Axsome Therapeutics, Inc.

Good morning, and welcome to the Axiom Therapeutics conference call. Currently, all participants are in listen-only mode. Later, there will be a question-and-answer session, and instructions will follow at that time. If you have any need to require operator assistance during the conference, please press star zero from your telephone keypad. As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Mark Jacobson, Chief Operating Officer at Axiom Therapeutics. Please go ahead.

Thank you, Operator. Good morning, and thank you all for joining us on today's conference call. This morning, we issued our earnings press release providing a corporate update and details of the company's financial results for the full year and the fourth quarter of 2022. The release crossed the wire a short time ago and is available on our website at axiom.com. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, the efficacy, safety, and intended utilization of our investigational agents, our clinical and non-clinical plans, our plans to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding synoviality and our pipeline products, revenue projections, and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on needed forward-looking statements, which are only made as of today's date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Ariel Tibuto, Chief Executive Officer, Nick Pizzi, Chief Financial Officer, Lori Engelberg, Executive Vice President of Commercial and Business Development. Ariel will first provide an overview of the company and then review progress made during 2022 and in the fourth quarter, as well as upcoming milestones. Following Ariel, Nick will review our financial results, and then Lori will provide a commercial update, including details on the first quarter of legality, sales, and our second quarter with Synozy. We will then open the line for questions. Questions will be taken in the order they are received. And with that, I will turn the call over to Ariel.

Well, thank you, Mark. Good morning, everyone, and thank you all for joining Axone Therapeutics' year-end and fourth quarter 2022 financial results and business update conference call. 2022 was a transformative year for Axone as we successfully transitioned to commercial stage and delivered on our goal to become a leading CNS-focused biopharmaceutical company. Now, with two differentiated products, Availability and Synology Commercialized, encouraging early launch metrics for Availability, a broad and advancing late-stage pipeline, and a strong financial position, Axel is well-positioned to continue to deliver significant value to patients and shareholders. The fourth quarter was an important milestone for Axel, as it is the first quarter with sales for both Obele and Senosi. Total net product sales in the quarter were strong at $24.4 million. Later, Nick and Lori will provide further details on our financial and commercial performance. To preview some of these updates, I'd like to start by talking about the topic that brings us all here, which is making a difference for patients. In just more than a quarter, Ability has already been prescribed to thousands of patients, and we have seen repeat prescribing by HTPs and refills by patients. Lori will provide additional perspective later. suggest that the unique mechanistic and clinical profile of Abelzi is having a positive impact on the treatment landscape for major depressive disorder and making a meaningful difference in the lives of MDD patients. Furthermore, with just half a year of snowy sales after the Axon relaunch efforts, we've seen steady growth both in the U.S. and overseas. We view the potential for Synose in the current indication as largely contact, leaving room for significant potential future growth. Just last week, we announced an important licensing deal for Synose, providing our new partner Forminovia commercial rights to Synose in Europe and certain countries from the Middle East and North Africa. Forminovia shares our excitement and commitment to maximize the potential of Synose for patients worldwide. Their strong commercial platform is well-suited to expand the availability of and access for this important treatment in the licensed region. In addition to our commercial progress, our broad late-stage CMS pipeline continues to advance, positioning us to drive further significant value creation in 2023 and beyond. Our leading CMS pipeline includes SS07 for migraine, SS05 for Alzheimer's disease agitation and for smoking cessation, ASF-12 from ALK-MFC, ASF-14 for phytomyalgia, and solar amphetol for ADHD. In the fourth quarter and subsequently, we made significant progress in our Alzheimer's disease agitation program with ASF-05, including the announcement of positive top-line results for the ACCORD trial, advancement of the ADVANCE-2 trial, and obtaining FDA feedback on our development plan for ASF-05 in dissemination. With regards to ADVANCE-2, our parallel group trial, based on recent and older trends, we now anticipate completion of this trial in the first half of 2024 versus our prior guidance of mid-2025. Given all the progress in the Alzheimer's Disease Vegetation Program, we recently sought and received feedback from the FDA on the registration file. The FDA requested generation of additional safe elderly population, including placebo-controlled safety information from the OnDone Advanced 2 trial, as well as long-term safety data in the target patient population consistent with ICH E1 guidelines. Based on this feedback, the company intends to submit an MDA for AXS05 after completion of the OnDone Advanced 2 and open-labeled safety extension trials. In parallel, we expect to initiate a Phase II free trial of FS-05 in smoking cessation in the fourth quarter of 2023. With regards to FS-07 for the acute treatment of migraine, manufacturing activities related to the planned resubmission of the NDA for this product candidate are ongoing, and we expect a resubmission to occur in the second half of this year. For AXS-12, our product candidate for the treatment of narcolepsy, enrollment in the Pivotal Phase III Symphony Trial is progressing, and top-line results are expected in the first half of 2023. As a reminder, AXS-12 has been granted orphan drug designation by the FDA for the treatment of narcolepsy. Our AXS-14 product candidate for fibromyalgia is also progressing, with manufacturing and other activities related to the preparation of the plan and the submission ongoing, and we expect to submit the MD for this product candidate in 2023. With regards to Solvianfetol or Synose for the treatment of ADHD, we are preparing to initiate a stage 3 trial in this indication in the first half of 2023. In the fourth quarter, we also shared positive top-line results from the SHARP trial, demonstrating improvement of cognitive function with Solvianfetol treatment, and highlighted new mechanistic data for Solvianfetol 1.1. These results further highlight the clinical potential and differentiated pharmacology of this molecule. As you can see, the Axon team is busy and continues to be excited as we prepare to deliver ongoing commercial success and potentially hit on multiple pipeline milestones, including clinical trial readouts and initiations and the filing within the next 12 to 18 months. I will now turn the call over to Nick who will review our financial results.

Thank you, Arion. Good morning, everyone. Today, we'll discuss our fourth quarter and full year results and provide some financial guidance. Total revenue in the fourth quarter of 22 was $24.4 million, consisting of net sales of our two commercialized products, Avelity and Senesi. There were no net sales in the comparable prior period. Avelity was launched in the fourth quarter on October 19th, and for the partial quarter, generated net sales of $5.2 million. Senosi generated total net sales to axiom of $19.2 million in the fourth quarter, consisting of U.S. net sales of $18.3 million and international net sales of $900,000. Because the ex-U.S. acquisition of Senosi closed on November 14th, the reported international net sales reflect the past quarter. Total revenue for the full year of 2020 was $50 million. Again, there were no reported sales for the prior year because the acquisition of Synosy and the launch of Veldy both occurred in 2022. For the full year of 2022, Veldy net sales were $5.2 million. For the full year 2022, Synosy generated total net sales to Axum of $44.8 million, consisting of U.S. net sales of $43.9 million and international net sales of $900,000. As a reminder, the U.S. portion of the acquisition of Synosy was completed on May 9th. Cost of product sales were $2.3 million and $5.2 million for the fourth quarter and full year of 2022, respectively, compared to none in the prior year. Research and development expenses were $14.7 million and $57.9 million for the fourth quarter and full year of 2022, respectively, and $13.8 million and $58.1 million for the comparable periods in 2021. The increase for the fourth quarter was primarily related to higher costs associated with ongoing clinical trials, including post-marketing commitments for Synosy and Avelity. Selling, general, and administrative expenses were $61.5 million and $159.3 million for the fourth quarter and full year of 2022, respectively, and $18.8 and $66.6 million for the comparable period in 2021. primarily related to commercial activities for Senosi and Abelli, including Salesforce onboarding, marketing spend, as well as higher non-cash stock compensation expense. Net loss for the fourth quarter of 2022 was $61.2 million, or $1.41 per share, compared to a net loss of $34 million, or $0.90 per share, for the comparable period in 2021. The net loss for the fourth quarter included $10.8 million, of non-cash stock compensation expense compared to $5.9 million in a comparable period in 2021. Net loss was $187.1 million or $4.60 per share for the full year of 2022 compared to a net loss of $130.4 million or $3.47 per share for the comparable period in 2021. The net loss for the full year of 2022 included $37.7 million of non-cash stock compensation for the full year of 2021. We ended the year with $201 million in cash and equivalents, compared to $86.5 million as of December 31, 2021. During the fourth quarter, we did not utilize our AT facility. In January of 2023, we amended our loan agreement with Hercules Capital to increase the size of the facility to $350 million to reduce the interest rate and to extend the maturity and interest-only periods while accessing a $55 million tranche. Additionally, in February of 2023, the company received approximately $66 million from the outlicensing of ex-U.S. Sanosi rights. Inclusive of these events, our pro forma year-end cash balance now exceeds $300 million. We believe that our current cash balance, along with remaining committed capital from the $350 million term loan facility with Hercules Capital, is sufficient to fund anticipated operations into cash flow positivity based on our current operating plans. I will now turn the call over to Lori, who will provide a commercial update.

Thank you, Nick. Q4 was certainly an exciting quarter for AXA with the launch of Avelity and the continued relaunch of Synosy. Both of our commercial products address serious, highly prevalent conditions and bring meaningful innovation to millions of potential patients. We are pleased with our commercial progress on Synosy, and although it is still early days, we are encouraged by Avelity's launch progress. I will share key metrics from our commercial efforts for both brands, starting with Synosi, followed by Abelody. As a reminder, Synosi is the first and only DNRI for excessive daytime sleepiness and obstructive sleep apnea and narcolepsy, and the first and only weight-promoting agent proven to improve wakefulness through nine hours. In the fourth quarter, total prescriptions for Synosi in the US grew 11% year-over-year and 1% quarter-over-quarter. For the full year, 2022, U.S. total Sanosi prescriptions showed strong growth with an increase of 21% versus 2021. The total prescriptions split by the diagnosed patient population for Sanosi is 70% for EDS due to OSA and 30% for EDS due to narcolepsy. Better coverage for Sanosi remains broad with 96% of commercial lives and 83% of total lives covered. The growth potential for Sanosi in the currently approved indication remains substantial. Sanosi currently has only a 2% share of drug-treated OSA patients and a 7% share in drug-treated narcolepsy patients. Sanosi is the only branded therapy available for patients who suffer from EDS and OSA, and we expect increased and enhanced promotional and disease education efforts to drive market share growth for the product in 2023 in the U.S. With recently announced licensing of ex-U.S. marketing rights for Synosi to PharmaNovia, we are well positioned to increase the availability of this important treatment to patients worldwide. Turning to availability, we launched availability on October 19th, and despite launching in Q4, a traditionally challenging quarter due to multiple holidays, we saw early signs of encouraging uptake with our initial HCP adopters. With only 10 full weeks of promotion in Q4, 2,200 unique HCPs wrote descriptions for over 6,000 new patients. Those metrics have grown to 4,300 unique HCP writers and over 13,700 new patients since launch. Importantly, HGPs who have written ability are gaining critical early clinical experience and are reporting promising patient response that is consistent with what we saw in clinical trials, with many reportedly seeing rapid onset of action and rapid achievement of remission. With regard to payer coverage, the commercial channel is expected to be the primary channel for ability, as it accounts for more than 60% of antidepressant prescription volume. Interactions with commercial payers as it relates to availability have been active and productive. Effective January 2023, we have contracted with one of the largest group purchasing organizations, or GPOs, for potential coverage of availability. As a result, pharmacy benefit managers, or PBMs, and health plans under this GPO will now be able to make formulary coverage decisions for availability based on the contracted terms. These interactions with commercial payers are proceeding as expected during the standard six to nine month period post-launch when new drugs are blocked while coverage decisions are being made. In the non-commercial channel, Medicaid coverage became effective in 49 states on January 1st, and Medicare plans have up to six months post-launch to determine coverage and add ability to formulary. We expect additional formulary decisions over the next six months. I look forward to discussing more as the payer process progresses. We are extremely encouraged by the initial launch progress and remain committed to our launch focus of driving fast HCP adoption, empowering patients, and enabling quality access. We are all aware that there is a mental health crisis happening in the US. and Major Depressive Disorder, or NDD, is a major public health concern, with 21 million U.S. adults diagnosed in 2020, and it reported significant increase in prevalence as a result of the pandemic. Ability is an important new therapeutic option for patients living with this chronic and devastating condition, and we are proud of our efforts to make Ability available to patients living with NDD and their physicians. I will now turn the call back to Mark to lead the Q&A discussion.

Great. Thank you, Lori. Operator, may we please have our first question?

Yes, thank you. Our first question is from Charles Duncan with Cantor Fitzgerald. Please proceed with your questions.

Yeah, hey, good morning. Thanks, Ariel and team, for that great overview, and congrats on the good quarter. I had a couple of questions on ability. One is commercial. One is more development. and that is regarding the commercial question. I'm just kind of wondering, I think what Lori just said addresses this question, but I'm wondering if she could drill down on any feedback she's getting from the market in terms of response rates and even persistence. Now, I know it's too long or too early to know real persistence, but what are prescribers seeing in their patients with regard to comparison in patients who are experienced with SSRI-based therapy. Thanks.

Hi, Charles. Thanks for the question, and good morning. You're right, it is very early days for us, and most of what we're receiving back from the field is purely anecdotal, so I hope you take that for what it's worth. You know, what we are hearing anecdotally is that patients are responding very consistent to labels. So that rapid onset of action is happening. They are seeing very early achievement of remission. Again, it's a little bit too early to talk about their ability, because we're just a few months into launch. But we have not seen anything that we would suspect would be different than what we see in the label or what we saw in the clinical trials.

Yeah, and maybe to add to that, I think one of the things that we are seeing are repeat prescriptions. So, you know, patients are refilling their prescriptions. Originally, they would have been switched off if there was no assistance.

Exactly, and just to give you some additional color there, you know, last week's reported data, about 50% of the scripts were from results.

Okay, that's great. It's great to hear. Regarding TAM expansion efforts for 005 in Alzheimer's agitation, Ariel, you mentioned some feedback from agency. I wasn't completely clear on that in terms of timing. I think that you mentioned possibly completing the trial in 24 versus prior 25, if you could provide more color on that. And then explicitly, you thought an NDA would happen after advance to but then also after an open-label extension study. So could you give us a sense of timing on when an NDA could be filed?

Thanks for the follow-up question, Charles. With regards to the disease agitation, when it varies through trial, you are correct. So based on the fact that enrollment is going, frankly, faster than we had expected, we now expect for that study to read out in the first half of 2024. The open-label extension trial has been ongoing, and we would also expect that to read out in 2024. And with regards to an MD filing, we would be in a position to file an MDA within six months after the readout of those studies.

Okay, that's helpful. Thanks for taking my questions. Congrats, and a good quarter.

Thanks, Ross.

Our next question comes from the line of Mark Goodman with SVB. Please proceed with your questions.

Mario, just to continue on this agitation study, can you confirm, like, your discussions with FDA? Have they signed off on both studies from an efficacy standpoint and all we're waiting for now is the safety data? Can you just confirm that? And second question is, if y'all can help us with how to think about gross-to-nets for both products for this year. Thank you.

Thanks for the question, Charles. Mark. I'm sorry. Oh, my God. All these self-analysts are starting to blur into one. No, of course not. All of you are very distinct. So, Mark, the... With regards to the interactions with the FDA, we saw feedback on the trials. The feedback that we got from the agency is that in the elderly patient population, safety data is really important, not just long-term safety data, but also the C-login for safety data. The APOR trial, it was a randomized withdrawal study, so it did not provide the randomized safety data, which the FDA thinks is really important in this patient population. And the other aspect of the study that the FDA did highlight, not necessarily a showstopper, is the fact that this was a truncated study. So importantly, though, the feedback with regards to exact patient numbers for the CT database is that it must meet ICH E1 guidelines. What's good is we're in a good position to provide actually all of those data points to the FDA. We do have the advanced one trial, which is already ongoing, which is enrolling. And so, I'm sorry, the Advance 2 trial, which has already been rolling, and so we're in a good position to provide all the safety data which would be required for the NDA filing.

Ariel, if Advance 2 fails from an efficacy standpoint, then what?

Well, that would be speculation, but we are encouraged that we currently have two positive trials in this education.

Right, that's my question. Did the FDA agree that you have two positive trials?

The FDA never agrees to anything until you file an NDA and they review it. But it's very clear that we do have two positive trials. We're very encouraged by that, and we're on track to provide the safety information that would be needed for an NDA filing.

Okay, and then the gross to net for both products for this year, how do we think about that?

Yeah, sure. Hey, Mark, it's Nick. For gross to net, so for the quarter, for a value I'll start with, gross net for the quarter was in the 60s. As of right now, we're not currently in a position to give specific guidance around GTNs. However, we remind you that there's no reason to expect that it's actually going to improve from this quarter, and it obviously could potentially worsen based on Q1 being typical, you know, the seasonality that you would expect, typical headlands of plant coverages resetting in-year, inclusive of deductibles, co-insurance. PAs would need to be, in some plans, would need to be recreated again, so potentially utilization, higher utilization of the copay card. And then obviously mix and channel distribution always impacts GTN. So, you know, we would expect in Q1 and Q2 that, We wouldn't expect anything better than where we're at today, and potentially it could worsen. Specifically around Sanosi, Sanosi, we were in the low 50s, again, for this quarter. We did have a favorable adjustment from prior quarters of $1.8 million. That was the GCN adjustment as we received updated claims, which is typical that we receive them in this quarter. Otherwise, for us to notice, it's pretty much been stable in the low 50s.

Thank you.

You're welcome.

Our next question is from the line of Vikram Purhit with Morgan Stanley. Please proceed with your questions.

Hey, good morning. Thanks for taking our questions. So we had two on. ovality. So first, just wondering if you could provide some color on kind of the typical profile of patients that are currently receiving ovality in terms of their prior treatment history and the lines of therapy they've been on prior to being prescribed ovality. And then secondly, I just wanted to see if you could provide an update on XUS commercialization and partnership discussions, if those have been happening, and if so, what you'd be looking for in a potential partner for AXS05-XUS. Thanks.

Hey, Vikram, I'll take that story. So, you know, currently, as we've mentioned multiple times and as a standard, most of the commercial plans have availability in an NDC block, which requires, you know, quite an effort to get patients online, which is why we're really excited about the demand that we're driving despite these challenges. However, due to that, you know, line of therapy use has been relatively slow. later line right now with about 28% sitting in second line and 61% sitting in third line plus. The response has been, again, to the question I answered with Charles, the response has been very, very consistent with label and to see that in later line patients is extremely encouraging.

Just with regards to the second part of your question, which relates to what we would be looking for with regards to a potential partner or a value in XUS. I think one of the things that we would look for is a partner with improving political capabilities, but also a partner that has experience with regards to navigating the pretty complex reimbursement landscape in certain geographies such as Europe.

Okay, got it, thank you. The next question's from the line of Jason Gerbery with Bank of America. Please proceed with your question.

Hey, good morning, thanks for taking my questions. Are you guys planning to increase enrollment of Advance 2 to get to the 300 patients by six months? I was just doing the math on, I think, what, 50 patients from Accord went into randomized withdrawal, and then you'll have like 175 under the current enrollment plan for Advance 2, so just curious, how you get to the 300. And then if you can comment on how we should be thinking about SG&A and OpEx ramp is 4Q 2022 on an annualized basis, sort of a good place to think about some growth off of that number, or is there going to be any step up from there? And then just, you know, last question, any comments on any inventory launch stocking here on the fourth quarter number? Thanks.

Well, yeah, I'll take that. First question, then we'll take the others. The answer is no, we do not anticipate having to increase enrollment in Advance 2 to meet the required patient safety database. As a reminder, we do have patients from Advance 1 in terms of general safety experience, but then we also have 170 patients, as a reminder, who were enrolled in period one of the ACCOR trial, and a lot of those patients, most of those patients, went into the open-label safety extension trial. So if you take the patients rolling over from ACCOR as well as the expected patients rolling over from ADVANCE2, that should put us in pretty good shape. Next.

Sure. Hey, Jason. So related to OPEX guidance, I think you mentioned using Q4 essentially as a proxy. I think that's a fair estimate. We stated in the press release that we expect expenses to increase year over year. Obviously, with the launch of the Velody and Synosy being acquired in the second quarter of this year, we'll have a full year of SG&A expenses and Q4 being Almost a full quarter, I think you can use that as a proxy and potentially a modest growth on the SG&A piece as it relates to thinking about 2023 on a quarterly basis. And then I think your other question, it broke up a little bit, but I think your question was related to inventory and channel and where we were as of the end of the year. For availability, we have roughly two and a half weeks of future demand in the channel. Obviously, the growth brand just launched it, and we do expect interim levels to fluctuate at our distributors as the novelty builds additional momentum in the market. It's not unexpected, and we believe in ordering patterns, we really reflect the strong patient demand that we've seen. For Synosi, we did have increased wholesale buying due to the seasonality. At the end of Q4, the inventory levels were somewhat elevated. However, we do see in Q1 that these inventory levels are coming down to approximately two to two and a half weeks. And one note is that we are actually in Q1, we operationally for distribution, we changed our model. from a title model to the traditional 3PL model. Title model was, as it relates to, as we launched and ensuring that we get licenses in every state, we changed to a traditional 3PL model now and reduced the, essentially, the middleman distributor, so we will see an inventory reduction in the channel, which will impact Q1 sales for Synode C by roughly two weeks. Thank you.

Our next question is from the line of David Anselm with Piper Sandler. Please proceed with your questions.

Thanks. So, just had a couple. First, on Sanosi, just broadly, what do you think you can do differently from the predecessor company that controlled the asset in terms of driving an inflection in volumes, and is the focus going to be more on OSA versus narcolepsine? Just give us a sense of what you're prioritizing and how you believe the commercial landscape for Synosy might prove to be different over time to the extent it is at all. So that's number one. And then number two on Ovelity, how should we think about eventual expansion of the sales organization to the extent you need to, and just talk about how that's going to evolve over time as the product gets more into its commercial life. Thank you.

Hi, David. I'll take both of those. First of all, I'll start with Sanosi. And how do we think we'll have an inflection point with this relaunch that we've talked about in Sanosi? You know, JAV laid a really strong foundation for the launch, for the initial launch. The important thing to remember about the initial launch with JAV was that they launched about three months prior to the COVID shutdown. And so the initial launch was heavily impacted for the majority of the first, you know, 18 months of the launch for that product. What we believe we are doing right now that will help provide an inflection point is that we've gotten really hyper-focused on the highest potential prescribers. And our plan is to make sure that with our differentiated clinical profile that those high prescribers, that we penetrate those high prescribers and then start to expand out in terms of targets. Doing that will help us gain market share very quickly as we really get sophisticated on the approach. In terms of OSA versus narcolepsy, OSA has a prevalence of about 22 million patients, and narcolepsy is 200,000. So that start difference right there tells you that a much larger opportunity is in OSA. We will right now continue to focus on other things, but we're not letting our foot off the gas on narcolepsy. So there's still a lot of room for growth there as well. In terms of availability in the expanded sales organization, right now we have about 165 reps calling on 25,000 HGPs. We are very, very confident in using our DCC approach to make sure that our reps are able to have the tools that they need to make effective calls and be very efficient about doing it. And because of that, we are very focused on making sure that penetration in those original target lists, which are the highest potential prescribers in the MDG space, is really high before we comment any further on any additional plans.

Okay. Helpful. Thank you.

Our next question is from the line of June Lee with Truist Securities. Let's just see with your questions.

Hey, thanks for taking our questions and for the updates. In the press release, you mentioned potential for up to four NDAs over the next 12 to 18 months. I'm assuming that it also includes narcolepsy, and if so, is Symphony and the Phase II sufficient to file and have a follow-up?

Thanks for the question. Yes, we do believe that Symphony and Phase 2 trial would be sufficient to file, assuming that Symphony is the positive study.

Great. And regarding the Sanosi deal, you know, at a high level, it looks like you were able to monetize the European rights at a very attractive valuation, possibly more than what JAD got for giving away for the worldwide rights. What do you think changed that allowed you to extract such value?

Well, I think that Wallace felt strongly about the potential for Sanosi and the overall value of the product. This transaction, the XUS licensing, it reflects the value of the product. So it's consistent with our perspective, what our perspective of Wallace has been and what we've communicated with regards to the potential of the product.

Our next question is from the line of Joseph Stone with Cowan & Company. Please proceed with your question.

Hi there. Good morning, and thank you for taking our questions. Maybe the first one, just a clarification on the ability number that you gave earlier, that 13,700 new patients. Was that as of last Friday, or when was the cutoff date for that? And then second was we did see the ANDA for Teva on availability. If you can just give us overall thoughts on your strength of the 2034 and 2040 patents. I know they're only challenging the 2040, but what are next steps here, and how does the company think about that? And I'll have one more very quick follow-up. Thanks.

Yes. Hi, James. Thank you for the question on the cut-off date. That would be as of the last reporting week, which was February 17th.

And you cut out there for the second part of the question.

Yeah, you immediately. Yeah, so just in terms of we saw the ANDA submission from TEVA challenging those 2040 patents. So what are sort of the next steps to in terms of litigation or in terms of potential settlement, and maybe if you could just comment on your confidence in the strength of the 2040 and the 2034 patents for Ability.

Sorry, so Hunter will take that.

Hi, nice to speak with you. I'm Hunter Mardock, the company's general counsel. So as we previously announced earlier this month, we did receive a paragraph note for notice from Teva relating to Ability. The receipt of the letter was normal. It was an expected part of the half-classman process. And to get to your question, it's no way indicative of the quality of our IP portfolio, which we're extremely proud of. Under the Hatch-Waxman Act, we have 45 days to file a lawsuit against TEVA if we wish to invoke the 30-month regulatory stay. And we're carefully analyzing TEVA's paragraph 4 notice right now, and we're carefully evaluating our next steps. I'm not able to provide much additional commentary regarding the notice or the steps we may take in light of the potential for future legal proceedings.

Great, thank you. And then just really quickly, I know you mentioned that for narcolepsy, the Phase II and the Phase III would be sufficient on an efficacy standpoint. Would you need an additional open-label safety experience, or will you have that necessary exposure once this trial reads out? Thank you.

We do have an open-label safety extension file ongoing. that safety experience will be part of the filing. As a reminder, in conjunction with our licensing deal with Pfizer, we did get the safety data, or the safety experience, which is extensive, with the molecule. That will also be part of the filing. I'm sure we have success.

Great. Thank you very much.

Thank you. Our next question is from the line of David Hong with SBMC. Please proceed with your questions.

Hey, good morning. Thanks for the update and fitting me into the Q&A. So I just had a quick question on gross to net for availability in coming quarters. Can you give us any sense of how quickly we should expect the GTN to improve over time? And would improvement correlate with the rate at which you can establish favorable coverage at major health insurance plans? I know you mentioned six to nine months for six to nine months window for that to generally take place. Is that fair to assume GTN should also improve over that time?

Yeah, David, thanks, Nick. I think that's the guidance that we previously gave, and we're really staying to that. It's hard to give any further quantitative guidance on GTN until we start seeing broad payer coverage, and then we'll be able to give a good sense of what the GTN and where the GTN will lie. So several quarters from now, I think we'll be able to give you a better sense of where GTNs will be. Great, thanks.

The next question is from the line of Yatin Senesha with Guggenheim Securities. Please proceed with your questions.

Hey, good morning, and thanks for taking our questions. This is Eddie on Friot, and just a few from us. On AXS-12, can you just provide a little bit more detail on the timing of those data this year and what you would need to see to give you confidence moving forward, especially with comparison to Senosy? And then just a quick follow-up on the Ovelity inventory. How much of that 5.2 in reported revenue for the quarter was due to channel stocking? Thanks.

You want to take the last question?

Yeah, I haven't quantified the actual amount related to specifically the inventory, but as I mentioned earlier on the question, it was roughly two and a half weeks of future demand. So you can kind of ballpark with that. That two and a half weeks, we do take GTN deductions on that. So even though it hasn't been sold, it's been sold to our distributor, it hasn't been sold to Channel, so we are accruing based on the proceeds or what we expect January's GTN would fall out of that.

And with regards to timing for OASIS-12, We expect to have results from that trial in the first half of this year. So that's what I assume. I think you can figure out what the first half is. So that would mean through the end of June. And in terms of what we would want to see, we want to see a positive trial. And this is a placebo-controlled study. So obviously we want to see a positive trial. That would give us two studies that demonstrate the efficacy of the product. And with regards to the comparison to Synosy, the indications are different. So Synosy is approved to treat excessively time-sensitive patients with narcolepsy. And ASSIS-12, you know, we're studying it for the treatment of cataplexy in patients with narcolepsy.

And Eddie, if I could just add, area of your mind, just to help provide context there. For narcolepsy patients, 100% of all narcolepsy patients suffer from excessive daytime sleepiness. And it's only estimated that about 70% suffer from cataplexy. I just wanted to give you context in terms of patients, the difference in patients.

Got it. Thank you so much.

Our next question comes from the line of Greg with Mizuho Securities. Please just share with your questions.

Great. Thanks so much for taking my question. Congrats on the quarter and the year. Maybe my question is a bit bigger picture in perspective as it relates to your marketed products and Avelity and Synosy. I know you've just launched Avelity and you've just gotten your hands on Synosy, but do you have a sense of at what point you as a company might be in a position to provide financial guidance around what you see for sales for each of those products and maybe even from a bigger picture perspective, could you remind us as you think about the total revenue opportunity for Avelity or AXS05 either in depression and also in AD agitation and how you think about synosy in EDS both in OSA and narcolepsy. Thanks so much.

I'm sorry, Craig. Can you repeat the first part of your question one more time for me?

Yeah. It was really more questions around the timing of when, as a company, you might feel that you're comfortable enough to provide financial guidance on forward-looking sales in any particular year for this. a situation where perhaps, you know, maybe three years down the line or two years, just how you're thinking about what might be comfortable?

Yeah, I would say, obviously, the way you prefaced your question originally is, you know, we're in the very early stages of durability as well as some OC. You know, so we haven't discussed when we would potentially give sales guidance as related to both products. One would surmise, though, with Snoopy being a somewhat more mature product, that we would be able to give some guidance on that product first.

Availability we're looking at you know various models here and and with fluctuate you know drastically so we're You know it would it would be further along I can't engage to the timing when we would give when we give sales guidance You know what we did Sam for the second part of your question you have talked about the sales potentials the peak sales potentials for both abilities was Sanosi starting with Sanosi Just in the current indication, we expect the product, we believe that the product could achieve sales of $300 to $500 million. And we've also said that we believe the product has a lot less of potential, we mean sales potential of at least $1 billion if you take into account potential new indications. And as we discussed, we are about to launch a pivotal trial in ADU2. And with regards to ability, we think that ability has a billion dollar potential in both MDV individually as well as in Alzheimer's disease agitation individually. MDV based upon the size of that market in terms of the number of patients who have MDV and who are diagnosed and treated, Alzheimer's disease agitation, based upon not just the prevalence of Alzheimer's disease and the percentage of patients who have agitation, which is about 70%, but also based upon the fact that there's nothing currently to treat those patients.

And then maybe one more follow-up from me, just on Synosy, where this split in its current use is, I believe, 70% in OSA and 30% currently in narcolepsy. I'm wondering if, as you look out in the future with your current plans, whether that is a number that will evolve from there or if it will stay there, and if it does evolve, any sense on which direction it might evolve in terms of that split? Thanks.

Yeah, thanks, Greg. I don't think or I don't foresee, especially in this current indication, that that's going to evolve much. As I mentioned before, our focus is heavily on OSA, just given the sheer size of the prevalence of that condition. But we're not taking our foot off the gas on narcolepsy because it is a very, very efficacious product for narcolepsy. Thank you.

Thank you. Thank you.

Next question comes from the line of Bert Haslett with BTIG. Please proceed with your questions.

Yeah, thank you for taking the question and all the clarifying comments here. My question is on the smoking cessation program. Could you just frame some of the parameters and timing surrounding the Phase 2-3 there, size of trial, again, timing, endpoints, things like that? And then with regard to the administration of dosing of ASS05, would you expect it to be dosed in similar fashion titration to a top dose as it is in MDD and AD agitation? Thank you.

Thanks, Bert, for the question. With regards to the timing, we do expect to initiate the Phase 2-3 trial in the fourth quarter of this year. So it seems we're working very hard to get that done. And in terms of the design of the trial, this will be a standard parallel group trial design. We will have more to say once we launch the trials. As we always do, we'll provide details in terms of the endpoints that we're looking at. But rest assured that the endpoints will be registration endpoints. And we have gotten feedback from the FDA on exactly what that will look like, and we'll provide those details once we launch the trial. And in terms of the dosing recommended, we'll also provide that information once we launch the study.

Great. Looking forward to that. Thank you.

Thank you. At this time, we have time to take two more additional questions. The next question comes from Miles Vinter with William Blair. Please proceed with your question.

Just wondering how many or what percentage of covered lives are actually represented through the plans that will use that GPO you bought online last month and when you anticipate those plans making those decisions?

Yes. Hi, Mike. I'll take that one. As I've stated in the prepared remarks, it was one of the three GPOs that are currently operating right now. Each of the three have a fairly substantial amount of covered lives. And the PBMs and plans that are underneath them now have the ability to access those contracted rates once they work through their standard and expected six to nine-month NDC block. So discussions are active with the other GPOs and payers, both from clinical reviews as well as discussions on formulary decisions. We do expect those to be made over the next six months.

And then just as a follow-up, last year when you met with the FDA and you decided to run Advance 2, I think, you know, did they guide that they wanted to see an additional placebo-controlled study for AD agitation because they wanted to see additional placebo-controlled efficacy as well as safety data at that time? And has that tone or commentary changed at the current meeting that you just had? Thanks.

Sure. Thanks, Myles, for the question. When we made the decision to initiate the Advanced True Trial, that was a decision that we made just from a business perspective. And so that was not based upon feedback from the FDA. However, once we did meet with safety data, in particular placebo control safety data, as well as a safety database based on ICUGE guidelines. That was information that was provided to us, and that will be required for you to be filing.

Okay.

Thank you.

Our final question is from the line of Matt Kaplan with Sladenburg Salmon. Please receive your questions.

Oh, hi. This is Raymond in for Matt. Congrats on the quarter, and thanks for taking our question. Just a quick one. I wanted to ask about Audelity as a DCC platform. You've had early success with Synosy and DCC. I was wondering how DCC and your initial experience with Audelity has kind of driven sales and any initial learnings that you hope to incorporate as the launch progresses? Thanks.

Yeah, hi. Thanks for the question. It's a good one. So as you mentioned, we have talked about what we're seeing on Synosys, so I won't rehash that. And on Novellity, we're still very early. What we've done is we've established a platform, the same platform that Synosys is operating off of. We are very confident in our Salesforce size as well as the tools that we've given them to reach the number of HTPs that we believe will drive rapid growth. And so, you know, it's a bit too early to really comment on that, but we are very pleased with how the team is using the platform and how they are, you know, helping drive growth that way.

Appreciate that, Colin. Thanks.

Thank you. I will now turn the call back to Axum's CEO for any concluding remarks.

Well, thank you again for joining us on the call today. We are proud of the hard work of the Axon team, which is now resulting in meaningful differences in patients' lives. This is only the start of more great things to come. 2022 is a pivotal year for Axon. We are not the same company we were a year ago, and we won't be the same company next year with all the strategic growth we anticipated. We are in line to report value-riding updates with multiple MDH state trial candidates and multiple late-stage clinical trials in some of the most challenging to treat CNS disorders in the next 12 to 18 months. Follow the plan. Axelman Financial has five commercial products in the market by 2025, and we're hard at work to meet those goals. Thank you. Have a great rest of your day.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.