Alkermes plc

Greetings, and welcome to the Alchemy's third quarter 2025 financial results conference call. My name is Rob, and I'll be your operator for today's call. All participant lines will be placed on mute to prevent background noise. If you should require operator assistance during the call, please press star zero from your telephone keypad. Please note that this conference is being recorded. I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Thanks, Rob. Welcome to the Alkermes POC conference call to discuss our financial results and business update for the quarter ended September 30, 2025. With me today are Richard Pops, our CEO, Blair Jackson, our Chief Operating Officer, Todd Nichols, our Chief Commercial Officer, and Joshua Reed, our Chief Financial Officer. A slide presentation along with our press release, related financial tables, and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the investor section of Alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see slide two of the accompanying presentation, our press release issued this morning, and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statement. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we will open the call for Q&A. And now I'll turn the call over to Richard for some opening remarks.

That's great, Cindy. Thank you. Good morning, everyone. So Alkermes delivered a strong third quarter. It was marked by solid commercial execution, significant progress in our development pipeline, robust financial performance, and continued execution across our strategic priorities. Today, we're raising our financial expectations for 2025, reflecting our confidence in the momentum of the business. Before we dive into the results for the quarter and our increased expectations for the remainder of 2025, I'd like to take a moment on the announcement we made last week regarding our proposed acquisition of Avidel Pharmaceuticals. This transaction is an important step forward in Alkermes' strategic evolution for three compelling reasons. First, we gain an FDA-approved medicine with significant growth potential. Lumerize is the first and only FDA-approved once-at-bedtime oxibate for the treatment of cataplexy or excessive daytime sleepiness in patients seven years or older with narcolepsy. It has already shown strong market uptake since launch. In 2025, It's expected to generate between $265 and $275 million in net revenue. Once the transaction is complete, it will immediately diversify our commercial portfolio and strengthen our profitability. Second, the acquisition will accelerate our commercial entry into the sleep medicine market. It will provide a well-established foundation for the potential launch of elixirexin, our promising erexin-2 receptor agonist in development for narcolepsy and idiopathic hypersomnia. Avidel is a recognized leader in sleep medicine and has successfully built and scaled a high-performing commercial organization. With positive Phase II data for Olexorexin and narcolepsy type 1 now in hand, data from Vibrance 2 and NT2 that we expect to report in November, and plans to initiate a global Phase III program early next year, we've reached a new level of conviction in the potential of our Olexorexin platform. And third, the financial strength of the combined company will enhance our ability to support a diversified development strategy in sleep disorders. This will include alexorexin, as well as our additional orexin-2 receptor agonist candidates, ALX4510 and ALX7290, which recently entered the clinic. Avidel's development pipeline also has the potential to broaden our offerings for the sleep community with an ongoing Phase III study of lumerizing idiopathic hypersomnia and valioxabate, a no-salt oxabate candidate in early-stage development. The proposed acquisition reinforces our commitment to neuroscience. It gives us additional scale and builds on our legacy of innovation in complex psychiatric and neurological disorders. The transaction is a compelling opportunity to accelerate our growth trajectory and is squarely aligned with our financial and strategic priorities. Upon closing, which we currently expect in Q1, we'll be able to provide more color on our expectations for the combined business. So with that as an intro, I'll turn it over to Joshua, who will walk through our third quarter financial results.

Thank you, Richard. I'm pleased to join you today for my first earnings call as Chief Financial Officer of Alchemist. I'm excited to be part of a company with a strong financial foundation, a clear strategic vision, and a deep commitment to delivering value for shareholders while advancing innovative medicines that have the potential to make a meaningful difference for patients. Since joining, I spent time getting to know our team, our operations, and our financial priorities. I've been impressed by the discipline and focus that drive our performance, and I look forward to building on that momentum. Now, turning to our financial results. Our third quarter results were strong, reflecting contained commercial and operational execution. Financially, the year is tracking ahead of our expectations, and based on our performance through the first nine months, we are raising our full year 2025 guidance to next. For the third quarter, we generated total revenues of $394.2 million, driven primarily by our portfolio proprietary products, which generated net sales of $317.4 million, reflecting 16% year-over-year growth. These results were driven by strong underlying demand, which Todd will address in his remarks, and gross net favorability, primarily related to Medicaid utilization rates, which drove a one-time gross net benefit of approximately $8 million for Vivitrol and approximately $5 million for Aristata. As we move into the fourth quarter, we expect Q4 net sales from this portfolio in the range of $300 to $320 million. Manufacturing and royalty revenues were $76.8 million for the third quarter, including revenues of $35.6 million from Vumerity and $30.2 million from the long-acting Invega products. Turning to expenses, cost of goods sold were $51.6 million, which compared favorably to $63.1 million for Q3 last year, primarily reflecting efficiencies following the sale of our Athlon-based manufacturing business last year. R&D expenses were $81.7 million compared to $59.9 million for Q3 last year, reflecting investments in the vibrant Phase II studies of elixirexin across narcolepsy, and idiopathic hypersomnia, and first in human studies and development efforts for our next orexin-2 receptor agonist candidates, ALTS4510 and ALTS7290. SG&A expenses were $171.8 million compared to $150.4 million for Q3 last year, reflecting the expansion of our psychiatry field organization earlier this year and promotional activities related to lobality. In Q4, we expect a modest increase in SG&A, primarily reflecting activities related to the Avidel transaction. This performance generated strong profitability of gap net income of $82.8 million, EBITDA of $96.9 million, and adjusted EBITDA of $121.5 million in the third quarter. As we look ahead, based on our strong commercial performance and momentum through the first nine months of the year, we are on track to deliver record revenues from our portfolio proprietary products in 2025. As a result, we are raising our 2025 full-year guidance to reflect our current expectations of total revenues of $1.43 to $1.49 billion, gap net income of $230 to $250 million, EBITDA of $270 to $290 million, and adjusted EBITDA of $365 to $385 million. Our full expectations are outlined in the press release issued this morning. Turning to our balance sheet, we ended the quarter in a strong position with $1.14 billion in cash and total investments. For the acquisition of Avidel, we will use cash from our balance sheet in conjunction with bank debt to finance the transaction. As we close the transaction and finalize the financing, we will be in a position to provide more details. Taking a step back, Alkermes is one of the few biopharmaceutical companies that has successfully transitioned into a fully integrated profitable commercial organization with an exciting development pipeline. I step into this role at a time when the company is operating from a position of financial strength with a clear growth trajectory and near-term opportunities with the potential to drive meaningful value for shareholders. I'm energized by the opportunity to help shape that next phase of our growth. Working closely with the rest of the leadership team to support our strategic priorities, and drive long-term value creation. I look forward to engaging with many of you in the weeks ahead and to contributing to the continued success of Alkermes. With that, I will turn the call to Todd for a review of the proprietary portfolio.

Thank you, Joshua. And good morning, everyone. In the first three quarters of the year, we executed with discipline against our targeted growth initiatives. The focus drove strong, consistent performance across our three proprietary brands. underscoring the strength of our commercial strategy and our capabilities. We're encouraged by the momentum we've built and remain confident in our ability to carry it forward. In the third quarter, we recorded net sales from our proprietary product portfolio of $317.4 million, reflecting 16% year-over-year growth. We drove strong in-market demand across Vivitrol, Aristata, and Levolvi. Starting with Vivitrol, net sales in third quarter were $121.1 million. Vivitrol performance continued to be driven by growth in the alcohol dependence indication market and our ability to capitalize on highly localized market dynamics in certain states and payer systems. For the full year 2025, we now expect Vivitrol net sales in the range of $460 to $470 million. compared to our prior expectation of $440 to $460 million. Turning to our psychiatry franchise, the expansion of our psychiatry sales force earlier this year was a key strategic initiative designed to enhance our competitive share of voice. With our expanded footprint, we have been able to significantly increase the frequency of our call volume for high-priority prescriber targets across Lee Balvey and Aristata. This increased share of voice along with strong execution has driven increased breadth of prescribers for both brands. For the Aristotle product family, in the third quarter, net sales were $98.1 million. Leading indicators related to underlying demand were encouraging with increased prescriber breadth and strong new-to-brand prescriptions during the quarter. For the full year 2025, we now expect Aristotle net sales in the range of $360 to $370 million. compared to our prior expectation of $335 to $355 million. Turning to Levolvi, net sales grew 32% year-over-year to $98.2 million. Underlying TRX growth was 25% year-over-year, driven by new patient starts and prescriber breadth. Gross to net adjustments were approximately 28% in the third quarter. For the full year, we now expect Levolvi net sales in the range of $340 to $350 million, compared to our prior expectation of $320 to $340 million. Across the portfolio, we are pleased with our performance through the first three quarters of the year and entered the final stretch of the year with strong momentum and a clear focus on delivering against our full-year objectives. With that, I will pass the call back to Rich.

Thank you, Todd. Well done. I think you can see from the results that the company is performing well across each of the key aspects of our business. During the quarter, our commercial teams delivered strong operational financial performance, and our R&D teams made major strides in advancing our expanding development pipeline. So I want to make comments about both aspects of the business. First, commercial. We enter the final quarter of the year ahead of plan and with good momentum into year-end. Over many years, we have developed capabilities necessary to operate in challenging payer and policy environments. By design, we manufacture our proprietary products in the United States and and we do not commercialize these products outside the U.S. We are growing our business by growing demand based on the clear clinical attributes of our medicines and maintaining a disciplined contracting strategy consistent with our view of their significant value. Now, R&D. Our portfolio of orexin-2 receptor agonists is advancing rapidly, led by elixirexin. The first Phase II dataset of elixirexin was presented at World Sleep in September, and In the VIBRANCE-1 study, elixirexin demonstrated compelling therapeutic benefits in patients with narcolepsy type 1, with a profound effect on excessive daytime sleepiness and cataplexy, along with a generally well-tolerated safety profile. Taken together with the clinically meaningful improvements in fatigue and cognitive function demonstrated in the study, we believe elixirexin has the potential to transform the treatment of NT1. At WorldSleep, the competitive positioning for elixirexin in NT1 also came clearly into focus. In this large, randomized, double-blind, multi-week study, elixirexin administered once daily across a range of doses demonstrated new potential best-in-class features. With data from this rigorous Phase II study now in hand, we're confident in the profile of elixirexin in NT1, and we're moving rapidly to initiate the Phase III registrational program in the first quarter of next year. We expect to be first to market narcolepsy type 2 and idiopathic hypersomnia. We completed enrollment in Vibrance 2 in patients with narcolepsy type 2 toward the end of the summer, and we expect to report top-line data in November. In idiopathic hypersomnia, Vibrance 3 is enrolling well, and we expect data from that study in mid-2026. Like Vibrance 1, these are both large, well-powered Phase 2 studies designed to provide substantial data sets informing potential Phase 3 developments. We are building a significant body of clinical data that deepens our understanding of orexin biology and its therapeutic potential in central orders of hypersomnolence and beyond. Equally important, the Phase II studies are yielding key learnings related to study design and implementation that we believe will be invaluable for Phase III and help support elixirexin's competitive position in narcolepsy. Beyond elixirexin and sleep disorders, additional candidates from our portfolio of orexin II receptor agonists are advancing well ALKS 4510 is in the clinic and progressing quickly through single and multiple ascending dose studies in healthy volunteers. We expect to complete this Phase I work early next year and move quickly into proof-of-concept studies in the disease areas that we plan to pursue. For ALKS 7290, we have filed the IND and recently initiated our first in-human study. Across our orexin development programs, we have demonstrated in clinical or preclinical models that orexin 2 receptor agonists may have powerful effects not only on wakefulness, but also across domains related to fatigue, cognition, attention, and mood. We'll look forward to sharing more on both of these candidates next year as they complete their phase one healthy volunteer studies. So, to wrap up, the third quarter was a clear demonstration of Alchemy's strong execution, commercial momentum, and scientific leadership. We continue to operate from a position of financial strength as we advance our pipeline and generate a growing body of data and insights that inform our strategy, and reinforce our conviction in the opportunities ahead. With disciplined focus and a commitment to innovation in the patients we serve, we're well-positioned to deliver long-term value for our shareholders. So we'll look forward to sharing our progress. With that, I'll turn the call back to Sandy to manage the Q&A.

All right. Thanks, Rich. Rob, we'll open the call now for Q&A, please.

Thank you, Sandy. We'll now be conducting a question-and-answer session. We ask you to please limit yourself to one question and one follow-up to allow as many as possible to ask questions. If you'd like to ask a question at this time, please press star 1 from your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you, and our first question is from the line of Mark Goodman with Lyric Partners. Please receive your questions.

Yeah, can you talk about Lebalvi just a little bit? It seemed to be a lot stronger than expected, and the gross to net seemed to be a little lower than expected. We were expecting that to kind of creep up some. Just give us a sense of what's happening with the product and just how you're thinking about gross to nets into the next year.

Yeah, absolutely, Mark. This is Todd. Yeah, we're really pleased with performance for Q3. As I said in my prepared remarks, Our psychiatry footprint really drove a strong share of voice in the quarter. We were able to significantly increase our call volume, which was our strategic plan. We did that in Q3. We believe that that momentum will carry into Q4. And so the result of that is we saw year-over-year TRX growth of about 25%. But what's even more encouraging is we saw new patients start year-over-year. NBRX has increased almost 16%. So the underlying demand is really encouraging, and we believe that's a really direct reflection of the expansion of our sales force. So for context, breadth of prescribing over the quarter increased 7%. So that's two consecutive quarters, Q2 and Q3. We saw a strong breadth of prescribing. To your question on gross to net, gross to net was a little bit lower in the quarter than from Q2. That's the result of just as deductible resets throughout the year, lower copay utilization, some small little dynamics like that actually had a lower gross to net for the quarter.

And markets, Rich, I'll just add, and Todd can expand on it, but the story about Levolvi over time in the marketplace, other than just our strong commercial execution, is its efficacy. And that efficacy message is resonating, and I think it's supported now by multi-year data in the real world.

How do we think about gross to net into next year?

So we're not going to provide any guidance today, Mark, for next year. We do expect that going into Q4 that the typical seasonal patterns would show up. So we do expect a little bit of expansion of gross to net in Q4. But we'll give you a full year guide in February.

Okay, thanks. Our next question is from the line of David Huang with Deutsche Bank. Please proceed with your question.

Hi, Eric. Thanks for taking the question. So I just wanted to ask about, I guess, expectations once the NT2 elixirexin data are in hand. How does that inform the next steps with the FDA, and when will we know more about the Phase III program and design? And then maybe just a follow-up on Vivitrol, just kind of the expectations heading into Q4 for that product. Thank you. Thank you.

David Rich, I'll take the first and then talk and answer on Vivitrol. So we expect that we're on track for data from the NT2 study in November. And as we've said along, when we get those data in hand, that coupled with the Vibrance 1 and T1 data will comprise the package for our end of phase student meeting with FDA. So we'll request that meeting as soon as we get the NT2 data. We'll have that meeting and then we'll launch the phase three program as our expectation early next year.

Yeah, in terms of Vivitrol for the fourth quarter, I think the basis of that is what we saw in Q3. We saw strong AD demand. AD sales continue to drive the substantial majority of the brand. We hear very encouraging feedback from the market, from HCPs and patients. So our expectation is that we would continue to see AD growth going to the fourth quarter. I think it's also just important to keep in mind that this is a mature product. So we think it will perform like a mature product, but our focus is really driving AD sales and Q4.

Our next question comes from the line of Umar Rafat with Evercore ISI.

Please receive your questions.

Hi, guys. Thanks for taking my question. I just wanted to dial in on the NT2 study a little bit. Could you perhaps lay out for us your expectation of how much of an MWT benefit is reasonable to expect knowing there's a bit of tax relaxes off of single-dose work in phase one, but on the flip side, patients are starting off at 10 to 12 minutes at baseline. So how much MWT improvements are you expecting? And then also any broad parameters around what do you know as of right now on blinded safety for NT2? Thank you very much.

Thank you very much, Rich. I won't comment on any of the blinded data. We'll get the full data set here just in a matter of weeks. So we'll look at the data in the aggregate. In a large, multi-week, randomized, placebo-controlled study, the blinded information is not particularly useful to us. So we'll look forward to seeing the whole data set right away. Our expectation is that, based on the Phase 1B study, is that we know that orexin-2 receptor agonists from that study can drive wakefulness in patients with NT2 and NIH. But we really don't have a numerical threshold at the outset because we also expect a lot more variability in the patient population. So from a phase two perspective, what we're looking for is we've identified a range of doses like we did in the NT1 study. What we'd like to see is the safety tolerability profile across that range of doses and clear evidence of efficacy across the various efficacy parameters, all to inform our dose selection for phase three. So that's the goal. If we can come out of the NT2 study with clear evidence of safety, tolerability, and efficacy and a design for phase three, we think we're going to be the first to market in NT2. And the same thing applies for IH. And this is the virtue, by the way, of running these large phase two studies. You know, when you're talking about cohorts of 90 patients or so over multiple weeks. And remember, it's not just the six-week or five-week double-blind period or eight-week double-blind period. It's also the extension period where we have dose variability and selection for patients. So between these two phases, we just learn a tremendous amount about patient preference as well as dose response. And that all goes into the calculus for phase three.

Thank you. Thank you. Our next question comes from the line of Paul Matisse with Stiefel. Please just use your question.

Hey, thanks so much for taking my questions. Just to piggyback off that, can you confirm what details you'll give us in the top line release? Will we know the actual effect size or are you going to be saving some of this for a medical meeting? And then on the safety point, how are you thinking now looking ahead as to whether you might employ some sort of titration to try to attenuate certain side effects given that in the OLE and the NT1 study, we weren't really seeing much in the way of new onset visual aids or things like that. Thanks so much.

Morning, Paul. So, yeah, we have a good sense of how we're going to provide the top-line data. You'll see that in the next few weeks. What you learn from the Vibrance 1 probably is that there's a lot of data that comes out of these studies. So what we'll do is as soon as we get the data, we'll start submitting the abstracts for the various medical meetings as they roll into 2026. But you can expect a fair amount of data coming out of it. But the top line, we have a good sense of the structure of it, and you'll see that in relatively short order. We have made a lot of decisions following Vibrance 1 about the structure of the dosing in Phase 3. We're going to keep most of that proprietary right now because we feel like there was some real learning. Some of them probably you can think through and derives from the comment that you made is that we really saw very, very little incidence of new onset adverse events for patients who had already been exposed to elixir accident in the double-blind period. All that information from Vibrance 1 has been put into our modeling, and I think we've settled on our phase 3 design, and you'll see that when the study gets underway.

Great.

Thank you. The next question is from the line of Akash Tiwari with Jefferies. Please proceed with your questions.

Hey, this is Manoj for Argos. Just two questions. When you release the top line vibrance to data, will you be releasing data points over time, like four weeks and eight weeks? Because both TAC994 and 86192 data showed some deterioration of efficacy, primarily in MWT, going from four weeks to eight weeks. Do you see any biological rationale for this, or is it just like a noise related to a small number there? And also, do you expect a dose response in vibrance in terms of ESS? And also lastly, what kind of PK profile do you look for the next-gen Oryxin agonist? Thank you.

So on the point about the tachyphylaxis that you referred to or Uma referred to as well, we don't see, based on previous data, the significant evidence of tachyphylaxis or degradation in efficacy as a signal between four and eight weeks or even 8 and 12 weeks in other data sets. So at the top line, I wouldn't expect all the detailed data of time course. But I just want to let you know at the outset, that's not our pretest hypothesis that we expect to see in degradation. Now, to the extent that one did, one way that you could overcome it is with a range of doses. And we've always thought that having a range of doses could be a real competitive advantage in this category. We were hopeful to see dose response across the various efficacy measures. but we won't know until we see the data. The three doses that we modeled for NT2 were designed to give us a spectrum of dose response, but we won't know until we see the final data set. And the PK profile of, I think you asked about the next erection agonist, we're really not going to disclose any of those particular attributes of the next wave of molecules coming in. I wouldn't necessarily describe them as next generation because I don't feel like they're improving necessarily on deficiencies that lixorexin has. They're just different. And so they're designed for different patient populations in different clinical settings. And as such, they share common features of potency and selectivity. And we think that's essential for interrogating this circuitry in the brain. But they will be different.

Thank you.

Thank you. Our next question is from the line of Joseph Tome with TD Callen. Please proceed with your questions.

Hi there, good morning, and thank you for taking my question. Maybe for the NT2 dataset, Can you talk a little bit about the importance of also showing the benefit on the ESS? Is this important for both the FDA, or is this more of a European measure, if you can kind of put that into context a little bit? And then for the Phase III programs, can you talk a little bit about your expectation for ocular monitoring? On one side of it, I could see that it would be helpful if you do see some early visual disturbances to kind of, you know, say that this was not impactful, but obviously on the flip side, it would probably make the Phase III a little bit more effective. So kind of your latest thoughts on that would be helpful. Thank you.

Yeah, morning, Joe. Yeah, we think in the NT2 study, both MWT and ESS, or Epworth Sleepness Scale, are primary inputs. And they capture different things. The virtue of the MWT is it's sort of a numeric quantitative assessment of the sleep latency. And ESS captures the patient experience, their self-described degree of sleepiness. And they both, I think they both are quite important. And in phase two, you know, we're interested in looking at where the sensitivity is, what scales move the most reliably across the doses. And that includes ortho-cognition, fatigue, narcosis severity scale, global impressions, you know, all the endpoints that we're looking at in phase two, because that informs your phase three sensitivity. structure in design. So we're hoping to see signs of efficacy across all those various parameters. Phase 3, it's too hard to say. Just recounting, I think that in Vibrance 1, what we saw was really generally very mild, one moderate, and one severe ocular in the form of blurred vision. And so it was generally very well tolerated, and that, along with the rigorous ophthalmic exams that were conducted in all the patients, I think really answered the question about are there any structural issues that derive from using an erection to receptor agonist. And so I don't know the answer yet, whether we'll have to do any monitoring in the Phase III study. We're hopeful that we don't, or to the extent that we do, it's quite mild. But I think in some ways that'll be more of a discussion with the regulators.

Thank you. Our next questions come from the line of David Amsel with Piper Sandler. Please proceed with your questions.

Thanks. Just a couple of quick ones on the additional erections that are going into the clinic. I know, Richard, you talked about properties in mood and attention. So is it safe to say that at least one additional disease setting is going to be in a psychiatric setting once you move into proof of concept studies next year. Maybe elaborate a little more on how you're thinking about that. And then secondly, I don't know if this has been asked, but any thoughts on elixirexin outside of the United States and what kind of discussions, if any, have you had with European regulators there? Thank you.

Good morning, David. Yeah, I think we've said about the next candidates that we're interested in three broad domains, psychiatry, neurology, and interestingly, certain rare neurodevelopmental or neurodegenerative settings where we think a significant part of the clinical presentation is excessive daytime sleepiness, anhedonia, fatigue, depressed mood, things like that. So we won't be more specific than that right now, But as I mentioned in the earlier remarks, our goal is, as we get through the SAD-MAD, to move right into those types of patient-focused studies to get signal early on. And what I'm hopeful is that by the end of 2026, people see how this program has expanded well beyond narcolepsy. And the essential prerequisite of that is getting these two candidates through their SAD-MAD, credentialing them as bona fide development candidates for these indications. That's well underway. So we're quite excited about how that's going to mature in 2026. The second question was Elixirex in XUS. We're developing in XUS. We're running clinical trials in Europe and in Asia. And there's a strong demand, I think, for this type of product for patients around the world. So given the state of pharmaceutical pricing discussions across the world, I think it's We can say comfortably we wouldn't expect to bring elixirexin to patients outside the U.S. at significantly lower prices than in the U.S., but our goal is to bring this to patients in the U.S., in Europe, as well as in Asia.

Our next question is from the line of Ash Pharma with UBS.

Pleased to see you with your questions.

Hi, this is for Ash. Thanks for taking our question. For NT2, how are you thinking about these patients' hypersensitivity to exogenous orexin? What's the most concrete evidence that you see why this hypersensitivity could be lower in NT2 patients versus the NT1 patients?

Yeah, I wouldn't describe it as hypersensitivity. I think it's the other direction. I think NT2 patients, based on the data, are less sensitive to orexin agonists administered exogenously. So NT1, recall, the disease is a deficiency of orexin. So in NT1 patients, small doses are driving significant efficacy benefits. As low as one milligram in our hands with elixirexin, we've shown meaningful changes in wakefulness. Whereas in the NT2 patients, and we know this from our Phase 1B study, you can drive higher doses in order to elicit more wakefulness, as well as they tolerate higher doses before you see adverse events. So the basic hypothesis going into the NT2 and IH studies is that there's a frame shift, there's a dose-response curve shift to the right so that you need more elixirexin in order to drive wakefulness, and patients will tolerate more elixirexin before seeing adverse events.

Thank you. Thank you. The next question is from the line of Leonid Timoshev with RBC Capital Markets.

Let's see if there are questions.

Hey, thanks for taking my question. I just want to ask how you're thinking about the NT2 versus IH populations and sort of the differences in your ability to actually accurately capture them in separate trials, sort of what you're hearing from physicians on how those are diagnosed and bucketed. And then ultimately, you know, whether these are differences that are meaningful in the real world and how that may impact how you're thinking about the relative opportunities of NT2 versus IH. Thanks.

I think it's an important question. I think we won't really know the answer until we complete the two studies. And I think there's differences, you know, based on our learnings in multiple discussions with clinicians and patient groups in the U.S. and Europe. There could be regional differences, too, in the way that the differential diagnosis is made. What's interesting, though, Lena, is the The hypothesis, there's no pretest hypothesis that suggests there might be a difference in the response between the IHNT2 diagnosis or the subcategorization within those two diagnoses. As you know, within IH, there are long-sleep IH patients. There are shorter-sleep IH patients. They have different phenotypes that they present. What we know from our phase 1B study, albeit small, was that just taking all comers with NT2 and IH, we were able to show changes in wakefulness and well-tolerated profile. So I think this is de novo clinical research. No one's ever tested an orexin-2 receptor agonist at these doses in these patient populations. So I think the whole community is going to be fascinated to see what the distribution looks like, what the variability looks like, and what the overall effect of various doses in these patients is. And then I think with that information, we can better design phase three, too. Are there ways of tuning up or focusing that response in the phase three studies? But a priori, we're enrolling patients without any discrimination between the differential diagnosis. Interestingly, in NT2s, you tend to use MWT as an endpoint, whereas that's not used in IH. They use the idiopathic hypersomnia severity scale in Epworth. So it will be interesting to see how the two patient populations look when we're finished with the studies.

Our next question comes from the line of Luke Herman with Baird. Please just use your questions.

Hey, guys. Congrats on the quarter and thanks for the question. Just a couple timeline questions on the earlier pipeline. So the next-gen orexins, are you expecting to share Phase I data from 4510 next year? And do you think there's a possibility of 7290 first-in-human data reading out next year as well? And then similarly, I know it's sensitive right now before a deal closed, but in general, do you see a possibility of some new data on the low-salt oxybate next year?

Yeah, the 4510 and 7290, I think, I can't say right now whether we'll show you data, quote-unquote, per se, from the SADMAT. I think it's more the gating, the go decision, say, if we're through SADMAT at doses we think are target-engaging and therapeutically relevant, then you'll know that we're moving into the patient-focused studies. The timing of the readout of those translational studies remains to be disclosed. I think we're getting a sense of it right now, but it just depends on how fast we move into those translational studies and how quick the readout is. So, Give us some time to give a little more refinement about that as we move into 2026. But our goal is to finish SADMAD for 4510 first and move right into some translational studies. Same thing with 7290. Get through the SADMAD and then go right into a different set of translational studies. We're obviously quite interested in the No Salt Once Daily development program within Avidel. And as we complete the merger, we will, or the acquisition, what we'll do is we'll give you more sense of, in our hands, what we'll be doing with that program. But we think it's a very logical extension to the business that Lumerize has built.

Great, thank you.

The next question is from the line of Ami Fadia with Needham Company.

Pleased to see your questions.

Hi, good morning. Thanks for taking my question. With regards to impact on nightline sleep, can you talk about the two mechanisms, orexin versus oxybate, and how you're thinking about the two mechanisms being complementary and how you intend to study that further going forward? And just separately, with regards to Aristata, can you talk about where you expect the gross net to land for the full year? Thank you.

Good morning. It's Rich. Yeah, I think your question about nighttime sleep is going to be a very fertile one for additional clinical research. What we've heard from clinicians, and you've probably heard the same thing, is notwithstanding the powerful daytime wakefulness that erection agonists are driving, there is still some interest in understanding how that coexists with consolidation of sleep at night for certain patients. Recognizing that most patients don't take oxibates, but the ones who do see real benefit from it, I think there's a real opportunity for some clinical research now to understand how the two can coexist, particularly in once nightly and once daily forms that we would control both. So that's an exciting area for further research for patients and I think for the full field. Because I think that the full effect of anorexin agonist on nighttime sleep architecture is still yet to be to be learned. We're developing those data in our phase two program with extensive polysomnography. So we'll be analyzing that data as we complete the Vibrance program. But in the meantime, I think that there's a, we see that there's a place for the OxyBates on a going forward basis for the patients who really benefit from them. And we want to further elaborate that. Todd, you want to talk about the G-scan?

Yep, absolutely. For Aristata, for the full year, we expected to follow the consistent historical patterns, which should be approximately 53%.

Got it, thank you. Our next question is in the line of view here with Mizuho. Please just use your questions.

Hey guys, congrats on the quarter. So maybe just a quick question on the gross net favorability. You benefit from the last quarter and this quarter for both Aristotle and Vivitrol. Just wondering, could you maybe just help us understand whether there's more benefit going forward. Like, what is being, like, yeah, help us understand why these adjustments. And secondly, in the quarter, could you also sort of speak about inventory, whether it's, is there any stocking or is that more on the level? Thanks.

Yeah, absolutely. Yeah, as we said in our prepared remarks, we did see a benefit for Vivitrol and Aristata. in relation to Medicaid utilization. Going forward, we're not assuming or planning for any additional gross net favorability within Medicaid. I think it's important just to note that the Medicaid volume, the absolute volume for Medicaid patients is stable. This is just related to the percentage of Medicaid across our overall channel mix. That's the favorability. In terms of inventory, there's always seasonal patterns during the fourth quarter, and it can be a little bit difficult to predict, but we are expecting a little bit smoother of a pattern from Q4 of this year into Q1 of next year.

Okay, thanks. Sure.

The next question is from the line of Ben Burnett with Wells Fargo. Please proceed with your question.

Hey, good morning. I wanted to see if you could just maybe talk about some of the phase three scenarios for elixirexin. I think we're assuming sort of two phase threes would be needed. I guess, number one, I guess, do you agree with that? And then if so, like would a phase three NT2 study maybe be sufficient along with an NT1 phase three to get approval in both of those indications?

Okay, that's our assumption right now, but we'll confirm that, obviously, with FDA. Our expectation is that we'll seek labeling for elixirexin for the treatment of narcolepsy, and the Phase III program will be a well-controlled Phase III study for NT1 on a standalone basis and a similar study in NT2.

Thank you. The next question is from the line of Douglas Tso with H.C.

Wainwright.

Hi, good morning. Congrats on the progress, and thanks for taking questions. I know it's early, Richard, and a lot of uncertainty, but just given the fact that you're always so thoughtful on public policy issues, I'm just curious if you've thought much about the potential impact of sort of lapse on ACA subsidies and what it could have for your commercial business in the near term. Thank you, and I have a follow-up.

Yeah, it's a good question, Doug, and I think everybody's watching that. I think my sense is that there's a strong political virtue to continuing the ACA subsidies at some level. And recall that in reconciliation in the one big beautiful bill, what we were able to make sure is that patients in our population, i.e. patients with serious mental illness and addiction, are treated differently. They're the ones who are the explicit target of programs like Medicaid because if these patients are not treated, they end up in the emergency rooms and in the criminal justice system and in the community. So the price points of our medicines treating these patients are lower and the gross nets are high, so they're not breaking the bank. So our view from a policy perspective, is that there's a political reason to keep ACA subsidies in place, A, and B, to the extent that we have changes that are focused on Medicaid population in particular, serious mental illness and addiction patients, we're going to continue to fight to have them carved out.

And I guess just to follow up on the Baldy, I'm just curious, just given the success you had with the sort of additional promotion and detailing the product, Do you have the sense, was it physicians just weren't writing and they just needed that consistent reminder, or was there just sort of some extent lack of awareness of the product and its attributes? Thank you.

Yeah, in terms of Lebalvi, I think the first thing is over the last several years, we've had a really strong focus strategically on building awareness around the efficacy profile of And and that is that's really resonating it resonates every single quarter. So that's a big driver It's just the underlying value of the product It's also important to remember that the Bobby has a broad label, right? So we have a broad addressable population. So we're seeing we're seeing strong growth with schizophrenia and bipolar The mix is still roughly about 50 50 but new patient starts are definitely growing more towards the bipolar population and And so I think with the strong efficacy, along with our commercial execution, and then also the resourcing that we've put behind the brand, we actually really saw a very positive quarter. And our expectation is that, and our focus is really growing that demand going into the fourth quarter as well.

But I guess just sort of what was driving it, do you think some clinicians just weren't familiar that you had the breadth of label for bipolar and the efficacy, or was it just You know, those are competitive markets, and you just constantly need to stay in front of reps. Thank you.

Yeah, it's a good point. The competitive landscape is fierce, as we know. And so, you know, we're very practical with this to make sure that we're putting resources in our highest growth driver. So we felt, and the data showed us, that we needed a stronger share of voice. But number two is physician research tells us that HCPs need experience. So once they get experience with one patient type, schizophrenia or bipolar, in general, patients are having a good experience. They're more open to expanding their breadth of prescribing. And so we're very pleased. As I said earlier, you know, breadth of prescribing has expanded by approximately 7% for two consecutive quarters. And we're seeing encouraging trends with depth. So it's really those two things. It's our commercial investment, but it's also the experience of the HCP and the positive experience they're hearing from patients.

Okay, great. Thank you.

Thank you. Our last question is from the line of Jason Gerbery with Bank of America. Please proceed with your questions.

Hey, this is Chi for Jason. Thanks for taking our questions. I want to follow up on the virtual AE commentary earlier for Vibrant's one. The commentary that I heard was that most visual AEs were mild, and there was one moderate and one severe case. Can you contextualize what constitutes a severe vision blur and how long did that AE last? And secondarily, is there a dose-response relationship with the visual AE in Vibrance 1? When I look back at the Vibrance 1 AE table, there was a severe case of AE of any cause in the 4 milligram dose. and two severe cases of AE of any cost in 8 mg dose. Can you clarify which dose level did that one moderate case of visual AE and which dose level did the one severe visual AE case occur in? Thanks so much.

Yeah, the vast preponderance of the visual AE, they were actually reported as blurred vision, were mild cases. There was one moderate that became a mild after four days, I believe, And there was one that was categorized as severe, but that was part of a constellation of symptoms that led to an early termination of that patient after the third day, I believe, in the study. So there was dose response. We saw more at the 8-milligram dose than at the 4 and the 6. But interestingly, in the extension period, after patients had been in the double-blind period and could choose their dose, if patients had been on a previous dose of elixirex and then moved to the 8-milligram, we saw no new incidents of visual AEs or vision. So we think that there is dose response. We think the phenomenon is largely mild, meaning it's noted by the patient but doesn't affect them, and largely occurred in the first week and are largely transient as well. But we'll see now in the NT2 data set what that looks like in the IHs as well. But as we build a bigger and bigger data set, the overall Conclusion, I think you have to draw from this class so far is that they're largely generally well-tolerated, and the side effects are generally mild to moderate and transient. And the top of the list of the AEs that are on target, you're going to see what these drugs are, are insomnia and polycuria, which is urinary frequency.

Okay, thanks.

Thank you.

That will conclude our question and answer session. I'll turn the floor back to management for closing comments.

All right. Thanks, everyone, for joining us on the call today. Please don't hesitate to reach out to us at the company if there are any follow-up questions.

Thank you. This will conclude today's conference. Let me disconnect your lines at this time and have a wonderful day.