Earnings Call Transcript - ACOG Q1 2025

Operator, Operator

Greetings and welcome to the Alpha Cognition earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Henry Du, Alpha Cognition's Interim CFO. Thank you. You may begin.

Henry Du, Interim CFO

Thank you, Sachi. Good afternoon, everyone, and thank you for joining us today for Alpha Cognition's first quarter 2025 financial results conference call. Today, after the close of market, the company issued a press release announcing these results. On the call with me 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, 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 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 May 15th, 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. Michael?

Michael McFadden, CEO

Thank you, Henry. Good afternoon, everyone and thanks for taking the time to join us on today's call. This is an exciting quarter for Alpha Cognition, as it marks our first quarter of recorded revenue for ZUNVEYL, our treatment for mild to moderate Alzheimer's disease. The first quarter of 2025 was characterized by a successful ex-U.S. business development deal, an additional U.S. patent approval, and the commercial launch of ZUNVEYL. First, I'll make a few comments on the business development front. We've already made significant progress with our first ex-U.S. partner, CMS Pharmaceuticals, who is representing ZUNVEYL research and development and distribution in China and other Asian territories. We expect our first territory distribution initiation in the second half of 2025 in a small territory and expect regulatory submission for approval in China in Q4 of 2025. The company anticipates modest royalty revenue from the CMS deal in 2026. The company is in advanced discussions with another company in an additional territory and expects an additional business development deal in the latter part of 2025. That deal, if consummated, will generate revenues for Alpha Cognition in 2026. In February, the company received patent notice from the U.S. patent office that our composition of matter patent coated tablets for pH-dependent release of galantamine was approved. That patent adds to the Alpha Cognition patent portfolio and provides additional patent protection through 2044. In April, the patent was accepted in the Orange Book. We've also received notice from FDA that the company requests for a patent extension of an early method of use patent will be extended, and we expect to hear the date of that extension in Q3 of this year. Now regarding our commercialization activities. We believe ZUNVEYL launch is off to a great start. The qualitative feedback is above our expectations and we're hearing positive patient treatment stories that indicate the product works and patients are tolerating ZUNVEYL as our data indicated they would. Prescriptions are being written as early as the first call by our sales team and this tells us the data is compelling and the need to treat is high. We have multiple abstracts accepted for presentation at the upcoming AAIC meeting in July and anticipate additional manuscripts accepted later in the year. Our goals in 2025 with our commercial launch are to establish ZUNVEYL as a core therapy, deliver breadth of prescriptions across nursing homes, and build our prescription base of experience with gerontology groups that will grow exponentially in 2026. We anticipate the approximate size of our team will be fairly consistent year-over-year with single-digit increases in head count possible as the company grows its business or advances its pipeline. We continue to believe the capital the company has raised is sufficient for Alpha Cognition to move to a positive cash flow position in year three, if we execute according to our plan. After Henry provides an update on our financials, Lauren will provide more color on the launch and the metrics we're looking at. Henry?

Henry Du, Interim CFO

Thank you, Michael. Good afternoon, again, everyone. As I review our first quarter results, please refer to today's press release and 10-Q that were filed earlier this afternoon. Starting with our operating results. For the first quarter of 2025, our operating loss declined to $3.7 million versus $4.4 million during the same period in 2024. The improvement was largely attributed to initial net product revenues from ZUNVEYL of $347,000 in the last two weeks of March and recognized licensing revenue of $2.6 million from the company's exclusive licensing agreement with CMS. This was partially offset by an increase in general and administrative costs associated with our commercial launch readiness activities, including hiring of sales force and consultant fees as well as non-cash stock-based compensation expense. Turning to net income performance. For the first quarter of 2025, we reported a net loss of $2 million or $0.13 per share, a decrease of $3 million compared to a loss of $5 million or $0.87 per share in the same quarter last year. This was primarily driven by an increase in interest income and favorable changes in the fair value of derivative liabilities. Now, moving on to the balance sheet. As of March 31, 2025, the company had approximately $45.5 million in unrestricted cash and cash equivalents, primarily due to the cash generated from the fourth quarter 2024 capital raise. Additionally, in the first quarter of 2025, we successfully retired our outstanding $900,000 debt obligation with NLS. As of March 31, 2025, the company maintains a debt-free balance sheet, reinforcing our financial strength and flexibility. The company has a strong balance sheet with sufficient liquidity to launch ZUNVEYL into the long-term care segment of the market. Lastly, a word on guidance. While we are not providing revenue guidance at this time, we are reiterating our full year 2025 expense guidance, which remains in the range of $38 million to $42 million. We continue to believe this range appropriately reflects the investments needed to support our commercial operations and corporate objectives this year. In summary, we made meaningful progress in the first quarter marked by reduced operating and net loss, initial revenue contributions from ZUNVEYL and a strong liquidity position. These results reflect disciplined financial management and early signs of commercial traction. We remain focused on executing our strategic priorities and delivering value to our stakeholders. With that, I will now turn the call over to Lauren to discuss commercial progress. Lauren?

Lauren D'Angelo, COO

Thank you, Henry. I'm pleased to provide an update on our commercial progress following the launch of ZUNVEYL, which is now available nationwide. We officially launched just over a month ago, and I'm excited to report that the early response from the market has been both encouraging and validating. Our commercial strategy was purpose built for the long-term care segment where the need for effective and tolerable Alzheimer's therapies is significant, and ZUNVEYL is already making an impact. As of April 1st, ZUNVEYL became reimbursable by Medicare, a critical milestone for long-term care access. This enables access to our drug in the Medicare system, a required and critical factor in our segment. Despite launching with no payer contracts in place, we've seen that nearly all of the ZUNVEYL orders have been filled successfully with or without a prior authorization. That speaks volumes about both the market demand and the clinical confidence providers already have in ZUNVEYL. The feedback from health care professionals has been overwhelmingly positive. Our sales team is energized and reports that the message around ZUNVEYL's clinical benefits and its differentiation in the space is resonating clearly. So, let's dive into some early launch metrics. As of last Friday, May 9th, just five weeks post-Medicare approval, we've seen approximately 500 bottles ordered, a meaningful indicator of real-world demand and growing confidence among providers. We're also seeing repeat writers, which we take as a strong signal of clinical adoption and satisfaction. In the first month, we can report that 66% of our top-tier long-term care targets have been engaged by our field force with approximately 1,400 unique homes reached. Approximately 100 unique accounts have placed orders, with half of them already reordering, indicating satisfaction with their results. This equates to an average of 17 orders per day in just the first five weeks. Even more importantly, the wholesalers are restocking their initial orders and we have already seen our initial stocking of the 5-milligram dose replenished. And last, but certainly not least, I am pleased to share that we have generated approximately $1 million in net sales through April 30th, just four weeks into the launch. The feedback from clinicians is consistent. They see ZUNVEYL as a much-needed option for long-term care patients, offering the right combination of cognitive benefit, tolerability, and ease of administration. We're also encouraged by the early signals of market access. We've seen minimal restrictions, a strong signal of payer confidence in ZUNVEYL's value proposition. Many plans have implemented a simple or single step prior authorization, making it easier for prescribers in the long-term care setting to initiate therapy without an administrative burden. This level of access without contracts so early in launch is encouraging and supports continued momentum as we expand coverage. We are engaged in conversations with the key plans, and many national and regional plans have indicated they're closely watching our prescription volume and utilization trends before making formulary decisions. We view this as a standard part of the access curve for a new product and remain confident that our early uptake will support broader inclusion over the coming quarters. From a promotional perspective, our multichannel strategy is delivering results. Our digital, promotional, educational programs are underway and early response from the field suggests strong receptivity. We have presented to over 100 health care providers through our virtual webinars to-date. Our medical team has engaged with approximately 150 providers and these interactions have been initiated by the health care provider, demonstrating strong interest from our customers. We know that disrupting entrenched prescribing behaviors in long-term care and working through the initial market access takes time, but these early results show clear momentum and strong execution by our team. With each week, awareness, adoption, and enthusiasm for ZUNVEYL continues to build. Overall, it's been a highly productive first month; we've validated demand, executed our launch plan with precision, and laid a strong foundation for continued growth as we expand access and awareness in the months ahead. I'll now hand it over to Michael for Q&A.

Michael McFadden, CEO

Thank you, Lauren. In summary, the team is excited about the commercial launch of ZUNVEYL. I think you hear that in Lauren's comments today. Qualitative feedback from physicians, pharmacists, and long-term care facilities is supportive of a drug that's both efficacious and well-tolerated. Our physician and pharmacy engagement is very high and our payer restrictions are about as expected. The company believes we have a disruptive opportunity with ZUNVEYL, and we'll focus this quarter on our selling efforts, continuing to exercise financial discipline, and our ex-U.S. operational execution. Operator, we'll now take questions.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. The first question is from Ram Selvaraju from H.C. Wainwright. Please go ahead.

Ram Selvaraju, Analyst

Thanks very much for taking my questions and congratulations on all this impressive progress in a very short period of time. I wanted to ask, first of all, some questions about the commercial metrics that were provided. And if you could maybe give us additional details on some of these fronts, in particular, the following four aspects. Firstly, if you can give us a sense of how many repeat prescribers there are at this point in time? And how you expect that number to evolve going forward? Secondly, if you can give us a sense of the length of time the first patients in, so to speak, have been on therapy and what you expect to be the average length of time patients stay on therapy given the enhanced safety and tolerability profile of this drug relative to other older generation acetylcholinesterase inhibitors? Thirdly, if you could just walk us through the prior authorization requirement for ZUNVEYL as it stands today? And then lastly, not sure whether you would be in a position to do this at this point, but any color and granularity you could give would be helpful. If you can give us a sense of how you expect contracting to evolve over the course of the next three to six months? Thank you.

Lauren D'Angelo, COO

Thank you, Ram.

Michael McFadden, CEO

Lauren, why don't I take the first part of that question and then have you walk through some of the metrics. So, on the length of time patients have been on therapy. We were approved by Medicare for reimbursement on April 1. We had patients on drug as of April 1. Orders were submitted. Patients were initiated on therapy. So, the longest time patients have been on since April 1. Now, we have seen that number increase every week, week-over-week. And now we have patients on a range of one to six weeks. We anticipate the patients, as long as they're benefiting from the efficacy of the drug, and they're seeing the tolerability that we are hearing about thus far, they could be on this drug for the remainder of their life, as Alzheimer's is a debilitating progressive disease. We know that the data shows very clearly these drugs slow the progression of disease; ZUNVEYL minimizes the behaviors that occur with the disease. So, we believe that physicians will keep patients on the drug as long as they're tolerating the drug and it's working for them. I'll mention one other comment. We've had many patients on the drug already. We've had no reports thus far of any adverse events relative to gastrointestinal issues and no adverse events relative to insomnia. Now, it's early, and we may not be hearing all of the adverse event reporting that does exist, but it's very encouraging to us that we've seen so far a very tolerable drug with these patients. I'll turn it over to Lauren to talk about repeat prescriptions and our payer work. Lauren?

Lauren D'Angelo, COO

Sure, thanks, Michael. From an account perspective, we've observed that of the 100 unique accounts that have placed orders for our product, more than half have already reordered. Our initial orders are coming from a small segment of high prescribers, while we anticipate the broader market potential lies with the majority of prescribers who are currently slower to adopt. We've started to see uptake from these middle prescribers, but it may take some time for them to increase their order volume. Fortunately, more than half of the accounts have already made additional purchases. Regarding prior authorization, this has been the best experience I’ve had out of my 20 product launches. While I don’t want to get overly optimistic, we recognize that as demand for our product increases, the authorization requirements may become stricter. You inquired about the specifics of prior authorization; they've been fairly straightforward. I've been tracking the Medicare plans and their respective requirements. About half of these authorizations are simple check-box items, like confirming if the patient has tried a generic or if there is a reason for not using formulary products. Most of the key plans have relatively simple prior authorizations. There are a few that might require patients to have tried a generic first and provide rationale for choosing our drug over a formulary option. However, we haven't encountered the typical requirement to provide extensive proof, which has been a pleasant surprise. In fact, most prior authorizations are straightforward check-box items without the need for documentation. There's only one plan that requires patients to fail two generics. As for our contracting efforts, we are actively engaging the key plans within the Medicare space. As you know, there are five main plans we focus on, and we have been having productive discussions with all of them. Some are taking a wait-and-see approach, which is common as they look to evaluate our initial usage data. We expect to have detailed metrics in the next couple of quarters, and we're optimistic about progressing these contracts. Importantly, we are seeing nearly all prescriptions processed without formal contracts, and we're confident in our ability to succeed in this market without coverage. While we plan to pursue coverage in 2026 to streamline the administrative process, we're satisfied with the current restrictions and the growth potential we anticipate even without coverage. Did we address all the points, Ram? I believe we covered everything.

Ram Selvaraju, Analyst

Yes. There were just three other aspects I was hoping you could talk through, if I may. Firstly, when you talk about the world beyond Medicare, what does that look like? Give us a sense of the commercial plans and the total number of covered lives that we might be talking about as we get beyond Medicare and how relevant that is likely to be for the future of this drug? Secondly, when we talk about the prior authorizations, I'm specifically interested in whether or not you think in the future a prior authorization requirement might emerge that specifically asks whether the patient has previously tried and failed galantamine? Or if you think that's unlikely to develop mainly because we all know the usage patterns of donepezil is far more widely used than galantamine. That doesn't seem very practical, but just wanted to see if you think that's likely to emerge in the future? And then lastly, with respect to the ways in which you might look to promote the drug going forward. Just wanted to see what your thoughts were on two specific aspects, one is sampling as well as the advertising aspect of this? And what specific promotional channel you anticipate is likely to be most appropriate for a drug like this? Thank you.

Lauren D'Angelo, COO

Thank you for the question. In the nursing home setting, approximately 80% of our plans and lives are covered by Medicare Part D. While there are some Medicaid and cash patients, commercial plans play a very minimal role for long-term nursing home residents. Our primary focus currently is on long-term stay patients in nursing homes. As we plan to expand into neurology in the future, we will pursue commercial contracts naturally after establishing ourselves with Medicare and Medicaid. Presently, our emphasis remains on Medicare Part D plans, and we are working with Medicaid, which varies by state in terms of when our coverage will be effective. Many states are not requiring prior authorizations for our drug, and we expect Medicaid coverage to be in effect by the end of May or June. By federal law, access to ZUNVEYL through Medicaid will be available in every state by July 1st. Once we finish our Medicare contracting, we will then turn our attention to commercial plans. As for galantamine, we don't anticipate that it will come up significantly in prior authorization processes, as most patients are currently on donepezil or have had negative experiences with it. Preliminary inquiries are typically about generics rather than specifically about galantamine. Regarding our promotional strategy moving forward, our main focus is executing successfully in the nursing home setting, which requires less promotional spending compared to launching into other markets. We are looking into various alternatives to reach our customers effectively, including digital programs, webinars, and advisory boards for feedback. We are actively participating in vital long-term care conferences. Once we expand into neurology, we plan to incorporate sampling, which isn’t permitted in long-term care settings at the moment. Our current budget is aimed at maximizing our reach within nursing home accounts.

Ram Selvaraju, Analyst

Thank you so much. Exciting stuff.

Operator, Operator

The next question is from Michael Freeman from Raymond James. Please go ahead.

Michael Freeman, Analyst

Good afternoon. Congratulations on the progress you’ve made; it sounds like a fantastic early launch. I'm curious about your focus on long-term care, which seems like a sensible market to begin with for the reasons you've mentioned. Although it's only the first month, have there been any indications of interest from practitioners, patients, or families outside of the long-term care setting who are looking to access the drug?

Lauren D'Angelo, COO

Sure. That's a great question. Yes, we have seen interest beyond long-term care. Our website allows providers and caregivers to request information about the product. We have received outreach from retail settings even before the launch after approval. We engage in conversations for every request we receive. We chose to partner with three large wholesalers to ensure ZUNVEYL is available at any pharmacy nationwide. We expect there to be additional demand, including from physicians who work in long-term care but also operate in typical retail environments. We began receiving inquiries right after we got drug approval, and we're actively following up on those. Our representative will reach out to retail doctors when we receive a request, and our medical team is also heavily involved in this outreach.

Michael Freeman, Analyst

Got you. Okay. Thank you, Lauren. And Michael, you touched on this with the earlier set of questioning. But I wonder if you could provide any color you can, of course, recognizing this is the first month of patients on drug? Any early feedback around? You touched on adverse events. I wonder if there's any commentary around efficacy? Or just like any feedback you're getting from these early patients on drug?

Lauren D'Angelo, COO

Yes, Michael.

Michael McFadden, CEO

I'll speak globally and then maybe, Lauren, I think it'd be really helpful for her to share a couple of patient examples with the group because that's really enthused our team, it enthused our company on what we're hearing specific to patient treatment by the doctors. So, I'll just say globally, we're most excited that we're seeing early efficacy with the drug. We are seeing efficacy at the starting dose, 5 milligrams. We're hearing that from doctors and patients. We have yet to hear a report of an adverse event reported to the company for gastrointestinal issues. Not to say it's not happening, but we would have anticipated to have a number of those reports if the drug was having an impact on GI as doctors are trying the drug for the first time. So, that global feedback enthuses the company a lot and it's above expectations so far for our leadership team and our medical team. Lauren, why don't you share one or two patient stories on what we're hearing because I think that really brings this to life for the group who is listening.

Lauren D'Angelo, COO

Sure. These are some of my favorite examples. I've received a few calls from representatives sharing incredible stories. One impactful story came from a care facility dealing with a particularly challenging patient. The staff had grown accustomed to daily behavioral outbursts at precisely 3:00 P.M., which was when this patient would create significant chaos at the nursing station. This resident was known for her unpleasant behavior, including throwing her phone at staff and other residents, and her family had stopped visiting due to her condition. Initially, the physician was doubtful about trying another Alzheimer's treatment that appeared too good to be true, but he eventually decided to use our product, ZUNVEYL, on this difficult patient. After starting ZUNVEYL, the nurses anticipated the usual 3:00 P.M. incident, but it never happened. This surprised them and raised their concerns, prompting them to search for the patient. They eventually found her calmly conversing with another resident at a table for the first time in over a year. Since then, the facility reported a reduction in her Ativan usage and has encouraged her family to visit again. This is a powerful story that highlights the potential impact of our product, although ZUNVEYL is not indicated for agitation. The facility is now so committed that they are placing more orders. In another case, a patient who was previously taking donepezil and trazodone, often rang her call bell at night and wandered the halls in a daze. After transitioning to ZUNVEYL and stopping donepezil, she finally slept through the night for the first time in years, which significantly enhanced her daytime engagement. Her family has noticed the change and insisted that she must stay on ZUNVEYL. These are just two examples, and I have many more that really illustrate the positive feedback we're getting from the field. We anticipate that as more stories like these come forward, they will generate advocates for ZUNVEYL. While we may encounter challenges with insurance plans and prior authorizations, these early experiences are crucial for building momentum.

Michael Freeman, Analyst

That's great to hear. It's really uplifting. I'm curious, with all the early feedback and information you'll gather over time, do you plan to compile this into a peer-reviewed publication? Are you considering conducting real-world evidence trials or something similar to consolidate this evidence in a single source that showcases the real-world impact of this drug?

Michael McFadden, CEO

Our medical team is currently focused on executing our medical strategy to share insights from the market and our drug findings. We have submitted several abstracts that were accepted for AAIC, with more submissions anticipated for other long-term care medical meetings. This is just the beginning. By the end of the year, we expect to finish a retrospective data analysis that will provide insights into the usage of ZUNVEYL in nursing homes, including the types of patients it is used for and the benefits observed, such as improved sleep without gastrointestinal side effects, as well as addressing patient behaviors. We will have additional data to submit for publication later this year. Furthermore, physicians have expressed interest in submitting case reports based on the positive responses they are observing in their patients, which they believe deserve to be documented in the literature. We will keep an eye out for this information being submitted to journals as well.

Michael Freeman, Analyst

Wonderful. Okay. I look forward to that. Last question is on money. So, I mean this is a relatively soon after your last update. But wondering how you're feeling about your balance sheet and being able to deliver your full long-term care rollout? And how are you thinking about the cash you have bringing the company to potentially breakeven?

Henry Du, Interim CFO

Sure Michael. Thank you. So, we're very comfortable with our balance sheet. We're glad to report that we are debt-free. So, we don't have any kind of interest payments to make and worry about. We're encouraged by ourselves. So, we do feel very comfortable that we can still continue to fund our operations and our commercialization without having to raise any money at the moment.

Michael Freeman, Analyst

Okay. Thank you very much. I'll pass the line.

Michael McFadden, CEO

Thank you, Michael.

Operator, Operator

The next question is from Dave Storms from Stonegate. Please go ahead.

Dave Storms, Analyst

Good evening everyone, and thank you for the chance to ask my questions. Congratulations on all the success so far. I wanted to start by mentioning that I thought I heard in the prepared remarks that you have set targets for your Tier 1 long-term care facilities. Regarding patient penetration in those facilities, what level of penetration do you expect to achieve in the first year?

Lauren D'Angelo, COO

Sure. The simplest way to describe this is that in any given home across the country, particularly in the territories we are marketing, around 70% of patients have Alzheimer's disease. Following an Alzheimer's diagnosis, there is a high treatment rate. So, if we consider a home with 100 patients, 70 would have Alzheimer's. We have observed that about half of those patients are not receiving any treatment; they have previously tried a generic medication but didn't tolerate it or experienced inadequate efficacy. The remaining half are currently on medication, and we expect that over half of these will discontinue treatment by the year's end. As we promote the ZUNVEYL story, doctors are recognizing its suitability for both groups: those not on treatment and those who are having difficulties with their current medications and are looking to switch to ZUNVEYL. Thus, we anticipate significant penetration, as many of those 70 patients with Alzheimer's will eventually be candidates for our drug, either when they stop their current treatment or because more than half have already done so. Does that clarify things?

Dave Storms, Analyst

That's incredibly helpful. Thank you. And just with that given penetration and noting that you've hired a full commercial field team launched ZUNVEYL nationwide. Do you believe the current sales force and infrastructure is sufficient to scale with that market or how should we think about that?

Lauren D'Angelo, COO

Yes. Michael, would you like to respond?

Michael McFadden, CEO

Yes, I'll just say we feel like we have 80% coverage with our current territory alignment with the current sales team that we have. We're always analyzing the market and looking at the response to the market of our promotion. And we could see small single-digit increases in that sales force to further penetrate some markets that are opportunistic, but it won't be a meaningful impact to our spend over the course of 2025.

Dave Storms, Analyst

Understood. Very helpful. Thank you. And then just kind of drilling in a little further. Net revenue for Q1, you mentioned was $347,000 following this March launch. How should we interpret that figure in terms of initial stocking versus maybe the underlying demand?

Lauren D'Angelo, COO

That's a great question. Before our launch, we did minimal stocking at the wholesalers, which sets us apart from other companies where I've experienced excessive stocking. Typically, those companies would stock two to three months of inventory, causing delays in sales due to excess stock. Instead, we opted for a minimal strategy at our major distribution centers, supported by our sales representatives. The good news is that we stocked both 5 milligrams and 10 milligrams. We have already sold out of our 5 milligrams, as doctors may begin prescribing them as early as April 1st or May 1st while increasing doses to 10 milligrams. Therefore, we have completely depleted our initial supply of the 5 milligrams, which have already been reordered multiple times in the past month. Similarly, our initial supply of 10 milligrams is also nearing depletion, and we continue to receive daily orders from wholesalers. Overall, it’s looking very promising, but I can confidently state that our initial supply of 5 milligrams is entirely sold out, and we are close to achieving the same for the 10 milligrams, as we need to manage the demand from titrated patients through the rest of the month from April.

Dave Storms, Analyst

Understood, very helpful. Thank you. One last one for me, if I could. Just zooming out a little bit and thinking about maybe some recent U.S. policy developments. Are you concerned with any impact to the long-term pricing power or formula dynamics in Medicare Advantage and other long-term care plans?

Michael McFadden, CEO

No, we expect to see consistency in the U.S. market, particularly in the Alzheimer's category. Taking a broader view on pricing pressures affecting pharmaceutical companies, there has been significant discussion about tariffs this year. Since we manufacture our product in the U.S., tariffs do not affect us. We source a small percentage of our API from outside the U.S., but this has an insignificant impact on our overall product cost. Therefore, we do not expect our gross margin to be influenced by any tariffs that may be implemented. Regarding reference pricing, there has been considerable chatter this week from the Trump administration, but this was already proposed in 2021 and was subsequently rejected by the courts. We currently lack details to understand how this new proposal differs from the previous one, so we are taking a wait-and-see approach. We will monitor any changes and are ready to respond if we believe they will affect our U.S. pricing. From a Medicare perspective, we foresee business continuing as it currently is for the remainder of this year and into next year, as that process is already in motion for 2026.

Dave Storms, Analyst

That’s all very helpful. Thank you for taking my questions and good luck in the second quarter.

Michael McFadden, CEO

Thank you, Dave.

Lauren D'Angelo, COO

Thank you.

Operator, Operator

There are no further questions at this time. I would like to turn the floor back over to Michael McFadden for closing comments.

Michael McFadden, CEO

Thank you, operator, and thanks everyone for joining us today. I think you hear the excitement of the team about our commercial launch of ZUNVEYL. I'll reiterate, we will be focused this quarter on our selling efforts. We'll continue to watch our spending to make sure we're spending on the right things and we're exercising financial discipline. And then we'll continue to progress our medical plans to share more information about ZUNVEYL in the U.S. market and also our ex-U.S. operational execution to make sure that we take full advantage of our Asia partnership. Thanks again for attending. Everyone, have a great day.

Operator, Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.