Everyone, and thank you for joining us on the morning of our 2024 TD Cowen Novel Mechanisms in Neuropsychiatry Summit. I'm Joe Thome, one of the senior biotech analysts here on the team at TD Cowen, and it is my pleasure to have with me today Chairman and CEO Richard Pops of Alkermes, so thank you very much for joining us. Richard, maybe in 2023, the company saw the completion of several litigation events and then the spin of the oncology business, so a little bit of a transformation for the company.
So far, we've seen solid commercial execution in 2024 and progress in the pipeline, but maybe if you want to start things off on a little bit of a state of the business, and maybe what investors should be looking for into the end of this year and maybe across 2025, that would be great.
Thanks, Joe. Good morning. Good morning, everybody. I think you summarized it actually quite well. I was reflecting, last year at this time, we hadn't spun our oncology business yet. We were still operating a big GMP manufacturing plant in Athlone, Ireland. We were getting ready to present the first four patients with NT 1 on our 2680 , the very beginning of the clinical program. And now today, where we stand in heading into October 2024 , we have this pure play neuroscience company. It's highly profitable. It's focused in an area of the pharmaceutical industry that has increasing attention. We have really strong product in LYBALVI, VIVITROL, ARISTADA, that comprise what is a billion-dollar portfolio in net worth, that, as I said, is quite profitable.
Now we're in a multifaceted phase II program for 2680 , having put up really important data in NT1, NT2, and IH, in patients suffering from the disease, and in a way that I'm sure we'll talk about more, but it's just consistent with the original design hypothesis of the drug. We find ourselves in a very sort of streamlined, strategically advantageous position right now. What I think people will learn as we build the 2680 program also is that the things that derive from that program, other pipeline candidates are going to emerge that are going to target this wakefulness circuitry in the brain. It has the potential to be very, very rich. I'm very pleased with where we stand right now.
I'm really excited about it, 'cause I think 2025 is gonna be a really important transformational year for us as well, because as we move into now randomized phase II data for 2680 , continue the growth of LYBALVI, and people begin to see how differentiated the company really is. So I'm, I think we're in a good setup for the new year.
Great. We definitely want to dive into the reasons and 2680 , but maybe given the focus of the day, we'll start first with LYBALVI. I want to remind the investor audience, if you do have questions for the team, please feel free to throw them in your Wall Street Webcasting chat box, and we can work them into the conversation. But the Libvolsi had over $70 million in Q2 sales. Maybe kind of what are you seeing in terms of where you're getting the best traction with the drug in the commercial setting? And maybe what should investors expect as sort of the mechanisms for continued growth? Is this kind of a linear climb, or is there anything discrete that you're thinking about that could really kind of increase uptake?
First of all, I always admonish to remind folks that I will make forward-looking statements, and I always do ask people to take a look at our risk factors as we articulate them, because we try to capture the risks that face the business, and there are many. With respect to LYBALVI, it is a really interesting market, and it is a really interesting product, and I think more investors are getting educated on the nuances of this particular market, because it is unlike other classic biotech markets where new medicines for new diseases with large unmet needs. This is a large, mature market. It is dominated by generic products. It is difficult to get drugs approved. When they are approved by the FDA, their labels do not differentiate a whole lot. And so drugs have to find their place in the market.
LYBALVI's place in the market is driven by efficacy. There are other entrants in the market that are driven by convenience or tolerability, but because LYBALVI is rooted in the foundational efficacy of olanzapine, with a huge track record behind it, the place for LYBALVI is in the efficacy niche. When that becomes relevant for all branded medications is in the switch, because patients are all on generic medications. They switch routinely. There's something on the order of 60 or 70 thousand switches that occur every month in the atypical antipsychotic class. Most payer systems try to keep patients on generic as long as possible.
If a patient is in the right setting of care, where there's an office that can do the paperwork and do the prior authorizations or whatever medical exceptions need to be done to put somebody on a branded medication, that's how they get access to a branded medication. Unfortunately, for these patients, irrespective of the medication that they're on, the average length of therapy on an antipsychotic is about six months. In the schizophrenia indication, it's a genericized market. The branded medications sit on top of that generic market. It's a switch market, and when patients switch, physicians switch them for a reason. The reason they switch to LYBALVI is because of efficacy. Now, three years into the launch, the question: Does LYBALVI have different weight profile than olanzapine? That's settled business.
That was the core thesis of the drug. I think that's been borne out in the real world. Now it's about how do you get your share of those switches? How do you continue to grow the market? And if you look at the profile of the launches in this category over history, they just keep growing. You just keep putting promotional intensity into it, which is a combination of personal promotion and DTC and you build. Now, remember, with LYBALVI as well, it's indicated for two indications, both schizophrenia and bipolar I disorder. So both of those have different subtleties in the markets, but both are characterized by the features that I just mentioned: large number of entrants, a lot of generic use, and fighting for that switch patient to get them onto a branded medication.
So our view of LYBALVI is that we'll keep going. We're just gonna keep growing the product. Its attributes are now established in the marketplace, so now it's just making sure that we get our appropriate share of the business.
Perfect. And on the last quarter, you did indicate that a major commercial contract was achieved. And then also, you're seeing further improvement on formulary positioning for important Part D plan. I guess, how does this impact revenues going forward? Is this something that takes a little bit of time to feed in to revenues, or does this just kind of help some of the prior auth paperwork and kind of things that you mentioned earlier?
So first of all, I'd say I'm really proud of our market access team and strategy because it was a little unconventional. Essentially, what we said is we're not gonna contract into commercial a t disadvantageous gross to nets.
We'd rather endure the suppression that the payers put into the system in order to prove the place of the medicine in the marketplace, so that payers were reimbursing for it without a contract. So then they begin to see an economic incentive to contract at more favorable terms or more reasonable terms with us. That led to this year, knocking off two of the three major contracts, which opened fifty-plus million lives to us, and the other contracts, you know, we're in discussions. To answer your question, I don't think of it as a step change. It's almost like a prevention of increasing access restrictions that were gonna be put on as the drug got bigger and bigger.
We're freeing up, we're making it easier for our sales force to sell the drug because when a prescription, when a physician writes it, they don't run into the red tape that they would otherwise run into. It's part of the ongoing long-term brand maturation. Ultimately, you end up contracts with these payers, but you want to do so on terms that don't destroy your gross to nets because those are one-way valves. Once you go through them, you never get it back.
Perfect. And maybe what are you seeing in terms of the DTC campaign, and are there other areas of either physician or patient education that you are anticipating launching? We'll get into kind of the impact of a potential KarXT approval, but I guess how important is that touchpoint with the physician, specifically maybe in the schizophrenia space, when you do have sort of new therapies coming to market?
You know, I think our analysis. DTC is just a fundamental component of what you do. It's just a question of how you flex it in your marketing mix each year and across the year. This year, we really front-loaded our DTC. I think what we're coming to the decision for moving into 2025 is to increase the size of the sales force a bit, because the personal promotion actually is really critical, particularly when you have new entrants in the field, to maintain your share of voice. So I think that both are an essential part of the mix. We want to make sure that we maintain our share of voice in the competitive market, and personal promotion with these physicians is really critical. Interestingly, too, Joe, it's not. We tend to use the term physicians.
In this category now, a lot of these are non-physician professionals, NPPs, like nurse practitioners and other prescribing nurses. They're really, really important in the market. We call, a lot of our calling and marketing direction is toward these professionals.
And you indicated earlier that there is a lot of unmet need in both schizophrenia and I guess bipolar two, but or as well, not bipolar two. But, and that patients do switch over, you know, relatively quickly between therapies. How do you view the potential impact of a KarXT or a emraclidine approval? Is there enough unmet need in the space and enough kind of switching between therapies that you really won't see an impact in your schizophrenia revenues, or are you anticipating significant competition? Maybe if you could just kind of set the stage on that, that would be helpful.
Yeah, I think your question almost answers itself in the sense that if... So anytime we have a physician who puts a patient on LYBALVI. I would say rarely is it ever, "We're gonna take you off of a medicine and put you onto LYBALVI," and vice versa, right? These patients, unfortunately, because of the disease, tend to stop taking the medicines, and the switch occurs in the setting where there's some type of re-intervention by the medical system. So I say only semi-facetiously, you know, everybody who's on a branded medication right now will end up on LYBALVI and vice versa.
Because sadly, that's it, it's a lifetime disease, and if you have a length of therapy that's only six months or so, unfortunately, you just end up churning through. So the biggest impact for new entrants in the market, there's a headwind and a tailwind. The headwind is that you have to maintain your share of voice because there'll be a whole bunch of new messaging coming into the marketplace. The good news is that messaging is all about branded medications, so that's opening more apertures for offices to write branded medications. As I said before, writing a branded medication in this space is not a natural state. It requires sometimes in settings where they just don't have the nurses or the staff or the office staff to do that.
More offices are writing branded medications, and the rebranding of the schizophrenia market based on a message of better efficacy for patients, that's extremely good for patients, and it's extremely good for new entrants in the market. So we have to balance both. We'll be paying attention to our share of voice. Our message on LYBALVI doesn't change in the presence of any other medicine. It is what it is. It's based on a huge clinical foundation of olanzapine, and that's something physicians can rely on. So in some ways, I'm a big fan of new entrants. We just have to make sure we protect our turf.
Perfect. And maybe jumping over to ARISTADA, definitely doing well with $86 million in the last quarter. Maybe how are you thinking about continued growth for this franchise? And is there an ideal patient for a long-acting injectable therapy?
Far more patients should be on long-acting injectables than are currently on in the U.S.
It's just based on data, and it derives from what we just talked about. If the average length of therapy on an oral is six months for a chronic progressive lifetime disease, it stands to reason that medicines that could, that are on board longer, providing therapeutic benefit for more of the year would be benefit. Now, for a drug like ARISTADA, with a two-month version, six injections a year in a patient has therapeutic coverage.
Unfortunately, the way the treatment system is built in the U.S., injectables are just used far less, far less frequently. To that point, this year, I think one of the surprises we had this year was that the overall long-acting injectable market didn't grow as much as we would have anticipated it, coming out of COVID, coming out of everything, and we're paying attention to that. LYBALVI, ARISTADA is a really good drug, and it competes really well. I, you know, our emphasis, our sales force carries both ARISTADA and LYBALVI, so when they walk into a physician's office, it's not just everything is a nail because I have one hammer.
It's like, what's the right thing for your patient, and how can we help you deliver the best medicines for your patients in service of their, of their well-being? So it's really nice to have a long-acting injectable and an effective oral as well. But I personally, I would love to see more patients on long-acting injectables.
When we survey our physicians, the results seem to suggest that they want to be using long-acting injectables more. Is this coming more from a patient needle phobia side of the calculus here, or is it a reimbursement thing, or do you think these physicians are just a subset of those that maybe just need to be-
I think you're calling on the subset, Joe. I think-
Yeah
Many don't. So if you think about the practice of psychiatry, often psychiatrists are trained not to touch their patients. They're in a different office setting than an interventional type. S o an intramuscular injection or a subcutaneous injection, it's not a natural course of action for many physicians' offices. And so the training is oriented toward oral medications, so there's a very dedicated subset of physicians who see the benefit, and it's very important in framing it to their patients, it's not viewed as punitive. This isn't like, "We don't trust you to take your medicine." It's actually, by taking the long-acting injection, it frees you to not have to worry about compliance, you can worry about other aspects of your healthcare.
So, it's we found in the market research, it's often just based on the way it's positioned and the framing, and the physicians who use many long-acting injectables have figured out the way to position it in a way that it's advantageous for the patient.
Perfect. Maybe we'll jump over to the orexin franchise, just because this has been a hot investor area of interest. Maybe just at a broad level, can you talk a little bit about the overall unmet need in narcolepsy and I guess also idiopathic hypersomnia? Maybe what proportion of patients aren't completely satisfied by a bedtime oxybate or some of the wake-promoting agents that we see during the day?
There's a major unmet need, and at our investor event, we'll spend a couple of hours in early October just doing a bit of a teach-in on some of the aspects of the market that we've come to understand through direct patient research. And it's interesting, there's a bit of a schism between if you call certain doctors who will say: "You know, we have medicines, we... It's not an unmet need in the sense that there's something in the armamentarium that we can use." You contrast that when you talk to the patients themselves, about how do you feel? Boy, there's a lot of unmet need. Not all physicians and not all patients get oxybates, by the way.
It's not a universally held approach to treating the disease. But also, and I should say, in saying that, they serve a very important purpose for many patients. I'm a fan of the oxybates. But there's a lot of t he oxybates are focusing on trying to consolidate sleep at night, rather than what we're doing with these orexin programs, which is looking at the actual neurocircuitry that drives wakefulness in the brain. The natural response, how do you drive wakefulness on a diurnal basis each day? And that's what the orexin system does.
What we're learning now, having tested our drug in multiple patients and seen other programs in multiple patients, patients are really, really excited about this mechanism, and they distinguish it from what precedes it, 'cause it may be the first disease-modifying approach to treating the disease. So it's a large population for an orphan. The price points are already established quite high. The regulatory pathway is quite, quite clear, and I think that now there's enough clinical evidence that's been generated to suggest that this is a really exciting new, new approach.
And maybe to follow on to that point, it was gonna lead into my next question, is in terms of why does it make sense to target the orexin pathway with a therapeutic? We obviously have several companies, you know, with orexin drugs in the clinic now. Maybe why now? Maybe why hasn't this pathway been further interrogated earlier? And when you think about therapeutic coverage, what's sort of the best, target profile that you would be looking for in a approved drug?
So this is where it gets really interesting. So the first part of it is that the actual neurocircuitry, the neurobiology is relatively new, you know, within the last 20 years or so.
So finding these orexin peptides, that these natural neuropeptides that drive circuitry in the brain, that is associated with daytime wakefulness. The natural ligands are peptides. They're neuropeptides produced in the hypothalamus by a bundle of neurons and they bind to G protein-coupled receptors in the brain. So it's these are complicated molecules binding to complicated receptors produced locally in the brain. What's so tantalizing is that in narcolepsy type one, NT1, is a deficiency of those neurons. So you, when you remove those neurons, that bundle of neurons and the neurotransmitter from the brain, patients become narcoleptic. So therefore, the first, the core of the bull's-eye was, if we replace them, we replace that neurotransmitter, can we recapitulate normal wakefulness?
And other companies have. Takeda was the first to do it with just a test molecule, and the results were really striking. Just giving an IV, trying to see whether you could replicate it, and bang, you could drive meaningful wakefulness. So the challenge then becomes: how do you replicate that with a small molecule? Because the neuropeptide's too big, you can't take it orally, it's not gonna cross the blood-brain barrier. So can you replicate something that might be several thousand molecular weight into something several hundred in molecular weight, that you could take orally, survive gut transit, cross the blood-brain barrier, bind to the receptor, agonize it, and on top of that, do so in a waveform that's consistent with the natural sleep-wake cycle? 'Cause if it's too short, you have to give it multiple times a day.
If it's too long, you might keep people up all night. So from a drug design perspective, it's really tricky, and that's why there are a few that have gone into the clinic, but you can see they separate fairly quickly because of all the different optimization parameters that are required.
Perfect. And I know the baseline orexin tone varies between NT1, NT2, and IH patients, so we'll probably want to tackle these individually. But maybe just for the NT1s and healthy volunteers that you've studied 2680 and thus far, maybe what are some of the take-home messages that you've seen in terms of efficacy? Maybe let's start on efficacy, and then we can dive into the safety profile after that.
So at the highest level, again, recognizing that all the drug development programs have risk across the whole category as new mechanisms are tested. I think it's pretty clear now that these agents are gonna drive meaningful wakefulness. I mean, it's profound, the wakefulness. I think the open clinical question relates to tolerability over time. Short-term, tolerability looks quite excellent. There's data from at least one molecule now over multiple weeks, looks well tolerated. So we just want to build that increment of safety into the database for the category and then for each individual molecule as well.
What's striking about what we've shown, and our program has been designed to do this, is that NT1, NT2, and IH are on a continuum, and they're shades of the same color, but they're actually quite different. They present differently clinically, and as you mentioned, they have different background orexin tone associated with them. So at the one limit condition, NT1, there is no orexin, so you're actually putting new orexin, orexin agonists into a naive background. Versus in IH, there may be plenty of orexin around, but something about the signaling is not efficient, or you're simply putting supratherapeutic levels of orexin into the brain to see whether you can drive additional wakefulness. And so in our program, we were interested in all three of those domains.
Our hypothesis, based on modeling, was the dose would be slightly different in them for those reasons, and indeed, that's what we, we've shown. NT1, we drove very significant wakefulness with very low doses, you know, beginning at 1 milligram up to below 10 milligrams, and then in the NT2s, we showed very meaningful wakefulness from, say, 5-25 milligrams, and IH as well, so now what we have is a range in phase II, that ranges from, say, 4-18 milligrams across a fairly continuous dose range, that we can interrogate all the different phenotypes, irrespective of the differential diagnosis. That's what's so interesting, like, whether somebody has NT1 or NT2 or IH, it almost doesn't matter if you have dosing flexibility to address the various presentations that you see clinically.
So we're t he data we presented this week in Spain, for example, on the NT2 and IH, completes that picture. So we presented an NT1, NT2, IH, the doses, the tolerability, and the striking efficacy, and the dose response, and I think so in many ways, it's all hanging together in a very logical way.
Is there an ideal signal for a developed therapy on the MWT? I guess this has been getting asked a little bit more, just as the class has seen some insomnia signals at bedtime, especially early in dosing. Is there an MWT benefit that's almost too much, or how do you kind of string that?
See, I think it's a very nuanced question, actually, because the MWT, the Maintenance of Wakefulness Test, is essentially a clinical trial artifact. In the real world, patients aren't getting MWTs when they go to a sleep specialist. They're being diagnosed based on their symptoms. But the MWT is a very useful coin of the realm for developing drugs, because you put a patient into a room for 40 minutes, hook 'em up to EEG, dim the lights, dim the sound, and see how fast they fall asleep. It's a 40-minute test, so the limit is 40 minutes.
And the oxybates, which are widely used drugs, take that sleep latency and increase it just by a small number of minutes. Whereas the orexins have been shown to maximize the effect. I mean, it's really a pretty profound difference. So the answer to the question is, anything that's better than current therapies is better than current therapies. Is maxing out the MWT for eight hours or 10 hours or 15 hours the best? That's gonna depend on what patient you're talking. That's my whole point about flexibility in dosing.
I think clearly you want to be able to interrogate the whole dose response curve. You want to be able to test doses that can take you as far along that response curve as you want within a tolerability profile. That gives you flexibility in the clinic. But no, I don't think that the goal should be necessarily maxing out the MWT for ten hours.
What you find, if you have dose proportionality, you can do that. You can drive. We even showed in our NT1 data, if you drive the dose to 10 milligrams in NT1 patients, we can keep certain patients up all night.
Interestingly, they didn't report that as an AE during this, because they'd never done that before. We view that as an efficacy measure as much as anything in pre, early development. Obviously, at the phase III commercial stage, you'll have your dosimetry figured out to the point where people will know how to dose the effect that they're looking for clinically.
Perfect. And the, when looking at the therapeutics across the landscape, going maybe over to the safety profile of it, we have seen, certain drugs show either cardiovascular side effects, visual disturbances, polyuria, and then obviously, we kind of already addressed the insomnia. But maybe on those first three, how large of a concern are each of these that are popping up? And maybe what have you seen with 2680 and the profile, across patients?
They're very different. The cardiovascular effects, I think, are more we're gonna be seeing in the first-generation drugs that aren't gonna make it. You know, if you have blood pressure, heart rate effects, I don't think anybody has a real sense of humor about that, and the more potent selective drugs like ours haven't seen. So we really haven't seen cardiovascular signals of any clinical significance in the program, which is great. That was the design hypothesis. If you drive the potency, if you drive the selectivity. Polyuria is probably an on-target effect. What I've shown is that wanes with time. It's like insomnia early in the exposure to the drug and patients accommodate it, or you get used to it.
And so but I've m y guess, again, we'll know when we have all the data, is it's probably a dose-dependent phenomenon, and patients report generally mild. Mild in the parlance, of course, it's important when we're grading AEs to understand mild, medium, severe. Mild means noted by the patient but doesn't affect them.
So that relates to polyuria. We and others have seen mild to moderate polyurias tend to be dose dependent, and I think that clinicians will say this is not gonna limit the use of these drugs. Visual disturbances is, I think, something that people have overemphasized because clinically, in our program, we saw none in NT1. We saw one at the highest dose in NT2 and one at the highest dose in IH, both mild and transient. And so again, clinically, not something that clinicians have been focused on.
Is it on target or not? With an N of one, you don't know. And so as we build out the phase II program, we'll interrogate that, as will others, I'm sure, in the clinical program as well. But again, mild transient side effects for highly potent drugs are not unexpected, and they're actually not limiting. It's just, it all goes into the risk calculation, risk-benefit calculation. What is it? What benefits are being provided to the patient versus what risks? And so my view is that all drugs have some type of on-target AEs, and that's the purpose of the clinical development, is to fully elaborate those. And then they shouldn't be hidden from, they should be interrogated, elaborated, put in the menu, in the label, so people know what they're dealing with.
Perfect. And the NT1 study was the first one to kick off, and then obviously NT2 to follow. But maybe into NT1's have you provided guidance on when we could expect some data from this first trial? And maybe how important is it to hit on sleepiness, MWT, and cataplexy events for this population?
Yeah, we should. In the NT- studies are activating sites and enrolling right now. We had said second half next year, we'll have data, and as we get more experience in site enrollment, we'll know better with more precision. The NT2 study, called Vibrance-2, started later. It started in the end of August. It's moving faster, and we're the only player in NT2 right now that it's enrolling into a randomized phase II study. So I think that both of those should converge into the second half of next year. I think that, as I said, we had a p-value of four patients in NT1. I think the efficacy side of it is rather straightforward.
I mean, the powering, when we power with the 2680, we're powering probably more for safety and the cataplexy endpoint, which is a patient-reported journal entry, rather than the MWT, which is quantitative, and we should see that signal fairly clearly, if the drug is active, which it appears to be. So, I think most folks on the investor side will be looking for the tolerability profiles of these drugs, rather than an open question about the efficacy at this point.
Perfect. And maybe just in the last minute, I know at the beginning you alluded to additional pipeline development in the orexin space. Obviously, you haven't kicked off a study with IH yet. Is this gonna be interrogated with a follow-on compound, or how do you see sort of the follow-on orexin compound pipeline and when we-
I think there's more to come.
Okay.
We're already nominating additional candidates. I think of 2680 as being our orphan indication, very invaluable medicine for a smaller group of patients. But as we learn to interrogate this circuitry with agonists that are well-tolerated and very potent, superimposing that pharmacology onto other well-known pharmacology in the brain or as monotherapy in other indications only makes sense. So, you'll hear more about that in early October, but it's been a very active program here for the last couple of years, and it's bearing fruit.
Perfect. Well, we look forward to it. Well, with that, we are at time, so, thank you very much for joining me today. We appreciate it.
Thank you, Joe.