Alkermes plc Price & Performance (ALKS)

We undertake no obligation to update or revise the 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'll open the call for Q and A I'll turn the call over to Richard for some opening remarks.

Thank you, Cindy. Good morning, everyone. So 2024 was a year to defined by commercial execution, efficiency and profitability and pipeline progress. During the year, key achievements across each of these initiatives demonstrated the realization of our goals becoming a pure play highly profitable, fully integrated neuroscience biopharmaceutical company. This morning, we'll review our strong 2024 financial performance, we'll discuss our financial expectations for 2025, and provide our view of the key value creation opportunity to operate in this year ahead. Larry and Todd are going to give you the details, but here's my view in the aggregate. 2024 was a banner financial year for the company. We exceeded $1,500,000,000 in revenue. Primarily driven by our proprietary commercial portfolio of medicines discovered, developed and commercialized by Alkermes. We managed the business to drive robust profitability and met our EBITDA goal. It has yielded more than $450,000,000 of EBITDA from continuing operations while investing in the pipeline programs that we believe will drive the future growth of the company. We used the profits we generated to strengthen the balance sheet. We repurchased approximately 8,000,000 shares retired all of our debt and ended the year with $825,000,000 of cash on the balance sheet.

We take the same financial ethos into 2025. And we'll continue to manage the business with a focus on profitability As we previously outlined on our last earnings call, we expect to generate over $200,000,000 of EBITDA in 2025 while advancing the REGEN program as aggressively as we can. The financial expectations for 2025 that Blair will outline next reflect the line of sight we have into the current dynamics with customers and payers in the competitive markets where we operate. For our mature products, Vivintrol and ARISTADA, we expect flat to modest growth. And for our most recently launched product, Nivaldi, continued growth and uptake in those markets. We'll take you through the specifics, particularly for Q1. So we can all start the year in alignment. As we prepare for key ALKS 02/1980 Phase two data readouts later this year, we focused on delivering solid and predictable financial performance. All of that leads to what we think is the principal value driver the company in 2025. Key data readouts for our lead development candidate, ALKS-two thousand six hundred and eighty. Which is currently enrolling two well powered randomized placebo controlled Phase two studies in patients with narcolepsy. With planned cumulative enrollment of one hundred and sixty patients and expected completion in the second half of this year, We designed these studies to provide robust data sets to to highlight the key characteristics of this campaign and along with that, the commercial opportunity and companion positioning associated with it.

I'll provide some additional insights into the 02/2006 study developed program later in the call. But for now, the point is that ALKS 02/1980 is on the threshold of revealing its medical and its commercial potential. We are a leader in development of new medicines based on Oraxin biology. Which is one of the most exciting potential new therapeutic categories within neuroscience. And it represents a transformational opportunities for Alkermes in the years ahead. We've been laying the groundwork for 2025 for several years. And we're well positioned heading into this eventful year. So with that as an overall introduction, I'm going to turn it over to Blair. Thank you, Rich. 2024 was Alkermes strongest year of financial and operational performance to date. Financially, we generated more than $1,000,000,000 in revenue from our proprietary commercial product. Delivered EBITDA from continuing operations of repurchased $200,000,000 of the company's shares retired $290,000,000 and ended the year debt free with approximately $825,000,000 million dollars of cash on balance sheet. Operationally, we completed the sale of our manufacturing business in Ireland, which streamlined our manufacturing footprint and positioned the company to expand gross margins going forward. We also made significant progress advancing our neuroscience development pipeline and are looking forward to important Phase two data readouts this year for our lead candidate, 680 in narcolepsy.

In 2024, we generated total revenues more than $1,500,000,000 driven primarily by our proprietary product which grew 18% year over year and generated more than $1,000,000,000 in net sales. For the year, we recorded VIVITROL net sales $457,300,000 reflecting 14% growth year over year. Net sales of the ARISTADA product family increased 6% year over year $346,200,000 in 2024.

And LIVALVI net sales increased 46% year over year to $280,000,000 Across the proprietary commercial portfolio, due to the timing of shipments ahead of the holiday the fourth quarter included an extra ordering cycle to cover the first week of the year. Inventory normalized to pre holiday levels in early January, you can think about this as pulling in one week of orders from Q1 into Q4. Dynamics resulted in year end wholesaler inventory build of approximately $20,000,000 dollars and primarily impacted VIVITROL and ARISTADA. Our fourth quarter results also reflected gross to net favorability primarily related to lower Medicaid and VA utilization in certain other credit These factors drove a one time gross to net benefit of approximately $12,000,000 for VIVITROL and approximately $3,000,000 for ARISTOT Taken together, these inventory and gross to net dynamics resulted in a proprietary product revenue tailwind in the approximately $35,000,000 in Q4. Moving on to our manufacturing and royalty business. For the year, we reported manufacturing and royalty revenues of $474,100,000.0 primarily driven by royalties related to long acting INVEGA products of $236,400,000.0 and revenues from HUMERITY of $134,000,000 Now I'll turn to our full year 2024 operating expenses our financial results from continuing operations.

These results reflect the separation of our former oncology business which was completed during the fourth quarter of twenty twenty three. Cost of goods sold were $245,300,000 compared to $253,000,000 for the prior year. [indiscernible] R and D expenses were $245,300,000 compared to $270,800,000 in the prior year. This consisted of focused investments in our neuroscience development program primarily related to the LX-two thousand six hundred and eighty clinical program, and support activities for our proprietary commercial product. [indiscernible] SG and A expenses were $645,200,000 compared to $689,800,000 in 2023, as we continue to invest in the growth of Lobaldi and focus on efficiency. Overall, the business drove significant profitability from continuing off generating GAAP net income of $372,100,000 non GAAP net income of $494,400,000 an EBITDA of $452,400,000 for the year.

Turning to our balance sheet.

Ended the year in a strong financial position. As I outlined earlier, during the fourth quarter, we prepaid approximately $290,000,000 of our outstanding debt. Ending the year of debt free with approximately $825,000,000 in cash and total continue to have $200,000,000 of remaining share repurchase authorization And going forward, we may opportunistically repurchase shares dependent on market conditions and the capital needs of the business. In 2025, we plan to manage the business to deliver significant profit profitability and cash flow, while investing in the growth opportunities that we believe will be the key drivers of shareholder value. During our third quarter earnings call, we previewed our expectations to generate EBITDA of greater than $200,000,000 for 2025. And today, I'll provide more detailed financial expectations. In addition, given the transformation of our business over the last several years and feedback we have received from shareholders, we are transitioning to an adjusted EBITDA metric going forward in lieu of non GAAP net income. As we believe adjusted EBITDA better captures the dynamics of our underlying business. Our expectations were outlined in the press release and the eight ks issued this morning. Starting with the top line, we expect total revenues for 2025 to be in the range of $1,340,000,000 to $1,430,000,000 driven primarily by net sales of our proprietary products in the range of $1,090,000,000 to $1,150,000,000 As we've previously disclosed, in 2025, we approximately $215,000,000 compared to 2024, reflecting the expiration of the Invega sustaining U. S. Royalty in August 2024 and the conclusion of certain legacy manufacturing following the sale of our manufacturing business Ireland last year.

Turning to expenses, cost of goods sold are expected to be in the range of $185,000,000 to $2.00 $5,000,000 reflecting our streamlined manufacturing footprint. R and D expenses are expected to be in the range of $3.00 $5.03 $35,000,000 This level of R and D spend is to accommodate our ongoing ALKS26A Phase two programs in narcolepsy and the planned initiation of the 680 Phase two program in idiopathic hypersomnia and first in human studies for 4,510 and ALKS 7,290. Our next orexin-two receptor agonist candidate. SG and A expenses are expected to be in the range of $655,000,000 to $685,000,000 which reflects investments in the expansion of our psychiatry sales team, targeted investments in the promotional support for our commercial products and continued focus on operational efficiency.

We expect an effective tax rate of approximately 17% in 2025. We are committed to maintaining a robust cash generating business and expect to deliver GAAP net income range of $175,000,000 to $2.00 $5,000,000 EBITDA in the range of $215,000,000 to $245,000,000 and adjusted EBITDA in the range of $3.10 $340,000,000 As we look ahead to Q1, due to more pronounced seasonality related to the year end ordering patterns in Q4, the dynamics within our royalty and manufacturing portfolio that I previously outlined. I'll provide some additional color on quarterly trending expectations to facilitate modeling. In the first quarter of twenty twenty five, we expect our net sales from our proprietary commercial product portfolio to be in the range of $220,000,000 to $240,000,000 This reflects our expectation of wholesaler inventory normalization related to the extra order cycle in Q4 and usual first quarter inventory drawdown typical Q1 patient copay and deductible reset dynamics and historical demand pattern.

Royalty and manufacturing revenue will reflect the annual reset of the royalty tiers on the remaining long acting INVEGA products. The conclusion of certain manufacturing revenue streams, and typical Q1 end market seasonal We expect these factors will drive a sequential decrease [indiscernible] On the expense side, we expect cost of sold in the first quarter of twenty twenty five to be down sequentially from the fourth quarter consistent with historical Q1 sales patterns. For the first quarter of twenty twenty five, we expect R and D expenses to increase approximately $15,000,000 sequentially from Q4 primarily driven by activities related to the ELPS 2,680 Phase two programs in narcolepsy. And study start up activities for the idiopathic hypersomnia Phase two. [indiscernible] expect SG and A expenses to be similar to the first quarter of twenty twenty four, reflecting investments in the Volvie promotional activities expansion of our psychiatry field sales force during the quarter. Taken altogether, expect Q1 to be closer to breakeven on an EBITDA basis basis with total revenues and profitability to increase significantly in the second quarter and remain fairly consistent overall in the second half of the year. These expectations for quarterly trending are reflected in the full year financial expectations that I outlined a few moments ago.

We entered 2025 well positioned financially with a strong balance sheet. A substantial commercial business and a continued focus on operational efficiency and profitability. We are investing in the initiatives that we believe will drive the future growth of the company and significant opportunities to create value for shareholders. With that, I'll now hand the call to Todd for a review of the commercial Thank you, Blair, and good morning, everyone. 2024 was an important year of execution, of our commercial strategy and I am pleased that we achieved our expectations of proprietary net sales in excess of $1,000,000,000 in 2024. Which reflected 18% year over year growth. Blair has taken you through the net sales performance, for my remarks, I will focus on underlying demand trends in our strategic focus areas and expectations for 2025.

Starting with VETITROL.

In 2024, VIVITROL net sales grew 14% year over year driven by 6% underlying demand growth.

This demand growth reflects strong traction [indiscernible] slightly offset by demand in the opioid dependence indication, The alcohol dependence indication represented approximately 75% of Vivitrol volume, is where we focus our promotional efforts.

As we look ahead to 2025, we expect VIVITROL demand grow at mid single digit rates and net sales to be in the range of $440,000,000 to $460,000,000 Turning to our psychiatry franchise. Which includes both ARISTADA and Levalve, We are focused on delivering growth across the franchise and are making strategic investments that we believe will drive underlying demand and profitability. For the ARISTADA product family, in 2024 ARISTADA net sales grew 6% year over year. In 2025, we expect underlying demand to be to remain fairly consistent compared to last year and ARISTADA net sales to be in the range of $335,000,000 to $355,000,000 In 2024, net sales of LEAVOLVE improved 46% year over year, primarily driven by underlying TRx growth of 39%. With growth coming from both the schizophrenia and bipolar one disorder indications.

Our promotional and direct to consumer advertising activities will continue to focus on driving adoption in both indications. Utilizing tailored approaches to effectively target each segment. During the year, we made significant progress in enhancing the access profile for LIVALVI in the commercial care channel with additional plans taking effect in January of this year. Looking ahead in 2025, we expect these in improvements will lead to slight widening of gross to net adjustments to the mid-30s as we previously outlined. We are pleased with Lebovig's access profile today and we remain focused on additional opportunities to enhance our coverage going forward. In 2025, we expect 25% year over year and net sales to be in the range of $320,000,000 to $340,000,000 for both Livaldi and ARISTADA. As we enter 2025, we will continue to focus on the competitive dynamics in the antipsychotic space as we invest in and expand our psychiatry sales team. In order to preserve a competitive shared voice from the lobby and reaccelerate growth for ARISTADA. We plan to complete our sales force expansion in the first quarter expect contributions from the new sales positions to be tangible few quarters from now. With the expansion of the sales team and enhanced access profile for LibALVI, and a strong value proposition for both brands, we believe we are well positioned to achieve our 2025 goals for ARISTADA and RIVALVI we look forward to sharing our progress with you.

With that, I'll pass the call back to Rich. Okay. Thank you, John. So we operate in commercial environments that require particular capabilities and scale. Our strategy and our investments focus on growth and profitability while enabling broad access to our medicines. We're well positioned there to be successful. Our commercial business is the economic engine of the company. Its cash flows give us the non dilutive capital to invest aggressively in our development pipeline while maintaining profitability. And that pipeline is now at a stage it has the potential to be transformative for the company. We see that becoming clear in 2025. With planned Phase two data readouts for ARPS-two 680 narcolepsy type one and narcolepsy type two. [indiscernible] OPTX-two thousand six hundred and eighty is our novel OREX-two receptor agonist. From the outset, we designed it with a future competitive profile in mind. Incorporating things that we've learned making medicines for patients in the real world setting. For AXS-two 680, the goal has been to offer simple, once daily dosing and importantly a range of dose to accommodate patients across narcolepsy type one, narcolepsy type two and idiopathic hypersomnia. Advancing multiple doses would offer patients and physicians potential to adjust dosing to individual needs and preference, which is an important feature across many CNS disorders.

We spend a second on these hypersomnolist disorders. Orexin is the master regulator of Wake Narcolepsy type one is characterized by the absence or loss of rexendurons in the brain. In NT1, norexin two receptor agonist has the potential to replace the missing neuropeptide and restore normal wakefulness. Clinical data in NT1 provides strong evidence of this activity. Narcolepsy type two and idiopathic hypersomnia are associated with more normal olfactory serotonin sprain, but may also be associated with average signaling of the erection system A foundation of clinical data suggests that an erection two receptor agonist can promote wakefulness in these patients too. Data from our ALPHA20 study Phase Ib study and an early proof of concept study connected by others both demonstrated significant improvements in weight loss in these disorders. At sufficient doses, we believe based on data observed, Orexin two receptor agonists may have potential significant utility in NT2 and IH. From a regulatory and development perspective, we're advancing ALKS 2,680 pursuant to a strategy designed with the end goal in mind, which is FDA approval and competitive position. With proof of concept data from a robust Phase Ib program in patients with narcopsy in hand, Last year, we moved into well powered parallel design confirmatory Phase two studies in MT1 and MT2.

Each study is designed to enroll 80 patients.

These studies will represent a significant additional increment of data for the entire When we're done, we'll have 160 patients' worth of data testing a range of doses over a multi week period outpatient setting. These are studies of sufficient design and duration to more fully characterize safety, [indiscernible] efficacy and dose response. These data will inform our 2,680 Phase three design, and also begin to elaborate our potential competitive positioning in the class. I'll give you a quick update on the progress we're making with VIBRANTOne and VIBRANT our Phase two narcolepsy studies we initiated last year. We've made significant progress with site initiations and enrollment. And I'm pleased with our momentum. We're now enrolling patients in The U. S. EU and Australia. And we expect data from both of these studies in the second half of this year. As we exit this quarter, this first quarter, we should have sufficient line of sight to estimate completion time.

With more specificity. In idiopathic hypersomnia, we submitted an IND to the Division of Neurology at FDA. And we're expecting to initiate that Phase two study in the early spring. This study will be known as Vibrance three and it will share structural features of the NARCELUX James. Randomized placebo controlled double blind parallel design for eight weeks. The doses will mirror our NT2 study at ten, fourteen and eighteen milligrams. Consistent with pivotal studies that are supportive of approval in idiopath hypersomnia, we'll use the Fworth sleeping scale as the primary endpoint and the idiopathic hypersomnia severity scale or IHSS as the key secondary endpoint. So in conclusion, for both our narcolepsy and NIH, see the structure and execution of the Phase II program as the springboard for Phase three registration, and commercial positioning. We are planning for success and preparing for the clinical program manufacturing, protocol design and regulatory work streams all underway. It's going to be exciting and a busy year. So with that, I'll turn the call back to Sandy the Q and A. Melissa, we'll open the call for Q and A now, please.

Thank you. Our first question comes from the line of Paul Matteis with Stifel. Please proceed with your question.

Hey, thanks so much for taking my question. I appreciate it. I just had one on the Arexin program.

Was curious, with these studies now well underway, and specifically with the NT2 study. I was wondering how closely you guys are monitoring adverse events retention, like that on a blinded basis, especially it's one of the questions of the class is how does tolerability look? In larger studies outside of MT1. And so any color you could provide there, if it is applicable, would be helpful. And maybe just speak to your confidence again on the therapeutic index across broader populations?

Hey, Paul, it's Rich. I'll take that one. So obviously, these are blinded studies, multicenter, multi country. But We monitor safety on an ongoing basis and not just ourselves, our but we have a DSMB that meets regularly to look at that. Remember the structure of the design is six week double blind period with a seven week extension thereafter. And we expect a high degree of retention through that throughout the whole program. We haven't seen anything to dissuade us from that at this point. I said in the prepared remarks, I think that the logic and the data supporting NT2 is pretty strong. Recognizing these slightly higher doses what we saw in our Phase Ib programs clear dose response notwithstanding the baseline variability that you might see in NT2. So we're encouraged at this point and we look forward to the PBM study.

Great. Thank you.

Thank you. Our next question comes from the line of Charles Duncan with Cantor Fitzgerald.

Hey, good morning, Rich and team. Congrats on a good year of progress.

Wanted to ask a quick commercial question and then a follow-up on the pipeline. With regard to the commercial setting, guess I'm wondering if you are not if you're considering what you're and ARISTADA given BMS and J and J becoming more active in the space. And I think Todd mentioned expanding the sales force. Can you give some color on call it, the magnitude of that expansion?

Yes.

Yes, absolutely, Charles.

This is Ty.

I'll take that. There's Well, look at the competitive dynamics all the time. The benefit to our portfolio would be market growth. As more companies invest in the category, which we think is a good thing, it doesn't really change the strategy that we have. We're going to in twenty twenty five locations, it will again show really strong demand growth for LaVallebi of approximately 25%.

We're also going to be expanding our sales force as I said in my prepared remarks. That's been something that we've been watching and preparing for, for a while. And that's really intended to make sure that we maintain a really strong competitive share of voice and that we're able to not only compete effectively, but really maximize the portfolio. As I said in my prepared remarks, it's about demand growth for us, but also profitability. And I think we're right on track for that in 2025. I mentioned the size of the expansion. Yes, absolutely. The size of the sales force expansion we're looking at, we're going to add approximately 80 representatives They'll be online at the end of this quarter.

We expect them to be operational in Q2. All of my tells me it just takes a couple of quarters for that to play out. They get trained. They get to the marketplace, they start educating HCP. So our expectation is we'll start to see the benefit with that expansion in the latter part of the year. Very good.

That's helpful. Quick two, realize that by end of the quarter, you'll give more guidance. But when you consider the NT1 patient population versus NT2, Can you provide some color on the interest in the two studies And could they read out at the same time, or is NT1 ahead of NT2 or reversed?

Charles, it's Trish. It's hard to say [indiscernible] NT2 started a little bit later. But with little competition in that ramp side initiations ramped really, really quickly. Fibrance-one, the NT-one study now is in multiple countries and coming out of the Christmas holidays, we're enrolling aggressively in that one now. So it's a true way to say it, but I think our hope is that they finish roughly at the same time in the second half of the year and hopefully give you more precision Excellent. Thanks.

And Charles, let me just say as a general matter, interest in the community of the Fraxen II receptor agonist is extremely high. In NT1, NT2 and IH. And I think that that's the sea change we've seen over the last years. So As more and more practitioners get aware of the developments that are happening in the field, I think the excitement level around the category is built.

Thank you. Our next question comes from the line of Umer Raffat with Evercore ISI. Hi, guys. Thanks for taking my question. I have two here, if I may. First, a quick one on Oraxent.

Rich, could you remind us if you're expecting the Type two study, the narcolepsy Type two to come before Type one or not?

I know you had commented on the recruitment rates on both trials previously. So I'm just curious. Secondly, on LibelVie, I'm just still trying to work my way through this. There's if we stick to the current gross to net and if we stick to the cadence of Rx growth we've seen in 3Q and 4Q it could imply a number which is below even the low end of your guidance. But on the flip side, we know there was a little bit of gross net delta as well as some inventory effects that were also helping. So if you could just walk us through some Good morning, Richard. Well, let me start with the erection one event. And The NT2 study is enrolling well and the NT2 study is enrolling well. And the big change since we talked about last coming out of the holidays is that a lot of our European sites NT1 study are up and running now and screening patients. So I think it's a horse race between the two of them. We'll have more precision on the actual completion in a couple of months' time.

Yes. This is Todd. I'll comment on the law obviously.

So if you look at the Q4 dynamics, from evolving, we saw approximately 5% TRx growth, which was relatively consistent with Q3 which is a a healthy sign. That was really driven by continued expansion with ACP breadth. Year over year ACP breadth or customer breadth grew by approximately 27%. So it's a really good leading indicator on the health of the brand and how it's expanding. Going into 25, our expectation is that again, we're going to see we're going to continue to see strong demand growth. There is going to be the typical demand patterns that Blair mentioned in Q1. So we would expect that but we'd expect building out of that in Q2, Q3 and Q4 That's really going to be driven by our sales force expansion. Once we do the sales force expansion, our total footprint will be approximately 400 sales representatives, which is a a really good strong share of voice. And that's going to be supported with expanded market access. So in Q1, we think the market access position for gross to net to get expand to around the mid-30s and then it will modulate down in Q2, Q3 and Q4. So the full year will be around that mid thirty range.

And that's a really important attribute for how we see demand growth, because as I said in my prepared remarks, we are entering here with even a stronger market access position. More patients in commercial, more patients in Medicare Part D have access and we think that's going to be a big driver of our demand growth for twenty twenty five.

Thank you. Our next question comes from the line of Akash Tewari with Jefferies. Please proceed with your question. Hey, this is Amy on for Akash. Thanks so much for taking your questions. So on OX-two, what's your confidence that OX-two 2,680 can differentiate on safety versus TAC-eight 61 in NT1? And what do you think the bar is? And another one, if we can, some of your competitors in the OXX2 space are alluding to the ability to proceed into Phase three trials with an expedited Phase 2a. What do you think the FDA wants from their Phase II studies when it came to dose exploration and end? Thanks so much.

Okay.

Hi, Amy. It's Rich. I'm afraid I won't be able to give you a whole lot of information about other people's programs I'll just tell you about ours.

The whole point of our Phase two design is by this design I. E. Eighty patients multi week parallel design with a primary endpoint of six weeks followed by an open label safety evaluation with dose ranging is to establish the safety, tolerability, efficacy, dose response profile in a rigorous way. So when we complete those studies, we'll have a very, very clear of our drug and then we'll be able to compare it to any other drug that is a similar stage of In terms of particular safety, I mean, my early common stance, I think until we have the Phase two data, we won't be able to say how we're going to differentiate on the safety basis. But we believe that the program already differentiates our priority given the range of doses that we've shown the dosing flex flexibility and the overall safety and tolerability we demonstrated in 1b. All of that needs to be recapitulated and expanded in Phase two. And then we'll have a clear picture. But I'd say categorically, between ourselves and others, in the interventional receptor ammuniz class, it's striking that the overall tolerability we've all demonstrated is largely mild to moderate transient side effects with pretty significant and profound efficacy benefits for patients.

Got it. Thanks so much.

Thank you. Our next question comes from the line of Jessica Fye with JPMorgan.

Please proceed with your question. Hey guys, good morning. Thanks for taking my question. Question on the 2025 guidance. What does that contemplate for INVEGA TRINZA as it relates to any risk of generic entry? And where does that litigation stand? And can you maybe characterize how much it contributes to the royalty revenue line? Thank you.

Yes. Thank you for the question, Jessica Blair. I think as we as we move into the beginning of the year, we have a little bit of dynamics as associates with the AVEGA.

Recognizing that The U. S. Royalty expired in August of last year. So we'll be resetting to the lower rates as we move into Q1 of this year. And then, we'll be achieving royalties moving forward ex U. S. Through 2026 and then the rest of the Capenuva and the longer acting through 02/1930. So the 40% to percent depending on where you are moving forward.

Thank you.

Thank you. Our next question comes from the line of Chris Shibutani with Goldman Sachs. Please proceed with your question.

Thank you and good morning.

Maybe broader questions.

One in terms of thinking about clinical development risks for assets for the neuroscience, we've certainly always known that it's very difficult. There's been some recent industry examples where it's been kind of treacherous Rich, you and your team have been no strangers to going through this. The journey has been long.

What are you putting in place with the Urexxent program?

That you think informs and helps mitigate some of the risk? And then second, more of a broad policy related question, Rich, again, you have had seats at some important tables thinking about the implications of healthcare policy on your business And would really appreciate if you could opine on a couple of points Perhaps if I could touch upon NIH related funding implications on research.

Tariffs, IRA, a couple of the big picture which you have been helpful in the past. Your insights as it relates to Alchemy's perhaps broadly to the industry. Thank you. Good morning, Chris.

First of all, on the clinical development risk, which is sort of endemic to when we think about CNS drug development, you think about clinical development risk and actually expansion of that risk between Phase two and Phase three That's part of the attractiveness of this XEREXING program. [indiscernible] [indiscernible] are things like PANS or HAMDI or MADRIS, where you're asking patients how they feel on an ongoing basis with the primary analysis happening often at a time point. Where you have huge placebo response as patients respond to care the context of a clinical trial. If you contrast that in something like narcolepsy type one where patients are washed out of all other medicines, they are highly symptomatic at the data randomization. And if they receive a really effective medicine, the placebo response is much more muted. If at all. So it's one of the reasons we are able to see a P value with such a small number of patients in our 1b We expect that to continue into Phase II and into Phase III. And for that reason, we see Phase II as being very, very indicative of what we would expect to see in a replicate Phase three study.

That's why we've powered them so much and make them look as much like pivotal studies you would want to see in Phase two. Policy questions are long one and I want bore you with everything about it. But but the overall admonishment is that it's very fluid right now as you would know. Going down your list, NIH funding is is something that I think it's going to be focused. Have you focused on intramural funding at NIH extramural is just so important for the public health and as such a track record of being valuable. But I think that there's going to be a real scrutiny on efficiency and and allocation of capital. Tariffs, I think that we've done a tariff analysis on our own business just given the way our supply chain is configured. We don't have a major exposure to tariffs. And I think they've all wait to see how significantly and extensively those are implemented. Fixes to the IRA, think are going to be problematic I think there's some rifle shot fixes that you could anticipate But I think in the context of reconciliation and all the other moving parts, I don't think they're a top priority right now.

But I think there are some rifle shots that are possible that you can almost characterize as as sticks to the law as opposed to a complete rewiring of the law. Our probably biggest concern and focus that we'll be watching from a policy standpoint is if you think of it under the IRA Medicare Part D was focal. In this new regime. You've got to figure that Medicaid is going to be focal given the money we've been spending there. So we want to make sure that in the event that Medicaid is being reconsidered or revamped, that our patients, those with serious mental illness and addiction not disadvantaged. And we think there's a good chance of doing that given the public health As always, thanks for the thoughtful responses.

Our next question comes from the line of Mark Goodman with Leerink Partners. Please proceed with your question. [indiscernible] Mitch, can you give us any more color on what's going on with these next gen orexins? Or when are you going to give us more color on what indications or just anything that you're willing to share just incrementally since we're on a live call here? And then just secondly, I know I've asked you about business development quite often and obviously we're spending a great deal of money on Oraxins and everyone's excited about it. You should be spending the money there. Just curious what's going on behind the scenes in business development should we be surprised if there's a deal or not a deal for anything else this year kind of add to the pipeline? Thanks. Good morning, Mark. I'd love to give you more information on next generation of reference, but I'm not going to I feel like our teams I feel like we're ahead of the curve on this.

We identified fact that we were going to go beyond narcolepsy a couple of years ago. We began a lot of investigated work of going through that net panning filtration to figure out where we think the smartest places are to go next. We gave you a little bit of a directional tease in the JPMorgan presentation where we showed you where we're looking categorically in ultra orphan, orphan well as broader indications. And we've mentioned that both four thousand five hundred and ten and seven thousand two hundred and ninety grew the the two new erections going to the clinic this year. Have different pharmacologic properties that make them somewhat distinct from the 2,680. And we'll give you more indications where we're going precisely as we can the SAD and MAD studies. Because those studies are the necessary prerequisites to determine whether we a safe, well tolerated drug that's engaging the target. From those studies, we'll go right into what we hope will be like the erection where we go into patient studies in Phase 1b or 2a where we can see early on whether we have signs of signal confirm the hypothesis. So on the BD side, you can see the pipeline this [indiscernible] And that's going to continue to enrich There are also some degree of covariance between them.

So we're always looking for clinical stage assets that might broaden that portfolio. If we're going to stay an independent pure play neuroscience company with the financial resources that we have, we will expand the pipeline. There's no question about it. But we kiss a lot of frogs in the Medisa. And we do a lot of analysis. And it's an exception rather than the rule when they get the filter. So it's hard to predict when that might happen. Also on the commercial side, you've heard us talk about before, we would love to be able to and leverage commercial infrastructure. And there's just not a whole lot of products, but we're always investigating ones that are emerging or nearing commercialization as well as those in the market. So I don't feel like we have a gun to our head and urgency, but we've got the financial resources and the instinct to do it.

Thank you. Our next question comes from the line of Uwe Yir with Mizuho Securities. [indiscernible] Rich, maybe just a follow-up on your brief comment about Medicaid funding. Maybe just help us understand what the sources for VIVITROL is these days given the shift from opioid to alcohol dependence and we just hope us to kind of think about if there isn't Medicaid [indiscernible] How should we sort of think about the potential risk to this product. And along that line, maybe just also help us understand the impact, I guess, from IRA Medicare Part D redesigned into for this year and potentially next year.

Good morning. I'll take a little bit of where Todd feel free to chime in. So Medicaid is an important source of business for all of our But I don't want anybody to be panicking about this yet. This is all very notional. My overarching comments on that one's ambition is to cut $1,000,000,000,000 from the federal government at some point you're going to be looking at allocation of monies to states under Medicaid. Now schizophrenia drugs bipolar drugs and addiction drugs are not breaking the bank in Medicaid. There's a lot of other places in Medicaid where you can look to save money. So our to the extent that you do see some type of Medicaid reforms, count on the fact that we will be in there advocating to maintain access to these types of for patients. They're priced fairly, the gross to nets are high, We're responsible participants in the overall ecosystem. We're not the bad actors. In not implying you mean the right bad actor to say we're not the big economic swing factor that's going to drive this. So we think we're going to have to the extent that people start focusing on Medicaid, we think there's an opportunity actually to focus on the benefits that medication provide to chronic disease sufferers with addiction and serious mental illness.

On the Part D side on the Medicare, Part D side, we qualify for the phasing. So our exposure in 2025 is 1%. So that's a perfect example of how we use our positioning to drive policies that had protected companies like ours that were providing medicines at fair prices into Could you also maybe talk a little bit about the sources of funding for VIVITROL?

Yes, absolutely, I can do that. So we look at total mix For VIVITROL, it's been relatively stable, about 50% is in the Medicaid channel. 45% or so is in commercial and that's growing with our focus on alcohol dependence as more of a commercial patient.

And the remainder is within the PHS segment.

Thank you.

Thank you.

Our next question comes from the line of Troy Langford TD Callum. Please proceed with your question.

Hi, everyone. Congrats on the quarter and thanks for taking our question.

Really quickly on 680, how quickly do you think you all can move pivotal studies in G1?

Or MG2 patients upon positive data this year. I guess, what are the gating items to initiation of the Phase three studies? And do you think we could see a pivotal study before the end of the year?

Yes, let's see how fast we finish up the Phase 2s, but I can tell you a lot of Phase two infrastructure build is anticipatory for Phase And so our hope is the way we sequence is we top line result NT2, We schedule end of Phase two meeting with FDA. As soon as we can figure out a time based on our completion to have that meeting. Meet with the review division, in this case, it's DPP, Division of Psychiatry. Depending on the results, we will probably look to file for breakthrough designation in NT2 And that opens up the line for discussions about accelerated pathways to market So we're going to be preparing to start Phase III as quickly as we can after we complete that in the Phase two meeting with FDA. Great. Thanks for the additional color.

Thank you. Our next question comes from the line of Douglas Tsao with H. C. Wainwright. Please proceed with your [indiscernible] Hi, good morning. Thanks for taking the questions. Maybe as a starting point, Rich, I think it would be helpful to just provide some perspective on what you think your competitive advantages are in the new reference space Obviously, you have a head start in terms of clinical development across some indications and it indicates statin future broader ones outside of the sort of wakefulness sleep category your head. But maybe just from a chemistry standpoint, just because obviously we started to see other companies begin to focus on the erection space. Maybe just walk through some of the challenges that others might experience and why you think that your sort of first mover advantage will prove to be durable? And then I have a follow-up on the VAVALITY. Thanks. Doug, good morning. Vrexin two receptors are G protein coupled receptors located in the brain And so from a ministal chemistry perspective, it's a high degree of difficulty challenge because you need to create [indiscernible] GPCR agonists which requires a fair amount of structure generally. They need to be orally by available They need to cross the boating barrier.

They need not to be a pump substrate, so they get pumped out of the brain. And then all that had to happen within a pharmacokinetic profile that's consistent with the natural sleep wake cycle. So enable once a day dosing. So we know the specific MELOS residues one needs to bind in order to have aggregates. We'll publish on the data in our patents so that people will see it more and more So the question is if you're coming behind us, how do you actually improve on what we and others are doing? In other words, if we have once a day dosing with a range of doses that are well tolerated that are used in NT1, NT2 and IH There's not a lot of space there. Now no drug is ever perfect. Right? So until we fully elaborate the characteristics of this drug in the Phase two study, it remains theoretical. But right now, we're quite pleased with the profile that we have So I think our competitive advantage right now in the current course race is that we have positive data in all three differential diagnosis NT1 NT2 IH. We have a range of doses, therefore showing dose response, and dose proportionality and the dosing between NT1, NT2 and NIH are adjacent.

That is four, six, eight milligrams being tested in Phase two for Q1 that applies immediately against ten, fourteen and eighteen milligrams in NT2 and IH.

So if that turns out to be somewhere close to the ultimate commercial ranges and allows dose patients and doctors to flexibly adjust their dose to accommodate their own individual disease needs and or aspirational life aspirations as well.

So I think that we like the positioning right now and we also believe that as the field gets more extensively elaborated, others will come in. And if I feel like narcolepsy is going to be well taken care of, if any ours and other drugs meet their profile. So then the action becomes in the other adjacent which we think are quite promising. That's why we're putting forty five ten and seven thousand two hundred and ninety in the clinic because we want to be ahead on that as well. So we're already anticipating success in narcolepsy. Recognizing the risks it still exists, but operationally preparing now for narcolepsy from a commercial perspective and expanding into new indications to capitalizing on the increasingly credentialed pharmacology. And Richard, I can, a follow-up in terms of your earlier comments. So in terms of sort of the multiple characteristics that are needed sort of boxes you need to check-in the erection space You would be sort of cautious when you look at some companies that are purporting to have sort of preclinical data or in vitro assays, highlighting the sort of potency of their molecules relative to what you and Takeda have done just given the sort of need to there are the challenges around PK and Penn brain.

Is that fair?

I think that's fair. I think I consider potency and selectivity to be seen in qua non. I mean, you have to have high potency and high selectivity to play. But it's a little bit like saying I have a great race car because it has great tires But you got to have an engine too and you have some doors and some seat belts and a helmet and all the things that make it into a race car. So, I think that all of those features, any one of those features, the deficiency in any one of those features is going to lead to some type of competitive disadvantage. Okay, great. Thank you so much.

The other comment I'll add to that is that in our experience, nothing really matters until you get into patients. Because healthy volunteers, we found in our hands that even sleep deprived healthy volunteers do not reap capitulate the sleep pressure of an NT1 patient for example. So dosing is going to be indication specific and along with that is tolerability. Because what you find is that healthy volunteers tolerate different doses than in Q1 patients. And so our view is always until you get into patients, you really can't get a sense of where you are with respect to therapeutic [indiscernible] tolerability, safety and dose response.

Okay.

Thank you. Our next question comes from the line of Joel Beatty with Baird. Please proceed with your question.

Hi, thanks for taking the question.

For VIVITROL, what are the key dynamics that impact whether you'll be able to achieve the mid single digit growth rate in scripts that was mentioned earlier in the call?

Hi, Joe. This is Todd. I'll take that.

Our key focus for VIVITROL is continued expansion in alcohol dependence. That's That's what's been that's what drove the brand in 2024.

We actually saw demand growth for alcohol dependence of approximately 14% which kind of helped offset some of the headwinds that we've experienced with with opioid use disorder. So we really believe that the brand will continue to grow. I think you have to keep in mind too, VIVITROL is a mature brand. So overall demand will be consistent with the mature brand. But we still believe that sub nationally dynamics within the non retail space such as in the VA for example, will continue to drive growth. So our two strategic areas are really the alcohol dependence indication sub nationally making sure that we can continue to drive access and growth within the VA.

Thank you.

Thank you. Our final question comes from the line of David with Piper Sandler. Please proceed with your question.

Hi, everyone. Thank you. Associated with the Volvie and wanted to dive more into that. Kevin is developing a long acting injectable form of olanzepine believe that they're submitting an NDA later this year. How would that impact the LIVALBI business? And are you anticipating that as any sort of headwind Also, do have you seen any impacts from Covance yet or do you anticipate any as that product continues to ramp? Thank you. Sure. Yes, this is Todd. I'll take the last one first. So at this point, we haven't seen any impact to [indiscernible] With Coventry. In Q4, we saw TRx growth of 5%. Overall, which is very consistent with Q3 and we expect strong demand growth throughout 2025. I think it's just really important to remember with a ball, it's a broad indication So bipolar one disorder and schizophrenia versus Kobenphie just in schizophrenia. And we're actually in 2024, we saw robust volume growth with both of those indications. In fact, we saw approximately 20% volume growth in the bipolar disorder indication. So it's a broad indication, broad population. When we feel really confident with our plan. For '25, which is really underpinned with the expansion of the sales force In terms of the potential olanzapine LAI, that's obviously something we always watch competitive dynamics.

And we have a really strong capability with the Elanst, Bean, Molly the way that I would think about this is historically and it hasn't changed, the rate limiting factor regardless of delivery for the lansabine molecule is really around weight gain and also around metabolic. That's the whole reason why we developed [indiscernible] Lvovaldi, we believe, will continue to show strong growth even in the face of any [indiscernible] The only thing I got to add to that, Todd, is typically an LAI interest doesn't affect your oral side of the LAI is its own sort of rarefied aspect of that. We wish it were a bigger part of the treatment algorithm, but it's relatively [indiscernible] and the Baldi Opera obviously operates in that oral category which is the vast majority of prescriptions.

All right. Hey, everyone. Thanks for joining us on the call this morning. If there are any follow ups, questions, please don't hesitate to reach out to us. At the company. Thank you. This concludes today's conference [indiscernible]