Good day ladies and gentlemen and welcome to ACADIA Pharmaceuticals Third Quarter 2023 Financial Results Conference Call. My name is Kathy and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call.

I would now like to turn the presentation over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications at ACADIA. Please proceed..

Trofinetide, Rare Diseases Franchise, will be available for the Q&A session. We are using supplemental slides which are available on the website's Events and Presentations section.

Before proceeding, I would like to remind you that during our call today we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements including goals, expectations, plans, prospects, growth potential, timing of events or future results are based on current information, assumptions, and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially.

These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements which are made only as of today's date. I'll now turn the call over to Steve..

Thank you, Al. Good afternoon, everyone and thank you for joining us. Please turn to Slide 5. ACADIA is entering a transformational period of growth delivering record revenue in the third quarter.

Our rapidly growing franchise and DAYBUE complements our highly profitable NUPLAZID business, and our robust R&D pipeline provides rich opportunities to fuel growth to even higher levels in the years ahead. We’re trying to capitalize on this opportunity set by executing on our strategic priorities. Let me touch briefly on them [ph].

First, we are extraordinarily pleased with the success of DAYBUE. We generated $66.9 million of net sales in the third quarter, our first full quarter since launch, demonstrating a high level of excitement in the Rett Community as soon as DAYBUE became available.

As we'll discuss today, we're seeing strong indicators across all launch metrics underlying these results, including demand, persistency, and access. Second, our NUPLAZID franchise continues to be highly profitable and strongly cash flow positive. NUPLAZID revenues for the quarter were $144.8 million.

These results reflect our ability to continue to gain market share and grow the revenue base.

Third, in addition to these successful marketed products, we have a deep and growing pipeline including our Phase 3 ADVANCE-2 study of Pimavanserin and negative symptoms of schizophrenia, where we expect to have a top line results in the first quarter of 2024, our Phase 3 study evaluating ACP101 in Prader-Willi syndrome where we expect to commence enrollment later this month.

And leveraging our learnings from NUPLAZID we've developed ACP204, next-generation 5-HT2A blocker. Here too, later this month we will commence enrollment of patients in our seamless Phase 2, Phase 3 program studying ACP204 in Alzheimer's disease psychosis. Fourth, the success of DAYBUE’s U.S.

launch underscores the opportunity we have to expand in the global markets following our expanded license agreement for DAYBUE announced in July, which granted us worldwide rights to the asset. Our early U.S.

experience serves as an important reminder of the significant unmet medical need worldwide with no approved treatments for Rett syndrome outside the United States. We’re meeting with Health Canada this month to discuss a planned new drug submission for [indiscernible] in Canada.

In addition, were engaging with European regulators in advancing plans in other geographies. Fifth, we have a deep early stage portfolio that includes disclosed and undisclosed programs focused on neuropsychiatric and rare disease disorders that represents significant opportunities to continue to build on our current growth.

In addition, we continue to remain very active in business development to further expand our portfolio and build on our success with DAYBUE and NUPLAZID in CNS and rare disease. Let's discuss our DAYBUE launch and some of the launch dynamics on Slide 6.

Five and a half months into the launch, we've provided hope to a community that has never had an approved treatment for Rett syndrome. We've seen Rett patients respond in amazing and inspiring ways to DAYBUE therapy.

We've established critical relationships in the medical and caregiver communities, and we provided a strong base for future continued success. During this time, from mid-April through September, we booked approximately $90 million in revenue.

In preparing for the approval and launch, we made significant investments in both, the medical and caregiver communities, in medical education, and launch preparations. And the result, everything about the launch thus far has gone either according to plan or exceeded our plans; and in some measures, greatly exceeded our pre-launch expectations.

Prior to launch, we expected demand to be high; it has been. In fact, one area where we significantly exceeded our pre-launch plans is just how fast the demand came immediately upon launch, particularly from centers of excellence. Another area where we have exceeded pre-launch expectations is the speed at which we've established access with payers.

As Brendan will speak to shortly, this access has come faster, both in terms of the pace at which payers have adopted formal coverage plans, and the pace at which they have approved treatment under letters of medical necessity prior to the adoption of written plans.

These two dynamics, pent-up demand from centers of excellence, and more rapid access than anticipated, coupled with high levels of patient persistence on therapy have resulted in just over 800 patients on DAYBUE as of September 30.

Importantly, these dynamics have produced a substantial foundation that will continue to benefit our launch as we move forward. We've established significant breadth and depth of physician experience with DAYBUE in a short amount of time.

A high number of patients and families are sharing their positive experiences at this early stage, enabling us to gain momentum sooner. In establishing access well ahead of plan enables us to further build on that momentum.

Turning to persistence; we previously reported that we're very encouraged by what we're seeing, and that continues to be the case.

As Brendan will discuss shortly, our real world evidence to-date indicates 81% of patients starting DAYBUE remain on therapy four months after treatment initiation, and only an additional 6% are beyond 60 days since their last scheduled refill.

In comparison, in our LILAC-1 open label extension study, 65% of patients who started DAYBUE treatment after rolling over from placebo remained on therapy four months after initiation. To sum up, we continue to operate at or ahead of plan.

Prior to launch, we projected a linear growth curve producing attractive revenue growth year-after-year; this is what we typically see in rare disease launches. Of course, what we didn't anticipate with the DAYBUE launch is the surge in demand that accelerated our penetration and the associated contributions to revenues in these early quarters.

As we move forward, we'll continue to leverage this strong foundation as we increase breadth and depth in all sectors of the Rett Community. Let's turn to a snapshot of our current products and pipeline on Slide 7.

What we see is an overview of our two successful commercial products and our pipeline of late and early stage programs that represent substantial long-term growth opportunities for ACADIA. As we've noted, NUPLAZID continues to be a highly successful franchise generating significant cash flow.

In Parkinson's disease psychosis, we continue to gain market share in both, our office-based and long-term care channels, and we booked another record quarter in the long-term care channel.

Our commercial team is continuing to successfully leverage the real world evidence studies rolled out earlier this year, and the impact is becoming increasingly evident each month and quarter.

Building on this, DAYBUE provides dramatic growth potential to our business, and we have a robust pipeline behind that where will be commencing late stage studies in two programs later this year. In our negative symptom schizophrenia program, we have something rarely seen in this indication, i.e. a positive pivotal study.

There are no FDA approved treatments to treat the negative symptoms of schizophrenia, the unmet need is high and we look forward to having results from our second pivotal study in the first quarter of next year. Later this month, we will commence our Phase 3 study with ACP101 in Prader-Willi syndrome.

Prader-Willi is a rare and debilitating genetic disease for patients have an unrelenting drive to eat. Here too, there are no FDA approved treatments. November will be a busy month for us as we also commence our seamless Phase 2, Phase 3 program with ACP204 in Alzheimer's disease psychosis patients.

And behind that, as I’ve mentioned we have a rich pipeline of early stage disclosed and undisclosed programs that position us for long-term growth. I'll now turn it over to Brendan to provide additional insights on our DAYBUE launch execution and NUPLAZID’s commercial performance on Slide 8..

Thank you, Steve. Let me provide additional commentary on our two commercial franchises; DAYBUE and NUPLAZID, and the terrific performance both delivered in the quarter. Let's begin with DAYBUE on Slide 9. We have three commercial execution priorities I'd like to discuss today; demand, persistency and conversion to paid treatment.

DAYBUE’s launch has outperformed across each parameter since approval. As Steve noted, we have seen a surge in demand for DAYBUE since the launch in mid-April, resulting in just over 800 patients on DAYBUE as of September 30.

This initial wave of demand for us was a bit unique, likely due to several factors including a very strong patient advocacy community.

800 patients on therapy is a great start but we still have a lot of Rett patients who can benefit from DAYBUE, many of whom have fewer interactions with centers of actual excellence and with patient advocacy organizations. This segment represents the majority of patients who have not yet been prescribed DAYBUE.

As we previously described, approximately 25% of Rett patients are treated in centers of excellence, another 60% are treated in high volume institutions, and the remainder in community practices.

As we look to engage this next significantly larger segment of the Rett market, we expect a more linear adoption curve as we've seen with other orphan rare disease, genetic -- rare disease launches. New patient requests are coming in at the rate we expected at this point in the launch and will support the continued attractive growth of DAYBUE.

Our experience so far with new starts, coverage, efficacy and persistency reinforce our conviction that DAYBUE will achieve a high degree of penetration in the Rett market.

To penetrate this larger segment of the market we are now employing a number of initiatives including delivering HCP and caregiver webinars which bring together experienced HCP treaters and caregivers with loved ones already on therapy to speak about their successful experience starting and staying on DAYBUE.

We're participating in local Rett events, especially during Rett Awareness month in October that provides an opportunity to bring together patients and families already on DAYBUE treatment with those that are still looking to learn more.

In addition, we're delivering HCP peer-to-peer programs to have experienced treaters help newer to brand HCPs with best practices on getting started and remaining on DAYBUE to realize long-term benefit. Let's next turn to a discussion of persistency on DAYBUE on Slide 10.

Real world persistency thus far is meaningfully better than we saw in our clinical trials. When we measure persistency based on confirmed discontinuations, 81% of patients who started DAYBUE remain on therapy at four months since treatment initiation.

When we measure persistency based on confirmed discontinuations plus any other patients who are more than 60 days past their last scheduled refill, the real world persistence is 75%. In comparison, in our LILAC-1 open label extension study, 65% of patients who rolled over to drug from placebo remained on therapy at the end of four months.

This is important because we believe high levels of persistence early on translates into a higher number of patients staying on therapy long-term. Further supporting this outlook is the extremely high level of persistency we've seen from patients that transitioned from the open label extension to commercial therapy.

This stronger than -- the stronger than -- the stronger early persistency does not surprise us.

We expect the real world experience to be different from what we observed in our clinical trials where caregivers and patients did not have all the information we now have about proven clinical benefits, as well as proper GI management, including specific language in our label that instructs HCPs and caregivers to discontinue anti-constipation medications prior to initiating DAYBUE, further supporting a better initial clinical experience.

I'd now like to turn to a discussion of conversion and dose compliance on Slide 11. In addition to outperforming on demand, we executed well ahead of plan on access. This is what enabled us to take that surge of demand and quickly convert it to paid therapy.

A significant proportion of this surge converted to paid in the second quarter, but most converted in the third quarter; this leaves a smaller number of yet to convert patients carrying over into the fourth quarter as we continue shortening the time between a script being written and converting to paid treatment.

To quantify our progress with payers, our early foundational work has resulted in payers adopting formal plans covering almost 80% of lives to date. Now, let me turn to titration and compliance to dose; two factors that have been helpful in starting and keeping patients on therapy.

Compliance to dose through three months is in the range of 75% to 80% of the labelled dose. As we expected, the majority of patients begin DAYBUE treating -- treatment by titrating up from a lower dose to determine their optimal long-term dose.

Most patients typically start at approximately 50% of their prescribed dose, and titrate up over a period of four to six weeks. We believe this compliance range provides insight into using titration to find the most appropriate dose so caregivers and patients can benefit long-term.

Finally, I'd like to turn to what matters most; the real world benefits caregivers are sharing with us about the improvements they're seeing in their loved ones being treated with DAYBUE. Please turn to Slide 12.

We are excited and gratified to see the real world daily stories of the impact DAYBUE is having on the lives of Rett syndrome patients through the caregiver testimonials you see on this slide.

A few representative examples of the day-to-day important benefits families are describing include improvement in speech or even speaking for the first time in years, broadening vocabulary and improved engagement and conversations, improved gait and feet placement, purposeful eye contact and improved communication through the patient's eyes, decreased hand wringing and stereotypies coupled with more purposeful use of hands.

We also regularly hear feedback about the loved ones increased alertness, with patients now being able to better follow conversations or complete activities they were previously unable to complete. These testimonials all speak to the promise of treatment with DAYBUE and we'll continue to monitor experiences [ph] as patients continue treatment.

I'd now like to move to Slide 13 for a discussion of the great progress we're seeing in our NUPLAZID franchise. As Steve noted, the NUPLAZID franchise is increasingly cash flow positive, and continues to provide a strong foundation for our overall business.

Leveraging the emerging real world evidence data, we continue to increase our PDP market share versus off-label atypical anti-psychotics in a contracted overall Parkinson's disease market. Product sales of NUPLAZID in the third quarter were $144.8 million.

The broad educational campaign we started at the beginning of the year, leveraging the real world evidence studies continues to deliver increasing value.

The more often we are able to speak with customers about these important observations regarding NUPLAZID and off-label anti-psychotics, the greater their competence in choosing NUPLAZID over other alternatives. These results reinforce the impact these datasets have on our efforts to drive new patients starts.

Looking at the broader market dynamics, we see that carbidova and levodopa prescriptions remain essentially flat over the first three quarters of 2023 versus the first three quarters of 2022 while NUPLAZID continues to grow, outpacing the market by a wide margin.

As you can see on this slide; in the office space channel during this timeframe, we've grown new patient starts 9% while all other PDP products have increased only 1%.

Turning to the LTC channel where we delivered a record bottle [ph] quarter for NUPLAZID, we also continue seeing improvement in new resident admissions indicating some degree of market recovery.

In this channel, NUPLAZID has substantially outpaced the class [ph]; growing 16% during this time period, while all other products used to treat PDP in the long-term care setting have grown just 7%.

Understanding that the large majority of revenues re-record during any given quarter are the result of refills by continuing patients; these significant increases in NUPLAZID new patient starts in both market segments are encouraging.

I'll now turn it over to Doug Williamson, our Head of Research and Development to provide an update on our pipeline programs starting on Slide 14..

Thank you, Brendan. In addition to our two commercial products, we have a strong pipeline of clinical programs providing us with several opportunities to further expand our growth. Let's start with Pimavanserin as a potential treatment for the negative symptoms of schizophrenia on Slide 15.

Predominant negative symptoms remain one of the largest unmet needs in schizophrenia, and as of today, there are still no approved treatments for these symptoms.

Our adjunctive Pimavanserin program is designed to treat patients whose positive psychotic symptoms are adequately controlled but who still suffer from persistent and uncontrolled negative symptoms, inhibiting their ability to lead a normal productive life.

As we stated last quarter, we have completed enrollment in advance too our second study of Pimavanserin in negative symptoms of schizophrenia. We look forward to sharing top line results in the first quarter of 2024. Please turn to Slide 16. We also have two pipeline programs with entirely new compounds in development; ACP101, and ACP204.

I'll begin with ACP101. We have completed all the necessary steps to initiate the Phase 3 study evaluating ACP101 for the treatment of Hyperphagia in Prader-Willi syndrome. This is a program we're very excited about.

Prader-Willi syndrome is a rare genetic neurobehavioral syndrome that affects approximately 8,000 to 10,000 patients in the United States and represents a significant unmet need. There are currently no therapies approved to treat the characteristic hyperphagia in patients with PWS.

On this Slide, we've laid out the design of the Phase 3 global multi-center, randomized, double-blind 12-week placebo-controlled study evaluating the efficacy and safety of ACP101 in approximately 170 Prader-Willi patients.

The primary efficacy endpoint is improvement of hyperphagia as measured by the hyperphagia questionnaire for clinical trials, or HQCT scale. Those patients who completed the study will be eligible to enroll in an open-label long-term extension study.

If data from this Phase 3 study is positive, we plan to submit a new drug application for the treatment of hyperphagia in PWS to the FDA. We look forward to working with the Prader-Willi community and clinical experts as we continue to advance development of this program. Please turn to Slide 17.

We continue to advance ACP204, our next-generation 5-HT2A compound which we're developing as a potential treatment for Alzheimer's disease psychosis. As we previously described, ACP204 works primarily as the inverse agonist of the 5-HT2A receptor.

Our experience with Pimavanserin suggests that this mechanism is very well suited for elderly populations with multiple comorbidities and concomitant medications providing anti-psychotic efficacy with a very attractive tolerability profile and low drug-drug interaction liability.

With ACP204, we're seeking to build on those learnings and believe it has an exciting future. Our work completed to-date includes a comprehensive Phase 1 program and supports our target product profile for ACP204.

As you can see on the Slide, ACP204’s profile could represent a significant improvement over an already strong product profile for Pimavanserin. Please turn to Slide 18. Armed with this strong data from Phase 1, we're preparing to start our seamless Phase 2, Phase 3 program for ACP204 in the coming weeks.

Our plan includes an initial Phase 2 study with over 300 patients, which is designed to roll seamlessly into two Phase 3 studies. This Phase 2 study has been designed and sized in such a way that if successful, it could be considered a pivotal registration study.

As a reminder, with this accelerated development plan, we can eliminate those finding and move from Phase 2 directly into two Phase 3 studies with the same sites continuously enrolling patients. As each site completes their Phase 2 site allocation, they will move directly into recruiting patients for one of the Phase 3 studies.

Once the full study allocation of patients for Phase 2 is complete, we will analyze and report Phase 2 results, by which time the two Phase 3 studies will already be underway. This plan, which we've aligned on with the FDA, will ultimately provide three potential pivotal studies for a submission.

Overall, we're very excited that the progress of this program. It represents an important component of our strategy to continue to provide attractive opportunities to grow our business. And now, I'll turn it over to Mark for our financial update on Slide 19..

Thank you, Doug. Let's review our quarterly performance on Slide 20. In the third quarter, we recorded $211.7 million of total revenues.

NUPLAZID net product sales were $144.8 million in the quarter compared to $130.7 million in the prior year; a $14.1 million increase year-over-year is comprised of a $7 million in shadow inventory reduction in the prior year that did not recur this year.

$4 million is attributable to lower 340B [ph] volumes, and $3 million as a result of 2% demand growth. Our gross and net adjustment for NUPLAZID was 19.9% for the quarter as compared to 18.6% in the third quarter of last year.

The increase to growth was primarily attributable to increase rebates associated with the Inflation Reduction Act, partially offset by the reduction in 340B volumes I just mentioned.

Turning to DAYBUE; net product sales were $66.9 million in the first full quarter of commercialization, reflecting the significant early demand and strong commercial performance described earlier by Steve and Brendan. R&D expenses increased to $157 million in Q3 2023 from any $81.3 million in Q3 2022.

The increase was mainly due to the $100 million upfront payment to Neuron [ph] Pharmaceuticals for the worldwide rights to Trofinetide, partially offset by reduction and other R&D expenses. SGA expenses increased to $97.9 million in Q3 2023 from $78.1 million in Q3 2022.

The increase was driven by commercial costs associated with our stronger than expected DAYBUE launch, partially offset by reductions in our spend on NUPLAZID. We ended the quarter with a cash balance of $345.9 million. On a year-to-date basis, excluding the upfront payment for worldwide rights to Trofinetide, we were cash flow neutral as a company.

With our successful launch of DAYBUE, we were cash flow positive in the third quarter, also when excluding the recent Trofinetide upfront payment. Going forward, we expect to be cash flow positive over the long-term subject to the size and scope of future business development.

Turning to Slide 21; we are raising the bottom-end of our full year NUPLAZID net sales guidance, and our new range is $537.5 million to $545 million. We are also raising the bottom-end of our full year NUPLAZID gross-to-net guidance, and our new range is 24.5% to 25%.

Additionally, we are providing fourth quarter DAYBUE net sales guidance of $80 million to $87.5 million. On the expense side, we are narrowing our guidance ranges as we near the close of the year.

Our full year R&D guidance of $340 million to $350 million narrows to the middle of our prior range, our full year SG&A guidance of $390 million to $400 million narrows to the upper half of our prior range. And now, I'd like to turn the call over to Steve for closing remarks on Slide 22..

Thanks, Mark. ACADIA is entering a transformational period of growth as we continue to execute across all our strategic priorities. And we would like to thank our employees for their accomplishments and their ongoing commitment and passion as we continue our mission to elevate life [ph]. Operator, I'll turn it over to you to start the Q&A..

Yes, thank you. [Operator Instructions] Our first question comes from the line of Ritu Baral of TD Cowen. You may proceed.

[Indiscernible]..

Ritu, you're coming to very muffled..

Could you turn up your volume, please?.

Yeah, I'm sorry, Ritu. We can hear you talking but we can’t understand what you're saying..

You could get in the queue again, and try again, but we'll bring our next questioner up. Just a moment, please. Your next question comes from the line of tests Romero with J.P. Morgan. You may proceed..

Good afternoon, everyone. Congratulations on all the progress. Our question is around cadence of patient starting DAYBUE, specifically in 3Q? And how that looked exiting the quarter? And then second question, if I could. Any trends with respect to the type of patient that might drop-off earlier than the average? Thanks so much..

Yes, thanks so much for the question.

Brendan, you want to take this?.

Yes. Sure, Tessa. Thank you so much for the question. I think the right way to think about our demand early on is a pull forward of the demand we would have expected to see in the first place. We had a highly engaged group of families that got started early.

It's important to note that prescriptions that came in the second quarter, many would be filled in the third quarter, simply due to conversion. And then, in the third quarter continued to see in the early part of that quarter that surge, many of which were then filled in the third quarter; some I think, will also carry over into the fourth quarter.

So what we're seeing is, I think we've brought the launch to sort of a stepped-up basis in terms of number of families and patients already on therapy.

And what we would expect to see leaving the third quarter is more linear growth but on the same slope very familiar to pain [ph] and other rare disease launches, though some of those didn't have the early step-up that we've seen..

And Brendan, I think second part of the question was regarding any difference some of you see in some of the patients that discontinue..

Sorry, great question. And no, I would say that it's been what we would have expected in terms of discontinuations.

As with any rare disease, a product launch with subjective endpoints, you know, some patients aren't going to see benefit early enough to stay on therapy; some will discontinue due to tolerability, but we've seen that across age ranges and weights..

Thank you. Our next question comes from the line of Yatin Suneja with Guggenheim. You may proceed..

Hey guys, thank you for taking my question. Very impressive results today, particularly on DAYBUE. So I have a question on the guidance.

Could you comment on some of the push and pulls into that guidance of $80 million to $87.5 million? Like what constitutes the lower versus the high-end? What are some of the drivers that can help you maybe be closer to the higher end versus the lower end? Thank you?.

Yes. Thanks so much for the question, Yatin.

Mark, you want to take up?.

Yes. So, as we've been discussing, I think we've looked at kind of all the key parameters that kind of build up to a financial core forecast; persistency, demand, access and conversion, and all of those together kind of come together to the range. Obviously, higher -- it gets you towards the higher end, lower towards the lower end.

One of the other thing kind of potentially on the lower end; you know, we've yet to go through the Christmas holiday period with DAYBUE, so we don't know if the last couple of weeks of the fourth quarter is what could impact bottles [ph] and sales on the lower end of the range..

Thank you. Our next question comes from the line of Ritu Baral with TD Cowen. You may proceed..

Hi guys, can you hear me now?.

Thank you..

Yes. Thank you..

Okay. I'm so sorry about that -- transmission noise..

No worries..

So obviously, congratulations on a series of consensus exceeding [ph] quarters. I wanted to ask about insurance coverage. As I'm sure you know, we've been conducting tracking survey of the DAYBUE launch, and one of the things we hear over and over again from doctors is complaints about coverage denials.

Despite the good numbers it seems like there is still patients left on the table because of denials around efficacy, denials around this, denials around that.

I wanted to see what you guys were hearing around denials? Maybe how long it takes for these exception letters to come through? And now that we're six months out, what are you saying on reauthorization? Thanks..

Thanks, Ritu.

Brendan?.

Sure. Thanks, Ritu. And thanks for the question. So, what we've seen is that published coverage policies have been very helpful. Now, obviously in the early days there is going to be a bit of a backlog in patients because we'll get the prescription in, we have to work through the prior authorization process.

And this is probably a bit compounded by the size of the rare disease treating audience. As you know, this tends to be even in centers of excellence, maybe a single physician and an assistant doing some of this work.

That's why we've provided them with so much support in the prior authorization process, and the work that our hub can do on their behalf. What I can say is that, approvals have continued to accelerate as we've moved further into the launch, coupled with these coverage policies that we've seen now covering approximately 80% of lives.

For your specific question around reauthorizations; those have very much been consistent with our expectations, and are reflective of what we've seen for other rare disease specialty products. They generally require a physician attestation that the patient is receiving clinical benefit from DAYBUE.

And most of those reauthorizations are at a 6-month or 12-month period, some of them are at 3-months, and then annually thereafter. But thus far, we have not had a final denial for a reauthorization for any DAYBUE patients,.

Just to maybe annotate on their last point; there are denials and there are denials. So it's not uncommon, particularly the plan doesn't have a formal coverage policy in place when a prescription comes in to issue an initial denial.

And so that is kind of noise in the system much of the time and -- but -- still doctors in their office have to deal with that as we do in terms of supporting them. But as Brendan mentioned in term -- the other kind of analysis [indiscernible], a plan just does not move off of that, that is very rare.

And so it does create a little bit of noise and administrative effort in the system which does then subside as more and more plans get forward policies in place..

Thank you. Our next question comes from Gregory Renza with RBC Capital Markets. Your line is open now..

Hi, this is a Anish [ph] on for Greg. Congrats on the quarter and thanks for taking my questions. Firstly, from your interactions with physicians treating Rett, what should one expect on seasonality of diagnosis, perhaps even stratified by age? And also if I could, how should we be thinking about potential value unlock for DAYBUE availability ex-U.S.

specifically by region? Thanks, again..

Yes, thanks so much. I'm going to ask Parag Meswani to take the first question and Brendan on the second question.

Parag?.

Sure. Thanks for the question. So, what I'll say at the outset is that overall physician feedback regarding DAYBUE is encouraging and points to a high level of caregiver interest regardless of age, gender, weight range, so on and so forth; so we feel very confident about their view of the product profile.

In terms of diagnosis rates, we don't really see any variance or differences as to when patients are diagnosed. What we do see our differences when patients are coming in for their follow-up. One of the things that Brendan mentioned in his prepared remarks is that there is a different cadence of when patients are going in to see their clinicians.

And overtime, we expect that to accelerate as more patients become familiar with DAYBUE and DAYBUE’s product profile..

Thanks, Parag.

Brendan, ex-U.S.?.

So for outside the United States, we are obviously excited about the opportunity to be able to bring Trofinetide to a broader audience. Our first progress will be in Canada. As we've described, we're already in conversations to bring DAYBUE to Canada in the next 18 months.

We've also began our conversations with regulators and taking scientific advice in Europe, and are also prepping for Japan. We will look opportunistically at the rest of the world as well for opportunities for us to continue our global expansion from there..

Thank you. Your next question comes from Jeff [ph] with Morgan Stanley. Please proceed..

Thanks for taking my question. You said that centers are treating existing prevalent patients during planned clinic days. So I guess with the expectations of more linear trajectory going forward, have the number of clinic days remain stable or are they starting to decrease the center's work through existing prevalent patients? Thanks..

Thanks for the question, Jeff.

Parag, you want to take that?.

Yes, happy to take that question. So, I would say that it is variable. We know there a number of centers of excellence have actually increased their clinic days as a consequence of the approval of DAYBUE; some have gone from a clinic day a month to a clinic day a week. Others don't have the infrastructure yet.

As Brendan mentioned before on the payer question, there may be just one or two clinicians who are responsible for everything from clinic visits to payer access issues and managing clinical trials as well.

So overtime, we are seeing more and more clinic days being added, we're encouraging that and facilitating those sorts of connections through centers of excellence and through the community as well.

But this is a new muscle ability to flex in many ways as more patients are being treated and seen, clinic days are being added to meet the demand that's coming in through the clinic doors..

Thank you. Your next question comes from a line of Charles Duncan of Cantor. Please proceed..

Hey, good afternoon. Steve and team, congrats on a great quarter for DAYBUE. I think I'll ask a couple of questions on the pipeline since other good questions have been asked. On the commercial -- on the pipeline, first of all, question regarding ACP101; helpful context in terms of number of patients.

Can you give us a sense of how quickly you would anticipate that study to enroll? And for ACP204, I guess I'm assuming that they're going to be primarily Alzheimer's disease patients that are later on in their journey? And how will you confirm that they're Alzheimer's patients versus other etiologies or is that not an issue for you for the conduct of this study? Thanks..

Thanks, Charles. As tempting it is to answer the first question, we just typically don't comment on projected enrollment until we get into -- actually get some enrollment experience; so we'll have to get back on that. And then I'll ask Doug to answer the second question regarding Alzheimer's patients..

Yes. And it's a great question Charles because that's actually a conversation we had with the FDA.

And their Outcomes Assessment Group are increasingly interested in validating the diagnosis of Alzheimer's; so we've agreed with them that we'll conduct a biomarker -- blood-based biomarker into the diagnostic procedure to just add extra -- an extra level of certainty that we're getting the diagnosis correct..

Thank you. Your next question comes from the line of Ash Verma [ph] with UBS. Please proceed..

Hi, thanks for taking our questions.

So just in terms of persistency on DAYBUE, I wanted to get your thoughts on how you think this could trend overtime? I mean, we -- it's very encouraging to see this four month data and get this type of granularity but how do you think this might look at like 6, 9 or 12 months? And any updates on the LILAC-2 study? And would that be a more representative data point for what we're seeing in the real world? Thanks..

Yes, thanks so much. I'll take the first question and ask Kathie to take a second. So with respect to the first question, it's early still. We do have as we've mentioned 800 patients with therapy, so now we have a meaningful amount of data on multiple parameters, including persistency.

So we have a strong number of patients that have completed four months of therapy and as we go forward we'll continue to monitor this and update. We have obviously not as many patients at five months ago before and six months and five, etcetera.

But I would say that as we look at the data that we have, with this separation between where we're -- what we're seeing in the real world, and what we're seeing from the LILAC-1 open label rollovers, which again, as we said we think is the best clinical trial comparison because those are patients starting therapy knowing they're starting on DAYBUE; we continue to see the separation.

And so, we look forward to updating you as we go forward but we're highly encouraged by what we're seeing. We’re expected to be able to improve on our clinical experience, we’ve put significant investments in it, and so far we are.

Kathie, you want to take the second question?.

Yes. With regards to our LILAC-2 study, we just completed that study as we had those patients continue on therapy until the drug was approved, and they had the opportunity to go on commercial therapy; over 90% of those patients did rollover directly onto commercial therapy.

We now have those results in hand and we actually plan on presenting them in early December; so in about a month at the American Epilepsy Society meeting. But I will say in LILAC-2 we had very, very few dropouts. So as long as they enrolled in LILAC-2, they stayed in LILAC-2.

And I think that's consistent with what Brendan mentioned is, we think we can sort of get them through that first period, then they continue to stay on to finish [ph] with DAYBUE..

Thank you. Your next question comes from the line of Tazeen Ahmad with BOA Securities. Please proceed..

Hi guys, good afternoon. Thanks for taking my question. Maybe I'll switch topics for a bit. On the upcoming ADVANCE-2 study, can you just remind us what type of data to expect at that top line readout in 2024? And what would you consider to be good data? Thanks..

Thanks for the question.

Doug, you want to take that?.

Sure. So the top line data, we expect to see -- we're using the NSA-16 [ph] and the primary outcome is the overall change in the NSA-16 [ph] which is a very well validated and accepted scale for assessing negative symptoms.

In terms of what does good data look like, the effect size that we saw at the 34 milligram dose in ADVANCE-1 was around about 0.3 -- I think it was 0.34, coincidentally. 0.34 was the effect size; so I think that's consistent with what generally constitutes a clinically significant change in psychiatric studies.

So if we saw that replicated, I think we'd regard that as a good data..

Operator, next question? Operator, can you hear me?.

Yes, thank you. Our next question comes from the line of [indiscernible] with Mizuho. You may proceed..

Hey guys, congrats on the good quarter. I guess I'll switch to drug. On NUPLAZID you mentioned that you've benefited from the 340B [ph] program this quarter. Just wondering if this is a one-time thing or do you expect this benefit to process going forward? Thanks..

Thanks so much for the question.

Mark, you want to take that?.

Yes. So generally speaking out of the 340B volumes as part of our mix has been slowly growing. I think what you saw in the results this quarter was the artefact of kind of a one-time increase last year that didn't happen this year; so that provided kind of a net change benefit and revenue when you're comparing the quarters.

I think as we go forward, we'll continue to expect slow to modest growth in the 340B volumes as we've seen over the last couple of years..

Thank you. Our next question comes from the line of Marc Goodman with Leerink Partners. You may proceed..

Hi, thanks. This is Madhu [ph] on the line for Marc. A couple of other follow-up questions on DAYBUE from us.

First, are you seeing any increases in overall diagnosis rates or numbers of Rett patients who have been identified in the community or when might you start to expect to see that? And then for the side effects, are you hearing anything on whether the side effects are better tolerated in specific patient subgroups like older versus younger patients? Thanks..

Brendan is the one who takes the first question.

Parag, you want to take the second?.

Yes. So thanks for the question. Can you forgive me; can you repeat the first question? I apologize..

The point was, did we see or have we seen any increase in….

Oh yes, forgive me, forgive me. So diagnosis rates; yes, we are -- so we're about two quarters into the launch of the drug. And as we look at data at this point, we're not seeing meaningful changes in diagnosis rates; I think it's safe to say that it's early on.

Our first goal is obviously to try and close that gap between the prevalent population, which we know is 6,000 to 9000 and the 4,500 or so diagnosed and treated patients in the U.S.

We will continue to track that very closely, we know as a first to market drug is approved, you tend to see increases -- you can see increases in the diagnosed population. And I think we'll continue to share those insights overtime..

Thanks, Brendan.

Parag?.

Sure. On the second question, what I'll say at the outset is that we're very encouraged with the real world experience, both from an efficacy perspective and from an tolerability perspective.

Remember, we learned a lot from our Phase 3 program, and that informed the basis of a very comprehensive approach to educating both, providers and caregivers at the outset post-approval.

And with the investment received, really favorably, we've designed a footprint inclusive of patient support services team that is paired with every single new caregiver, every single new family that goes on DAYBUE, and we supplement that with extensive education to providers as well.

So that is -- started out launched, it remains a core part of our communication point day-in and day-out with providers and with caregivers.

And because of that, the experience that we're seeing hearing both, from the prescriber perspective and from a caregiver perspective is that a much better tolerability experience with tools to mitigate any tolerability issues as they arise, whether that's diarrhoea or other issues as well..

Thank you. Your next question comes from the line of Salvin Richer [ph] with Goldman Sachs. You may proceed with your question..

Hey, thanks. This is Matt on first Salvin [ph]. Your highlighted NUPLAZID is recently cash flow positive, could you share what kind of margins you have right now and where you see that headed longer term? And then on the litigation -- patent litigation for NUPLAZID; I think we’re expecting an update by the end of the month.

Do you have any update there for us? Thank you..

Yes. I'll take the second question first. And I'll ask Mark to answer the first one. So, the district court has not issued a decision yet. We think highly likely that the court will by the end of the year for sure.

And just in terms of update or commentary; it's litigation, there is nothing really that we have to say at this point other than I'll just say what we said before. And that is, we believe the law is on our side and we're highly confident in our position. So, we're eager to get to a decision as well. Mark you want to take the….

Yes. On the cash profitability of NUPLAZID, we generate approximately $300 million of cash flow on a fully allocated cost basis of the franchise.

We expect that to continue to grow overtime, obviously on a year-to-year basis as we go through our budget plans and investment cycles on -- for year-over-year, we'll decide to the level of support and investment for the franchise with the focus being both on top line growth and near-term profitability..

Thank you. Your next question comes from the line of Sumant Kulkarni with Canaccord Genuity. You may proceed..

Good afternoon. Thanks for taking my question.

Assuming that NUPLAZID [ph] is successful in negative symptoms of schizophrenia, how are you thinking about potential pricing given the product is already in the market? And do you think you're appropriately resourced from a Salesforce perspective?.

Two-part question. Brendan why don’t you take the second part. Actually Brendan if you can take both, if you don't mind..

Yes, sure. So for us, the -- in terms of pricing, were not going to discuss where we are at this point other than to say we certainly will be looking at events that run into value across our portfolio of indications.

When we stopped to think about resourcing, we are a CNS focused company and there is a fair amount of crossover between the treaters of negative symptoms of schizophrenia which will allow us to kind of capitalize on core resources we have within the organization.

But we will obviously logically expand our footprint to cover both, the locations treating these patients and the broadened psychiatry population that tends to focus on these negative symptoms of patients..

Thank you. Your next question comes from the line of Ami Fadia with Needham & Company. You may proceed..

Good evening. Thanks for taking my question and congratulations on the strong performance of DAYBUE. Maybe just one follow-up on DAYBUE from me.

Can you talk about sort of the time to approval for patients, whether they are under medical exemption or whether they are under an insurance plan where they do have them put on the formulary? And I'm trying to sort of get a better sense of where you are in the launch, as you've indicated that the quote from here will be more linear.

Is this more to do with sort of the initial bolus [ph] of patients already getting on DAYBUE and now it's more about really -- blocking and tackling and getting -- waiting for new patients to be diagnosed? If you can give any color on that. Thank you..

Thanks so much for the question. Two-parter question.

Brendan, you want to take the first? And Parag, the second?.

Sure, that would be great. So, thanks so much. What we've seen, and unsurprisingly and very similar to other rare disease launches, the initial approvals have come through letters of medical necessity, letters of medical exception; that was in the second quarter and somewhat in the third quarter.

As I pointed to, we now have almost 80% of covered lives that have planned -- written planned coverage for DAYBUE. And as we've seen, almost on a month-by-month basis, we've seen more in -- in the same month approvals, second month approvals, third month approvals, overtime as these written plans have gone into play.

So, as I think we said on our last call, by the end of the year we'd expect most of those policies that are going to be published to happen before the end of the year; we would expect to see a few more between now and the end of December.

But we are pleased with the coverage we already have and the increasing pace at which those enrollment forms are becoming prescriptions.

You want to take the second piece, Parag?.

Yes.

Can you repeat the second question, please, if you don't mind? Or Steve, you want to repeat that?.

I think it was the linearity of the adoption of DAYBUE as a function of sort of what's happening for treatment dynamics in the fourth quarter or close to a surge?.

Yes, sure. So you know, at this stage as Brendan mentioned in his prepared remarks and in the Q&A as well, through a really effective pre-launch education and connecting closely with the Rett Community with providers, we have led to a step-up in update during the first couple of quarters.

At this stage, our plan for growth is to really identify physicians and patients that have a smaller number of Rett patients, and patients that aren't having the same degree of frequency as visits in the clinics as they had in the first couple of quarters of the year.

So, our goal moving forward is to establish the strong foundation that we've had so far in terms of demand, which is a significant breadth and depth of physician experience so far; a high number of patients and families sharing positive experience at the marketplace, and an access that has happened much faster than our initial pre-launch expectations.

So looking ahead, given this early demand, we're expanding our efforts beyond COE to reach physician to have fewer Rett patients, as well as family that aren't as connected to clinicians or regularly visiting direct providers on a day-to-day basis..

Thank you. We have time for one more question which comes from the line of Jay Olson with Oppenheimer. You may proceed..

Hey, congrats on the quarter and thank you for taking our questions. Based on the impressive DAYBUE launch dynamic so far, could you please share your latest thoughts on the longer term commercial potential in terms of what peak sales are achievable? And how does the commercial value of the ex-U.S. opportunity compared to the U.S.

opportunity? Thank you..

Thanks so much for the question, Jay.

Mark, you want to take that?.

Yes, clearly. Jay, thanks for that. We're very excited about what we have experienced in launch so far with DAYBUE. As we've said many times, we expect this to be a very, very meaningful product in terms of size. In the U.S., it could be similar to Pimavanserin just as a matter of and higher.

But as a matter of kind of just our company policy and this we don't put out at peak sales estimates; the size of the opportunity outside the U.S., there are more Rett patients just by population in Europe than there are in the U.S., little less in Japan than they are in U.S.

The pricing dynamics in those markets could be a little different but we're still working through that as we advance towards our regulatory efforts. So, more to come to discuss in the coming years..

Thank you very much..

Thank you. This completes our question-and-answer session. Mr. Davis, please proceed to closing remarks..

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

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