Good morning, ladies and gentlemen and welcome to Intra-Cellular Therapies First Quarter 2021 Financial Results Conference Call. As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Dr. Juan Sanchez, Vice President, Corporate Communications and Investor Relations. Please go ahead..

Good morning and thank you all for joining us for today’s conference call. Our earnings press release provides a corporate update and details of the company’s financial results for the first quarter ended March 31, 2021. This press release crossed the wire a short time ago and is available on our website at intracellulartherapies.com..

Thanks, Juan. It’s a pleasure to be here and welcome to today’s call everyone. We are very excited to share our progress during the first quarter of this year.

First and foremost, last week, we announced the acceptance by the FDA of our supplemental new drug applications for lumateperone for the treatment of bipolar depression with a PDUFA action date of December 17 of this year.

This marks an important milestone towards offering this important medicine for a broad group of patients living with bipolar depression, a complex and highly prevalent chronic condition with significant unmet medical needs.

As many of you heard from our KOL call last week, lumateperone, given its efficacy and safety profile, if approved, will be a promising new medicine for these patients. We are very excited about this opportunity and our commercial team is actively preparing to launch immediately upon approval.

I will now provide additional highlights of the first quarter, starting with our commercial progress. Total revenues grew to $15.9 million in Q1 2021. We are pleased with CAPLYTA’s quarter-over-quarter prescription growth of 23%, despite challenging market conditions due to COVID continuing.

CAPLYTA’s net product revenues for the first quarter were $15.6 million versus $12.4 million in Q4 2020 and $0.9 million in Q1 2020. Larry Hineline and Mark Neumann will provide further details shortly..

Thanks, Sharon and good morning everyone. It’s a pleasure to be here today with all of you. We made steady progress with the launch of CAPLYTA for schizophrenia during the first quarter of the year, registering a 23% increase in total prescriptions versus the fourth quarter of 2020.

This performance came at a time of intensified coded impact during the winter months that limited psychiatry patient visits overall and increased the proportion of visits conducted through telepsychiatry.

Psychiatrists have generally been more conservative in their treatment approach in a telepsychiatry setting versus an in-person visit thereby reducing the frequency of treatment changes, including switches from other anti-psychotics. This has been particularly true for patients with more complex conditions like schizophrenia.

In-person sales representative access to physicians also continued to be impacted during the quarter as clinics and offices maintained visitation restrictions for industry representatives.

More recently, we have seen incremental improvements in market conditions and remained optimistic that this should continue with more favorable dynamics emerging in the second half of the year, including increases in schizophrenia patient visits and greater physician access for our sales force efforts.

We continue to successfully execute our hybrid commercialization model of combined in-person and virtual engagements and drove significant prescription growth during a time when the overall anti-psychotic market declined slightly..

Thank you, Mark. I will review our financial results for the first quarter ending March 31, 2021. In the first quarter, we recorded total revenues of $15.9 million and net CAPLYTA revenues of $15.6 million. In the same period in 2020, we recorded $1.1 million of total revenues and $0.9 million in product revenues of CAPLYTA.

Cost of product sales were $1.5 million in the first quarter of 2021 compared to $69,000 for the first quarter of 2020. Research and development expenses for the first quarter of 2021 were $15.1 million compared to $16 million for the first quarter of 2020.

This decrease is due primarily to a decrease in manufacturing expense and offset by an increase of lumateperone clinical and non-clinical expenses. Selling, general and administrative expenses were $52.6 million for the first quarter of 2021 compared to $34.1 million for the same period in 2020.

This increase is primarily due to an increase in sales related labor costs and commercialization costs. Net loss for the first quarter of 2021 was $52.7 million compared to a net loss of $47.4 million for the quarter ended March 31, 2020.

Cash, cash equivalents, restricted cash and investment securities totaled $613.4 million at March 31, 2021 compared to $658.8 million at December 31, 2020. This concludes our prepared remarks.

Operator, could you please open the line for questions?.

Our first question comes from Brian Abrahams with RBC Capital Markets..

Hey, guys. Thanks so much for taking my questions and congratulations on all the progress. I guess, maybe starting with the existing indications, schizophrenia, you mentioned that you are seeing some incremental improvements in market conditions.

I was wondering if you could expand on that a little bit? I guess I am curious to what degree are you seeing any very recent changes in the delivery of psychiatric care with the pandemic waning now and just how much persistence do you expect telehealth to have as you are sort of thinking about navigating any longer term fundamental changes to the overall environment and sort of how you manage through physician behaviors and potential switching?.

Hi, Brian. Thanks for the question. I will ask Mark to address those, please..

Yes, sure, Sharon. Hi, Brian. Good question. Yes. I would say the two main areas when we say that we have seen incremental improvements in market conditions more recently, January and February were very challenging as cases of COVID rose as we moved into March and then into April caseload began to come down, the country is starting to open back up.

And we are starting to see some improvements in the number of patient’s visits for schizophrenia patients coming back for their appointments. We are seeing our sales force incrementally be able to gain access in physician offices and in clinics, but we are still not back to pre-COVID levels in both of those.

We think that we are optimistic that we are going to continue to see these incremental improvements for a while. And then in the second half of the year, we think that’s when we are going to see the greatest advances in market conditions. The one area that has persisted has been the use of telepsychiatry.

So, this is an area that psychiatrists adopted quickly. And throughout the pandemic, they have been maintaining the percent of visits through telepsychiatry at about the same level, about 50% of the visits.

We do expect, as conditions improve, that the degree to which telemedicine is used in psychiatry will begin to come down, but there will probably be some persistence that remains with telemedicine.

Of course, it’s difficult to know what’s going to happen with COVID and difficult to know what’s going to happen with reimbursement for telemedicine, but we would expect that, that would begin to come down back more towards baseline in the second half of the year..

Got it. That’s really helpful. Thanks Mark. And then on the deuterated lumateperone program, you talked a little bit about the PK profile there.

Can you also talk about how maybe any differences there in the receptor profile such as on D1 or mu might be guiding your decision to move that into dementia-related behavioral disorders and then maybe just quickly remind us on the IP for that? I will hop back into queue. Thanks..

Yes. Thanks, Brian. I think 1284, the receptor profile and the PK we are going to present that data at a medical meeting. So, I think I will leave it for right now, suffice it to say that we believe that it is advantageous for the indications that we are pursuing, just to remind you.

We have said that 1284 quickly is absorbed and is present in the circulatory system and that we have good PK in the normal healthy volunteers and in the elderly population. I would not look at – there isn’t mu activity here. So, I think you are confusing that with ITI-333. So – and then you asked one more question, the IP.

The IP is – and we certainly don’t have the entire patent prosecution portfolio yet that the patents that have issued going to the 2040s..

Got it. That’s super helpful. Thanks, Sharon..

Our next question comes from Jessica Fye with JPMorgan..

Hi, guys. Good morning. Thanks so much for taking my question.

You said that you are working on increasing access for CAPLYTA in the commercial channel, what’s your current commercial coverage? And what’s your goal for commercial coverage either to get to before or shortly after the approval in bipolar depression? Also, what’s the payer mix in bipolar depressions?.

Mark?.

Yes, sure, Sharon. Thanks, Jessica, for the question. Yes, I’ll start with your second part of your question first.

The payer mix in bipolar depression is different than it is from schizophrenia, as we’ve been communicating in the past in schizophrenia, roughly 70% to 85% of all schizophrenia prescriptions flow through the government channels, either Medicaid or Medicare Part D.

With bipolar depression being a different condition, you see a lot more of those prescriptions coming through the commercial channel. That doesn’t mean that there aren’t significant prescription levels coming through Medicaid and Medicare for bipolar depression, but we will see an increase in commercial.

As far as our access, our focus because of that dynamic for schizophrenia has really been to prioritize the Medicare Part D and state Medicaid channels where we have over 95% access to cap light in both of those channels. With commercial, it’s in the – between 50% and 60%, and we’ve made really good progress there.

And we will be focusing during year, leading up to bipolar depression and shortly thereafter to get the commercial access up to the same levels that we currently have for Medicaid and Medicare as that becomes more important in bipolar depression..

Okay, great. And you also talked about expanding the sales team for the bipolar depression launch.

Can you elaborate on that a little bit?.

Yes, sure. So the prevalence of bipolar depression is much greater than it is for schizophrenia. So that means there are more patients, and therefore, more physicians who care for those patients.

So we expect to see and expansion of our target audience size from about 23,000 today with schizophrenia, about doubling to about 44,000 once we have the bipolar depression indication now. There is a good degree of overlap in the prescribers of schizophrenia.

So the good news is virtually all of the 23,000 prescribers that we currently target for schizophrenia. Also treat high levels of bipolar depression.

So we will be able to leverage our existing footprint, our existing infrastructure to reach those physicians, but the additional 20,000 or so physicians who treat high levels of bipolar depression patients, but don’t treat schizophrenia. It’s for those physicians that will be expanding our sales force prior to the approval.

We don’t anticipate expanding the sales force by 2x, which you might expect with the doubling of the size of the target audience. But it will be a significant expansion.

And we don’t feel we will need to double the size of the sales force because we do believe some of the changes in the commercialization model that we’ve seen during the pandemic, where physicians like to receive their information and be educated in a mix of ways, both in person, which will continue, but also now even more to a greater extent, virtually and through digital means.

We think we will be able to have a more efficient sales force with a greater number of targets. And therefore, we won’t have to double the size of the sales force, but there will be a significant expansion, and we will be highly competitive at those levels with the existing companies that have products indicated for bipolar depression..

Okay, great. And maybe just the last one, I apologize if I missed this in prepared remarks.

Do you think in the past, you’ve indicated a comfort with current consensus, which, if I look at Bloomberg right now, looks slightly over $100 million for CAPLYTA this year? Are you still comfortable with consensus estimates?.

So I’ll start on that and then I will ask if Mark has anything to add to it to do so. We believe we have a great product, a great team, and we’re confident of CAPLYTA commercial success and of our ability to execute and our execution. We are comfortable with the current consensus for the year.

Of course, it depends on the rate of COVID recovery and particularly as it relates to the return of schizophrenia patients to office visits. So as Mark mentioned, some of the offices are opening up, the community mental health centers are seeing more patients. They are starting to allow people in.

And of course, we’re dependent upon the patient population we treat. Schizophrenics, which is a fragile patient population and to they are returning to doctors’ offices. With that, we are comfortable with the current consensus for the year..

Got it. Thank you..

Our next question comes from Charles Duncan with Cantor Fitzgerald..

Hi, Sharon and team, thanks for taking the question and congrats on good quarter progress. I wanted to ask you, first of all, Mark, a quick question regarding kind of the survey work that you’ve done.

In terms of the importance of lack of weight gain and extrapyramidal side effects etcetera, being more important for BPB 1 and 2 versus say, schizophrenia in terms of prescriber decision-making.

I guess I’m wondering, are you specifically asking those questions of current prescribers or of prescribers that have not yet prescribed CAPLYTA? And what is the awareness of calculate for in terms of its profile for those not current prescribers?.

Yes. Thanks, Charles. Good question. So when we do our market research for new indications like bipolar depression, we go out to physicians who are high prescribers within that condition, whether they are current prescribers of CAPLYTA or not. So our market research would include a mix of both of those types of prescribers. And you’re absolutely right.

When we do that, and we talk about what are the most important treatment drivers for them when considering what antipsychotic that choose to treat a patient with bipolar depression. Obviously, efficacy is very important to them. That’s something that comes up right away.

But very quickly, safety and tolerability in particular, weight gain, but also metabolic disturbances, movement disorders, etcetera, are also very important in their treatment decisions.

And when in a market research setting, we then put the clinical data from lumateperone in front of them and ask them to rate the performance of CAPLYTA and their likelihood to prescribe for that patient type in the future. They raise the product very highly.

They see the strong efficacy in the two clinical trials they see the differentiated safety and tolerability profile.

If they are familiar with CAPLYTA already, they see that the safety and tolerability in the bipolar depression trials was essentially replicated from what we saw in the schizophrenia trials, and that all leads to a very high intent to prescribe in bipolar depression for these prescribers..

That’s helpful, Mark.

And then just sticking with prescriber dynamics in the first quarter versus what you’re seeing in the second quarter thus far, how do you feel about qualitatively about breadth versus depth in terms of prescribers within a practice versus broadening the number of prescribers?.

Yes. Good question, Charles. And we continue to be pleased with what we’re seeing in both breadth of prescribing as well as depth of prescribing. And we continue our marketing efforts against both of those dynamics. So we continue to add significantly new prescribers each week. And the existing prescribers, we continue to see the depth in increasing.

So I’d characterize it as at this stage of the launch, we feel very good about what we’re seeing there, and we’re going to continue our efforts in both of those areas..

Okay. Last question for Sharon, in terms of the pipeline, I am really intrigued with the broadening pipeline, particularly wanted ask you today about 214, although interest in the rest of the pipeline as well.

But in terms of 214 or lurasidone, I guess I am wondering, in terms of the PD indication, are you thinking about trying that first in early-stage patients or in patients that are on – already on dopamine therapy. And given the mechanism, it would seem to me that there is potential used beyond PD.

I’m wondering if you could provide some thoughts on that?.

Sure. Thanks for the question, Charles. So in our Phase 1/2 study, these were patients who were on what they and their physicians believed, were optimized treatment so these are not very early stage patients because, of course, they are not on these meds yet when they are very early stage.

So I think that while we do believe that our PDE1 inhibitors may, in fact, have potential to be disease modifying. We are first testing them and helping patients with their motor disturbances and the dyskinesias, which just to remind you, these dyskinesias are caused by the medicines that they are taking.

So we also do believe, if you remember back to our preclinical data with our PDE1 inhibitors, we very effectively treated their cognitive deficits, either early or late, either recall or retained. So we believe that there is a potential for treating cognitive deficits as well in this patient population.

And lastly, as we have shown now, both in brain with the ability to prevent neuroinflammation by preventing activation in the brain and in the periphery by preventing the recruitment of macrophages to tumors that we can have an effect on these populations of cells as well. So – and we think all of that comes together in Parkinson’s disease.

In fact, the neuroinflammatory effects, the progression of disease. cognitive deficits you see in this patient population and of course, their motor deficits and their dyskinesias..

Okay, thanks. Thanks for taking my questions..

Our next question comes from Umer Raffat with Evercore ISI..

Hi, this is Bo for Umer. Thanks you for taking our questions. First, could you remind us what do you expect for the duration of therapy in schizophrenia and bipolar monotherapy and bipolar adjunct therapy? We understand that Dr. McIntyre at the FDA event. I mentioned that Study 402 have very low drop off rate.

If you could give us some color on that, really appreciate it. And second is on your ex U.S. commercial strategy. Are you waiting for the bipolar sNDA approval to consider ex U.S. partnership or you are already in discussion? Thank you..

Thanks. I’m not sure I understand your question on duration of therapy for this class of drugs, all studies are done as short-term studies. Both schizophrenia and bipolar depression patients remain on their drugs. For very long periods of time, it’s AR compliant and if they don’t dropout due to side effects.

So if that doesn’t answer your question, then I would ask maybe you could rephrase it or say it again. And then I’m now forgetting your second question.

Can you ask that one again please, Bo?.

Sure. The second question is on the ex U.S. partnership..

Right. Sorry. Yes, right. So we will partner ex-U.S., I think we are first focused on our approval in the U.S. for bipolar depression. But you will see us partnering in other parts of the world..

Thank you very much.

And could you give us some color on the dropout rate in the Study 402?.

I can’t remember it off the top of my head. I don’t know Suresh, if you remember it, or we can look it up and get back to you later in this call or after the call..

Thank you very much..

But it was low. Yes. Okay..

Our next question comes from Marc Goodman with SVB Leerink..

Hi. Thanks for taking my question. This is Rudy on the line for Marc. So I have two quick questions.

First, can you provide some color on the gross tonight and the inventory changes in the quarter? And secondly, regarding the long-acting injectable study, just curious what data should we expect from the ongoing study and what are net steps to move into a pivotal trial? Thanks..

So I’ll take the long-acting injectable question, but I’ll wait for Larry to tell you about the gross to net first..

Okay, thank you. Thanks for the question. As you know, we’ve got several quarters of experience with gross to net for CAPLYTA. And going forward for the balance of 2021, we expect that gross to net to be in the range of the mid-20s to the low 30s hopefully, that’s helpful..

Yes, that works. Thanks..

And then I will take the long-acting injectable question. So right now, we are in the single ascending dose study. And what we hope to get to that is, of course, safety and tolerability as well as the PK, meaning that we have a sustained PK value in the range that we’re seeing for the oral therapy.

Following this study, we would be doing a multiple ascending dose study. So we expect this data on the single ascending dose study later this year. We would then begin the multiple ascending dose study, followed by – we have an agreement with the FDA for one efficacy study prior to application for approval..

Got it. That’s very helpful. Thanks for the color..

Our next question comes from Andrew Tsai with Jefferies..

Hi, thanks. Good morning and congrats on all the progress. So my first question is just on the filing for bipolar depression.

Did the FDA happen to mention anything perhaps in your day 74 letter about their thoughts on whether to host an AdCom or I understand the FDA can do whatever it wants, but would it be reasonable for investors to rule out that scenario?.

Hi, Andrew, I think as we’ve seen over time, I would never rule out anything about anything when it comes to drug development and approval. Our Day 74 letter did not address an AdCom..

Okay, thanks. And my second question is on the ongoing sales of CAPLYTA. I mean, a competitor recently reported sales for their branded anti-psychotics that missed consensus by get amount. So do you have any thoughts what is going on in the overall marketplace and why CAPLYTA seemingly isn’t being affected as much as the other competing drugs? Thanks..

Mark, do you want to take that and then I’ll add if need be?.

Yes, absolutely. And thanks, Andrew, for the question.

Yes, we have, as I said in my proactive remarks, we have been very pleased with the steady progress that we’re making, the 23% quarter-over-quarter total prescription growth came at a time, a very challenging market conditions, when you look at the overall anti-psychotic market during that same time period that we grew 23%, that market actually declined slightly and the branded market declined even more than that.

And as I think you’re well aware, there is some seasonality associated with that. But I think the majority of that was due to the challenging COVID conditions that we saw, especially in January and February when the caseload really rose to a very high level. Now we have seen recent incremental improvements in those market conditions.

We are seeing higher level of patient visits. We are seeing some better access for sales representatives. But that’s coming slowly during this quarter. We do think as the country continues to open that we will see greater advancements in the second half of the year, but the first quarter was a challenging one from a COVID perspective.

And I think that’s what you’re seeing reflected in the overall prescription market for the anti-psychotics. So we were pleased. We think we executed well in this environment. We think we have a great product. The product continues to be very well received.

We’re getting great feedback from physicians in our market research surveys and anecdotally through our sales force. So we do expect to see that continued quarter-over-quarter prescription growth and revenue growth. And the magnitude of that depends on the rate of the COVID recovery.

How schizophrenia patients come back, the access of our sales representatives, but we feel good about how we’re executing in this environment. So I hope that’s helpful..

I’d like to just return to Andrew’s question before we go on to the next one because I’m not sure I gave you a complete answer. The real answer is that at the present time, we have no indication that we will have an AdCom.

And we do believe that our application is straightforward and having said that, as I said before, our letter didn’t have any information regarding an AdCom..

Perfect. Thank you..

Our next question comes from Graig Suvannavejh with Goldman Sachs..

Hi, this is Nancy on for Graig. Thank you for taking my questions. So, on 333 in opioid disorder, if you could get a sense about the ideal results were just like from that trial or is there a benchmark that you are looking for? Thank you..

I am sorry you blanked out right at the important part of the question. I know it was something about 333, but I don’t know what you were – you then went fuzzy.

Can you repeat it?.

Yes, sure.

So, what would the ideal results look like for the Phase 1 trial of ITI-333 in opioid disorder? Is there a benchmark that you are looking for?.

Well, yes. So, obviously, it’s extremely important that you demonstrate safety and tolerability. So, that is overall extremely important and then of course the PK.

So, this is a single ascending dose study and we started very low in dose and we have been escalating the dose through the different cohorts and we have now completed several cohorts and obviously looking to continue seeing safety and tolerability we have been seeing and to measure the pharmacokinetics and then we expect the results from this study by year end.

And then we would go into a multiple ascending dose study..

Okay, thank you..

Our next question comes from Ashwani Verma with Bank of America..

Hi, thanks for taking my question and congrats on the progress. So, I had just one quick one though. I wanted to ask about the CAPLYTA’s script growth trends. Were there any extraneous factors impacting the 1Q aside from COVID? I asked that because the sequential growth went from 74% in 4Q to 23% in 1Q.

And do you think this kind of growth will bounce back from 1Q levels as I realize that you need at least 23% growth for the remainder of the year to hit the consensus?.

So Mark, maybe you could take that and you can talk about the anti-psychotics in general, what we have seen..

Yes. Good question, Ash. And yes, I think in the overall anti-psychotic market the first quarter of this year versus the fourth quarter of last year, there was actually a slight decline in the number of prescriptions. And when you look at the oral branded market, it was a more significant decline overall.

So, during that time, CAPLYTA was able to grow at 23%.

I think what you see in the first quarter is a combination of some seasonal effect, where patients are required to get reauthorization on prior authorizations, you see some impact on revenues of increased gross to net for certain products, because there is more out-of-pocket payment assistance provided to patients.

Now, what I would say is with CAPLYTA is we are affected to a lesser degree by those things, because our predominant patient type is the dual-eligible Medicare patient that is not exposed to high deductible insurance plans or to a little bit later going into the donut hole or exempt from that. So we are not hit on the revenue side from that.

On the prescription side, CAPLYTA is subject to some of the same reauthorization seasonal impact that you see in the first quarter that will begin to go away in the second quarter and get better as the year goes on. And so, we do expect to see continued quarter-over-quarter growth in prescriptions in revenues for CAPLYTA.

And as I mentioned, we have seen some incremental improvements recently in March, in April to the market conditions due to COVID. We expect that to continue, but we expect to see the greatest advancements there in the second half of the year and that’s when we believe we will see further prescription acceleration.

But again, we feel good about the product, how well it’s being received. We feel good about how well the team is executing even during challenging market conditions and we look forward to those conditions improving and really having the opportunity to drive prescription growth for CAPLYTA at even greater extent..

Yes, got it. Thank you..

That concludes today’s question-and-answer session. I’d like to turn the call back to Dr. Mates for closing remarks..

Thank you everyone for participating on today’s call. We look forward to updating you as we get updated and we look forward to bringing new medicines to patients and to our PDUFA date for bipolar depression. We are very excited about that here at Intra-Cellular Therapies. Operator, you can now disconnect..

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect..