Great. Good morning, everyone. Thanks so much for joining us. I'm really pleased to be joined by Richard Pops, Chairman and CEO of Alkermes. Thanks so much, Rich, for joining us.
Thanks for having us.
Yeah. Maybe before we jump into your commercial business and your pipeline, I can start with a big picture question here. Alkermes has been undergoing this evolution over the last couple of years. Maybe just level set for us: what spurred this change? Where do you see the company today? Where do you hope to see it in the next five years?
First of all, it's great to be here with you. It's great to meet you in person for the first time. Thanks for doing the work on the company. This company is a super interesting company because it's never really been the same for any long period of time. It's evolved from an early, early focus on a very narrow aspect of neuroscience into a broader drug delivery company with a lot of deals with big pharmaceutical companies that drove a royalty business, and then taking those royalties and segueing into a proprietary products business. Today, with a billion-dollar top line, all driven by our own medicines that we've made and marketed ourselves, a few years ago, we just decided that we wanted to keep moving higher and higher up the value chain.
If you think about it from the early days, when you're taking other people's drugs and improving them, that drives a certain amount of value creation. The ultimate, the zenith of value creation in our business is making brand new molecules, doing new things for patients that haven't been done before. We got interested in this area of neuroscience associated with the sleep-wake cycle and circadian rhythm a number of years ago. We had a hunch that it would bear fruit. Of course, you don't know until you do. The interesting thing scientifically has been the segue from our making technologies that would take other drugs and improve their PK or PD through formulation to everything we do now is based on our own chemistry and has been for a number of years. One of our great technical strengths is in our chemistry.
That turns out to be an essential prerequisite to going after the orexin space, is the molecular design is quite complicated. It has been a continuous evolution. Coincidentally, and I do not think any of us could have predicted the certain macro environment we are in right now for big pharma and small pharma, where the premium now for new molecules that can command a higher price point without payer control for long periods of time, they have never been more valuable. We are really pleased with where we are positioned right now because the commercial business drives substantial and sustained profitability that funds the pipeline, and we see the pipeline growing and expanding over time.
Great. Maybe to your point, $1 billion in top line revenue, yet I think the focus very much this year is on your pipeline, on the orexin portfolio that you have here. You have referred to this space before as a new white space for the field. Maybe speak a little bit more about what in particular makes you so interested? What makes you convicted in the orexin opportunity?
The short answer is data because the promise of the orexins became manifest from a neuroscience perspective fairly recently. The first papers were published in 1999, 2000, identifying the circuitry in the brain for the first time that actually drove wakefulness. There have been all kinds of development work, as you know, on the sleep side in service of having more wakefulness during the day. Now, having discovered this bundle of neurons that drives wakefulness in the brain across multiple regions of the brain, the question was, could you replicate the natural ligand, which is a neuropeptide, with a small molecule and drive that wakefulness rather than just helping people sleep better so they're more awake? It is a much more direct intervention with the circuitry that's relevant.
We, and I think Takeda were really the leaders in this, demonstrating that indeed the small molecule agents could recapitulate what the neuropeptide does. Now where the program stands, I think between our data and others' data is that it's very clear that these small molecule agents can drive significant wakefulness in NT1 patients. The open question right now that I think will make a long way to answering in our phase two data will be, what's the tolerability like of doing so over time in these patients? So far, the data look really good. Your conviction grows as you get more and more data sets under your belt.
Maybe to that point, before we jump into the phase II and the expectations ahead of those studies, just remind us what you did see in the phase I study here. What can we expect next or this week at the sleep meeting? Maybe help us put that into context compared to these other assets that are out there.
The secret, you can take different approaches to your early clinical work. Ours was informed by the fact that we made the decision that healthy volunteers who are sleep deprived really did not serve much predictive purpose at all. We knew that because we ran a phase zero study where we just ran through the methodology of how we would test an orexin agonist. In that, we interrogated whether we kept patients up till 4:00 in the morning, whether that would drive sleep pressure analogous to what you would see in an NT1 patient. We determined no.
What we did in our program was we went into phase one in healthy volunteers in a single ascending dose format, which is typical, and then moved very quickly into a multiple ascending dose format, which allowed us to credential multiple doses to allow us to go right to patients. Our phase one B study was conducted in patients with NT1, NT2, and IH. In a very data-intensive crossover design, each patient received multiple doses. We tried to get a sense of the dose response that we would see using the hallmark efficacy test, which is this maintenance of wakefulness test. The data were quite clear. That was what was so exciting about it. It was not ambiguous.
In a dose-dependent fashion, we could see increases in the Maintenance of Wakefulness Test across NT1, NT2, and IH, albeit at slightly higher doses for the NT2 and IHs than the NT1s. We showed that in that study that ALKS 2680 was highly potent once-a-day dosing in a dose-dependent fashion. That was all the information. We fed into our modeling to design phase two. Phase two is what's underway now. At Sleep this week in Seattle, you won't see any brand new data from the 1B study. That's been widely. You'll see some new quantitative EEG, qualifying that as a biomarker that you're looking at in the brains of patients. I think you'll see some panel discussions and just more education about the orexin pathway.
Great. Your phase II study is Vibrance-1, expected to read out early three Qs, so coming soon. Maybe you can help frame expectations for what you would like to see from that study as it relates to MWT, cataplexy rates. The tolerability, as you mentioned, is going to be top of mind there. We'd love to hear your thoughts.
I just think it's such an exciting moment now because this is why we develop new drugs, is to get new data sets like this. When I think about it in the aggregate between Vibrance-1, -2, and -3, we'll have circa 300 patients of new information about orexin through the receptor agonism in a whole range of patients, in making contributions no one's ever made before, which is this whole range of doses rather than just a single dose that might be efficacious. For Vibrance-1, Vibrance-1 is the NT1 patient population. It's a much more mono-dispersed patient population. We expect data very similar to what we saw in the 1b, that is, at the doses we've chosen, which are 4, 6, and 8 mg, we expect to essentially bracket the doses that we might end up using in phase III.
Of course, we won't know this till we look at the data. But the expectation is that we've created a range of doses then that gives us the ability to model then for phase III what the more precise doses are. The goal is at the lower dose to have activity, but really, really excellent tolerability. At the highest dose, maybe have maxed out what we see and have more side effects. Define what the edges of those parameters look like to model for phase three. Vibrance-2, I think, will be even more interesting in a way because it's a much more variable disease. There's no predecessor data of efficacy of orexin 2 receptor agonist in NT2 because the Takeda study was not successful. We have a higher range of doses, 10, 14, and 18 in that patient population.
When we get those data, then we'll get a sense of how important the variable doses are because the disease is much more variable in that case as well as with IH. I think in the aggregate, this will be the first real major contribution of once-a-day dosing, a range of doses, and a range of diagnoses, looking at a six- eight-week double-blind period, looking at really fully elaborating tolerability profile, and I think incrementing the field in a significant way.
When you think about your NT2, so for Vibrance, or sorry, NT1 for Vibrance-1, when you think about MWT, I mean, you're seeing with Takeda's asset, you can get pretty close to 40 minutes on the MWT. Do you think that's necessary? What is the appropriate maybe threshold that you'd like to see across your doses?
For me, the most important thing is not the absolute number, it's dose response. Because if you have dose response, you can essentially dial up the duration. Different patients will have different clinical presentations, and they'll also have different desires. In a 40-minute MWT, I think the important thing to understand about the test itself is it's actually a little more complicated than people often realize. The MWT is run over eight hours. It's actually a 40-minute test conducted every two hours over eight hours. The number that you see is an average of that delta from baseline across four different tests over an eight-hour period. It does not tell you much about the shape of the curve. It does not tell you about a lot of stuff that is buried in that number.
The biggest drugs in the field right now move an MWT latency for NT1 patients, which might be under five minutes, and move it into the low teens at best. As you said, the orexins can almost max out the test, whether you can max it out early for the first few tests or all the way and keep people up all night. I think that what I want to see in our phase two is what we saw in the 1B, which is dose proportionality pushing the MWT to limits that no one's seen before with oxybates. We know from patients that this is not just the only measure. The MWT has the virtue of being a number. You can do stats on it. It's objective. It tells you nothing about the quality of the wakefulness of that patient.
I think in the fullness of time, this will be the virtue of this category. Because what we hear from patients in the Takeda study and our study is the quality of the wakefulness compared to being on a stimulant or other ways of driving wakefulness per se. If this is indeed the natural circuitry in the brain that drives overall wakefulness, that applies to cognition and to vigilance and to mood and all kinds of other domains that we're actually going to learn more about in these studies as well.
Got it. Maybe one point there, just remind us what measures you are looking at within these Vibrance studies to be able to detect the quality of wakefulness or these other domains, cognition, mood.
In the first tier that you'll see at the primary analysis of the primary endpoint at six weeks, the first top line you'll see will be the classic MWT and then the Epworth Sleepiness Scale and the cataplexy rates as captured by the patients' diaries. That triad is the classic. Beneath that, and the FDA recognizes those. The FDA does not recognize the PROs. We and Takeda, I think, are going to do a lot of work to try to validate some of these in the context of this disease. We'll be looking at a whole range of PROs that you'll see in a secondary set of analyses later in the year. We'll be looking at nothing bespoke. These are off-the-shelf measures that have been used in other studies.
Got it. As you think about the AE profile that you would be comfortable with and that physicians have spoken to you about being comfortable with, maybe talk to us about that, particularly in the context of what you did see in the phase I B.
What's remarkable about the class as a whole so far and other stimulant is that given how potent these molecules are and how profoundly they're affecting key circuitry in the brain, I think categorically you'd say that the side effect profile has been mild to moderate and transient and quite advantageous at this point. We know from our data and others that the hallmark AEs that appear are insomnia and polyuria, which is urinary urgency. Those, based on the Takeda eight-week phase II data, appear primarily in the first week and then diminished as patients get used to being on this new therapy. Tend to be dose-dependent and transient, mild to moderate. Our data set will provide even more information because we'll be able to push the doses higher and see what we run into as we push the doses higher.
It may just be the same things with more frequency and severity. New things may emerge. We will see when we unblind. We have a data safety monitoring board that is looking at unblinding data through all our studies. Obviously, we keep rolling with a green light on those. I am hopeful that the way that the class will emerge will be all drugs have side effects, but they will be as described: mild to moderate, transient, and not leading to patient discontinuations and counterbalanced by the quality of the wakefulness that patients are experiencing, which is perhaps different than they have ever had before.
Just to confirm, no discontinuations in your phase I B from these AEs.
No.
Correct. Okay. If they stayed mild, moderate, transient, do you anticipate?
If you asked that, I'm going to look at Sandy and Blair. Thumbs up.
Do you anticipate that would impact uptake in a commercial setting if it was truly just mild, moderate, and transient?
Think about what patients are enduring right now with stimulants and oxybates and not getting the efficacy that they want. I fully expect these drugs to have side effects. I fully expect them to be dose-dependent. I fully expect them to have efficacy that has not been seen before. That is why you do the phase II to make sure you can confirm that. There is so much excitement in the community. The reason I'm going to leave here this evening, flight out of Seattle to go to the sleep conference, is we'll meet with all the patient groups on narcolepsy and IH as well as the KOLs.
If you compare it to a year ago in Houston and a year and a half ago to Brazil, the field has moved from talking a lot about oxybates and sleep apnea machines to orexins. It is because more and more sites are using them in clinical trials even on a blinded basis and getting hands-on experience with their patients and what they are doing.
How concerning are the visual disturbances?
Right now, there's not enough data to make a conclusive statement because we had one occurrence in our NT2 population and one occurrence in our IH population at doses we're not testing in phase II. That doesn't mean we're sanguine about it. The point is there's a very logical case as to why some type of pupillary or ocular thing could be an on-target effect of an orexin two receptor agonist as you raise the dose. In phase II, what we're doing is in contrast to one B, where we had no baseline ophthalmic understanding, people could have had glaucoma or intraocular pressure changes. We didn't know. In one B, all patients have a baseline ophthalmic exam. To the extent they have any AE, they'll be worked up in a correct way to try to understand if there's any basis for it.
We're blinded, so we won't know until we unblind. I think it's a really important question.
Maybe just quickly touching on NT2 here and IH, you've spoken about the patient population is much more heterogeneous than NT1. Gives you the confidence that you'll be able to actually detect out a signal from these populations since the patient baseline characteristics may be so different?
The primary reason we believe in it is the one B study where we've done it already. In that study, it's important to know the patients in any way. I suppose there's a way of running that one B study where you could have hand-selected certain NT2 or IH patients that look more like NT1 patients, i.e., with small low sleep latencies. We didn't. We took all comers, and we saw a reliable dose response at these higher doses. Our modeling turned out to be quite correct in where we thought the doses would have to go. In the NT2 group, the MWT, recognizing there's a 40-minute test, just to make the numbers simple, let's say that in NT1s, your average baseline is five minutes. You have a 35-minute dynamic range then to play with.
Let's say in your NT2 population, let's say the baseline average was 25 minutes. Of course, you only have 15 minutes to deal with. The 25 minutes probably doesn't represent a central tendency. It's probably just an amalgam of somebody's got five, somebody's got 30. It's a much more heterogeneous population. That's why we love the phase II design. We'll just look at the data and see what it tells us. Because we can drive, if this circuitry in the brain is driving wakefulness, NT1, think of as the knockout model. You knock out all those neurons. What's the phenotype? Basically, you're fighting in your sleep all the time. The qEEG data from healthy volunteers, as well as the data from the NT2 and IH, has suggested that, call it even super physiologic doses, administer this receptor and drive the circuitry. You'll drive more wakefulness.
I think our belief is if you see a strong signal in NT1, you should see a signal in NT2. You should see a signal in IH. Go beyond that. Maybe then you should see signals in patients with other psychiatric and neurological disorders.
Great. Maybe one last question here for your phase two studies. They all embed kind of a post-dosing or, I guess, a post the six or eight-week dosing regimen where the patient can modify their dose. Maybe speak to us about the importance of that, what you hope to learn from it, and how it'll help inform your phase III.
This is also new knowledge that predecessors have not been able to do because without a range of doses to play with, you cannot ask this question. What are we doing? We have a double-blind period, six-week in the NT1, eight-week in the NT2 and IH, where patients stay in their dosing lane. They are randomized to one of three doses or placebo. They stay in that lane for that fixed period of time, double-blind. The primary assessment is at the end of that double-blind period. All patients go, if they want to continue, they move to the middle dose. That would be 6 milligrams in NT1, 14 in the NT2. They stay on that dose, and they know they are on that dose for a two-week period. For the subsequent five weeks, they get to choose. Do they want to go up or down?
That'll help answer the question about whether or not maxing out the MWT is always the greatest thing to do. Or do people have different individual preferences? That'll be additional information to help us select doses for phase three.
Maybe if we can switch to the commercial opportunity or how you see this market evolving. I think the company has put out numbers in terms of the prevalence for NT1, NT2, IH patients. It is quite large, yet a fraction of those patients, only a fraction, are treated. How and where do you see an orexin agonist fitting into this landscape across all three indications?
This answer is informed by more and more conversations we're having with physicians. We'll do more of it this week at the sleep meeting. I think the common response we're hearing is that there will be a very deep penetration in NT1 because it's a disease-modifying therapy. You're replacing the deficient neurotransmitter effectively. The quality so far of the data that we've seen is sufficiently advanced over what precedes it and the tolerability profile of things we've talked about. Because the clinical presentation of the NT1 patient is pretty consistent. NT2, you hear ranges 30%-50% of patients might be targets for Erexin. Why is that? It's not that it's necessary that you're not driving efficacy in those patients. These will be expensive drugs.
For many NT2 patients with fairly light, modest disease, they might do well just with generic modafinil or something like that. They will not need all of the things that an orexin 2 receptor agonist might bring with it. I think that will really depend on the data we need to see for the NT2 and IHs. I know originally, you may recall, we were not going to develop 2680 in IH, keeping it only in the narcolepsy indication. After we got the 1B data, we met with a lot of the thought leaders in IH, which has overwhelming response. There is a huge unmet need. There is a paucity of drugs. These patients need something. It really makes sense to extend to that as well. I think it will be driven by the quality of the data.
I think that it starts with NT1 and then ripples out from there.
When you think about these markets, is there a scenario where orexin, to your point, NT1, you see deep penetration there? Is that cannibalization of the existing drugs, or are you essentially growing the market because so many of these patients are not being treated right now?
Yeah, that's a critical question. I think a lot of investors haven't looked at it carefully enough. Because someone will say to us, "What fraction of the oxybate market will you take?" It's important to understand that oxybates are not the modal way of treating this disease. Of the 80,000 patients who are treated for narcolepsy in the country, about 16,000 get oxybates. And a lot more of them have tried oxybates and decided not to use oxybates. Oxybates are very difficult to be on for a sustained period of time. But for the patients who found their way to them and used them, they liked them, and they're going to continue to use them, I think many of them will. Most of the market is underserved. I think that when those 16,000 patients drive a couple billion dollar market. I think about the inverse.
You've got 64,000 patients who aren't getting everything that they need. I think that's why I think the numbers get so exciting from a financial point of view if you think about having a disease-modifying therapy in this category.
Disease-modifying. Do you see scope for combination use with other agents, or is this truly somebody will opt for an orexin agonist as monotherapy?
To be determined. I think that in NT1, it should become frontline monotherapy. The question is whether the oxybates. I think that remains to be seen. In our phase two study, we are going to explore using polysomnography in the double-blind period, what the quality of the sleep architecture looks like for somebody who is on an efficacious dose of an orexin two receptor agonist. That is new information. We do not know that. One school of thought says if we drive meaningful wakefulness for 12 hours in a day, you should sleep better, should consolidate sleep better. That is a hypothesis. The other hypothesis is that for the patients who really like what the oxybates do, i.e., really guarantee you go to sleep at night and defragment your sleep in a way, that there will still be a place for those. I think both are possible.
Got it. As you think about the commercial opportunities, we mentioned IH has relatively fewer options compared to NT1 or NT2. Would it make sense to focus your marketing efforts towards specifically IH? I mean, you've done this with VIVITROL as you think about alcohol dependence versus opioid dependence. Is that a strategy you would look at?
I don't think you need to. I think the core of the bullseye is going to be NT1. It's the most explicit demonstration of the disease. It's a huge unmet need. I think as clinicians see that this agent can be used in their NT1 patients, it will naturally flow into these other diseases of hypersomnolence. That's why I think it's so important to try to get a label that accommodates all three because the differential diagnosis in the real world is quite complicated. People don't run MWTs in the real world. In fact, they don't put people in the sleep lab in the real world. The reimbursement just people are treated based on the clinical symptoms as they present. The clinical symptoms between NT2, IH, and even NT1 sometimes can be almost indistinguishable. I mean, the hallmark distinction between NT2 and NT1 is cataplexy.
What we've learned is that cataplexy can be explicit where you lose muscle tone with high emotion to being very subtle and not even detected necessarily by the patient. That NT1 patient may look just like an NT2 patient and vice versa sometimes because we have NT2 patients with sleep latencies under five minutes. Then IH, the differential between NT2 and IH, we're finding in our clinical trial, sites will say we have NT2 patients who enroll. They come in to qualify the patient. The patient has IH and vice versa. Because the distinction on that differential diagnosis is the presence or absence of a certain number of these sleep onset REM periods, which you can only really detect via EEG in a sleep lab. That isn't happening in the real world.
People are showing up with a clinical presentation, excessive daytime sleepiness, and the doctors have to make the call. If you have a drug that's only indicated for one, where the payer says, "Well, you have to prove that it had," it's much easier if we can just sort of run the gamut and say NT1, NT2, IH, range of doses, go for it.
Got it. Maybe following up on that, as you think about what the potential label could look like for 2680, you've now touched on the potential to be used across these three different indications, multiple doses, once daily. What are the puts and takes to being potentially second to market behind Takeda?
I think Takeda deserves an enormous amount of credit for being the first mover in the field and doing it responsibly and publishing their data and just doing it correctly. Their drug is, I think, a proof of the pharmacology, but it's an incomplete product because it's given twice a day in an interesting regimen because it's given once in the morning and then another dose three hours later, I believe, three or four hours later. It is not a classic BID dose. It's given in that way. It is going to be indicated only for one of these diagnoses, NT1. I think it proves the point, but it opens up a huge vulnerability from a commercial perspective for a drug that could be across all the indications with a range of doses given once a day. Hopefully, that's what we have.
The admonishment always is you have to wait for the data. You have to see what we have. There are always risks in developing small molecule drugs, particularly for the brain. So far, so good. What is so exhilarating is that this is why these companies within the company, we have been waiting years to get this data set to see what it looks like. I think it is going to answer a lot of questions.
Great. Maybe in the last couple of minutes, we can touch on your commercial portfolio. Before we do, just quickly, as you think about 2680 and commercializing this, recognizing that you have commercialized your products exclusively in the U.S., is this a strategy you would also look to employ with 2680, or would you actually take on global commercialization?
Here's what you don't do. You don't launch your drugs at a lower price in other countries. 2680 for us, from a commercial perspective, is a breath of fresh air. In our existing portfolio, it is largely Medicaid and Medicare, where the payers put up enormous barriers to access. Gross donets are very high, restricted formularies, multiple competing drugs. This is a completely different space. It is a space where they come in high prices, disease-modifying therapies, more analogous to some of the biologics than traditional CNS small molecule drugs. We could absolutely develop it for Europe ourselves and Asia. I can see in Japan partnering for a number of reasons. I think we're thinking about this drug on a more global basis.
Got it.
By the way, the reason we do not commercialize VIVITROL or LYBALVI or ARISTADA in Europe was because of this price differential. Because Europe was just unwilling to pay a price that was either directly relevant to the U.S. price at all, which is a fair U.S. price. These are not super expensive drugs. It just did not feel like it was either economic or fair to do that. I think that decision was a good decision.
Just quickly, the Medicaid and Medicare exposure for NT1, NT2 with IH patients?
Low.
Low.
Low. This is largely commercial. I think we model it, I'm looking to Blair, somewhere around 80% commercial probably.
Got it. Maybe in the last minute and a 1/2 that we have here on your commercial portfolio, anything you'd like to share here as you think about the growth trajectory moving forward for these three products? What are the puts and takes to achieving your EBITDA guidance for this year?
I'm really pleased with where we are on the commercial portfolio and the way we've sort of aligned with the street on where it is and where it will go. It's taken away a lot of the volatility quarter to quarter as people we've guided clearly to it. We're in that lane. In this type of environment, to be able to rely on a multi-product billion dollar top line that's profitable as a source of capital to fund our business, it's rare. I think that I often say that we live in the post-apocalyptic world at Alkermes because we deal with government price controls all the time. We deal with restricted formularies. We deal with high rebates to get on the system. We can thrive in those systems.
It's just a different business model than selling very high-priced medicines to very small patient populations, which is a lot of biotech. I think that for LYBALVI, it's still in a really nice growth phase. ARISTADA is a long-acting injectable atypical antipsychotic, benefiting from the fact that we've expanded our sales force this year. VIVITROL continues to surprise after a long time in the market. It continues to grow largely in the alcohol indication.
Great. With that, Rich, thank you so much for joining us. Thank you, everyone.
Thank you.