All right. I think we're gonna go ahead and get started just to stay on track. Thank you everyone for joining us in the room and online today for the 2026 TD Cowen Healthcare Conference. I'm Joe Thome, one of the senior biotech analysts here on the team at TD Cowen, and it's my pleasure to have with me today, Chairman and CEO of Alkermes, Richard Pops. Thank you for joining us. Obviously, it's been a busy year and busy start to 2026. Actually, maybe if you wanna just start with a quick state of the business and what investors should be looking for for 2026, then w e can kinda dive into the individual parts.
Well, good morning. Good to see you, Joe. So 2025 was just jam-packed with changes at the company. In fact, in many ways, it perfected this transition we've made of the company over many years. A lot of it happened in the third and fourth quarter. One of the things we've been doing is sort of reminding people the journey the company's been on and how strongly positioned we are for 2026. Most of that comes from the idea of how what's consolidating in our business around sleep medicine. Obviously, with alixorexton and the orexin franchise, but also with the completion of the acquisition of Avadel.
We are now a major player in the sleep medicine market. That was preparatory for our launch that we expect for alixorexton as well. In the meantime, the base business is so vibrant and strong and cash generative. It's a really interesting moment because we have the ability to fund this pipeline, which is expanding significantly with a very vibrant commercial business. I think it doesn't take a lot of imagination now to see how we're gonna be moving into the sleep medicine market as well. I think we're about as optimistic as we've ever been at this stage as we enter 2026.
Great. Obviously, there has been a ton of focus on the sleep medicine market and with your development in the orexins. I think still a lot of investors were surprised when the Avadel transaction was announced, and I think there's a lot of reasons why it makes sense, obviously. Can you kinda go into why the company decided to also add an oxybate to the franchise, w hat this does for you maybe on the, you know, marketing effort and why Avadel was the right choice?
I think there was surprise on the day of the announcement. I think as people thought it through.
That makes sense.
I think The surprise dissipated and was replaced by, "Okay, that there's a logic to this." The logic is driven in two different domains. Number one, we see oxybates as continuing to be an important component of the treatment paradigm on a going forward basis, and probably even more so as the overall treatment and diagnosis of narcolepsy expands to more closely match the prevalence numbers. Number two is what it does for us to prepare for the launch of alixorexton.
This is a rare disease, a large one, it's really controlled in multiple sleep centers and specialized places where to have presence there from a commercial perspective for a couple years while a competitor is launching as well, literally shifts the launch curve with we anticipate for alixorexton up and to the left.
Mm-hmm.
As we valued the transaction, we thought, "Okay, what's the discounted cash flow that we can anticipate from the sales of LUMRYZ, which is growing and an important new entrant in the market, A, coupled with B, which is the change in the valuation of the launch of alixorexton?" We felt like in our hands, it was probably the most logical buyer and had the most value to gain from integrating in Avadel into the team. From a purely, you know, HR perspective, Avadel's team is largely a commercial team, and they've gone through what we've gone through with LYBALVI and with VIVITROL, which is that learning curve of burning in the habits and the behaviors and the relationships that lead to a successful commercialization of a product like this.
We won't, you know, we use that as the nucleus to build around as we launch into a broader orexin market.
Perfect. Maybe where do you see the unmet need in narcolepsy right now? Obviously, you can use more of a daytime stimulation approach and obviously the sleep consolidation approach to try and increase wakefulness during the day. What is still missing that maybe you can address with either something else you can do with LUMRYZ marketing wise or the orexin compounds and... Yeah, maybe we'll start there.
Well, there's the here and now, then there's the twinkle in our eye, and I'll start with the here and now. Narcolepsy is a 24-hour disease. It's characterized by excessive daytime sleepiness, of course, but also by highly fragmented nighttime sleep. While most patients are not on an oxybate for a number of reasons we can discuss, a lot of them logistical, the ones that are really find benefit from that consolidation of sleep at night. I don't think that that's gonna change even if we have availability of a wake-promoting agent during the day, like an orexin agonist. I think my own thinking on that has changed over the last couple of years.
A couple of years ago, I would have thought, "Well, maybe the orexins are sufficient to obviate the need for a nighttime." I think for many patients, that will be the case. As talking to patients over the last couple of years, you find that those who are dedicated to using oxybates see real nighttime benefits from doing so. That's the here and now, and you've heard me talk before, the space between the prevalence of this disease and the diagnosis of the disease is vast. You know, numerically, there's something like 200,000 patients who have narcolepsy in the U.S., of which only 80,000 are treated. Often, when you get new, effective oral medications coming to the market, the space between the diagnosis and the treatment rate, and the prevalence and the treatment rate converges.
As it converges, that wedge that's dedicated to the oxybates will continue to flourish, I believe. Now, the twinkle in the eye is, of course. One of the striking things in market research when we first got into the field was notwithstanding the fact there's lots of medicines, quote unquote, for this disease, patients have huge unmet needs. What is the idealized way of treating narcolepsy? I mean, perhaps for some patients, the best way of treating it is with a daytime agent and a nighttime agent. We're gonna be the only company, I think, well-positioned with two agents of our own to actually do that research, develop that evidence, and start building the expectations for better outcomes for patients.
Great. Maybe we'll shift a little bit to the orexin side of things and overall just therapeutic coverage of the agents. What do we know so far as to the, I guess, the ideal time and frequency to dose the orexin pathway for NT1 and NT2 patients? Does this change patient to patient? Maybe how are you investigating the ideal dosing?
I think overall, I think investors should be quite excited by the fact that between ourselves and Takeda, you know, we've now run big studies, published the data, and the safety, tolerability, and efficacy profile of these, of orexin 2 receptor agonist is becoming more and more clear. I think it's less mysterious than it might have been even 1 year ago. You know, 1 year ago at this time, we didn't even have our phase II data, and now we have VIBRANCE-1, VIBRANCE-2, the Takeda phase III data. I mean, there's a lot of evidence now that all is mutually reinforcing about the safety and tolerability and the efficacy of these drugs. I think what we learned through the large phase II program was 2 things.
One was even in the NT-one study where once-daily dosing was driving, you know, normalization across multiple parameters for these patients, even the, in, during that study, we were hearing from investigators and patients that the quality of wakefulness that people were, was experiencing was so good that they wanted it to persist into the later hours of the evening if they wanted to stay out at night, for example. So even after the NT-one data, we were thinking about from a lifecycle management perspective, would it make sense to what we were calling at the time a top-up dose that people... Look, because you actually, the PK profile of these drugs, you want them to come off in the early evening so people can prepare to go to bed, and some people want to go to bed at different times.
There are people who want to stay up later. We were thinking, does it make sense to have a top-up dose? That was further reinforced when we got the NT2 data because I think the dominant feature of the NT2 data was that it came off earlier in the day than in the NT1 patients. A lot of variability in both, but the general wave form was it. We knew that if we simply split the dose, we could drive longer wakefulness. That's the hypothesis. That accelerated the idea of the top-up dose actually putting into the pivotal program, and I think that turned out to be serendipitous because I think that's gonna give us competitive positioning that will be really, really strong. We see the anchor dose being, for most patients, a once-daily dose.
For those patients who wanna have a longer duration of wakefulness, maybe not all the time, maybe sometimes, there'll be a split dose, and there'll be that'll be in the label with dosimetry understood. Because we ran such a large phase II program, for example, in NT2, 90 patients, we're the only company that's ever run a 90-patient cohort with positive outcomes of orexin 2 receptor agonist where we can model exposure wakefulness profiles to select those split doses that both the magnitude of the dose as well as the timing of the dose. We go into the phase III program feeling like we've got far more information than anybody else moving very, very quickly now.
Great. maybe using a lot of that information that you got, you recently unveiled the potential phase III program that you're gonna be starting soon.
The potential.
Not potential, but yeah, potentially successful. Yeah, you announced the phase III program that's gonna be kicking off when you did earnings last week. I guess, can you hit the highlights of the phase III program? What's the duration of treatment and the endpoints that you think are most important here? Obviously, in the phase II, you did do some ocular monitoring, but it showed pretty good outcomes on the ocular monitoring for the long term. I guess, is that incorporated into phase III, or what do you need to do related to that?
First things first, the foundation of the phase III program is an ongoing interaction with the regulatory bodies to design and understand the program. We ran the phase II program based on input that we received from the Division of Psychiatry, and that's why we ran large parallel design multi-week studies with safety follow-ups. That provides the foundation then for the end of phase II, meaning where you map out your phase III program as well. The phase III program is comprised of 3 different studies, 2 in NT1 and 1 in NT2. Recall that we received Breakthrough designation at the end of last year, so that facilitates those interactions with the reviewing division. The NT1 studies will look very much like the predecessor compound that just went through phase III.
In other words, 12-week studies, parallel design, 3 dosing arms in each, and primary endpoint is the Maintenance of Wakefulness Test or MWT, along with the Epworth Sleepiness Scale. Of course, in NT1 patients, you're looking at cataplexy rates as well. All 3 of those endpoints are relevant for the labeling of the drug. We'll test QD dosing as well as split dosing in those studies. That's probably the newest piece of it because as mentioned before, as strong as the once-daily dosing data are in NT1, we think it's advantageous from a label perspective to have that split dose option in there as well. The single NT2 study has 4 arms, also 12 weeks in duration.
MWT primary endpoint, ESS, and as you know, we've also been investigating other secondary endpoints relating to fatigue and cognition and all that. We're gonna continue to build the database with respect to those parameters well, but the approvable endpoints are the classic approvable endpoints.
Great. What have you learned based on your discussions from KOLs, with KOLs and based on the phase I and phase II data that you have as sort of the ideal MWT and sleepiness score benefit that you should be shooting for with the eventual profile of these drugs, maybe both in NT1 and NT2?
Here's where I think a lot of investors can learn from talking to the actual investigators. MWT or the Maintenance of Wakefulness Test is not a clinical tool. It's not used. Patients present based on clinical symptoms, and they're treated based on their clinical symptoms. Epworth Sleepiness Scale actually as rudimentary as it is a real nice measurement of people's perceived sense of sleepiness. This pursuit of the highest MWT is an illusion because the study is a 40-minute test that you administer every 2 hours over an 8-hour period. If I had an MWT test today, I probably would be at 40 minutes for the first couple time points, but by the afternoon, you're probably gonna be a little sleepier.
That's why people say a normal MWT is an average across those, that 8-hour assay is something circa 20 minutes or better. Thirty is not necessarily better than 20, and 40 isn't necessarily better than 30 'cause you can actually drive hypervigilance in these studies. I've often said, I can max you out on an MWT test using stimulants and caffeine. You wouldn't like the way you felt, but you'd have a big number on your MWT test. I think it's about normalcy, and that's why we were so interested in these domains that capture that both in fatigue and cognition as well as excessive daytime sleepiness with the Epworth Sleepiness Scale.
I think the treatment goal should be moving toward normalcy across a period of time long enough during the day where people can achieve what they want to achieve. NT2 in particular, I think the street misunderstood what the MWT values mean because, again, an average MWT across a heterogeneous population where you actually have non-responders on MWT who respond on ESS, rather than being a measure of central tendency, that average is more just an amalgam of responders and non-responders that gives a number. Whereas I think in the NT2, in NT1s, it was more representative of the general condition, how, you know, pushing it well above normal. The NT2 study, we reported at the 18-milligram dose.
You know, the vast majority of these patients were reporting normalcy on ESS. That clinically is why when people with NT2 are gonna take these medicines, if they're feeling normal, they're not gonna know what their MWT is.
Mm-hmm.
They're not gonna have that assay done in the U.S. They're gonna stay on the medicine because of the way they feel.
In the phase II data, the benefits on cataplexy were maybe not as strong as you would have hoped for or investors would have hoped for, but you did incorporate maybe some changes in the phase III program in terms of how you are assessing cataplexy, or you indicated that at the time of the phase II data. Can you talk a little bit about maybe some of the differences and areas for improvement on cataplexy monitoring?
Yeah, I wouldn't say they weren't as strong. I think the statistical method that we used, which was a comparison of a rate at a 1-week period of time later in the study compared to placebo 1-week rate at the time. If you look actually the decrement from baseline for these patients, it's significant. But to your point, we did have a number of different methodological approaches site by site, which we've standardized for the phase III. You know, with the size, the duration, and the methodological changes and also just looking at the overall phenomenon of the change from baseline, we're quite confident going into the phase III study.
Are you giving investors any timelines in terms of when we can expect phase III data? Obviously, things are starting up now, so there's an easy out question, but curious if you're guiding them.
I think it's probably too early. We'll wanna get the sites initiated, and we're gonna wanna make sure that we have high quality. The other thing we learned in phase II, so more than you would hope, there's a lot of distribution across the sites of the quality of their work, particularly in the administration of the MWT, capturing cataplexy, the differential diagnosis between NT1, NT2, and IH. There's a lot of learnings that come from running a 40-plus site study in multiple countries. We're gonna apply those learnings to the phase III. We're hoping even through careful curation of the phase III, that can amplify your efficacy signal that you see.
The two large data sets that were expected by the end of the year are both focused on idiopathic hypersomnia. We'll see the first one from LUMRYZ and then obviously later with the orexin. How should investors be thinking about what outcomes you're looking for for IH for both of these different compounds, if they're the same or different?
IH is a really interesting opportunity because it's sort of a vague diagnosis. You don't have NT1, you don't have NT2, but you have excessive daytime sleepiness and certain sleep architecture patterns, you get called IH, but there's a lot of heterogeneity in that patient presentation. The confidence we have derives really on the orexin side, it comes from our phase Ib study and our NT2 study, where notwithstanding that variability, the efficacy, the wakefulness signal that the orexin agonist can drive seems to power through it. I suppose prior to having any data, our expectation would be the IHs would look somewhat like the NT2s.
we're adding the split dose regimen into the IH study, so we can actually test in real time whether splitting that dose actually drives those later MWT time points. remember, in IH, you don't use MWT as an endpoint, but we're measuring anyway just to get a sense of the qualitative nature and quantitative nature of that wakefulness. With respect to the oxybates, you know, XYWAV is approved in this indication. The study that Avadel ran basically mirrors that study. The difference being it's a once nightly. you won't have that midnight wake up or mid-course of night wake up phenomenon. you know, we didn't run that study. We attached a CVR to it, 'cause I think it does create new value, we should see those data in Q2.
Perfect. Maybe talking about the tolerability of orexins, 'cause obviously that's been a favorite topic of investors for better or worse. I guess, what do we know about the orexin on target side effects, maybe how long those last in certain patients if they're able to kind of quote-unquote, I guess tolerate these AEs, and which ones do you think will need to be managed most intensely if any?
Yeah, I don't think any of them need to be managed intensely. I think that's what I said in the opening comments. I think now with our data set and Takeda's data set, the side effect profile of these drugs tends to be mild to moderate and transient largely. What's interesting, the most commonly reported side effect I believe across both studies was insomnia. You might think that's pharmacologically driven by, you know, brain levels of orexin driving wakefulness. We actually don't think that's the case. We think it's really more because you're disrupting or changing the circadian rhythm of these patients, and that's a fairly significant change. That's why what's interesting is that particular on target side effect tends to diminish or dissipate within the first two weeks or so.
Consistent with this idea that it's not pharmacologically driven, it's probably more based on rhythm changes. The other one which is on target and more persistent is polyuria, so urinary frequency. That's on target, probably dose dependent. It doesn't tend to lead to discontinuations. It tends to be mild to moderate. Patients, I think, are fine with it given the quality of the wakefulness that they're getting. But in our case, because we have a range of doses, we think we'll have much more flexibility to be able to manage that should that be problematic for anybody else. A year ago at this time, people were, you know, really obsessively focused on the visual aspects of it.
I think with data, I think people have come to realize that to the extent that there are pupillary or other changes that might be transient, they tend to be mild and, and not lead into discontinuations or really reported much clinically at all. I think there was fear in the NT2 populations. We went up to higher dose, we would see more of them, and we didn't. I don't know how you feel, but I feel like we're getting. We used to get 40 questions a day on it, now.
Definitely.
we get 0.4.
Yeah.
Yeah.
Yeah. No, I agree. It's definitely come down. Obviously based on the excitement for orexins, in controlling obviously a lot that we've touched on so far, you've decided to take two other orexin drugs into the clinic so far into some additional indications. The first one maybe we'll hit on is ALKS 7290 for ADHD. We're gonna see some maybe initial proof of concept data in the back half of this year. Maybe can you talk a little bit about first, how are some of these follow-on compounds like ALKS 7290 and ALKS 4510 different from Orexin? Maybe we'll start with ADHD. Why was this the first indication here that you selected to look at?
This is where this whole field starts getting really exciting because the proof point of the validity of the circuitry is in the knockout model, i.e., narcolepsy. We've already shown in NT2 and IH patients in small data sets that super physiologic doses, if you will drive attention and wakefulness and mood and cognition, all these other things. At the limit condition, you think, "Well, okay, how could these agents be used in all of us to tune up various parameters?" The one of the most immediate adjacencies biologically is in ADHD, where this circuitry, if you look at the way the orexin neurons innervate other parts of the brain, it speaks directly to vigilance and attention and those things.
That's been established in preclinical models, and you've seen some of those data that are quite translatable with active agents, both stimulants and non-stimulants, that translate into these animal systems that are pretty rigorous. We've tested the orexin agonists as monotherapy and in combination in these models, and we're struck by the fact that monotherapy with orexin 2 receptor agonist looks like a really strong ADHD drug. We feel like analogous to what we saw in narcolepsy, in a relatively small cohort of patients over a 2-week period in a phase Ib setting in a dose ranging, we should be able to see that signal. That's why we're excited to launch that this year.
The prerequisite of that, of course, is chemical matter and then the single ascending and multiple ascending qualification in healthy volunteers. That's almost done. We think that there are a number of different things that are going to derive from this suite of chemistry that we have, which is, which is a rarefied, you know, there's not a lot of these orexin 2 receptor agonists that share all the properties that you need. ADHD is an immediate adjacency, as is fatigue.
Mm-hmm.
You know, we showed in the narcolepsy studies using, you know, benchmark or well-established measures of fatigue, like the PROMIS Fatigue Scale, which is not idiosyncratic for narcolepsy. With no experience with it, we tested in phase II, we saw very rapid and persistent changes in fatigue. Just for the uninitiated, fatigue is different than sleepiness, and patients report, you know, it's a very different domain than just feeling excessive daytime sleepiness. This idea of persistent fatigue, you know, physical fatigue, mental fatigue, and I think that in a post-COVID world and other indications as well, there's just a lot of interest in that. When we talk to patients with narcolepsy and some of these other chronic conditions, you hear a lot about fatigue, and you hear a lot about brain fog.
Mm-hmm.
These are two domains that, you know, there's not a lot of, you know, clear endpoints that FDA has established on those, but they're highly important clinically, and I think that these orexins and agonists have a real promise in that area.
Maybe on that point, because the secondary endpoints, at least so far from the NT1, phase II data that you have presented so far at SLEEP last year, Sleep Europe, showed some benefit on sort of these more not just sleep endpoints, but focus and sort of cognition? Can you kinda hit on those a little bit? Would you expect similar outcomes in the NT2 w hen we see the full data from those?
They showed more than some. In the VIBRANCE-1 study, we used something called the British Columbia Cognitive Complaints Index. It's not a measure of cognition per se, it's how patients feel about their cognition, so it's really clinically relevant. We used the PROMIS Fatigue study. Both at baseline, these NT1 patients were highly symptomatic on both of them. The first time point measure, which I believe was at 2 weeks, these patients, you know, many if not most of these patients reported normal, and that persisted all the way through the double-blind period as well into the open label period. This is. I mean, this is a really profound effect on these scales.
Which as I said, were not tuned for narcolepsy patients. They're just, you know, off the shelf. I n NT2, we'll show more of that data at SLEEP, but we saw a similar type of effect on improving cognition and fatigue in a much more variable patient population. The signal's not quite as obvious in the NT2s just because of the variability, but it absolutely... That's what the circuitry in the brain does, is these 60,000 neurons in the lateral hypothalamus, they innervate a whole bunch of other brain systems and turn on secondary messaging through other neurotransmitter systems. That's all measurable in animals and increasingly in humans.
It's not, "Oh, wow, this turned out to be idiosyncratic." This is right on target what we expect, I believe.
Great. Obviously there's been a ton of focus on the orexins over the past year and some change, but you do have a strong base business as well, and obviously unveiled the guidance for that for 2026 last week. Can you talk a little bit about the strength of the base business? Probably the most focus is on LYBALVI. Kinda what are you seeing in the schizophrenia market and bipolar markets there, and what's gonna be important to hit your guidance for 2026?
What's remarkable is the way we've transformed the business over the last several years. We had a top line of half a billion dollars or so driven by royalties from Johnson & Johnson and a couple other people. That was the business. We identified years ago that if we were gonna get to the next level of valuation, what we had to do is transform that from being a royalty business to being a proprietary products business. Of the one-point whatever, $6 billion or $7 billion we're gonna do this year, $1.4 billion of it or so are proprietary products. For a company to go through that type of transformation is quite remarkable. Now with alixorexton, that's probably our first true bona fide blockbuster.
I mean, there's, you know, the admonishment one always gives at this point is there's always risk in these things. You know, drug development is a highly complicated and risky business. You know, we feel like now with the phase II program that we've run with alixorexton and the qualification from Takeda in terms of the pharmacology, we feel like, you know, the commercial business that we have is gonna continue to grow. Right now, that base business. What we like about the base business is that it's multiple products, and now we're adding Avadel. We add another drug that did something north of $280 million last year, right? It's balanced, it's diverse, and it's profitable. In so doing, we build an infrastructure then that's scalable because it's expensive to build U.S.-based commercial, right?
It just is. particularly outside of rare disease because there's a huge compliance infrastructure, medical affairs, market access, you know, all the things that go into it. Once you get it to profitability, you can keep building onto it, and that's what we've been able to do. We're able to manage the business now to invest aggressively into our pipeline while driving significant EBITDA. When we looked at the acquisition of Avadel, for example, we said, "That'll broaden the commercial portfolio, increase our top line, increase our profitability, and we can retire that debt.
We don't have to use a share of stock to buy it, and we can retire that debt aggressively over time. I think it's a really super nice asset to have, is that flywheel of commercial profitability to drive us for the future.
We talked a lot of the synergies and the rationale behind the transaction. I guess, is the company interested in additional BD? Maybe on the flip side, there are a lot of different areas where the orexins could be studied. Maybe you can't do them all yourself, or do you wanna keep them all yourself? Would you license some of these earlier orexin products or certain indications? Is that-
Probably not now.
on the table?
Probably not now. Let's see how this plays out. We can see the sequencing, the increase in the valuation of the company pretty clearly now. As of right now, we don't even have the value of an NT1, NT2 drug in the... That will change over time now that we've come out of an end of phase II meeting with FDA. We're launching a phase III program that looks like something that a large pharmaceutical company would run. We're not cutting any corners here. This is a serious development program now. We're expanding the aperture now with ADHD and fatigue to begin to broaden the pharmacology here. We will always be interested in looking at tuck-in BD deals that leverage our clinical and scientific capabilities.
That's just, that's what you do as you build these companies over time. Always, you know, anytime you can leverage your commercial infrastructure, because often that, a lot of that can drop to the bottom line if you have redundant commercial capability. There just aren't a ton of great commercial products that you would say, you know, fit logically into what we do 'cause. You know, I think that the company now is at a point where we're feeling like we can execute on our late-stage program, our earlier-stage program, our commercial program, and have bandwidth across all of those.
Great. Awesome. Well, a lot of progress and a lot more to come