Greetings, and welcome to the Alkermes Q2 2021 Financial Results Conference Call. My name is Alex, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now hand the call over to Sandra Coombs, Vice President of Investor Relations. Sandy, you may begin.

Good morning. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended June 30, 2021. With me today are Richard Pops, our CEO; Iain Brown, our Chief Financial Officer; and Todd Nichols, our Chief Commercial Officer. Before we begin, I encourage everyone to go to the Investors section of alkermes.com to find our press release and related financial tables, including a reconciliation of the GAAP to non-GAAP financial measures that we'll discuss today. We believe the non-GAAP financial results, in conjunction with the GAAP results, are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this morning, and our most recent annual report filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we'll open the call for Q&A. Now I'll turn the call over to Richard.

That's great. Thank you, Sandy. Good morning, everyone. We had a strong second quarter and a number of good things happened. Excellent commercial performance and other positive developments, all demonstrating continued execution against the priorities we outlined at the beginning of the year. VIVITROL, ARISTADA, and VUMERITY each showed strong year-over-year and sequential growth. These elements of the revenue line, coupled with a disciplined focus on costs, drove our financial results. We reported robust non-GAAP net income for the second quarter, and we are increasing our guidance for the year. The FDA approval of LYBALVI represents another meaningful growth opportunity for the company, and the value of the pipeline has also become more evident with nemvaleukin advancing and other candidates progressing as planned. Current revenues, emerging revenue streams, and a focus on efficient management of the business provide significant opportunity to create value. I want to talk a little bit about LYBALVI, our first approved oral antipsychotic. LYBALVI will leverage our commercial infrastructure and represents our next revenue growth opportunity. LYBALVI is indicated for the treatment of adults with schizophrenia and for the treatment of adults with bipolar I disorder. The label is strong and reflects LYBALVI’s features. We believe we’ll be able to differentiate this medicine in a large market based on its clear attributes in a simple message, LYBALVI captures the established efficacy of olanzapine with less weight gain. We’ve been establishing our commercial capabilities and presence in the schizophrenia market for five years with ARISTADA, our long-acting injectable antipsychotic. Building on these capabilities and developing a franchise of treatments for serious mental illness has been a centerpiece of our long-term strategy. The commercialization of LYBALVI will leverage our experience and expertise in this complex commercial setting and this is already underway. Since approval, we’ve engaged with hundreds of thought leaders and healthcare providers and expect to launch LYBALVI into the market with a strong baseline awareness of the medicine and its differentiating attributes. Olanzapine is widely recognized as being highly efficacious. However, physicians and patients often avoid prolonged utilization due to concerns about its propensity for weight gain. LYBALVI provides an opportunity to harness the efficacy of olanzapine as a maintenance therapy in schizophrenia and bipolar I disorder with less weight gain. Our guiding principle has always been to make medicines that address the real-world challenges faced by people living with complex and serious diseases, and LYBALVI reflects this focus. I think we can tell a similar story about nemvaleukin. Nemvaleukin is our novel, investigational engineered IL-2 variant immunotherapy designed to capture and expand the proven efficacy of IL-2 while engineering out certain of its limiting side effects. The development program has progressed rapidly. In the last 12 months, we’ve achieved clinical proof-of-concept in two indications that we plan to advance into registrational studies. We enrolled over 200 patients in the clinical development program, entered into a clinical trial and supply agreement with Merck for our planned Phase 3 study in platinum-resistant ovarian cancer, secured FDA orphan drug designation for mucosal melanoma, and worked with the FDA to agree upon registrational pathways in both of these difficult-to-treat indications. Last month, we provided a substantive clinical update at ASCO and we were joined by the lead investigators for both ARTISTRY-1 and ARTISTRY-2 studies, who shared their clinical perspectives and experiences with nemvaleukin. That presentation is on our website. If you haven’t seen it, I recommend taking a few minutes to watch it to give you a sense of the current status of the program and the significant progress that we’ve made. Nemvaleukin is accumulating a clinical dataset that we believe differentiates it from the other IL-2 variants in development. It has demonstrated responses in high unmet need populations across a range of tumor types, including durable and deepening responses in ARTISTRY-1. Our clinical development strategy is focused on addressing unmet needs and we focus on difficult-to-treat patient populations, including patients with checkpoint inhibitor-unapproved tumor types and patients in the post-checkpoint inhibitor setting. The study is planned for this year, including the ARTISTRY-6 study in melanoma, which we’ve already initiated and the planned ARTISTRY-7 Phase-3 study in platinum-resistant ovarian cancer, are designed to support potential registration. We are moving ahead now with momentum and look forward to sharing our progress across the program with you. So, before I conclude, I want to acknowledge the efforts of our talented and dedicated employees who have remained focused and committed to the patients we serve over the past 18 months despite the challenges in the constantly changing environment. Our commercial and operational success during this time is a testament to their agility, innovation, and perseverance. Q2 was a pivotal quarter for the company. Strong commercial, operational, and financial execution, FDA approval of LYBALVI, and the accumulating data and operational progress across the nemvaleukin development program provide a strong foundation for growth and execution for the balance of the year. I will now turn it over to Todd and Iain to take you through the Q2 results and our improved financial expectations for the year. Todd?

Great. Thanks, Rich, and good morning, everyone. Our commercial team delivered strong performance in the second quarter. Our execution, together with continued improvement and new patient starts, contributed to the highest quarterly net sales for ARISTADA to date and a return to pre-pandemic volumes for VIVITROL. Based on our results in the first half of the year and our expectation that current trends in the treatment landscape will continue, we are raising the bottom end of our full-year net sales expectation ranges for both ARISTADA and VIVITROL. Iain will fully outline these revised expectations shortly. Starting with VIVITROL, net sales in the second quarter increased approximately 23% year-over-year to $88.4 million. Q2 VIVITROL unit demand reflects improved access to treatment since the height of the pandemic. The recovery of VIVITROL has been driven by increased adoption in the alcohol-dependence indication, and we continue to focus on our strategy of increasing awareness of VIVITROL as the treatment option for alcohol dependence among providers, caregivers, and patients. Recent market research shows that 80% of healthcare providers surveyed believe the prevalence of alcohol-dependence has increased in the past year. Consistent with this research, the alcohol-dependence treatment market has grown at a faster pace than the overall addiction market over the same timeframe. The recovery of prescriptions for opioid dependence has been slower, both for VIVITROL and other treatments, despite increasing opioid overdose deaths across the country. We believe this is partly driven by pandemic-related disruptions that persist in the treatment system, as certain settings of care, including residential treatment centers and government treatment locations, have yet to fully return to their pre-pandemic operational capacity. We are committed to continuing our work to support patients and healthcare providers during this pressing public health crisis. Turning now to the ARISTADA product family. Net sales in the second quarter increased approximately 23% year-over-year to $72.4 million, driven by strong TRx growth on a month-of-therapy basis of 15% year-over-year. This growth outpaces the broader long-acting, atypical, antipsychotic market growth of 5%. We have continued to see positive recovery trends in the long-acting antipsychotic market in recent months. Healthcare providers reported an increase in patient visits as offices reopened. The number of diagnosed patients increased, and prescription volumes grew sequentially. While the COVID-19 pandemic is not behind us, recent trends in prescription and patient volumes and access to healthcare providers in both the addiction and long-acting antipsychotic markets are encouraging. Notably, our sales force expanded the percentage of their in-person calls to approximately 70% in June, up from 50% in March. As we enter the second half of the year, we are monitoring the emergence of variants and local conditions carefully as potential new COVID-19 hotspots arise, and we’ll make adjustments to our commercial strategy if necessary. I’ll end with an update on our launch activities for LYBALVI, our new oral antipsychotic agent. During the second quarter, the FDA approved LYBALVI for the treatment of adults with schizophrenia and the treatment of adults with Bipolar I disorder. We are pleased with the approval label, which includes data showing that treatment with LYBALVI was associated with less weight gain than treatment with olanzapine and proven antipsychotic efficacy. Additional feedback on our label from thought leaders and the treatment community has been encouraging, and we believe that anticipation for product availability is building. This will also be our first opportunity to realize the synergies of adding an additional product to our psychiatry franchise, as LYBALVI will join ARISTADA in our psychiatry product portfolio and leverage our existing commercial infrastructure and expertise in this market. We are currently laying the foundation for a full commercial launch as we engage with healthcare providers to build awareness and demand ahead of putting the product in the channel in the fourth quarter. Awareness of LYBALVI has been steadily increasing over time, and we believe we are well positioned for launch. Hiring is underway for our open sales force positions, and we are impressed by the caliber of talent that the LYBALVI launch is attracting. With the label now in hand, we submitted our promotional materials to OPDP for review and are excited to launch our new campaign. In this first phase of launch activities prior to product availability, we finalize our speakers bureau, which we will begin to deploy in the fourth quarter, and have also focused on increasing our engagement with payers. The large potential patient population, the clear need for additional efficacious treatments, and the features of LYBALVI as reflected in the label, provide meaningful opportunity in the oral antipsychotic space. As the country continues to reopen and the frequency of in-person promotional activities increase, we believe we will be well positioned for a successful launch in the fourth quarter. Looking ahead, we are focused on execution as we advance launch activities for LYBALVI, work to achieve our expectations for VIVITROL and ARISTADA, and continue to drive awareness of the value proposition of these important medicines. Now I will turn the call over to Iain to review our second quarter results and our updated financial expectations for 2021.

Thank you, Todd, and hello everybody. We are pleased with our Q2 results as we delivered strong top-line growth and reported both positive GAAP net income and robust non-GAAP net income. Based on these results and our expectations with respect to the ongoing recovery from the COVID-19 pandemic, today we are raising our financial expectations for 2021. I’ll provide additional detail on these expectations in a moment, but first, I’ll start with an overview of our second-quarter financial highlights. For the second quarter of 2021, we generated total revenues of $303.7 million, representing a year-over-year increase of approximately 23% and a sequential improvement of 21%. This was driven by the strong performance of both our proprietary commercial products and key products from our diverse portfolio of manufacturing and royalty revenues. The strong revenue growth, combined with our continued focus on disciplined operating expense management drove a GAAP net income of $2.4 million and a non-GAAP net income of $49.2 million for the quarter. VIVITROL net sales in the second quarter were $88.4 million, driven by a 29% increase in units year-over-year due in part to an improvement from the significant pandemic-related disruptions in the treatment system in the second quarter of 2020 and also the execution of our strategy to increase awareness of VIVITROL as a treatment option for alcohol dependence. This unit growth was partially offset by higher gross to net adjustments in the quarter of 51.8%, as compared to 46.4% in the second quarter of last year. Gross to net adjustments were consistent with Q1, and in Q2, inventory levels increased sequentially by less than $2 million in line with both increasing demand trends and typical seasonal patterns. Driven by these results and favorable gross to net adjustments, we are raising the bottom end of our 2021 expectations of VIVITROL net sales by $16 million from a range of $315 million to $345 million to a range of $330 million to $345 million. We now expect gross to net adjustments to be approximately 52.5% for the full year, driven by lower than expected Medicaid rebating and an improved product return rate. Turning to the ARISTADA product family, net sales in the second quarter increased 23% year-over-year to $72.4 million, primarily driven by underlying unit growth. During the second quarter, gross to net adjustments for ARISTADA were 54.8% consistent with our expectations for the year. Inventory levels did increase during the quarter by approximately $6 million as the number of key customers adjusted their inventory to support the growing demand. Based on the current trends outlined by Todd, we are updating our expectations for ARISTADA net sales for the full year, raising the bottom end of the range by $15 million from a range of $260 million to $290 million to a range of $275 million to $290 million. Moving on to our manufacturing and royalty business. In the second quarter, our manufacturing and royalty revenues were $142.3 million, compared to $116.5 million in the prior year. This increase was driven primarily by accelerated uptake of VUMERITY, which contributed $20.3 million of total revenue in the quarter, and also growth of royalty revenues from INVEGA SUSTENNA and TRINZA. This continued growth is reflected in our increased financial expectations for the year. Total operating expenses increased 6% compared to the same period in the prior year, driven primarily by higher costs of goods sold, largely due to increased revenues and increased sales and marketing investments for the upcoming launch of LYBALVI. Specifically, costs of goods sold increased to $53.1 million, compared to $45.1 million in the same period of the prior year. R&D expenses for the second quarter were $97.5 million, compared to $94.2 million for the prior year, reflecting increased patient enrollments in the younger nemvaleukin clinical studies and the initiation of the ARTISTRY-6 Phase 2 melanoma study. SG&A expenses for the second quarter were $139.2 million, compared to $132.0 million for the prior year, which included incremental investments to support the approaching launch of LYBALVI. As we continue to lay the foundation to achieve the profitability targets that we set forth for 2023 and 2024, we are focused on carefully managing our operating expenses and prioritizing investments in the company’s strategic priorities and future growth drivers. Turning to our balance sheet, we ended the second quarter in a strong financial position with approximately $670 million in cash and total investments and total debt outstanding of $297 million. I’ll shift now to our revised financial expectations for 2021, which reflect the strong operational performance in the first half of the year, continued recovery from the pandemic, and our focus on disciplined expense management. Our full expectations are outlined in the press release we issued earlier this morning. We believe these revised ranges are appropriate based on current trends and our expectation that treatment provider practices and patient flow will continue to normalize. However, any new COVID-related disruptions may impact our ability to meet these expectations. For the top line, we now expect total revenues to be in the range of $1.145 billion to $1.185 billion, an increase of $30 million at the midpoint driven by both higher proprietary revenues and higher manufacturing and royalty revenues. We are also adjusting the ranges for certain operating expense line items, with changes at the respective midpoints of each range as follows: our expectation for costs of goods sold increased by approximately $5 million, driven primarily by the higher revenues. Our expectation for SG&A expenses decreased by $10 million, primarily due to refinements to our launch plans for LYBALVI. And while R&D expense expectations remain unchanged, recall that we are anticipating a $25 million milestone payment in the third quarter related to the submission of an IND or equivalent for ALKS 1140, the first clinical candidate to emerge from our HDAC inhibitor platform. The strength of our top line and our disciplined expense management are together driving improvements in our profitability. Our expectation for GAAP net loss has improved by $30 million, and our expectation for non-GAAP net income increased by $20 million to a new range of $85 million to $115 million. Looking ahead, we are focused on driving continued growth of our proprietary commercial portfolio and capturing operating leverage as we launch LYBALVI, while at the same time advancing the nemvaleukin development program and investing in our early-stage pipeline. We believe we are financially well-positioned to execute on our business strategy, drive profitability, and support shareholder value creation in the years to come. And with that, I’ll hand the call back over to Rich.

Great. Thank you, Iain. I’ll finish briefly. I’ll just say, looking ahead, I am encouraged by the outlook for the business. VIVITROL, ARISTADA, LYBALVI, and VUMERITY each represent a growing or new revenue stream. Our infrastructure has adapted to support these products as efficiently as possible. VIVITROL is supported by a bespoke and efficient set of capabilities designed specifically to maximize the medical and economic value of this singular medicine aided to the market. ARISTADA and LYBALVI are synergistic and provide significant opportunity to drive operating leverage with our purpose-built psychiatry infrastructure. VUMERITY is growing, and our commercial partnership with Biogen delivers pretax profit directly to the bottom line. Together, the revenues from the products have the potential to drive significant growth over the coming years. The longer-term potential growth drivers for the business are the development programs in our neuroscience and oncology pipeline. Each program is designed to address specific unmet needs leveraging our scientific strengths. Our objective is to develop truly innovative medicines with a clear value proposition. Nemvaleukin is our most prominent and advanced asset in the pipeline, but we are equally excited about our earlier stage program. I look forward to sharing updates from our HDAC, Orexin, and engineered cytokine portfolios as they advance towards the clinic. With an intense focus on business excellence, financial discipline, and effective capital allocation, we believe we are well-positioned to create value for our stakeholders, including patients, healthcare providers, caregivers, our employees, and our shareholders. And with that, I’ll turn the call back to Sandy for the Q&A.

Okay. Thanks, Rich. Alex, we'll open the call for Q&A now.

Our first question comes from Vamil Divan with Mizuho Securities. Please proceed with your question.

Hi. Great. Thanks for taking my questions. So maybe if I could just ask two. One on VIVITROL. I heard the comments you made around the sort of dynamics in the alcohol versus opioid market. Can you maybe just quantify performance this quarter, just give us a sense of how much of it’s coming from alcohol versus opioid? There maybe even on top plus, so looking forward I expect a growth between the two to differ. And then the other one would just be on nemvaleukin and the sort of update you guys had at ASCO. If you can just sort of comment on what we can expect from that product in terms of data in the second half of the year whether and lower to see otherwise in any updates you may have in terms of the collaboration. Just assume that you’d be having with larger partners for that product. Thank you.

Good. Okay. I’ll start off with VIVITROL. The visibility that we have is claims data and also our own hub reported data. It’s a little bit lagging. Our belief from what we see in the data so far is that the mix of business between alcohol and opioid is remaining about a 50:50 split. We are expecting that the alcohol dependence indication will continue to grow and we are encouraged by that. One of the areas that we are encouraged by is really looking at diagnosed patients. When you look at the diagnosis right now, quarter-over-quarter we are seeing alcohol dependence as a market at large growing at approximately 5%. And then we also take a look at just new patient starts or NBRxs, which is also a leading indicator for us. Overall, the market NBRxs is up approximately 2% to 3%, and VIVITROL NBRxs are up about 10% quarter-over-quarter. So, again, we believe it’s about a 50:50 split. All of the indications are telling us, and all of our qualitative research from physicians are telling us that alcohol dependence is growing and that utilization for VIVITROL in alcohol dependence is growing. So we are expecting that to continue into the back half of the year.

And Vamil, maybe I’ll take the second part of your question and have Sandy give you the update on data. So, the important part about the ASCO presentation, just to summarize, is that I think the real differentiation of nemvaleukin is becoming clear on at least three different fronts. One is the molecule itself in terms of its intrinsic pharmacologic properties and the way it’s driving. Then the second differentiating feature was its clinical data where we are showing monotherapy efficacy as well as efficacy in combinations with Pembro in a range of different tumor types in both checkpoint inhibitor-unapproved and approved settings. And then the third point of differentiation I think is the registration strategy going for this white space in the serious unmet needs as evidenced at the beginning by mucosal melanoma and platinum-resistant ovarian cancer. All of this together provides the foundation for advancing these discussions with potential partners because, partnering nemvaleukin remains a centerpiece of the strategy because of its potential utilization from different categories and different combinations and different tumor types. So, I won’t comment on the specific discussions on it. We just know that that’s something that’s an intense focus within the company, and we’ll update you as we make progress.

Okay. And in terms of data proof in nemvaleukin, we did provide a very comprehensive and substantive update at ASCO. The data from ARTISTRY-1 and ARTISTRY-2 continue to mature and we’ll monitor that data and determine the appropriate medical meeting forms to present those data in the future. We’ll intend to have it presented at ESMO but it’s premature to commit to which datasets will be highlighted at this meeting.

Okay. Thank you.

Thank you. Our next question comes from Cory Kasimov with JPMorgan. Please proceed with your question.

Hey. Good morning, guys. Thanks for taking my questions. I have two from me, as well. I guess, one, I just wanted to follow on VIVITROL and this notion of alcohol versus opioid. I understand what the dynamics of COVID and what’s happening in the marketplace today. But longer term, has your thinking changed on all tiers – and what and how you are looking at the relative contributions from these two segments? And then, I wanted to also ask if you can comment a little bit more on the SG&A expectations. You got the lower anticipated guide ahead of the LYBALVI launch. It’s not a law, but it’s not also typical in a situation like this. So, is it just the function of some of that spend being pushed into 2022 or more about leveraging ARISTADA, or is there something else there that I am missing? Thank you.

Thanks. Good morning, Cory. I’ll take the first question on VIVITROL and how we are thinking about it. At Alkermes, we’ve always had a focus on alcohol and also opioid. We have worked on the evolution of our strategy for the last 12 months or so. We really believe that there is an opportunity to further expand growth in the brand for not only opioid but more holistically for the alcohol indication. If you think about the market at large, there are 14 million patients that actually have a diagnosis of AUD, but there are only 400,000 that are actually on treatment right now. So, the penetration for treatment is relatively low. When we do all of our research right now, we talk to physicians, again, 80% of physicians right now are telling us that they believe that they are seeing an increase in alcohol dependence with origination levels that are very strong at this point. We also ask very consistently about medication. 70% of physicians report to us that they believe in medication to be important. So our opportunity is really to build awareness in the patient community right now around medication and not just a stigma, as this is a medical condition as well. When we look overall, the dynamics of the business at a sub-national level, we are actually seeing consistent growth in the majority of the states right now and also within the outpatient settings. For example, community mental health centers are actually showing strong double-digit growth. Most of these centers are really focused on alcohol at this point right now. So, we do believe that there is an opportunity long-term to drive awareness and to drive greater penetration for patients that suffer from this disease, and we believe that VIVITROL can play a big part in that.

And then, Cory, on the SG&A expectation side, I would say, we’ve really been able to fine-tune the launch expectations subsequent to approval and with the label on board, which we are obviously very happy with. The focus is very much to leverage the existing infrastructure that we have for ARISTADA. And I think, as you look at the timing of spend, we’ll increase investments into Q3, and then there will be a bigger step-up in the fourth quarter as we’ll have all the reps on board, and all the marketing materials will be available for the launch, which we expect to happen in the fourth quarter. So, I think that’s the way we look at SG&A expense in the second half of the year.

Great. Thank you very much.

Thank you. Our next question comes from Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.

Hi. Thanks for taking my questions and congratulations on a very good quarter. I just want to drill down on the VIVITROL opioid headwinds you called out. Can you just elaborate how these headwinds we are seeing at the moment compare to your expectations, maybe at the beginning of the year? Are we seeing improving trends, a little bit worse? Any color there. And then, if you can just elaborate, obviously, we are seeing opioid just go unfortunately the wrong way. And so, are these headwinds really just coming from patients monitoring into a facility, or is this funding gap at states as they – COVID, just any color in terms of how you might see these headwinds in the opioid space progressing? Thank you.

Yes. Absolutely. Brandon, first and foremost, there are no gaps in funding at this point right now. I’ll just make a quick comment on that. Medicaid is the primary source of access for VIVITROL. We have very strong access within the Medicaid segment. There has been additional federal fund release. But we don’t have visibility as we said in the past that state-level grants are available. But we know there is a significant amount of funding that is available, and our belief is that eventually that will trickle down to the sub-national level and we use that for Amity programs and programs such as VIVITROL. So, we are very encouraged by that as well. When we think about overall the market and the landscape with the market, I would characterize it this way: that we are actually starting to see a stabilization for opioid dependence. We knew there were significant headwinds in 2020 based upon access to treatment providers and access to injections. We adapted our commercial strategy to a hybrid personal promotion and did a lot of work in the pharmacy space to ensure that patients had access to treatment overall. We are continuing to see some headwinds, mainly in the controlled settings of care, and that’s really the primary space that VIVITROL is used for opioid dependence. These are going to be residential treatment centers. These are going to be certain federal facilities such as the VA, union health services, and so forth. I would say, in Q2, we are starting to see some encouraging trends there. On a quarter-over-quarter basis, we are seeing growth in those segments. But still, not back to the levels that we would expect from 2019. So, the headwinds mainly that we are seeing with an opioid dependence right now are based upon the controlled settings of care and improving access for patients that need detox services. Our belief is that as the pandemic continues to improve, access to providers, and access to services will improve, and we’ll continue to see a stabilization with that business.

Very helpful. Thank you.

Thanks, Brandon.

Thank you. Our next question comes from Paul Matteis with Stifel. Please proceed with your question.

Great. Thanks for taking my questions and congrats on the quarter. For LYBALVI, I was wondering if you could kind of layout what you think the payer landscape is going to look like at launch and what’s your goal over time, maybe in 2022 or 2023? Specifically, what do you think the step-through looks like for prescribing this drug initially? Do you think people will have to step through Zyprexa? And what do you think that looks like over the mid to long-term? What’s the realistic goal? Thanks so much.

Yes. Absolutely. I’ll tell you, we are really excited about the launch of LYBALVI. As you heard Rich say, we are in the first phase of our launch right now that started with the approval on June 1st. In the first phase, the way that we think about this is we are extremely focused right now on building awareness, and the awareness numbers are increasing, which is very encouraging. We are doing that with ATPs, but we are also doing it with payers right now as well too. We are executing engagement plans with payers in sharing the clinical profile. Payers are most interested in our clinical profile at this point. That was our expectation; our medical team is out sharing the clinical profile. We had well over 60 different presentations on our clinical profile, and it is encouraging. I think the way that we think about the payer landscape and the payer environment is there are three key segments of the business: Medicaid, Medicare, and commercial. They are roughly going to contribute an equal proportion overall. The profile of access will really emerge over the first 12 to 18 months, and that’s very consistent with what you see with other branded competitors as well. So, what we know, and our assumptions are that the payers are on different timelines. For Medicaid, it’s a state-by-state plan. We know where the top volume states are, and we know when their decisions and their coverage decisions will be made. We know with Medicare that coverage decisions will be made when the product is in the channel within the first 90 days. Also, we know that for commercial, there are going to be quite a bit of indices blocks at launch. These payer restrictions aren’t uncommon outside of just this category, and our belief is that this will be anywhere from six to nine months. So, we are going to have access programs at launch, PA support benefits investigation, co-pay programs at launch, sampling programs at launch to help support access to the product and help support trial in the usage at launch. The profile for access will really evolve over the first 12 to 18 months.

Do you want to comment on the step-through?

That’s right. Yes. The question on step-through. We are – the feedback that we received from payers is that LYBALVI will be treated similar to any other branded agent. It’s very common in the marketplace to have PAs prioritization step-throughs. It could be one step-through, or a two-step; there is the potential to have a step-through through olanzapine. So, we are prepared for that with the programs that we have in place.

Great. Thanks very much.

Thank you. Our next question comes from an unidentified Analyst with Evercore. Please proceed with your question.

Hi. This is here speaking for Umer. Thanks for taking the time for our question. Just to follow up on LYBALVI. Consensus is modeling about $70 million to $80 million of sales for fiscal year 2022. How are you thinking about those numbers relative to your learnings from recent antipsychotic launches? And separately, a different question on VUMERITY. Could you clarify your policies on royalty rates and revenue recognition? We know there are nominal rates of about 15%. But today’s numbers imply about 20% of Biogen’s reported net sales; any detail you could give there?

So, this is Rick. Why don’t I start on the LYBALVI question. Obviously, we are not ready to give guidance for 2022 yet. But I do think recent launches indicate a couple of things about the gradualness of the access as it opens up over the course of the first year. And Todd referred to that, and it’s built into our operational plan. We are actually funding our launch sequentially as access grows across the nation; we can then dedicate more marketing and personnel resources to the launch of the product. From our view, is that you can hold these two thoughts simultaneously, namely that the launch can be gradual, and the open market potential can be substantial. But these are not square wave launches in those different aspects of the business.

Sure. On the VUMERITY question, we have two sources of revenue for VUMERITY. The larger one is the royalty, which as you say is 15% of end-market net sales. So, if you take Biogen’s net sales for the quarter, multiply it by 15%, that’s our royalty. The other element is we do manufacture the product for Biogen as well on a cost-plus basis. So that difference is really the manufacturing revenue that we earned in the period.

And I’ll just add one comment to Rich’s LYBALVI comments: not all of the models that we have seen have been updated to reflect the Q4 launch timing. So some of those models are going to get pushed out, and I would expect that number to come down a bit.

Got you. Thank you.

Thank you. Our next question comes from Marc Goodman with SVB Leerink. Please proceed with your question.

Hey. Good morning. Rich, I was wondering if you can give us an update on the original strategic review with respect to how you are thinking about partnerships. How you are thinking about the divestitures? How you are thinking about your original margin goals that you laid out for us at that time? Thanks.

Yes, I’m glad to answer that, Marc. Clearly, achieving margin goals is much more feasible with a strong revenue line. That's why it's crucial to highlight the return to growth in VIVITROL, ARISTADA, VUMERITY, and now in LYBALVI. With a positive outlook for our top line, we've been concentrating on cost management over the last couple of years. Iain has dedicated significant effort to fine-tuning this to help us meet our profitability targets. A key element of this strategy involves partnering on nemvaleukin from a financial standpoint to mitigate certain R&D costs associated with it, as it represents our largest R&D investment at this time. Additionally, this partnership aim is to fully unlock the medical potential of the drug, which is intended for use with other treatments across various cancer settings. Thus, collaboration continues to be an integral aspect of our approach.

Are we in talks for partnerships? Are they going well? Can you give us any sense of when you might have some help to defray some of these costs? Is this by the end of the year?

Yes. I am not going to put a timeline on that for obvious reasons, but they are important for us to do, and it’s also important for us to do it in the right configuration with the right partner. This would hopefully be a long-term relationship that’s going to have substantial strategic value to the company. So, we are going to make sure we do it correctly.

Okay. Thanks.

Thanks, Marc.

But the only color I’ll give you, Marc, is that, what is the tailwind for partnering is the data, and that was so important at the ASCO presentation that we made just a month or so ago is that the data are really coming together nicely. That’s been a necessary prerequisite for serious partnering discussions, so we are encouraged by the way that dataset is building, and I think that’s going to continue to help us.

Thanks.

Thank you. Our next question comes from Terence Flynn with Goldman Sachs. Please proceed with your question.

Hey. Good morning, this is Matt on for Terence. Thanks for taking our question. With regards to the nemvaleukin partnership, could you just talk about what you view as some ideal structure for such a partnership? And then, also in terms of monetizing any non-core assets, what will be your focus for cash?

Yes. I think that the features of the nemvaleukin partnership are a couple of principal ones. One is with the partner or counterparty that’s a strong oncology developer or someone who can augment our development capabilities substantially. Number two is, obviously, offsetting significant amounts in the R&D spend. But that’s associated with number three, which is broadening the indications that we are going after for nemvaleukin. We have intentionally after a period of time in the clinic of signal exploration and we’ve counted down the program now into these registrational pathways in mucosal melanoma as monotherapy and in platinum-resistant ovarian cancer in combination with Pembro. But there are other indications that we get signals from all clinicians regularly now looking for additional combinations, different places to go, and we’ve been avoiding those focusing the spend on these most advanced registration pathways. So, the quality of the partner, the financial commitment to it, and the ability to expand the footprint for the development program both in terms of indications as well as regionally or globally, those are the important features for us to consider.

Got it. Thanks.

Thank you. Our final question comes from Kelly Shi with Jefferies. Please proceed with your question.

Hi, good morning. This is Jason on for Kelly Shi. You may have just addressed my question. However, we are curious about nemvaleukin; aside from melanoma and ovarian cancer, what do you see as the other most promising indications based on efficacy? Additionally, which indications do you believe are the most promising for moving to the next phase? Also, could you comment on the clinical and regulatory standards for the melanoma registrational trial? Thanks.

Yes. I think in general, in the nemvaleukin program, we are really interested in this white space, where patients are being treated, where checkpoint inhibitors have not shown robust efficacy or post-checkpoint inhibitor failure. That’s both in combination with the checkpoint inhibitor like Pembro, but also potentially in other combinations. You saw us present some data at the Investor Day, and we’ve presented publicly on some work we’ve been doing with tyrosine kinase inhibitors. The TKI combination with IL-2 variants is really encouraging as well. So, the white space is both in different combinations as well as different tumor types, but again, I think our preference at this point is rather than looking at tumor types, we are looking for nemvaleukin plus the checkpoint inhibitor to increase efficacy in approved tumor types in indications where there is currently no checkpoint inhibitor therapy or that checkpoint inhibitor therapy is limited. I forget the second part of the question.

The clinical bar for ARTISTRY-6 and ARTISTRY-7, what kind of response rates are we looking for. Yes, we haven’t disclosed the study design details for ARTISTRY-7 yet or provided details on that. But that will be a forthcoming one as we initiate that study. For ARTISTRY-6, in melanoma, this is intended to support potential registration in mucosal melanoma, which is really underserved and has high unmet need. There are not a lot of treatment options that these patients have left. We haven’t provided a specific ORR or the durability of response rates that we are looking for. We will really look at it as a holistic dataset and review that with the agency to support potential approval once we have the data from that study.

Yes. I think it’s an important point we tend to make, because it’s not just an overall numerical response rate. One of the promises of IL-2 therapy, of course, is the durability of these responses. So it’s a combination of response rate and the durability of the responses that will provide the overall profile of the medicine that could support registration.

Great. Thank you. Very useful.

Alright. Thanks, Jason.

Thank you. Ladies and gentlemen, we have no further questions. This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.