data that came out earlier this year where they basically said roughly 4% of the treatment centers in the country are using all three medications when it comes to the treatment of opioid addiction.
As the breadth of growth in various states increases, as we move to more understanding that patient-centered approaches are the way to treat this disorder, that many patients are different, and that the option for a relapse prevention medication with a monthly injection is a very attractive option for patients and sees excellent data as we've seen with X-BOT and the Tanum data. I think we continue to see growth for VIVITROL. It's hard to predict exactly that slope quarter-to-quarter. We'll give you our predictions for 2019 when we do our annual guidance in February, but we certainly have not lost our optimism for the long-term growth of VIVITROL.
Vis-à-vis the AdCom, I think so far the review is proceeding as we would've anticipated. We'll see the final briefing materials when you guys see them. We're prepared for the meeting as we would've prepared for it all along. We're looking forward to it.
From Jefferies, we have Biren Amin. Please go ahead.
Yeah. Thanks, guys, for taking my questions. Hey, Richard, just wanted to get more color on the head-to-head ARISTADA study versus Sustenna that reports out next year. What do you hope to achieve in this study, and will this be label enabling?
Morning, Biren. Yeah, it's been an interesting study because it was considered to be a pretty aggressive idea when we first floated it a few months ago. Remember, about a year ago at this time, we presented data at a congress that showed patients who were failing to get adequate clinical relief on Sustenna switching to Aristada, which was surprising for some people because the common belief is that Aristada and aripiprazole formulations are not as powerful as antipsychotics compared to paliperidone or risperidone. We've never really thought that was true, and those data bore it out in the sense that patients switching had really nice responses to Aristada, suggesting that sometimes different may be better, rather than one of the agents being more or less powerful than the other.
That led us to say, with the Initio approval coming, let's run a study in a real-world setting that's really meaningful to providers, and to patients, and to payers, which is if we can initiate on Initio in the hospital and discharge with a two-month dose, that's a very powerful offering in the community. Let's compare that head-to-head versus Sustenna. The primary comparison is not an inter-group. It's just looking at the baseline of the patients in each group compared to their results at a certain time point, a month or two months or something like that. It'll also give us the opportunity in a parallel way to look at the relative efficacy of the two medicines.
I don't know if it'll give us label indications, but it'll certainly give us information that a lot of opinion leaders and folks in the community are interested in seeing.
From Goldman Sachs, we have Terence Flynn. Please go ahead.
Hi. Thanks for taking the question. Maybe just on 5461, can you remind us, Rich, where you guys stand with commercial prep, and is the outcome of the AdCom really a key input into the next stage of that build, or is it the FDA decision? Maybe just remind us also how you're thinking about the size of the footprint. Thanks.
Sure. I'll take the first part, ask Jim to do the second part. 5461, Terence, I think the AdCom is really central to the FDA's decision-making on this. That doesn't mean there's not some space in between November 1st and January 31st. It doesn't guarantee approval, but it certainly is an important necessary step in our view. We have done an enormous amount of preparation for launch of 5461, but we won't pull the trigger on hiring the next level of Salesforce expansion until such time as we really have a sense that the drug is going to be approved. Remember, with a drug like this, which is expected to be scheduled, it'll receive FDA approval if we're fortunate, but then it'll go into the DEA scheduling process, which is another three months typically.
That three months actually is very useful to us as we begin to operationalize for the launch, which we expect to happen in the summertime. Jim, you want to clarify?
Yeah, just a few things on the preparation for the launch. Obviously, a lot of work that's gone into creating awareness about the fact that there's still a high unmet medical need and the role of adjunctive therapy in treating major depressive disorder. Also a lot of discussion regarding the mechanism of action of how 5461 will work and how it will benefit patients. A lot of work going in meeting with key opinion leaders, meeting with providers, as well as meeting with payers to make sure there's awareness of the value of a product like 5461. As you would expect, there's been a tremendous amount of work done in Salesforce sizing and ensuring that we've got the right sales force from a size perspective as well as from a quality perspective in the field at the right time upon approval.
A lot of work going into that, and we're well prepared for the launch of 5461.
Terence, just to finish up the thought, it's a bit of a simultaneous equation because we'll have an important data read out on 3831 before the end of the year as well. So as Jim thinks about sizing our commercial footprint in psychiatry, is it ARISTADA and VIVITROL, or is it ARISTADA, VIVITROL, and 5461, or is it ARISTADA, VIVITROL, 5461, and 3831? And those are all different configurations that are in play.
Brandon, we have time for one more question, please.
From Morgan Stanley, we have David Risinger. Please go ahead.
Thanks very much. I was hoping that you could talk a little bit about the acceleration in VIVITROL in recent weeks. So what we've seen in the IMS data is that the performance has picked up and just wanted to better understand what you would attribute that to. Obviously, you've been working on improving the commercial effectiveness of your efforts, but wanted to understand that. And also just wanted to understand your take and how you're planning to respond to ICER if their report is negative on the value of VIVITROL. Thank you.
Maybe I'll take it and then Jim Frates and Jim Robinson can chime in if they want to, Dave. For me, I smiled when you asked about the acceleration in VIVITROL because I really don't even look at it week to week. VIVITROL moves on a different wavelength than your typical pharmaceutical product. I wouldn't overinterpret any single or two- or three-week trend, and we'll try to guide you guys as best as we can see, as we've done in the past with VIVITROL. The basic hydraulics for VIVITROL are that policy is shifting in favor of more long-acting injectable antagonist therapy. More money is flowing into the treatment system, those positive forces run up against the institutionalized forces of inertia in a broken treatment system that's slow to change.
It is changing, and we're chipping away at it, we remain very optimistic about VIVITROL. The ICER thing, I expect the ICER review to be negative. The preliminary report is negative, I think it's actually an example of the wrong-headed approach that policymakers sometimes take to the treatment. The idea that long-acting injectable antagonist medication is substitutable or should be viewed as interchangeable based on cost with replacement therapy is really a disservice to the patients who have different treatment alternatives and different objectives for their care. I actually don't think that the ICER report is going to matter a whole hell of a lot.
All right. I think that concludes our Q&A for today. Everybody, thanks for dialing into the call. Please don't hesitate to reach out to the company if you have a question later today. Thank you.
Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.