ACADIA Pharmaceuticals Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Acadia Pharmaceuticals' first quarter 2023 financial results conference call. My name is Corey, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of today's call. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised today's conference call is being recorded. I would now like to turn the presentation over to Mark Johnson, Vice President of Investor Relations at Acadia. Please proceed.

Thank you. Good afternoon, and thank you for joining us on today's call to discuss Acadia's first quarter 2023 financial results. Joining me on the call today from Acadia are Steve Davis, our Chief Executive Officer, who will provide an overview of our performance and review of our business. Brennan Thien, our Chief Operating Officer, Head of Commercial, will provide updates on our recent launch of Debut for the treatment of Rett Syndrome, followed by commercial updates on our new Placid franchise. Doug Williamson, our Head of R&D, will provide an update of our pipeline programs. And Mark Schneier, our Chief Financial Officer, will discuss our financial results before turning it back to Steve for final remarks and opening the call up for your questions. In addition, Kathy Bishop, our Chief Scientific Officer and Head of Rare Disease, will be on the call and available for the Q&A session. I would also like to point out that we are using supplemental slides, which are available on the events and presentation section of our website. Before we proceed, I would first like to remind you that during our call today, we will be making a number of forward-looking statements within the meaning 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 with the SEC. 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. 2023 is off to a great start with strong progress across our four strategic priorities. First, in March, Daveu received FDA approval as the first and only treatment for Rett syndrome. Our team moved quickly to make Daveu commercially available by mid-April, and we will be sharing updates on our launch execution with you today. Second, we continue to deliver steady volumes in our new franchise and Parkinson's disease psychosis. Our PDP business has generated increasing cash flows year-over-year, every year since turning profitable in 2019. Third, we expect to complete enrollment for our Phase 3 study, Advance 2, evaluating Pimivanserin as a treatment for the negative symptoms of schizophrenia around mid-year, and we'll have top-line results early in 2024. And fourth, we've completed Phase 1 development of ACP204, part of our Next Generation 5-HP2A program. Our next steps are to meet with FDA to discuss the clinical development plan to evaluate ACP204 as a treatment for Alzheimer's disease psychosis. Let's begin with a quick recap of our debut approval and subsequent launch on slide six. Since the approval of debut on March 10th, we've been working around the clock to deliver this first ever treatment for Rett syndrome to the patient community. Rett syndrome is an extremely debilitating, rare genetic neurodevelopmental disorder that severely impacts the lives of patients and their families. We are beyond excited to be launching this first-in-class, first-to-market drug for a disease with such a high unmet need. The treating community is also excited. They've been extremely receptive, and HTPs are moving quickly to prescribe debut, having waited a very long time for an FDA-approved therapy. In parallel, we are engaged with payers in our first post-approval discussion. As is typical with rare disease launches, we anticipate it will take some time for payers to adjudicate the initial prescription request. As you would expect, we are working diligently with plans to obtain insurance coverage for patients who have prescriptions submitted to our hub. Although we are only three weeks into the launch, we are highly encouraged with the response we've seen so far, and Brendan will provide additional color on our launch execution today. Now let's turn to New Pleasant on slide seven. Our New Pleasant franchise continues to deliver steady volumes and gain market share in a contracted PDP market. In parallel, we've optimized and reduced our New Pleasant commercial expense base, which has resulted in a significant increase in profitability for the franchise, providing a meaningful contribution to our overall business. Our first quarter performance of $118.5 million in net sales was driven by a year-over-year increase in demand bottles of 2%. Sell-in volumes were down slightly year-over-year as a result of quarterly inventory fluctuations, which Mark will describe further in his section. We're beginning to see early indicators that our discussions with healthcare providers on the real-world evidence publications are gaining initial traction. This is evidenced by an increase in our market share of new to therapy patients for PDP. As we've laid out previously, there are two catalysts which we believe can contribute to top-line growth for our nucleoside franchise. One, as I just mentioned, is the awareness and understanding by healthcare professionals of the three real-world studies that demonstrate the benefits of nucleoside relative to the off-label atypical antipsychotics. So far, the initial feedback has been very positive on these datasets. And two is a return to growth for Parkinson's medication prescriptions as well as in-person patient visits returning to pre-pandemic levels, which we've not yet observed. And now let's briefly review our clinical programs on slide eight. Doug will provide more detail in his section, but beyond our two commercial programs, New Closet and Debut, we're developing multiple programs all focused on treating significant needs in CNS. A couple of quick updates. One is we've noted before the negative symptoms of schizophrenia has been an exceedingly difficult area with lots of industry failures over multiple decades and still no drug approved to treat this condition. With Pimivanserin, we've achieved something very rare in this population, a positive pivotal study, Advance 1. So, if our ongoing Advance 2 Phase 3 study results are positive, we would be in a position to submit a supplemental new drug application shortly thereafter. Again, we expect to have results of this study in early 2024. And two, as I mentioned, we've completed our phase one development work for ACP204, the lead molecule in our next generation 5HT2A program. The key takeaway here is that the phase one work continues to support our target product profile, and we plan to initiate phase two studies in Alzheimer's disease psychosis later this year. I'll now turn it over to Brendan to provide additional insights on our debut launch execution and Euclid's commercial performance. Thank you, Steve. Please turn to slide 10. We are thrilled to have launched our second commercial product, Debut, the first and only medicine ever approved for the treatment of Rett Syndrome. As we've discussed throughout the development program, Rett Syndrome is a highly debilitating disease with patients requiring lifelong, continuous care and assistance with all aspects of daily living. Debut and patient enrollment forms became available on April 17th, ahead of our initial expectations. As we are only three weeks into the launch, we will not provide any specific metrics today, but we will share initial insights and color on our launch execution and the positive feedback we've received from the broader RET community. Let's turn to slide 11. First, our launch execution is going very much according to plan. As expected, we are receiving enrollment forms representative of the broad FDA-approved label debut has received for the treatment of RET syndrome. With the broad label received back in March, we are pleased to see patient enrollment forms for both male and female RET patients, both clinical trial participants and de novo patients, patients from all ages above two to well above 20 years of age, patients from both clinical trial sites, centers of excellence, high-volume institutions, and from standalone neurology practices. Of the identified 4,500 diagnosed and treated RET patients, As of today, our outreach proactively spans physicians treating well over 50% of the diagnosed RET population. This includes engagement with 100% of RET centers of excellence and clinical trial sites, which treat about 25% of the total RET population. In fact, over 90% of our patients remaining from our open label extension studies have started the process of becoming paid patients. We also have engaged a large number of the 300 high-volume institutions, which represents 60% of the patient population. And we're starting to engage the over 2,700 standalone neurology offices in the community setting. In addition, our launch execution includes development of key marketing materials, both print and digital, standing up and activating a speakers bureau to further educate the RIT treating community, Engaging the community at medical congresses, including branded debut booths. Since approval, we have been actively engaging in a robust and productive dialogue with the payer community. And as the process takes time, it's too early to comment further today. In addition to these payer engagement activities, our AcadiaConnect support services hub, along with our field-based family access managers, are already providing meaningful support to both HCPs and families, to provide the best financial assistance options given the patient's coverage to ensure timely access to debut. And finally, following our approval, we hosted our first RET community caregiver-focused live webinar, sharing information about the product, how to enroll a loved one and obtain a prescription, the path to access, and all of Acadia's robust support services. The webinar was a big success with over 900 caregiver attendees, well above our internal targets. I'd like to reiterate that while we are only three weeks into the launch, we are highly encouraged with the response we've seen so far. We look forward to sharing more on our next quarterly call. Now let's discuss our new plasma performance on slide 12. In the first quarter of 2023, we grew demand bottles 2% compared to first quarter last year, Our performance was driven by an increase in new-to-brand prescription share and new patient starts across both the office-based and long-term care channels. Beginning in fourth quarter and continuing now into the first, we have observed early indicators of growth in new patient starts for New Plaza. As you may recall, new patient growth was negatively impacted during the pandemic as a direct result of the reduction in the overall patient population, fewer patients coming into the office or being admitted to a long-term care facility, and a decrease in prescriptions of foundational PD treatments like Carvodopa and Levodopa. Thus, by maintaining steady volumes for Nuplasid, we are actually continuing to grow share in an otherwise contracted PDP market. Furthermore, we are encouraged by the high level of engagement we are seeing from HCPs when presented with the real-world evidence data highlighting the potential differences in treatment with Nuplasid, compared to off-label antipsychotics. These data sets on mortality, safety, and healthcare resource utilization create an important ongoing dialogue with physicians to further differentiate NuPlazid as the first and only treatment option for their PDP patients. We are pleased that our teams have grown market share and achieved early indicators of growth in new patient starts, all while continuing to optimize and reduce our NuPlazid commercial expense base. With a focus on both top and bottom line, I'm proud to say that the New Plaza franchise has continued to grow profitability each year since turning cash flow positive in 2019. And with that, I'll turn it over to Doug Williamson to provide an update on our clinical programs.

Thank you, Brendan. Please turn to slide 14. Firstly, to support the debut launch efforts, we continue to set up important opportunities for scientific exchange and sharing of medical information, while also generating important new data for the REC community. Our medical affairs team is often running, including our medical science liaison team, who have already delivered important scientific information and clinical education about Debut to the REC community. We continue to have a meaningful presence at the key medical congresses that are central to the REC community, including the American Academy of Neurology Congress, or AAN, in April, and the upcoming International Rett Syndrome Foundation Conference in June. At AAN, we presented several posters, which included important clinical presentations and data, as well as surveys on disease education. In addition, we're excited for two very important clinical publications, which should be available in the coming months. One is the publication of the Phase III Lavender results, and the other is a white paper on the best approaches to GI management associated with trofinetide. Finally, in the next month or so, we'll be initiating a large-scale prospective naturalistic study to learn more about how DEBU is best used in a real-world setting. Let's move on to our clinical programs, starting with pembavanthrin as a potential treatment for the negative symptoms of schizophrenia on slide 15. Persistent negative symptoms remain one of the largest unmet needs in schizophrenia. And as of today, there are still no approved treatments for these symptoms. The negative symptoms of schizophrenia are characterized by social withdrawal, lack of emotion, or flat affect. Our adjunctive PIM of Answering program is designed to treat the approximately 700,000 patients in the U.S. whose positive symptoms, the hallucinations, delusions, and other psychosis are adequately controlled but who still suffer from persistent and uncontrolled negative symptoms, inhibiting their ability to lead a normal, productive life. Our second pivotal study, ADVANCE-2, is almost identical to our positive ADVANCE-1 study, but with two key differences. First, a clear learning from the ADVANCE-1 trial was that the optimal therapeutic dose for further evaluation of Pimivanserin in negative symptoms of schizophrenia was the 34 milligram dose. And this is indeed the dose we're evaluating in ADVANCE2. And second, it's well understood in our industry, as well as by the FDA, that placebo responses have become less reliable in U.S. schizophrenia trials over the past couple of decades. We also observed this in our U.S. sites of our ADVANCE1 trial. And so, now that we have the U.S. exposures we need, ADVANCE2 is being conducted solely in sites outside the U.S. ADVANCE2 is close to completing enrollment, which should occur around mid-year with top-line results in early 2024. Please turn to slide 16. I'd like to provide an update on our next generation 5-HT2A program, and specifically the lead molecule ACP204, which we're developing as a potential treatment for Alzheimer's disease psychosis. Similar to penivantrin, ACP204 works primarily by blocking 5-HT2A. We believe this mechanism is ideally suited for elderly populations, and with ACP204, are seeking to build on our learnings from Pima-Lanserine. As Steve mentioned, we have completed our phase one work for ACP204. In these studies, in both healthy adults and elderly volunteers, we've focused on characterizing receptor occupancy and exposure, and optimizing the doses we plan to evaluate in phase two development. ACP204 continues to demonstrate a very favorable safety and tolerability profile. In addition, we've confirmed that ACP204 reaches steady state in less than half the time, so roughly five days compared to around 12 days with PIRM and Vanserin, and this could potentially translate into a faster onset of action. Our work completed to date also appears to support our target product profile of minimizing the risk of QT prolongation. Our next steps are to meet with the FDA and discuss the future clinical development plan for ACP204. Now I'll turn it over to Mark for a financial update.

Thank you, Doug. Let's review our quarterly performance on slide 18. In the first quarter, we recorded $118.5 million in net sales, up 3% from the first quarter of last year. Our gross to net adjustment for the quarter was 29.3%. Year-over-year demand growth was up approximately 2% in the quarter, driven by an increase in new patient starts across both channels. As Steve mentioned, cell and volume declined approximately 2% year-over-year as in-channel inventory declined in the first quarter of 2023 compared to an increase in in-channel inventory in the first quarter of 2022. R&D expenses decreased to $69.1 million in Q1 2023 from $128.9 million in Q1 of 2022. The decrease is related to a $60 million upfront payment for our Stoke collaboration, which we recorded in Q1 2022. SG&A expenses increased slightly to $101.2 million in Q1 2023 from $96.7 million in Q1 2022. We continue to expect SG&A expenses to be essentially flat for 2023 versus 2022. This is a result of one, the optimization and reduction of our new Placid commercial expense base, and two, making the right investments to execute a successful launch of debut. We ended the quarter with a cash balance of $402.9 million compared to $416.8 million at the end of 2022. Our balance sheet remains strong, and we are confident in our ability to execute on our current business plan with our existing cash resources. As you can see on slide 19, we are reiterating all guidance measures for 2023, including net sales, gross to net, and expense ranges. And now I'd like to turn the call over to Steve for closing remarks. Thanks, Mark.

Please turn to slide 21. I'd like to end today's prepared remarks focused on our execution across our four strategic priorities. First, Debut was recently approved and launched only three weeks ago. We look forward to providing our first quarter of net sales for Debut and appropriate performance metrics on the next earnings call. Second, in our PDP commercial franchise, we look forward to continuing to driving share growth and profitability of new plans. Third, we plan to complete enrollment in our Phase III Advanced II study for the negative symptoms of schizophrenia mid-year with top-line results expected in early 2024. And finally, we plan to meet soon with the FDA to discuss the clinical development plan for ACP204. As always, I'd like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate life.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. Question, please press star one one again. Please limit to yourself yourself to one question. I repeat one question. Please stand by while we compile the Q&A roster. Our first call comes from Ritu Baral of TD Cohen. Ritu, your line is open.

Good afternoon, guys. Thanks for taking the question. I will just ask one. It's on your new payer discussions for a debut. Can you give us any more color on what those are focusing on? Specifically, are you seeing any unexpected preauthorization requirements or, I guess, restrictions to a certain patient population, patient age, patient size, say, you know, to the phase three requirements, or are they open to prescribing per label? Thanks.

Thanks much for the question, Ritu. Brendan, you want to take that? Sure. Ritu, thanks for the question. And yes, we have been engaging payers ever since we got our final label. They've been very good and constructive, encouraging discussions with payers. I think that they've largely demonstrated that they're following the process we would have expected for rare disease products. We are working with them logistically to get early patients access through what would be considered a medical exception or letter of medical necessity process. That is precisely what we expected and is going according to plan. We have not yet seen policy decisions. Those can happen in a relatively short period of time, as you know. Some can take 30 to 60 days. More will take in the 60 to 90-day range, and some can take up to 180 days. But as of now, we're really working in that interim period to get those first identified patients put on therapy while those policy decisions are being made.

And is there openness to reimburse, I guess, to the label versus clinical trial admission, I'm sorry, inclusion criteria?

Yeah, thanks again for the question. We are, I guess I'll say, we're very pleased by, first of all, the breadth of the label that we've received. We are encouraged by the breadth of enrollment forms that we've gotten from clinicians, from the youngest of patients to patients well over the age of 20. And we've also seen enrollment forms that have come from each of the different types of treatment settings, from clinical trial sites all the way through to standalone neurology practices. And thus far, I think payers are working closely with us to provide access to those early patients. We have not seen a meaningful restriction in these early days.

Very helpful. Thanks.

Please stand by for our next question. Our next question comes from the line of Charles Duncan at Cantor Fitzgerald. Charles, your line is open. Charles, you're very low, sir.

And I'm wondering what you think that will enable in terms of adoption, as well as the two publications that you mentioned, particularly the control of diabetes. Is that a point of pushback that you think having a publication will help you to educate others?

Charles, I'm sorry. On our end, we cannot hear you. We can hear you talking, but we can't make out your question. Can you hear me? No, much better. Yeah, please. Yeah, go ahead, Charles.

Okay. Sorry about that. Sorry for taking time from the call. In terms of the registry, how will that help you to drive adoption for debut? As well with the two upcoming publications, has there been pushback on the use of debut and management of diarrhea? Thank you.

Thanks so much for the question, Charles. We've heard it this time. Brendan, I'll let you take that. Sure, Charles. Thanks so much for the question. So in the real-world setting, we've been in the privileged position of being able to proactively communicate the benefits and tolerability profile of Debut. We've been able to do that with clinicians, and we've been able to do that with families as well. So I would say with the appropriate GI management plan, it's been very well received. In fact, I would say that the feedback's been very positive, especially when we can reference the label itself that shows the clarity on discontinuing anti-constipation medicines as the FDA saw fit to put in the label. And then I guess beyond that, we learned so much from the phase three program that we're able to surround both clinicians and families with the type of support they need. We have our field-based family access managers, 18 of them, that are paired specifically with the caregivers and patients and HCPs to make sure that we've set the right expectations for the best of treatment plans. And I don't know if Doug or Kathy wanted to speak about the real-world evidence piece, real-world study. Yeah, Kathy, you want to comment on that?

Yeah, I'll take this, and Doug, you can chime in if I missed something. So trials, as Doug mentioned on the call, as we roll out the launch, in parallel with that, we're offering patients the option, and it's just an option if they want to, caregivers can choose to enroll their RET patient into a real-world evidence study. Just as Brendan mentioned that we learned a great deal through conducting the clinical trials, we are launching this study to learn additional information about how Debut would be used in the real world, both in terms of what efficacy looks like over the long term, and as well how clinicians and caregivers choose to manage the diarrhea in the real world, which I think is a lot easier to do outside the confines of a clinical trial where you're maybe on placebo. You also are confined to study visits and things like that. So that's really the purpose of the study. It's sort of an optional add-on for patients who will go on commercial drug.

Very good. Thanks for taking the question, and congrats on the recent progress.

Thanks much, Cheryl.

Thank you for your question. Please stand by while we bring to the stage our next question. Our next question comes from Tess Romero of JPMorgan. Tess, your line is open.

Good afternoon, Steve and team. Thanks for taking our questions. So beyond net revenues from sales of debut, what are the key metrics you will be providing the street to gouge the health of the launch? And if you cannot provide those metrics to us today, qualitatively, how should we think about kind of what the key buckets or areas that you see as most valuable? Thanks so much.

Yeah, thanks much for the question, Tess. Mark, you want to take that? Yeah, and thanks, Tess. As we mentioned, we're only three weeks into launch, and at this stage, we just don't think it's constructive to share metrics today or just to share specifically what we will share on the next call. What we can commit to you and the investment community is that not only will provide net revenue on our next call, but we will provide a reasonable set of metrics that we find will be meaningful at the time and going forward to give you insight in our progress on launch.

Okay, thank you.

Thank you very much. Please stand by for our next question. Our next question comes from Tazeen Ahmad at Bank of America.

Tazeen, your line is open.

Hey, guys, can you hear me?

Yes, we can, Tazeen.

Okay, perfect. Hi, Steve. Just wanted to ask you about ACP 204. As far as the Phase I data, when exactly should we be expecting to see that, and what level of data should we expect to see things?

Great. Thanks so much for the question. Doug, you want to take that?

Sure. So, in phase one, we explored and characterized the receptor occupancy and exposure and basically used that data internally to optimize the doses that we planned to evaluate in phase two. So, we don't plan to share details of the phase one data. It's really more important for those internal decisions. and for the Phase 2 plan, you know, going beyond that. So, we'll release more information once we've agreed on a development plan with the FDA and probably issue a press release, you know, after that meeting.

Have you requested that meeting yet?

We have.

Okay. Great. Thank you.

Thank you very much. Stand by for our next question. Our next question comes from Nina of Citi. Nina, your line is open.

Hey, guys. Thanks for taking my question. So just on the tropinotide launch, you mentioned that about 90% of the patients that are expected to rollover have initiated the process to get on commercial or paid drug. Can you just walk us through that extra 10% why they haven't been initiated yet? and then what the overall timeline is now for expected completion of rollover of the open-label extension patients. Thanks.

Brendan, you want to take that? Sure, and Nina, thanks so much for the question. And just to clarify, we have over, I would say over 90% of eligible open-label extension patients have begun the process to become paid patients. So we're talking about a handful of additional patients that are also completing end of study visits with their trial investigators. At that point, the families engage with their insurance plans, of course, with Acadia support where needed, and we'll help them with the completion of the adjudication process and converting to paid patients as soon as reasonably possible. And for those handful of families where they're still in that process, I'm sure some of them just want to spend a little bit of time with their clinicians, take a look at the benefits that they're seeing, and then decide how best to proceed. All in all, we will be pursuing support of 100% of those patients eligible for moving over, and we expect that that process will take, on average, two to three months.

Got it. That's helpful. Thank you.

Thank you. Stand by for our next question. Our next question comes from the line of Mark Goodman at SBB Securities. Mark, you're up.

Thanks for taking my question. This is Rudy online for Mark. I have a question from the project. Can you maybe talk about the current penetration of this product? in the PDP population, and what are your current expectations for peak penetration? Thanks.

Sure. Brendan, I'm going to let you take the first part of that, and Mark, the second. Sure. So, thanks for the question. We reported in our prepared remarks that we have increased our share of new patient starts in the first quarter. That was in both the long-term care setting and in the community setting. and we also increased our new patient starts overall year over year in both of those populations. We don't provide guidance necessarily on where ultimately we believe penetration will be, but we do know that in the community-based setting, we're well over 20% and continuing to move that north. As you know, we started in long-term care after we started in the community setting, so that is growing and growing more rapidly, but is still kind of making up that space. And overall, we're over a 20% share for the entire New Plaza business across both channels. So, Mark, I don't know if you want to add to that.

I think you covered both parts of the question. Thanks. Thanks.

Very helpful. Thank you. Please stand by for our next question. Our next question comes from the line of Gregory Renza at RBC Capital Markets. Gregory, your line is open.

Great. Thanks. Good afternoon, Steve and team. Congrats on the progress, and thanks for taking my question. Steve, maybe just a quick one for me as you've acknowledged the award of the priority review voucher on Debut's approval. Just wondering if you could update us on your latest thinking there. as far as extracting the value and harnessing the value of the voucher, either for you or for external parties, clearly a shared effort with Neuron, but also sponsors out there who are looking to accelerate their own programs before the FDA. Any call you have there would be great. Thanks so much.

Yeah, thanks so much for the question, Greg. I'll just take a little bit of a running start and remind you that we share the value of that with Neuron. But the decision in terms of how to utilize that voucher is entirely abreast with us. And so we haven't determined yet whether we'll sell it or use it in one of our internal programs. If we use it, we have to pay Neuron their share based upon the market value, and there's an established market value for these things. And if we sell it, then we pay them their share of the proceeds from the sale. So we haven't made a firm determination yet, but obviously we're really happy to have it. These things are quite valuable, and whether we ultimately use it for one of our programs or sell it, will be a factor that we'll determine down the road.

Got it. Thanks, Steve. Thank you. Please stand by for our next question. Our next question comes from the line of Paul Mateus at Stifle. Paul, your line is open.

Hi, this is James on for Paul. Thanks for taking our question. Maybe just a quick one on ACP204. I guess as you're thinking about subsequent clinical development plans, I guess one, do you expect to be able to move right into pivotal studies? And two, are you thinking about, you know, running relapse prevention studies or an acute studies? I guess just any color on your clinical development plans would be great. Thanks.

Yeah, thanks much for the question. So, as we stated earlier, based upon the profile of this drug, which is, as we said, closely enough related to Pimivanserin to be in a space that we know well. We know the chemical space well, we know the biochemical space well. That puts us in a position where we have the opportunity to move aggressively with the program. So, as Doug mentioned in his prepared remarks, We're not quite ready to describe exactly what the Phase II and beyond program looks like. I'll simply say that once we've met with FDA, we'll be in a position to go into that in much greater detail. And as Doug mentioned on the call, at this point, now having completed Phase I, the target product profile that we set as our goal in this continues to look extremely attractive. The drug in Phase I was very well behaved very well tolerated, no safety issues, clearly appears to get to a steady state and therefore potentially a faster onset of action than Pima-Vansarin. We've seen no indications of QT issues at this point. And this profile that we see with these 5HT2A blockers appears to be carrying forward with 204 in providing a lot of the benefits that we see with We've answered plus some based upon the design features that we set out as our goal. So we're eager to get to the point where we can talk more about that, but the next step is to meet with the FDA, and then we'll go into greater detail.

Thank you very much. Stand by for our next question. Our next question comes from Jason Butler at JMP.

Jason, your line is open.

Hi, thanks for taking the questions. Just one on the PDP market dynamics. You've said now for a couple quarters that you're seeing early signs of growth and new patients start. Can you maybe just give us a little bit more context there of where you think in the office-based setting we stand today versus pre-pandemic or where you think a future normalized level would stand. Thanks.

Yeah, thanks so much for the question, Jason. Brendan, you want to take that? Sure. Thanks for the question. And yes, if we look at it in context to, I'll say, mid-pandemic, I think that there's a market dynamic in the community setting that is relatively consistent at this point. We still see fewer in-office, in-person patient visits, and we see a flat PD market in terms of use of carbidopa levodopa, so essentially 0% growth year over year. As we stated on previous calls, we're focused on the real-world evidence data that exists to help us differentiate Nuclasid from other atypical antipsychotics in terms of outcomes. Those three data sets have been important additions to, I think, the whole clinical discussion of this category. And I think they've been very well received by our audiences, both in the community and in the long-term care setting. So for us, from a midpoint of the pandemic where new patient starts had slowed down, I think, along with the market, We're encouraged to see that we're able to increase new patient starts and increase share in what is otherwise a contracted PD market. That for me is the best way to describe this. Encouraging results on the new plazid end for new starts in a market that has been a little bit sluggish in the early part of 23. Thank you.

Thank you very much. Next question. Stand by as we queue it up. And our next question comes from Jason Hung of Morgan Stanley. Jason, your line is open.

Hey, thanks for taking my question. This is Jeff. Can you talk about your updated thoughts on business development? How important is it to you to be cash flow positive versus further expanding your mid- to late-stage pipeline, say, with M&A? Thanks.

Yeah, thanks much for the question. So as we stated previously, business development continues to be a very important part of our business. We have now an established franchise both in neurology and psychiatry, established franchises in rare disease and broad applications, and we have an opportunity to leverage those capabilities and we'll continue to do that. You know, the question in terms of prioritization of profitability versus continuing to build the company for the future is the answer is we're going to do both. We're going to continue executing on business development, particularly in an environment that is much more attractive today than it has been at any time in recent history. But we will continue to also be very judicious about the investments we're making. And as Mark mentioned in his prepared remarks, and as you've heard us say before, with the PDP franchise as an example, That franchise became profitable and began throwing off cash in 2019. It's become more profitable every year since then, and we'll continue to have that as a top priority. So as we move forward, you'll continue to see us exercising discretion as well as investment opportunities on both fronts. Great.

Thank you.

Thank you very much. Stand by for our next question.

Our next question comes from Salveen Richter at Goldman Sachs. Salveen, your line is open.

Hey, thanks, guys. This is Matt on for Salveen. We were just interested, is there a specific patient group where docs are more keen on using Debut? Some of our checks with doctors suggested a preference to use the drug in stable early-stage patients versus late-stage ones. So, we just wanted to see if that was in line with what you're seeing. And then, could you share what you view as the most important takeaways from the presentations? Thanks a lot.

Yeah. I'm sorry. We didn't hear the second part of the question.

Just what you view as the most important takeaways from your AAN presentations.

Got it. Okay. Brendan, do you want to take this question? Sure. Matt, thanks for the question. Obviously, we're three weeks in and have been watching with keen interest to see what patient populations our audience would look to address. I'd go back to the prepared remarks, however, to show you that with a broad label, we've been very encouraged by the breadth of enrollment forms that we're seeing. And it's indicative, I think, of what we saw in the Lavender study, which demonstrated that regardless of age or severity of disease, across the eight domains of the RSPQ, we've seen improvements. And that means that both clinicians and caregivers are going to look at their individual patients and say, you know, I think there's an opportunity to help improve this individual patient's situation. So as I've said, I wish I could point you to a particular patient type, but we're very encouraged that there's a broad range of patients that are being considered for debut, both in terms of age, as young as two and well above 20. We've seen male and female patients. We've seen patients that are across a disease severity spectrum. Some clinicians looking to start with patients that are maybe on the thicker end of the scale and others looking to intervene as early as they can in a younger patient population. So it's still very, very early days to see, but in terms of the feedback that we've gotten from clinicians, we're not seeing a particular interest in a subset, for example, of RET patients. And Kathy, I want to talk about AAN.

Yeah, I'm happy to talk about AAN. So on the clinical side, we had two main presentations from our clinical trial data. One was additional data from our Lavender Phase III study on the benefits observed with Dave's view on communication, especially nonverbal communication endpoints. As we previously talked about, Communication is one of the key aspects of the disease that caregivers and parents really would like to see improvement. Most patients with Rett syndrome lose the ability to speak and cannot even communicate non-verbally with things like eye gaze or pointing at what they want. So in the Phase III Lavender trial, we include a key secondary endpoint to assess non-verbal communication, the CSBS, and then we actually had an additional functional task asking them to indicate preferences as a surrogate for nonverbal communication. And then we saw benefit with Debut for both of these nonverbal communication endpoints compared to placebo. So the presentation at AAN focused on that. We actually have a publication we're putting together on that data. And then the second clinical presentation at A&N was in the daffodil study, which is the younger girls aged two to four who've been on open-label debut for over a year now. And with that, we saw a very consistent safety tolerability profile compared to the Phase III data. No new safety or tolerability outcomes in that study. And we've even had a lower discontinuation rate due to diarrhea with only one patient discontinuing over the year. And then in addition, we included some initial exploratory endpoints looking at efficacy. These younger girls are harder to study efficacy because they are in a period of regression that's very variable where they lose ability, but there's a lot of individual variability in that. but we are seeing steady outcomes as far as efficacy and some hints of improvement on debut. In addition to those two, we did have a couple other presentations on health economics outcome, just showing the burden of disease that Rett syndrome causes in these patients and these families.

Got it. Thanks a lot.

Thank you. Please stand by for our next question. Our next question comes from Yatin Sunja of Guggenheim. Yatin, your line is open.

Thank you for taking my question to a real quick one. With regard to the debut, could you comment on how should we model duration of therapy? That's one. The second one on New Plaza, the second quarter generally is a stronger quarter. Should we look at the past or the last couple of years and predict how the second quarter is going to look like, or are there any key changes this year versus, let's say, last year? Thanks.

Yeah, thanks so much for the question. Brendan, you want to take the first question and Mark the second one?

Sure. Thank you so much for your question. We're not really providing internal estimates on this concept of duration and persistency because there is, of course, going to be a range, but I'll give as much color as I can as to what we're thinking. First and foremost, as we said, we learned an awful lot from the phase three study, Lavender, and as a function of that, we've known what to expect. You've heard in the last couple of calls where we've talked about all of the support systems we've put in place. And obviously, we want nothing more than for patients and families to see the long-term benefit that Debut stands to offer from the work that's been done in Lavender, the additional work that's been done in the open label extensions, and hopefully beyond. So there are a couple things that lead us to believe that we can be supportive in the real-world setting to get to those outcomes. The first, we were obviously very pleased with the label. The label allows us to speak to discontinuation of anti-constipation medications from the outset. That's very important. It sets up the right treatment expectation with both clinician and family. The second is that we have proactively been able to work with the HCP audience and families to discuss educational efforts on GI management. Both of those set those audiences up for the appropriate expectations as they move into treatment with debut. And then we support them in the field with the family access manager team, which I said, these folks are paired specifically with each patient and family so that we can be well positioned to hold their hands from the outset on the beginning of this treatment journey, both for the patients and caregivers. So for us, we believe that sets up the best of all patient experiences, again, looking to get to the long-term benefit for debut, and while we're in the very early days, the feedback we've gotten both from clinicians and families has been very positive about setting the appropriate treatment course, but more importantly, having the support necessary for them to begin and stay on that journey. Thanks much, Brendan. Mark, do you want to take new plans for seasonality?

Yeah, thanks for the question. As you know, we don't provide quarterly guidance, but let me just share some additional color, which I think will be helpful. I think as we discussed on this quarter, there tends to be some seasonality for patients, one, as they go through the Medicare reauthorization process. That happens for all patients. In q1 it's just that process just happens for new patients as we move on later in the year. So you'll have that That dynamic is tends to be more positive Going forward q2 through q4. We also have the higher gross to net In the first quarter, you know primarily due to the reauthorization process and our obligation for that for all patients that will be lower again in the second quarter and third quarter a little higher in the fourth quarter and typical with kind of the seasonality that you've seen in past years. I just remind you this year we do have the impact of the Inflation Reduction Act. So our gross net will be higher year over year on a quarterly basis and consistent just with our overall annual guidance. And then as far as just seasonality between quarters, obviously we'll report results as we go through. Our revenues are obviously impacted by volumes, patient volumes. So how the results of patient volumes throughout the rest of the year will impact our sales on a quarterly basis.

Thank you.

Thank you, everyone. This is all the time we have for today. I'll now turn it over to Steve Davis, CEO, for closing remarks.

Great. Thank you, operator. Thanks again, everyone, for joining us today. We look forward to updating you on our progress next quarter.

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.