ACADIA Pharmaceuticals Inc.

Good day, ladies and gentlemen, and welcome to the Acadia Pharmaceuticals second quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Mark Johnson. Vice President of Investor Relations at Acadia. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining us on today's call to discuss Acadia's second quarter 2022 financial results. Joining me on the call today from Acadia are Steve Davis, our Chief Executive Officer, who will provide an overview of our second quarter performance and a review of our business. Mark Schneier, our Chief Financial Officer, will discuss our financial results and guidance. Brendan Thien, our Chief Operating Officer, Head of Commercial, will provide updates on our commercial performance, and Kathy Bishop, our Chief Scientific Officer and Head of Rare Disease, will provide an overview on tryptophan. Dr. Serge Stankovich, our President, will then discuss our pipeline progress before turning it back to Steve for final remarks and opening the call-up for your questions. I would also like to point out that we're using supplemental slides, which are available on the Events and Presentations section of our website. Before we proceed, I would first like to remind you that during our call today, we'll be making a number of forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events, or future results, are based on current information, assumptions, and expectations that are inherently subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially. These factors and other risks associated with our business can be found in our filings made Your caution not to place under-reliance on these forward-looking statements, which are made only as of today's date. I'll now turn the call over to Steve.

Thank you, Mark. Good afternoon, everyone, and thank you for joining us today. Please turn to slide five. Our business plan is focused on the following priorities. Maximize the value of our Parkinson's disease ectosis franchise with new plazas. Delivered to refinentad to the market as our second commercial product. in the first FDA-approved treatment for Rett syndrome, complete our second pivotal study in negative symptoms of schizophrenia, discipline early-stage development to selectively advance molecules into late-stage development, and finally, positioning ourselves to leverage an increasingly attractive opportunity set in business development by carefully allocating capital as we fund our current business from our existing balance sheet and move to becoming cash flow positive. Let me get into these in greater detail. Let's start with our Nuplizit PDP performance on slide six. For the second quarter of 2022, Nuplizit achieved $134.6 million in net sales, representing a 17% year-over-year increase. Importantly, Nuplizit continues to outperform the basket of top-branded drugs in the neurology segment, the PD market, and in long-term care facilities. I'm proud of our execution to continue to outperform market comparators and grow market share in a Parkinson's market environment, which continues to be negatively impacted by the pandemic. Given the current PD market dynamics, we have been and continue to be focused on efficiently managing and optimizing our PDP commercial spend. As Mark will describe in a moment, by carefully allocating capital to PDP opportunities with the highest ROI, We expect to keep overall SG&A relatively flat in 2023, while funding the projected launch of terpenetide in Rett Syndrome. Longer term, our outperformance against market competitors and ability to continue to gain share in what is currently a downsized market is of confidence in our ability to continue to grow the brand while maximizing the value of Nuclizate and PDP. Before leaving Nuclizate, I want to provide some clarity on our patent protection for the franchise. Our Composition of Matter Patent in the Orange Book was recently updated with patent term extension out to the end of April 2030. In addition, we are conducting clinical work in pediatric autism that should result in a six-month pediatric extension, taking our Composition of Matter Patent to the end of October 2030. As a reminder, we have additional method of use and formulation patents that protect the currently marketed tablets and capsules of Nucleazid out to 2037 and 2038 respectively. Let's now move to slide seven. As announced last month, we submitted our NDA for trofenetide for the treatment of Rett syndrome in adults and pediatric patients two years of age and older. The submission is based on our pivotal phase three Lavender study, which delivered positive top line results on its co-primary endpoints and on the key secondary endpoint. Trofenetide has been granted fast track status and orphan drug designation for Rett syndrome, and it's also been granted rare pediatric disease designation by the FDA. As such, we expect this NDA to receive a priority review with an action date most likely in the first quarter of 2023. And if approved, we would expect to receive a pediatric priority review voucher. Our commercial medical teams are working diligently on preparing for launch, including market development, disease state education, customer profiling, and broader care team identification. As a reminder, our patent protection for Trofinetide consists of a method of use patent with expected patent term extension out to early 2036, with additional patents pending. Moving now to Pim Evanson for the treatment of negative symptoms of schizophrenia. Pim Evanson has already completed one positive pivotal study, Advance 1. As we previously noted, negative symptoms has been a particularly difficult area for the industry with many failed studies and no FDA approved therapies. Our second pivotal study, Advance 2, is ongoing. Advance 2 is virtually identical to Advance 1 with one important difference. In Advance 1, we explored a range of doses and determined that the top dose, 34 milligrams, the same dose approved for PDP, performed meaningfully better than lower doses. So in Advance 2, we are only using the 34 milligram dose. As Serge will discuss, as a result of the ongoing Russia-Ukraine war, we are extending our projections to complete enrollment to around the middle of next year. As a reminder, this is a study with a six month treatment period. Let's now turn to slide eight to discuss the further evolution of our early stage portfolio. One early stage program we've not previously discussed is an internally developed new molecule, ACP204, which is currently in phase one development. ACP204 builds on the learnings of PIM of answering. At this point, the compound is looking very good. and if phase one is successful, we plan to develop it as a potential treatment in neuropsychiatric symptoms, which may include Alzheimer's disease psychosis. We expect ACP 204 to complete phase one development around year end. Of course, making disciplined decisions in early development is a threshold requirement to success in late stage development. We've also made the decision to discontinue the development of ACP 044 in acute and chronic pain based on an evaluation of the final data set from a previously completed Phase II bunionectomy study. We're also discontinuing ACP319, an M1 PAM modulator, based on a profile that does not support advancement to Phase II. Moving to the bottom of the slide, I just want to go back to a point I made when I opened my remarks, and that is that we are positioning ourselves to leverage what we believe will be an increasingly attractive business development environment. We're positioning ourselves by being very focused in our investments in PDP, prioritizing investments with ISROI. As I mentioned, this will enable us to appropriately fund our launch in Rett syndrome while keeping SG&A relatively flat. We will also continue to be very disciplined in allocating capital in our R&D portfolios I've described above. If the capital market stage disjointed, and it appears they will for the foreseeable future, What we've seen in the past in these cycles is that the tables tilt dramatically in favor of companies like us, companies with a strong balance sheet, solid revenues, and established commercial and R&D infrastructure. In addition, we've established an infrastructure across all four quadrants you see here, in both psychiatry and neurology, and across broad indications and rare disease. Of course, terpenazide is a good example of our past success in business development. Our strong financial position and established infrastructure position us extremely well to leverage the evolving business development opportunity set for further success. With that, I'd like to now turn the call over to Mark to discuss our financial position, guidance, and strategy in more detail.

Thank you, Steve. Let me start by building upon what you just talked about as we turn to slide 10. As a company, we continue to refocus our expense base to align it with our key strategic priorities. This includes the optimization of our SG&A expenses, as well as the prioritization of our R&D expenses. At the same time, we continue to ensure they're able to fund our existing business without the need for additional capital. Now let me provide some additional calls. First, we expect to invest in the launch of Trefinotide while maintaining a relatively flat SG&A expense base in 2023 as compared to 2022. This means we will continue to redeploy resources from PDP commercial and G&A to the Trefinotide commercial effort. Second, we have prioritized our R&D portfolio with a number of programs advancing, continuing, completing, and terminating. Based upon our prioritization efforts, we expect R&D expense from program costs to decrease by approximately $50 million. We expect a reduction of $15 million for the remainder of this year and another approximately $35 million next year. And finally, with a current cash balance of $436.4 million, we have more than sufficient resources to fund our business until we turn cash flow positive. Of course, this is subject to the scope of future BD. Now let's turn to our quarterly performance on slide 11. In the quarter, we recorded $134.6 million in net sales, an increase of approximately 17% compared to $115.2 million of net sales in Q2 of 2021. Year-over-year demand and selling volume were down 1% and 2% respectively. During the current quarter, our selling volume matched our demand volume. And for the first six months of 2022, demand growth was up over 1% year over year. Our gross net adjustment for Q2 was 15.4% down from 18.4% last year. Gross net for the first half of the year was 20.2%, which is essentially flat as compared to 20.4% for last year. Gap R&D expenses increased to $75.6 million in the quarter compared to $56.9 million in Q2 2021. The increase was primarily due to development activities for ACP 044, which has now been discontinued, investment in trefinetized commercial supply, which is expense in advance of approval, and expenses related to early stage programs. GAAP SG&A expenses decreased to $89.9 million in the second quarter from $96.8 million in the second quarter of last year. And finally, we ended the quarter with a healthy cash balance of $436.4 million. Please see our adjusted guidance ranges on slide 12 now that we are halfway through the year. At the beginning of the year, we deliberately provided a wide net sales guidance range to reflect various scenarios related to the pandemic. At that time, I mentioned that the top end of the range reflected a significant improvement in PD market dynamics, and we've not seen that yet so far this year. As a result, we are reducing the top end of our net sales guidance range. Regarding gross to net, we have reduced our range slightly to 19.5% to 20.5% for the year. On the expense side, we are reducing our R&D guidance by $15 million and maintaining our SG&A guidance. While R&D will come down in 2022, we expect most of the cost reductions I referred to earlier, another approximately $35 million, to be realized next year. We are raising the bottom end of our expected year-end cash balance and are now guiding to the range of $375 to $405 million. To reiterate, we are confident in our ability to generate sustainable growth with our existing cash resources. And now I'd like to turn the call over to Brendan to discuss our PDP business.

Thank you, Mark. Please turn to slide 14. I'm pleased with our team's performance this quarter, delivering net sales of $134.6 million, representing 17% year-over-year growth. Today I want to address four key themes regarding our commercial organization and performance. the PD market dynamics and our relative performance. Next, optimizing growth for the NewPlaza brand. And I'll shed some light on exciting new real-world studies on PimaVanser and safety profile. And we'll finish off by discussing our preparations for Trufinitide. Let's start with the PD market dynamics and our relative performance. Our demand volume grew slightly in the first six months of 2022 compared to 2021. which is encouraging given the very slow incremental improvement in the PD market dynamics seen to date. As shown on this slide, we are further encouraged as New Plaza's growth outperformed foundational Parkinson's medications, including carbidopa levodopa, as well as a market basket of branded LTC products across multiple therapeutic areas. This performance continues to indicate our strong brand support from our treating audience and has allowed us to continue to increase our market share, which has grown despite the pandemic and is up approximately 15% since 2019. Second, as Steve alluded to, we have continued to optimize our PDP commercial spend in the current market environment to evaluate growth opportunities more efficiently and increase cash flow from the business. We will, as always, be opportunistic when PD market dynamics improve and move closer to pre-pandemic levels. Third, and recently, several real-world studies have been published or presented that make important comparisons when treating patients with Pimavanthrin as opposed to off-label, multi-receptor, atypical antipsychotics in PDP patients. One of these studies was recently published in the American Journal of Psychiatry. The authors of this study concluded that Pimavantrin use was associated with approximately 23% lower mortality rate than other atypical antipsychotics over 360 days. These are important findings which Serge will speak to in a moment. Let's now turn to our preparations for the launch of Trofinetide for the treatment of Rett syndrome on slide 15. Acadia is preparing to reach yet another important milestone in the company's history. launching a second commercial product and building a rare disease-focused commercial organization. Our commercial teams are already working on shaping and developing the market for what will potentially be the first therapy approved to treat Rett syndrome. Patients with Rett syndrome generally have a dedicated care team, which includes their caregiver, usually family, as well as their healthcare providers. In order to achieve our goals in the near term, we have several prelaunch activities ongoing. including building best-in-class patient support and educational resources to further generate awareness retrofinetide upon launch and identify and engage the families of RET patients. Secondly, we are continuing to engage the community to build awareness, including leveraging our strong partnerships with RET advocacy groups to best understand care team needs and perspectives. And finally, We're increasing our community outreach for disease education and establishing trofinetide's clinical impact through publications, scientific presentations, and KOL engagement. Our ultimate launch objective will be to establish trofinetide as the foundational treatment for Rett syndrome and ensure access to all patients in need. I'll turn it over now to Kathy to discuss Rett and trofinetide from a clinical perspective.

Thank you, Brendan. Let's start on slide 17. As you know, Rett syndrome is a serious and debilitating rare disorder for which we estimate there are between 6 and 9,000 patients in the United States. There is no FDA-approved treatment for Rett syndrome in the U.S. The debilitating symptoms of Rett syndrome include severe neurodevelopmental and motor impairment, including gait abnormalities and loss of purposeful hand use. loss of ability to communicate both verbally and non-verbally, and GI issues, including severe constipation. Ultimately, Rett syndrome patients lose their ability to maintain independent functioning on a daily basis and require around-the-clock support. Let's review the lavender results on slide 18, which form the basis of our recent NDA submission to the FDA. In the lavender study, positive results were observed for the pre-specified co-primary endpoints. At week 12 for the RSVQ, the p-value was 0.0175 with an effect size of 0.37. As a reminder, the RSVQ is a validated caregiver-completed rating scale assessing a wide range of neurobehavioral and neurodevelopmental core symptoms known to be impaired in Rett syndrome. Trifinitide patients improved on average 5.1 points from baseline at week 12 on this scale, which is very meaningful. In addition, at week 12 for the CGII, the p-value was 0.003 with an effect size of 0.47. The CGII is a clinician-completed assessment of how much the individual's illness has improved or worsened relative to baseline. scored using a standardized rubric that is specific to the clinical features of Rett syndrome. This effect size is quite meaningful for these patients and their families. Furthermore, in the study, statistically significant separation from placebo on the key secondary efficacy endpoint was also achieved. This important endpoint was designed to assess the communication skills of the patients. Although initially designed for infants and toddlers, This skill is applicable to and has been applied to older age groups for patients with neurodevelopmental disorders such as Rett syndrome. Lack of ability to communicate verbally and non-verbally is a significant challenge for Rett patients and their families. On this endpoint, at week 12, the p-value was 0.0064 with an effect size of 0.43. The consistency of these results was observed across all age groups and severity of disease in the study. This helps reinforce its meaningfulness and chafinitides potential in all patients with Rett syndrome. In addition, these results are also consistent with what was observed previously in Phase II studies. And now I'll turn it over to Serge for an update on our other pipeline programs.

Thank you, Cathy. Good afternoon, everyone. Let's discuss the evolution of our CNS portfolio on slide 20. First, to reiterate what Steve and Mark said, we believe that the business development opportunity set will continue to get more and more attractive over the course of the next year and favor companies like ours that are well capitalized and have existing infrastructure in place to transact and expand. Therefore, it is important to stay disciplined and make the right investment decisions for each program and the portfolio as a whole. As a result of our prioritization efforts, today we announced that we have discontinued the development of ACP 044 in acute and chronic pain and ACP 319, the lead molecule from our M1 PAM program. On the other hand, We are investing further in an internally developed molecule, ACP204. This molecule is being evaluated in phase one, and we expect to complete phase one development around the end of this year. ACP204 builds upon the learnings of Pimavanserin in the treatment of neuropsychiatric symptoms. We are also investing in our ASO programs with stoke collaboration among the early stage programs. Now, let's discuss Pimavanserin in PDP and the negative symptoms of schizophrenia. Building upon what Brandon stated, I would like to discuss a couple of real-world studies on slide 21 that compare treatment with Pimavanserin in patients with PDP to off-label multi-receptor atypical antipsychotics. First, the recent publication in the American Journal of Psychiatry. And second, a recent poster presented at the 2022 American Society of Clinical Psychopharmacology Annual Meeting. Both the publication and the presentation were made public in June of this year. The publications described findings from the retrospective Medicare claims analysis comparing the risk of all-cause mortality associated with pimavanserin versus other atypical antipsychotics in patients with Parkinson's disease to treat psychosis. The authors' conclusions were that pimavanserin use was associated with an approximately 23% lower mortality than other atypical antipsychotics over 360 days. The risk of mortality was approximately 35% lower in Pima-Vanserin patients than with other atypical antipsychotics during the first 180 days of use, while the risk was similar thereafter. This data is very encouraging, and our team is proud to continue to make Nuplasid available to patients with PDP and their families. Let's move on to our second potential indication for pre-malancery, starting on slide 22. There are over 700,000 patients in the United States who are currently treated for schizophrenia but still have persistent and potentially debilitating negative symptoms, such as social withdrawal, lack of emotion, and blunted affect, among others. These symptoms lead to low social functioning, long-term disability, and significant caregiver burden, and there is currently no FDA-approved treatment. As part of our advanced program, we have one positive pivotal study, ADVANCE-1, where we observe statistical separation on the primary endpoint overall, and even more robust results in patients receiving 34 mg of Pimavanserine. These positive results were published in Lancet Psychiatry. Today, I want to focus on the results of the 34-milligram group, which appears to be optimal therapeutic dose, which we are evaluating in our second pivotal study, ADVANCE-2. The graph on slide 233 shows the improvement for only the patients who received 34-milligram dose of pimavanserine. You can see that significant improvement from placebo was achieved at week 26 when an unadjusted p-value of 0.0065 with an observed effect size of 0.34. The separation began as early as week 2, which continued to increase throughout the six-month treatment period. We look forward to keeping you updated on our progress in this high unmet need. And with that, I will turn the call back to Steve for closing remarks.

Thank you, Serge. Please turn to slide 25. Today, we are executing on our promise to deliver New Plaza to patients with PDP, where there's an attractive long-term opportunity to continue to grow the brand. In addition, we are preparing for our second commercial product launch with Trapinatide, advancing our phase three program for the negative symptoms of schizophrenia, and developing several additional programs while pursuing strategic business development. With a strong balance sheet and the projected launch of our second product early next year, we are well positioned for long-term growth. In closing, I would like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate lives. I'll now open up the call for questions. Operator?

Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star 11 on your touch tone telephone. We ask that you please limit yourself to one question. I repeat, please limit yourself to one question. Please stand by for our first question.

That will come from the line of Charles Duncan with Cantor Fitzgerald.

Please go ahead.

Hi, guys. Thanks for taking the question and the thorough update today. Let's see. I'll try to ask one question. It'll probably be a multi-parter perhaps for Kathy. I guess I'm wondering if she could provide any further color on whether or not she anticipates an ADCOM given that tropinotide is a first-in-class, first-in-indication drug. and what's going on to prepare for that. And then maybe the second part is for Brandon, relative to target product profile, if he can share any feedback from payers that you've gotten so far on Trophinitide.

Great.

Thanks, Charles.

Kathy, you want to take the first part of that question? Brendan, the second?

Yeah, happy to. And thanks for the question, Charles. As we announced, we filed our NDA in July. And as Steve mentioned, given that Rett syndrome is a severe, rare pediatric disease, we are anticipating priority review. At day 60, since the filing, we will hear about acceptance of the NDA. So that would be in September. And we are anticipating at that time hearing about a producer date officially. and as well where the FDA is leaning on an advisory committee meeting. I will say we are preparing in case they are going to have an advisory committee meeting, but in my experience having worked in rare disease for about 20 years, it is not necessarily so that for the first drug in a given indication they have an advisory committee meeting. In our case, I think the data is pretty straightforward, so there's potential that that would not happen.

Thanks, Kathy, and Charles, thanks for your question as well as Brendan. Yes, we've had a chance to engage payers since the Lavender trial results. They are very understanding of this being an area of high unmet medical need. They understand the devastating nature of Rett syndrome. They also have had a chance to see trofinetide's target product profile They understand the importance of being able to treat across the core symptoms of Rett syndrome, and they have given us, I think, favorable feedback on that product profile, expecting that the product would be, like other rare diseases in the pediatric space, that they would expect citrophenatide in that same category.

Very good. I'll hop back in the queue. Thanks.

Thank you. One moment for our next question. That will come from the line of Ritu Baral with CalWIN. Please go ahead.

Hi, guys. Thanks for taking the question this afternoon. I wanted to ask about ACP204. When you say building upon the learnings of Pimavansarin, is that a statement on the mechanism of 204? Is that also an inverse agonist? And is this your forward ADP strategy? Phase 2 strategy. Thanks.

Yeah, thanks for the question, Ritu. Let me ask Serge to comment on the first part of that question, and then I'll take the second part regarding ADP go-forward strategy. Serge?

Yeah, thanks, Ritu. A great question. We are developing ACP 204 as an internally developed compound with similar, but different and differentiated pharmacology from Pima-Vanserin. So as a compound, although it does target the synergic system similarly as Pima-Vanserin, it has a number of potential advantages that are stemming from differences in pharmacology and some properties of the molecules. So, that perspective, we anticipate that this molecule is going fairly successfully so far through the phase box to pursue, after our work, to pursue aggressive development into the neuropsychiatric symptoms. Obviously, among others, we've been very careful. Alzheimer's disease psychosis, but we are looking at a whole array of psychiatric that this compound may be. One thing that I would add here, particularly of the importance of this compound is the higher potential in terms of the efficacy, which again is related to the properties of the molecule and the data that we have from our preclinical and preclinical work. And the second, there is, as well, a differentiation in terms of a lack of liability, QT liability, which is differentiation compared to Pima-1-serine.

I think we can start. and on my end of the line was breaking up a little bit. Did you hear his answer?

I heard about the QT. I heard about the potency. I wasn't exactly sure about the differential pharmacodynamic middle portion.

Okay. Well, let me just sum it up. So, 204 is similar but not identical from a biochemical perspective. So, from a binding profile perspective, very similar but not identical. That together with, you know, Other properties of the compound we think give us important potential. Very similar, but not identical. That, together with other properties of the compound, we think give us important potential differentiating factors from pembavancerin. Of course, this all has to play out in the clinic. We're eager to continue advancing the compound, but we think it has very great potential, and we're excited about it, given that it's an early-stage compound. In terms of our ADP go-forward strategy, as we previously stated, we do not plan to conduct another ADP study with Pimivantrin. That kind of decision is always multifaceted. It partly relies on the amount of time that it would take to run another study. This is for elderly population and the pandemic. There's always the potential for that taking longer than otherwise would, juxtaposed against where the product is in its lifecycle, and other considerations. And in this case, it also included ACP 204. So it certainly wasn't the only consideration, but it was a consideration. ACP 204 will have a patent life that will go into the early 2040s. And so, you know, it was, so going forward, We will not be running another study with Tim of answering. We've not yet determined if we will with ACP 204, but certainly that will be one very high priority indication for us to consider. At this point, we just need to wrap up phase one, get a full profile on the compound, then we'll get back to you and others with a more definitive development plan.

Very helpful. Thanks, Steve. Thanks, Serge. Thank you. One moment for our next question. That will come from the line of Nina Garg with Citi. Please go ahead.

Hey, guys. Thanks for taking the question. I was just wondering if you could clarify some of the dynamics on the quarterly PMAV answer and gross to net specifically. Maybe if you can describe kind of what drove the steep drop-off in the gross to net discount there, and then if you can clarify what we should expect for the full year, that would be great. Thanks.

Sure. Mark, you want to take that?

Yeah, sure. Thanks for the question. The decline for the second, you know, just for the second quarter in comparison to the second quarter of last year was really a timing difference that happened in accruals between the first and second quarter of 2021. So I think that's why we're, you know, importantly noted kind of the growth to net for the full six months year to date, which is essentially basically the same and flat. And as we look forward to the year, we announced or I commented that we are bringing down our guidance range for gross to net a little bit from 19.5% to 20.5%. And that's just as we're seeing kind of less of a growth in 340B dynamics, which has been kind of the main driver of growth over the last year or so as gross to net has picked up.

Got it. That's helpful. I guess then maybe if you can talk a little bit about just then the script dynamics and kind of how we should think about kind of the pace of new starts in the second quarter, just because it seems like most of the sequential growth in sales is driven then by the growth to net.

Yeah, I hear you, Mark. Go ahead. Yeah, I think as we, you know, we continue to just be in this kind of I guess, flat to modest growth period that that will last forever. But, you know, it remains where we are now. So we're confident that, you know, over the long term, that as kind of PD market dynamics kind of return to a more favorable environment and normal environment, as we would expect, timing of which is hard to predict, that we'll return to, you know, greater growth period as we continue to outperform and gain market share in this market. I think for the remainder of this year, you know, we lowered the top end of our guidance range just, you know, that was reflective of a PD market dynamic that would have been significantly improving. You know, as I mentioned, we haven't seen that quite yet. So our current range is that kind of demand would be in kind of the slightly negative to positive range for demand growth, selling bottles will be slightly Less than demand is our expectation, as we had last year. A little bit of sell-in growth that exceeded demand growth, and we don't necessarily expect that dynamic to increase to continue this year. And we'll see where we wind up this year and look forward to growing the brand over time.

Got it. Thank you.

Maybe just to quickly echo Mark's comments, one of the things to just note is that we the PD market environment is smaller today than it was prior to the pandemic. We see that when we see the scripts for carbidopa levodopa growing at a very slow rate, much slower than it was prior to the pandemic. We see it in occupancy rates in long-term care facilities, patient in-person offices, et cetera. So we've talked about those dynamics a lot. Importantly, uh despite a smaller what is today a smaller market which we believe will grow again in the future throughout the pandemic we've gained about 15 percent market share so our market share part of the pandemic versus the work scheme today has gone up about 15 so uh that is another consideration in terms that gives us confidence that as pandemic conditions ultimately improve and we're able to continue to grow market share that it will uh we'll go back to the kind of longer-term growth rates that we've seen historically.

Got it. Thank you.

Thank you. One moment for our next question. That will come from the line of Chris Howerton with Jefferies. Please go ahead.

Hi, y'all. This is AJ Velasquez on behalf of Chris Howerton here. Are you thinking about NSS any differently following Karuna's CAR-T data today? Do you maybe see atypical antipsychotics as a sort of holdover if physicians are willing to go out and get preauthorizations for that?

Sure. Serge, you want to take that?

Yes, absolutely. Thanks for the question, although I'll probably leave for Brett to comment on the authorization and all that. But from a scientific perspective, I would say that the Indication that Karuna is pursuing is very different from the indication that we are pursuing with Pima-Vancer in the negative symptom schizophrenia. First of all, Karuna's program is on a therapy in acute schizophrenia symptoms, short-term studies, and the results, I would say we are very pleased to see that there is another potential treatment option for this serious condition, but it's very different from negative symptom schizophrenia where it's a long-term treatment with a requirement that positive symptoms of schizophrenia, acute symptoms of schizophrenia are under control and that remaining negative symptoms in terms of social withdrawal, emotional withdrawal, and so on, are treated with most frequently adjunctively, and that's exactly how we are pursuing that. So we are not seeing a direct read-through from the Karuna data because it's a different competitive environment than what we are pursuing. I will remind you there are no approved treatment for negative symptom schizophrenia, while there are multiple treatments for acute schizophrenia symptoms. I will only add one other thing is that movement on the negative symptom subscale of PANS in the context and paradigm of the acute short treatment is something that we regularly see in our trial because with the reduction of acute symptoms, you are seeing some movement on the negative symptoms as well. But that's not accepted as evidence of the efficacy in the treatment of negative symptoms of schizophrenia. The only long-term six-month studies in a context of stable positive symptoms and improvement of negative symptoms is accepted by regulators as an appropriate paradigm for evidence of efficacy.

Gotcha. Thank you for the clarification.

Thank you. One moment for our next question. That will come from the line of Greg Renza with RBC Capital. Please go ahead.

Great. Thanks, Steve and team, for the update today, and thanks for taking my question. I just wanted to give you a chance to perhaps close the loop on the recent CRL with Pima Vantra. I know it's been communicated from you and the team as disappointing and certainly telegraphed over this recent time, but just perhaps you can to provide a punctuation mark on, or I should say a final point on what it means for the company. You've made some changes today that are certainly meaningful across the pipeline and the profile, but how is that feeding into how you're looking at ACAT going forward? Thanks.

Yeah, thanks much for the question, Greg. You know, look, there's no drug approved for the treatment of Alzheimer's disease psychosis, and it's a dramatic unmet needs. So of course, we continue to be very disappointed that we didn't have a positive outcome with our resubmission in ADP. You know, look, going forward, we haven't given up on the indication. I think we've given a clear signal that today still remains a very significant unmet need. And, you know, maybe one of the key elements of success in ADP is just the recognition that this is a very frail and elderly population. And they take a lot of other medications. And so an ideal drug to treat them is one that resolves the or at least mitigates the psychosis, but also does it without a lot of side effect or tolerability baggage. And so that's been kind of a hallmark of our approach working through the synergic system. And so, you know, we'll continue to be interested in trying to help the, you know, 600,000 patients and their families that are currently taking atypical grand test psychotics that have a lot more side effect baggage than what we've seen with our approach. So we'll continue to be very interested. Obviously, we'd much prefer to be helping these patients today, but we'll continue to press forward on multiple fronts.

Thanks, Steve. Appreciate the call.

Thank you. One moment for our next question. That will come from the line of Mark Goodman with SVB Learing. Please go ahead.

Steve, can you tell us what is your strategy for Europe? Are we still thinking about bringing New Plaza to Europe at all? And then just on the pain product that you killed, why kill it before we get the chronic pain data? Thanks.

Sure. I'll take the first part of the question. I'll let Serge take the second. So in terms of Europe, Our strategy has not changed. You know, the grim reality is for drugs like this, like Nuplaza, that is, the pricing environment outside of the United States is very different. And in many cases, it's difficult to get pricing that would even make the venture profitable or or even break even. And so it's just a very challenging environment in Europe. And of course, if the whole world operated with similar pricing structures, we just wouldn't have any drugs. So I wish the situation were different, but it's a very difficult situation today for lots of drugs in terms of getting appropriate pricing outside of the United States. So our strategy there has been to consider advancing new plasma with additional indications above and beyond PDP. We'll come back and take a look at that when we get the results of negative symptoms of schizophrenia. We do have, in Europe as well as in Japan, 10 years of data exclusivity, so the product life would not be governed by patents. And so we'll take a look at that down the road. But today, with only a PDP indication, it just makes it a very challenging environment to launch in.

Yeah, on the second question about ACP-044, first, let me just find that early stage small molecule drug development has a high attrition rate. And therefore, it's our approach that we consider very important to be disciplined with the data. We have a high internal threshold for future investment, and this a particular candidate, ACP044, did not meet it. The decision to discontinue ACP044 was multifaceted, but ultimately the efficacy data we observed in the bunionectomy study, and we spent quite a bit of time analyzing that data thoroughly, as well as when that's juxtaposition with the safety and tolerability profile, Overall, the totality of data just did not reach our threshold for further investment in this molecule. Having said that, I will say and remind you that we acquired a battery of molecules with this mechanism of action, and we will be realigning our focus to earlier stage molecules and evaluating their further development.

Thanks.

Thank you. One moment for our next question.

That will come from the line of Danielle Brill with Raymond James. Please go ahead.

Hey, guys. This is Alexander for Danielle. Forgive me for getting a little granular. I just want to look at trofinetide and some of the open label studies that are happening. So when you top-lined lavender, you spoke about some diarrhea mitigation strategies, including the removal of anti-constipation meds, given that Trufinadide could be administered in an unblinded fashion. So we were curious what percent of patients stopped taking anti-constipation meds in the open-labeled Lilac studies, and also what the rates of diarrhea in patients in Lilac who were not on anti-constipation meds.

Thanks for the question, Alex. Yeah, do you want to take that?

Sure. Thanks, Alex, for the question. So, as we had patients enroll in the Lilac 1 and Lilac 2 open-label extension studies, which are continuing, as we talked about previously, we instituted a diarrhea management plan to help deal with the diarrhea. It's important, critical to note that these patients have severe GI issues due to the Rett syndrome, which in about 80% of patients is severe constipation, which in this patient population that is unable to communicate verbally and non-verbally is very difficult to manage both through the parents and the physicians who manage these patients. And this constipation can be very severe leading to hospitalization. So they are on multiple anti-constipation medications. So what we suggest now and what we're planning for as we think about commercial launch is implementing a diarrhea management plan in which we ask them to stop taking those anti-constipation medications as they start on trofinetide, because you could imagine that those medications along with trofinetide would contribute to the diarrhea. And in addition, we asked them to manage the diarrhea using over-the-counter medications as well as fiber supplements. And we have seen a reduction in the severity and incidence of diarrhea with this management plan. And we have patients who have remained on trofinetide for a very long time now. I don't think we provide specifics in terms of percentages, but we are optimistic that this diarrhea management strategy, as we work towards commercial launch, will be effective in managing the diarrhea that we see with trofinetide. Also, we want to remind you that the diarrhea is mild to moderate severity. It does not lead to dehydration or hospitalization. So when you compare that to the constipation that the patients have, this could be preferred.

Great. Thanks so much for the comment.

Thank you. One moment for our next question. That will come from the line of Sumant Kulkarni with Canaccord Genuity. Please go ahead.

Good afternoon. Thanks for taking my question. On the business development environment, you mentioned that you're in a potential situation to take advantage of that. How quickly would you need to do that? What's the switch stage for a product in terms of the pipeline stage it's in, and how would you balance that against the potential recovery in the Parkinson's disease market?

Yeah, thanks so much for the question, as you want. So let me just start by reflecting on what we've seen in cycles like this in the past. And it's been quite a while since we've had a significant and sustained downturn in the capital markets in the biotech industry. What we've seen in the past is as these kind of closed windows or disjointed capital markets go on for two quarters, three quarters, four quarters, that companies just naturally become more engaged and interested in partnering because it just becomes more and more difficult to for them to fund all of their programs independently. And so that's what we anticipate happening. We're beginning to see some early signs of that, you know, companies that maybe were not as interested in talking earlier are now more, you know, engaging. But for this to really result in a meaningful change in the attractiveness of the business development opportunity set, the capital markets will need to stay just joining for another quarter or two or three years. which at this point in time is anyone's guess, but it doesn't look like this is going to turn around anytime soon. And so while in some respects it's a difficult time for the industry, it winds up being probably a net positive for us and companies like us because what happens is the BD tables, as we said, just tilt dramatically in favor of companies with our kinds of resources and infrastructure. So as we go forward, we're poised to take advantage of that. by far the most challenging competitor we've had in business development for the last five to seven years has been the capital markets. And that's, you know, a very, very different dynamic today as we go forward. Thanks.

Thank you. One moment for our next question. That will come from the line of Paul Matias with CIFL. Please go ahead.

Hi, this is James on for Paul. Thanks for taking our question. You mentioned ADP as a potential indication for ACP204. I guess in your recent communications with the FDA, you know, around PIM of answering, I guess, did they provide any specific guidance or anything around what development should look like, you know, for example, running acute versus relapse prevention studies or, you know, any learnings that you can carry forward as you potentially pursue that indication? Thanks.

Yeah, thanks so much for the question. I'll start, and Serge, feel free to jump in if you have additional thoughts. So, first of all, let me just say, with ACP204, we've not had discussions about late-stage development yet with the FDA. That'll be a part of the process in due course. But what I would say is, of course, we learned an awful lot about Alzheimer's disease psychosis throughout the development of Pimivantrin. And so, we'll leverage those learnings. We have a very, very good feel for what the appropriate safety and tolerability profile needs to be, what efficacy is, how to run these studies, et cetera. So I think we're very, very well positioned to leverage the institutional knowledge that we have in ADP. And, of course, if ADP, if we pursue to afford ADP, which we've indicated we think is a very attractive indication, then we'll certainly be able to leverage all those learnings. Serge, anything you'd like to add?

Yeah, I would just briefly add that circumstances around premium of answer in development in ADP dementia-related psychosis and or ADP were different, are different than any new chemical entity that you would bring into development. In that, at the time we were contemplating doing and agreeing with FDA to do a randomized withdrawal trial, we already had behind us two acute trials in the psychosis associated with neurodegenerative disease. So there was already evidence of efficacy in the acute treatment and paradigm for treatment of psychotic symptoms. Any new molecule that you would bring would have a different circumstance, and then obviously the development program would just have to be designed to accommodate those circumstances.

Very helpful. Thanks.

Thank you. One moment for our next question. That will come from the line of Yatin Sunea with Guggenheim. Please go ahead.

Hi, guys. This is Eddie on for Yatin. Thanks for taking the question. So on tropinotide, given the lack of approved therapies, do you expect to bolus the patients going on drugs quickly after the launch, or should we accept some sort of education or sales work to temper that ramp? And related to that, how many of those 6,000 to 9,000 U.S. patients have you identified so far? And then quickly, if you can comment just a bit more on why you terminated the M1 program. Thanks.

Sure. Brendan, you want to take everything down to the M1 portion of the question, and then, Serge, I'll let you ask you to take that. Thanks.

Sure. Sure, Eddie. Thanks for the question. The desire to trial prophenotide, whether you're speaking about HCPs or families is high in all of our market research we see a high level of enthusiasm for that and with that said we've been able to look at other analogs of rare disease pediatric product launches there is the early stages where of course we would expect patients that have been part of our studies to be able to roll over onto a commercial drug relatively seamlessly. And we're working very closely with centers of excellence and high-value institutions to make sure we're very well aware of the patient population already diagnosed to be ready to treat. And with that said, we will work closely with payers to make sure we're doing our best to make sure that access is available as readily as possible, but we do anticipate in the first few months post-launch that there will be work to be done to make sure that every patient that is seeking therapy will have an opportunity to be treated. I think your second question was around how many of these patients are we already aware of. We've done a lot of work with multiple databases to confirm the already identified and diagnosed RET population. And of that 6,000 to 9,000, I would say that roughly two-thirds of patients are diagnosed. And we expect, as is the case with many rare disease products post-launch, that diagnosis rates would increase when people are aware that there is a therapy available. Don't expect that to be overnight, obviously, but as more and more people become aware, that there's a novel treatment for Rett syndrome, it's very likely that families will seek additional diagnoses.

Thank you. In regard to M1 program, let me just make a first start with a clarification. We did not discontinue M1 PEM program. We made a decision to discontinue development of the ACP319. And the story there is very similar what I described with the ACP044. We defined a certain profile that we were anticipated on the basis of the preclinical animal data and early stage phase one data. And the molecule just did not rise to the level of reaching that high threshold. of our anticipation for the competitive molecule. But I will remind you that we have additional backup molecules in our M1 PEM collaboration with Vanderbilt, and we will be further evaluating these molecules as we move forward.

Thank you for all the time. Appreciate it.

Thank you. One moment for our next question. That will come from the line of Amin Makaram with Needham. Please go ahead.

Thank you, guys, for taking the questions. This is Amin for AMI. One question from our side. Do you have visibility on how GTN for Nucleus is likely to trend next year in light of the increasing 340B mix?

I'm sorry, I couldn't hear the question. Could you ask it again?

Thank you for taking the question. So, do you have any visibility into how GTN for neoplasia is likely to trend next year in light of the increasing 3, 4 dB mix? Got it. Okay. Thank you very much. Mark, you want to take that?

Yeah, sure. Thanks for the question. You know, we don't forecast kind of out for next year at this time. We'll release guidance when we publish our fourth quarter results. I think what we've seen thus far this year is that the growth in volume of 340B is moderating. So, I think that is the component of why we reduced kind of our guidance for this year for gross to net, and we'll continue to monitor that as we proceed through this year and consider that as we, you know, share guidance with the street for next year.

Thank you.

Thank you. One moment for our next question.

That will come from the line of Jay Olson with Oppenheimer.

Please go ahead.

Oh, hey, thanks for the update and thanks for taking the question. Since you have two programs for Rett syndrome with trofinetide and then a collaboration with Stokes Therapeutics, can you just talk about how these two programs would complement each other and potentially be used in combination? Thank you.

Yeah, sure. Thanks much, Jay. Kathy, you want to take that?

Sure. Yeah, and we think that the two different programs, because they have different mechanisms, would complement each other very nicely, so not compete with each other. But Drifinitide could be a foundational treatment, hopefully approved next year. the STOAT program is in clinical has a very different mechanism in that the goal is to increase the missing MEKP2 protein in these patients. And so patients on nitrofenatide could also undergo that therapy as well, having an additive, maybe even a synergistic effect. And I think I'll just add that all the work Brendan and his team is doing now for the potential launch of definitive ret syndrome kind of establishes us as the leader in that disease. So, any follow-on program will be able to use all those learnings as we develop and commercialize the second program.

Thank you.

Thank you. And we do have time for one more question. And that will come from the line of Ritu Baral with Cowen. Please go ahead.

Hi, guys. Thanks for taking the follow-up. I wanted to ask about the SG&A, which you guys indicated should stay relatively flat despite the RET launch. And you mentioned sort of redeploying some of that capital from PDP to RETs. Can you discuss where you're pulling the RET dollars from, and I guess your conviction that it won't destabilize the PDP franchise. Thanks.

Sure. Mark, you want to start? Sure. Thanks, Steve, and thanks for the question, Ritu. I think importantly, you know, as we look forward to next year and kind of develop kind of our investment for both PDP and Treponatide, we did it independently. to figure out what the right resources are to put on each product. And a consequence of that evaluation kind of results in an overall flat SG&A. The flat SG&A in and of itself wasn't a specific target. And I think for us on Drapinatide, we want to make sure we have the right resources and budget to ensure a successful launch. And on PDP, you know, we just remain in this kind of modest, you know, Modest growth period, flat growth period, and as we get deeper into the life cycle of the drug, what are the best return on investment tactics and how do we drive growth and value at the same time? And we're confident that we're putting the right resources behind the drug to achieve that as we move forward.

Thanks, Mark. Sorry, Rita. Yeah, just, again, echoing Mark's thoughts. The only thing I would add is, you know, we've mentioned this before, but just try to be a little more precise. With PDP right now in the current market, which is smaller, you know, for instance, things like DTC advertising on television don't produce the same kind of return on investment if, you know, patients are going to, patient visits to their doctor are down 20%. So, however, digital DTC continues to be very effective. So we're far enough into the pandemic now to have a good feel for what are the drivers that are driving growth, you know, web exposure directly with physicians, physicians talking directly to patients, long-term care occupancy rates and new patient admissions. a very good feel for what the levers are to pull in this kind of environment. And so as a consequence, there's just some investments that just don't pass the test to invest in having nothing to do with red or launch there, but just because we're just being disciplined about how we invest our dollars. The last thing I'll add is just want to insert something that Brendan mentioned earlier. There's important new real world information out that's just been published that I think does really help underscore the benefits of PIM of answering. And so that's the kind of thing, of course, that we are investing heavily in to make sure that our medical affairs team is very well equipped to describe those differences and help physicians understand that data when they have questions about it. So I feel like we're pressing on all the right buttons and the resource dollars are, as Mark mentioned, purely a consequence of our assessment of what's

uh working and warrants investment in at this moment in time in these in this environment and one doesn't thank you i would now like to turn the call back over to mr steve davis for any closing remarks great thanks much operator uh thanks again everyone for joining us today we look forward to updating you on our progress next quarter ladies and gentlemen thank you for participating in today's conference call this concludes the presentation You may now.