Alpha Cognition Inc. Q3 FY2025 Earnings Call

Greetings. Welcome to Alpha Cognition's Earnings Conference Call. Please note that this conference is being recorded. I will now turn the conference over to Henry Du, Interim CFO. Thank you. You may begin.

Thank you, Vaughn. Good afternoon, everyone, and thank you for joining us today for Alpha Cognition's Third Quarter Financial Results Conference Call. Today, after the close of the market, the company issued a press release announcing these results. On the call with me today are Alpha Cognition Chief Executive Officer, Michael McFadden; and Chief Operating Officer, Lauren D’Angelo. Today's call is being made available via the Investors section of the company's website at www.alphacognition.com. During the course of this call, the management may make certain forward-looking statements regarding future events and the company's future performance. These forward-looking statements reflect Alpha Cognition's current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's latest SEC filings. Actual results may differ materially from those projected in these forward-looking statements. For the benefit of those of you who may be listening to the replay, this call is being held and recorded on November 13, 2025. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press releases and current filings with the SEC. Alpha Cognition declines any obligation to update these forward-looking statements, except as required by applicable securities laws. I'll now turn the call over to Michael.

Thank you, Henry. Good afternoon, everyone, and thanks for taking the time to join us on today's call. This call marks our second quarter of earnings following the commercial launch of ZUNVEYL for the treatment of mild to moderate Alzheimer's disease. The third quarter of 2025 was characterized by sales growth of ZUNVEYL, continued engagement in the long-term care segment of the market, additional pricing action on ZUNVEYL, progress with our business development partner, CMS Pharma, and additional publications that highlight ZUNVEYL data and the Alzheimer's market opportunity. Post close of the quarter, the company raised additional capital that strengthened its balance sheet and will allow the company to invest in a significant growth opportunity that has emerged with symptom management of Alzheimer's disease. The capital will be used to accelerate growth and invest in sales, marketing and research for ZUNVEYL in treating behavioral symptoms that often emerge with Alzheimer's. During the quarter, the company made substantial progress on our commercial launch. The sales and marketing team has made contacts with over 1,850 prescribers in the long-term care market, and we saw prescriptions written in over 500 nursing homes. Launch to date, we've seen duplicative prescriptions written in 70% of these nursing homes, which is a strong indicator of product trial. We expect new and duplicative home numbers to rise significantly in the coming quarters. Regarding clinical performance, ZUNVEYL appears to be performing well with anecdotal reports of cognition improvement, behavioral reduction or amelioration and continued limited reports of adverse events. Reported GI adverse events continue to be in the low single digits, indicative of a well-tolerated medication. One of the company's focuses in 2025 has been to share medical information that provides rationale for ZUNVEYL treatment of Alzheimer's. This quarter, the medical team had 7 abstracts accepted for publication with 3 poster presentations made to LTC Pharmacy at ASCP. This is the Association of Consultant Pharmacists in October. Two poster presentations were made to psychiatrists and neuroscientists at the Neuroscience Education Institute last week, and 2 poster presentations will be made to Alzheimer's researchers as the clinical trials for Alzheimer's Disease, or CTAD in December. Our medical team continues to publish compelling data in the Alzheimer's segment regarding cognition and behavioral symptoms. Regarding research and development, the company will initiate 2 studies in a long-term care setting, one in Q4 of 2025 and one in Q1 of 2026. The 2 studies, which we call CONVERGE and BEACON will assess ZUNVEYL cognitive benefits, tolerability, effects on sleep and behaviors, and utilization parameters like polypharmacy. These studies will provide critical data for ZUNVEYL, and the patient population for our commercialization focus. We anticipate CONVERGE will complete in Q3 of 2026 and BEACON will complete in Q4 2026. Both of these studies are lower-cost studies, which are accounted for in our current spend guidance for this year and in 2026. The company will also initiate a prospective registry trial in Q1 of 2026 called RESOLVE. That will provide valuable data on ZUNVEYL efficacy in treating behaviors that occur with Alzheimer's disease. The trial will also assess ZUNVEYL tolerability and caregiver burden. These are important measures all providers consider when choosing a treatment. And we think the data will be instrumental for ZUNVEYL positioning with physicians and payers. More information will be communicated about the registry trial in Q1. From a business development perspective, our partner, CMS, filed in China for approval and the file was accepted for review. We anticipate the 18-month review process will apply to our application and the approval could occur at the end of 2026. We also continue to advance our sublingual formulation and anticipate formulation and tasting work to be completed in Q1 of 2026. The company plans to run a comparative PK study versus existing formulations, and we'll use this data as a basis for submission of an IND in Q3 of 2026. The company continues to manage our expenses judiciously while preparing to capitalize on emerging opportunities in the long-term care market. Chief among these is optimally positioning ZUNVEYL, which has clinically meaningful benefits across both cognitive and behavioral symptoms associated with Alzheimer's. Lauren will discuss our commercialization process momentarily, but first, Henry will speak to the financials for the company.

Thank you, Michael. Good afternoon, everyone, and thanks for joining us today. As I review our third quarter 2025 results, please refer to today's press release and Form 10-Q. So let's start with the numbers. For the quarter, we generated total revenue of $2.8 million, driven by $2.3 million in net product sales from our lead commercial product, ZUNVEYL, and $507,000 in licensing revenue from our collaboration with CMS. These results show encouraging early traction and lay a solid foundation for scalable growth in the quarters ahead. Total operating expenses were $8.2 million, including $633,000 of cost of goods sold and cost of revenues and $7.5 million in operating expenses compared to $2.5 million of OpEx in Q3 of last year. The increase mainly reflects higher SG&A costs as we ramped up our commercial launch activities for ZUNVEYL and expanded our operations to support growth. That resulted in an operating loss of $5.3 million versus $2.5 million in the same period of 2024. Turning to net income performance. We reported a net loss of $1.3 million or $0.08 basic loss per share and $0.30 diluted loss per share compared with a net loss of $1.9 million or $0.31 per share basic and diluted last year. The improvement reflects a $3.7 million noncash gain from changes in the fair value of derivative liabilities, along with $378,000 in interest income for the quarter. Now moving on to the balance sheet, where we remain well capitalized. As of September 30, we held $35.4 million in unrestricted cash and cash equivalents, which does not include approximately $38 million in net proceeds raised in October through our equity offering and overallotment exercise. Combined, these resources provide a strong balance sheet and an operational runway that extends well into 2027, giving us the flexibility to execute on our commercial and corporate priorities with confidence. Lastly, a brief update on guidance. Looking ahead, while we're not providing formal revenue guidance today, we expect continued sequential growth in ZUNVEYL sales as awareness and payer access expand through 2026. From an expense perspective, we now expect full year 2025 operating expenses to be in the range of $28 million to $30 million. That's a reduction from prior guidance, reflecting our ongoing focus on cost discipline, operational efficiency and prudent resource allocation. Areas of concentration were contract negotiations, reassessment of marketing spend and delaying the hiring of certain positions that we believe will be more cost effective to outsource in the near term. So overall, the third quarter was a period of continued momentum, highlighted by steady revenue growth from ZUNVEYL and a solid financial position. We're encouraged by our early market progress. And as we look forward to the remainder of the year, our team remains focused on disciplined execution, sustainable growth and creating long-term value for our shareholders. Thank you. I will now turn the call over to Lauren to discuss commercial progress.

Thanks, Henry. The third quarter reflected continued strong momentum in the U.S. rollout of ZUNVEYL within the long-term care market. Following a successful launch earlier this year, Q3 results show sustained acceleration in demand and prescriber adoption, reinforcing ZUNVEYL's growing role in Alzheimer's disease management. We delivered another quarter of robust growth. Ex-factory purchases rose 44% versus Q2, increasing from 2,640 to 3,808 bottles. The company believes this does reflect increased levels of inventory from multiple wholesalers and may have some impact on Q4 purchases. Demand sales bottles dispensed grew even faster, up 102% from quarter 2. Importantly, we are seeing double-digit growth month-over-month since June. Growth was broad-based across all regions, reflecting deeper facility engagement and rising prescriber confidence. Fulfillment rates remain high and patient titration and persistence continue to meet expectations. Our commercial footprint continues to expand rapidly. We engaged 2,038 homes in Q3, bringing our total reach launch to date to 2,942 unique homes. Of these, 605 homes have ordered ZUNVEYL with 70% of those homes repeat ordering and 15% new orders in September. Additionally, we saw a 50-50 split between 5 milligrams and 10-milligram orders in Q3, which demonstrates the strong tolerability profile of our drug as patients are consistently able to reach the therapeutic dose, an outcome that has not been possible with current treatment options. Our field team directly engaged with 1,850 prescribers in Q3, bringing total launch-to-date engagements to 2,630. 576 prescribers wrote orders in Q3, a 55% increase from Q2 with 62% of them writing multiple orders, a strong signal of growing confidence in clinical fit. These metrics highlight deepening engagement and sustained momentum across our prescriber base. Market access continues to advance as planned. Following our national health plan agreement earlier this year, we focused on operationalizing coverage and expanding regional payer discussions. 2027 Medicare Part D submissions remain on track. For the planned contract previously announced, the company has seen 15% of business cover ZUNVEYL with no restriction. We have no additional visibility for this PBM regarding when other plans may make a formulary decision for ZUNVEYL. The company anticipates a second PBM payer contract to execute by the end of 2025, and anticipates that it will take 2 quarters to realize unrestricted coverage from that business. We also executed a strategic WACC adjustment to $820.15 per month, aligning pricing with ZUNVEYL differentiated value and CNS benchmarks. Payer feedback confirms the price remains competitive within long-term care formularies. Our field and operations teams remain fully deployed and highly effective with an average of 16 years of industry experience, including 10 years in long-term care, our reps are driving meaningful clinical education and adoption across this complex channel. We've maintained strong product availability and fulfillment rates. Operational learnings from payer interactions are streamlining prior authorization processes, improving speed to therapy and patient access. We have expanded our reimbursement team to better support homes in processing prior authorizations, enabling closer alignment with customers and allowing us to anticipate and address challenges more quickly. The organization continues to execute with financial discipline, ensuring every pricing, promotional, and resource decision supports long-term value creation. Our marketing remained focused on HCP education and brand reinforcement. Digital and in-person initiatives continue to emphasize ZUNVEYL's differentiated clinical profile, particularly its label consistent benefits across multiple behavioral domains measured by the neuropsychiatric inventory. Feedback on our refined clinical messaging and titration support toolkit has been highly positive, reinforcing prescriber confidence and proper initiation. As we enter Q4 and prepare for 2026, our priorities remain clear and consistent: expand ZUNVEYL's presence across additional long-term care homes, deepen relationships with high potential prescribers, optimize payer access and approval timelines, and sustain disciplined execution across all functions. ZUNVEYL's accelerating adoption, durable demand growth, and expanding payer access underscore our strong commercial foundation and exceptional team execution. We remain confident in our ability to drive continued growth and broaden access for patients and caregivers in the quarters ahead. With that, I'll turn it over to Michael.

Thank you. In summary, the team is focused on execution, executing more calls with high-value HCP targets, managing the current restrictions with health plans and pulling through contracts with others. We're focused on increasing prescriptions by home and by prescriber to take advantage of the opportunity we see for ZUNVEYL in the long-term care segment. Our business development team has worked with our partner in Asia to file ZUNVEYL ahead of schedule and to deliver what we believe will be several 2026 approvals that will add additional revenues for the company. The company believes we have a disruptive opportunity with ZUNVEYL. We will focus in the next quarters on selling efforts and continued financial discipline. We'll now take questions.

Our first question comes from Ram Selvaraju from H.C. Wainwright.

This is Eduardo speaking on behalf of Ram. Thank you for the information on the commercial development. It was challenging to capture all the details. I wanted to check on the current status of the contracting discussions. How many GPOs have finalized agreements to cover ZUNVEYL? You mentioned the second one, so I assume there's one already and possibly the second one will be finalized by the end of the year. Could you provide a bit more detail on that?

We're very focused on the key plans in the long-term care sector. There are four main Medicare plans that we are targeting, and we have one of those already under contract. We're currently working with the downstream accounts to ensure they include ZUNVEYL in their coverage. We're in the final stages of securing another contract with one of the larger PBMs, which we aim to complete by the end of this quarter. As we approach the first and second quarters of next year, we will continue engaging with the downstream accounts and conducting regional payer calls to ensure they honor the contract and provide coverage for ZUNVEYL. Each of these four plans is expected to cover approximately 25% of lives in long-term care. We're optimistic about our progress as we prepare for the launch. We've secured one contract and are working to finalize another by the end of this quarter, with plans to activate them in the following quarters. We're also maintaining negotiations with the other two plans.

Yes, that was really helpful. And you mentioned 15% coverage, 15% without restriction right now?

Yes. So what we have visibility to, so when you think about the plan that we signed last quarter, what happens is it takes 6 to 9 months for the downstream plans to adopt the contract. What we know is about 15% of those have adopted their processing claims for ZUNVEYL without any restriction. We don't have visibility into the other plans yet, and we'll start to see more of that over the next couple of quarters.

Got it. Could you provide more details on the number of unique prescribers for ZUNVEYL, including the changes and the breakdown between repeat and new prescribers?

Sure. In Q3, we had 576 prescribers, and 62% of them placed multiple orders. To date, 605 homes have ordered ZUNVEYL, with 70% of those homes making repeat orders. Additionally, 15% of new homes started prescribing in September, the last month of the quarter. We are observing a significant amount of repeat orders and receiving positive feedback from physicians. They tend to start slowly, trying the product, but once they see results in one or two patients, they begin to order more. This initial phase of prescribing leads to increased usage over time. It's noteworthy that we're experiencing month-over-month double-digit growth, and many prescribers are reaching the 10-milligram dose. This is crucial because, historically, most patients have been on subtherapeutic doses. Currently, half of our prescriptions are at the 10-milligram dose, which is unprecedented in this market, indicating that the drug is effective as intended.

Great. And if I could have one more on when do you expect to start this related to royalty revenue from China?

Yes, probably not until '27 from Mainland China, but we should have some smaller Asian countries obtain approval in 2026. And from those countries, we would be launching immediately upon approval. So the company would realize revenue in the quarter launch from each of those countries.

Our next question comes from Boris Peaker with Titan Partners.

Great. First, I just want to say congratulations on the excellent sales growth here. Maybe kind of speaking of that, could you comment on what are the key marketing messages that are maybe resonating with prescribers? And what is the most common pushback that you get?

It's a great question. I would say that we have a variety of customers in the home care space, and certain key messages really resonate with each of them. Overall, we're receiving a lot of positive feedback regarding ZUNVEYL's effects on behaviors. As we've mentioned in previous quarters, we adjusted our messaging based on early insights. We learned that prescribers noticed a significant impact on patients, particularly those with mild to moderate Alzheimer's. Consequently, we emphasized this point in our communications. We have data supporting the positive effects of ZUNVEYL on behaviors, which is one of our strongest messages. Additionally, many providers are very interested in the lack of impact on sleep, which is another key message for us. We anticipated this during the launch since market leader Donepezil is often linked to insomnia and sleep disorders, making our message about no insomnia particularly effective. These two points are our top messages, but overall, the range of benefits that ZUNVEYL offers is highly valuable for all these customers dealing with this specific patient population.

Great. And in terms of pushback?

Yes. We are not experiencing any significant pushback regarding ZUNVEYL messaging. Our main challenge lies in addressing payer obstacles and assisting prescribers and homes with prior authorizations when necessary. In terms of messaging and the drug's working experience, ZUNVEYL is performing better than anticipated. Our primary concern is finding ways to support the prior authorization process to ensure the drug receives approval. This is why we have focused on expanding our reimbursement support team. We have learned a lot in a short time about how to provide this assistance, and that is where our attention is currently directed. We have increased our team size, collaborated with providers, and offered support to help them complete prior authorizations correctly for the drug's approval. When prior authorizations are completed properly, there is a high rate of approvals, and that is where our team is concentrating efforts right now.

Got it. And my last question, maybe on the WACC adjustment you were talking about. Can you please explain exactly maybe I missed the details of that and kind of what the impact is on the gross to net from that and kind of your revenue per patient?

We implemented a price increase because we observed that the long-term care market, particularly for CNS products, supports the value of our offerings, allowing us to make this adjustment without facing any resistance. Our gross-to-net ratios remain very high as we've indicated, with only one contract experiencing about a 15% offer with no restrictions. Thus, our gross-to-net ratios continue to be very strong at this time. Michael, would you like to add anything?

Yes, I'll add. I assume a plus 9% short term on 9% on the impact of that price and at steady state, we still anticipate we'll have a $500 to $550 net price on ZUNVEYL.

Yes, and I think in terms of percentages, gross to net should be in the mid- to upper 20% discount just from a percentage standpoint.

I was hoping we could go back. You mentioned earlier that you're getting about 50% to the 10-milligram dosage. Could you spend a bit more time talking to maybe the difference in demand among the dosages and how that changes as prescribers get more comfortable with the product?

When we launched the product, we initially saw a lot of prescriptions at 5 milligrams due to the 4- to 8-week titration period needed for this vulnerable population. Providers typically start with a lower dose and increase it gradually. We anticipated that the transition to the 10 milligram would occur over time, particularly in Q4 and Q1 of next year, as it usually takes longer for providers to feel comfortable increasing the dose due to historical limitations in treatment options. However, we were pleased to notice that because of the low adverse events, providers are becoming more comfortable with adjusting the dosage quickly. This has led to a 50-50 ratio of dosages in Q3, which happened more rapidly than we had predicted. It seems that physicians are starting at the initial dose, but once they have successfully titrated a few patients to 10 milligrams, they are becoming more confident in doing so for others, reducing the waiting period from 8 weeks to about 4 weeks. This indicates a faster progression to the higher dosage, highlighting the product's tolerability.

Understood. And that's exactly what I was looking for that. And then just one more for me. Maybe how does the sales cycle look? You've been in the market for a couple of quarters now. Is the sales cycle shortening? Is maybe the prescriber interaction to order ratio, number of interactions declining to orders? Maybe any anecdotes of prescribers that have already been made aware of ZUNVEYL before the initial call, anything like that?

Sure. What we're seeing is that with the launch, particularly in long-term care, all providers start slowly. Even those who participated in the studies begin with a few patients to assess effectiveness before gradually expanding their patient base for ZUNVEYL. We've observed that physicians who actively prescribe are accelerating this process more quickly. The initial slow uptake is due to the vulnerable patient population and their historical disappointment with this class of drugs. Once providers start, we notice a faster increase in their patient base. Currently, from a sales perspective, many of our homes are repeat ordering, with 70% having repeat orders, which is a strong metric for a launch brand within just two quarters. For those providers who have tried the product and given it time, the sales process is quicker for them to try it again and use it for more patients. However, for healthcare providers who are unfamiliar with it, it typically takes a couple of months before they are willing to try it, and they will take their time to become comfortable with it.

Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's teleconference as well. We thank you for your participation. Please disconnect your lines, and have a wonderful day.