Greetings, and welcome to the Alkermes Second Quarter 2023 Earnings Financial Results Conference Call. My name is Marianne, I’ll be your operator for today’s call. Please note that this conference is being recorded. I’ll now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may begin.

Thank you. Good morning. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended June 30, 2023. With me today are Richard Pops, our CEO; Iain Brown, our CFO; 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, related financial tables, and reconciliations 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 and quarterly reports 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. And now, I’ll turn the call over to Iain.

Great. Thank you, Sandy, and hello, everyone. Our second quarter results reflect strong execution across our business, highlighted by the 21% year-over-year growth of our three proprietary commercial products and reinstatement of the long-acting INVEGA royalties in the U.S. following our success in the arbitration with Janssen, which concluded during the quarter. This clear resolution further enhances our financial strength and is complemented by our progress in separating the oncology business, our ongoing emphasis on operating efficiency, and our commitment to profitability as reflected in our 2024 and 2025 profitability targets. Before reviewing the underlying business results for the quarter, I’ll walk through the impact of the final award from the Janssen arbitration as it relates to our second quarter financial results as there are a number of important elements. First, we recorded $197.1 million of back royalties and associated interest related to 2022 as revenue in the quarter. Of this, $195.4 million related to the long-acting INVEGA products and $1.7 million to CABENUVA. This revenue is reflected in our GAAP results. However, it is excluded from our Q2 non-GAAP net income. Second, we recorded $51.3 million of incremental royalty revenue related to Q1 2023, of which $50.2 million related to the long-acting INVEGA products and $1.1 million to CABENUVA. In total, we have received $248.4 million of back royalties and interest from Janssen, and these proceeds are reflected in our cash position at the end of the second quarter. And last, we recorded $76.9 million of royalties on Q2 worldwide net sales of these products, of which $75.7 million related to the long-acting INVEGA products and $1.3 million related to CABENUVA. Royalty revenues related to Q1 and Q2 of 2023 are reflected in both our GAAP and non-GAAP net income in the second quarter. All told, we recognized $325.3 million of royalties and interest in the second quarter related to these products, all of which was included in GAAP net income, while $128.3 million related to 2023 net sales was included in non-GAAP net income. So now turning to our full Q2 financial results. For the second quarter, we recorded total revenues of $617.4 million, which included robust performance across our proprietary product portfolio, which grew 21% year-over-year. Starting with VIVITROL. Net sales in the quarter were $102.1 million, reflecting 6% growth year-over-year, driven primarily by growth in the alcohol dependence indication. Inventory in the channel was stable and gross to net deductions were within normal ranges for the quarter. For the full year, we continue to expect VIVITROL net sales in the range of $380 million to $410 million with demand expected to be fairly stable over each of the next two quarters. Moving on to the ARISTADA product family. For the quarter, ARISTADA net sales increased 10% year-over-year to $82.4 million, driven primarily by higher underlying demand. Inventory in the channel was stable, and gross to net deductions were within normal ranges for the quarter. And for the full year, we continue to expect ARISTADA net sales in the range of $315 million to $345 million. LYBALVI net sales for the quarter were $47 million, up 24% sequentially. Underlying prescription growth was 16%, and during the quarter, inventory in the channel rebounded to normal levels following relatively lower levels at the end of the first quarter. Gross to net adjustments in Q2 were approximately 26%, reflecting a continuation of our disciplined contracting strategy in the commercial space. We currently expect that gross to net adjustments will remain fairly stable for the remainder of 2023. For the full year, we expect LYBALVI net sales will be towards the higher end of our previously provided guidance range of $180 million to $205 million. Moving on to our manufacturing and royalty business, in addition to the Janssen royalties I’ve already discussed, the company recorded revenues from VUMERITY of $32.3 million compared to $26.2 million in the same period in the prior year. Turning to expenses. Total operating expenses were $378.2 million for the second quarter compared to $310.7 million in the same period in the prior year. R&D expenses for the second quarter were $100.8 million, compared to $92.9 million for the same period in the prior year, reflecting acceleration in the recruitment of the ongoing nemvaleukin clinical studies, advancement of our ALKS 2680 orexin 2 receptor agonist program into Phase 1b, and ongoing LYBALVI life cycle management studies. SG&A expenses increased to $205.3 million from $150.4 million for the same period in the prior year. The increase was largely driven by a $28 million investment in the LYBALVI direct-to-consumer campaign, including the start of the TV component in May, as well as certain expenses related to the separation of the oncology business. Looking ahead, we currently expect DTC-related expenses to be lower in each of the next two quarters. Our top line results combined with our continued focus on disciplined operating expense management resulted in a GAAP net income of $237.1 million and non-GAAP net income of $94.3 million for the quarter, which as I mentioned, excludes the Janssen back royalties and associated interest of $197.1 million related to 2022. Turning to our balance sheet, we own a strong financial position as we ended the second quarter with $907.2 million in cash and total investments with total debt outstanding of $292 million. This positions us well to appropriately capitalize Mural Oncology upon separation, which we continue to expect will be in the order of $200 million to $300 million. Today, we are reiterating our financial expectations for 2023 that we previously raised on June 6 following the successful outcome in the Janssen arbitration. As a reminder, our financial expectations reflect the combined neuroscience and oncology business for the full year. We remain on track to complete the separation in the second half of the year. So in conclusion, as we enter the second half of the year, we are well positioned financially to execute on our strategic priorities, drive the launch of LYBALVI, advance the ALKS 2680 clinical program, and complete the separation of the oncology business. We will continue to focus on driving strong performance and momentum across the business to create long-term value for our shareholders. And with that, I’ll hand the call over to Todd.

Thank you, Iain, and good morning, everyone. I am pleased to share that we delivered solid growth across our proprietary commercial portfolio again in the second quarter with 21% year-over-year growth. Our sales performance during the quarter was driven by strong execution by our commercial organization. We’re particularly pleased with the continued uptake of LYBALVI in the oral antipsychotic market. So let’s start there. During the quarter, LYBALVI net sales were $47 million. Prescriptions grew 16% sequentially to approximately 38,300 TRxs for the second quarter. Importantly, growth of new-to-brand prescriptions accelerated sequentially as well. As we outlined earlier this year, our strategy for LYBALVI in 2023 is focused on three key initiatives: grow prescriber breadth, optimize our access profile, and build awareness for LYBALVI. During the quarter, prescriber breadth grew by 1,800 prescribers to approximately 11,150 healthcare providers who had written a prescription since launch. In our recent market research, healthcare providers cited LYBALVI’s efficacy, weight gain profile, and patient outcomes as key drivers for their increased prescribing, which is encouraging feedback as we think about brand awareness and potential future prescribing patterns. And LYBALVI persistency continues to be in line with other branded oral atypical antipsychotics and better than generic olanzapine as we expected. Market access continues to play an important role for LYBALVI, like all brands in this space. In Medicare/Medicaid, we currently have a pathway to access for all patients. On the commercial side, we are pleased with how our commercial access strategy is playing out. We made deliberate decisions to focus on maximizing net revenues and limit commercial contracting at this stage of the launch. From a net sales perspective, we believe that maintaining a higher average selling price in the commercial channel outweighs any access limitations we have encountered as a result thus far. Going forward, we will continue to evaluate our contracting strategy in the commercial space, balancing volume growth and the profitability of each unit. With that said, we expect to evolve these commercial access profiles to remain fairly stable for at least the remainder of 2023. Our DTC campaign will be a key factor in driving awareness and maximizing the opportunity for LYBALVI in the long term. The TV component of our DTC program launched during the first week of May and is focused on bipolar I disorder. The campaign is designed to drive high levels of awareness amongst patients, caregivers, and healthcare providers. We will pulse our investments in broadcast advertising based on expected ROI with greater investment and ad placement when broadcast TV viewership is highest in the spring finale and fall premiere seasons. While we’ll take some time to see the full impact, leading indicators on the effectiveness of the DTC campaign have been encouraging. We continue to believe LYBALVI is on a strong growth trajectory and look forward to sharing our progress with you. Turning to the ARISTADA product family. Net sales in the second quarter grew 10% year-over-year to $82.4 million, driven primarily by TRx growth of approximately 5.4% on a month of therapy basis. We were encouraged to see continued sequential growth in ARISTADA INITIO brand prescriptions, which we believe was driven by strong share of voice in the long-acting atypical market. We expect this market will continue to be dynamic and our team will continue to focus on highlighting ARISTADA’s differentiated value proposition, including its once every two-month dosing option in the ARISTADA INITIO initiation regimen, both of which are supported by clinical data from our ALPINE study. Turning to VIVITROL. Net sales in the second quarter increased approximately 6% year-over-year to $102.1 million. The alcohol dependence indication continued to be an important driver of growth and accounted for approximately two-thirds of the VIVITROL volume. Importantly, against the backdrop of continued growth in the alcohol dependence treatment market, prescriber breadth for VIVITROL has continued to expand within the alcohol dependence indication, which has driven new patient starts over recent quarters. We also continue to see signs of stabilization for the opioid-dependent side of the business, particularly within our top five volume states. As a reminder, the trial in our VIVITROL patent litigation with Teva took place in February, and we continue to expect a decision in the second half of this year. We remain confident in the strength of our case. However, regardless of the outcome of this litigation, we continue to believe that the nature of the product and the complexities and dynamics of the market in which it is commercialized make typical generic erosion unlikely. Overall, we continue to be pleased with the performance of our commercial product portfolio and the strong execution of our commercial strategy by our team. We look forward to updating you on our progress as we move through the second half of 2023. And with that, I'll hand the call over to Rich.

That's great. Thank you, Todd. The second quarter was important. We had a number of critical accomplishments that were central to our plan for the year. Strong commercial performance, success in the Janssen arbitration and reinstatement of the associated royalties, commencement of the Phase 1b study for ALKS 2680, advancement of enrollment in our oncology studies, progress toward the planned separation of the oncology business, and the successful reelection of our directors at our Annual Shareholder Meeting. So now as we enter the second half of the year, we expect a number of important domains within the business to come more sharply into focus. The value of the commercial portfolio, including LYBALVI, initial resolution of the VIVITROL litigation, clinical proof-of-concept data for ALKS 2680 in narcolepsy, and completion of the separation of our oncology business. Each of these elements represents an important opportunity to drive value. So taking each in turn. First, the value of our commercial portfolio and the commercial organization that we've built. As you've heard from Todd and Iain, our commercial organization has continued to generate robust growth for our proprietary products, driven by an intense focus on execution of our commercial strategy. Now in its second year of launch, LYBALVI has continued to require attention with the potential in the large oral atypical market. The start of the broadcast DTC campaign during the quarter was a significant milestone. DTC is an essential component for every big brand in this market and we expect DTC to be an important driver of awareness and uptake of LYBALVI, building on the strong momentum we've established. Our LYBALVI strategy is designed to maximize net revenue growth and profitability over the long-term and to demonstrate the operating leverage we've engineered into the business. We're confident in our strategy. So our focus will continue to be on execution. Next on VIVITROL. We expect initial resolution of VIVITROL litigation in the fall. I say initial because either party may choose to appeal the decision whichever way it goes, which would introduce a new cycle of legal interaction. For this reason, we would not expect changes in our go-to-market strategy for VIVITROL in either 2023 or 2024. With that said, as Todd noted, we're confident in the innovation embodied in VIVITROL. I would not expect typical generic erosion in this market. VIVITROL is an important treatment option for opioid and alcohol dependence, and we believe it will be a key product in our portfolio for the foreseeable future. Turning to ALKS 2680, our Orexin 2 receptor agonist program. The program is designed to generate key data early in its clinical development, and we are moving quickly. Based on the progress we made earlier this year in the single and multiple ascending dose parts of the Phase 1 study, in the second quarter, we initiated a Phase 1b proof-of-concept study in patients. This proof-of-concept study is evaluating established clinical efficacy endpoints, including EEG-based maintenance of wakefulness tests in patients with narcolepsy type 1, narcolepsy type 2, and idiopathic hypersomnia. In a crossover design, subjects will act as their own control and receive single doses of multiple dose levels as well as a placebo with a washout period in between. With a small number of subjects per cohort, we believe this approach will allow us to efficiently assess initial dose response and inform dose ranges for potential future clinical studies. Enrollment in the narcolepsy type 1 patients is on track, and we continue to expect initial data from the 1b study later this year. We look forward to sharing this data with the scientific and investor communities. In the meantime, while we enroll the 1b study, we're preparing our Phase 2 clinical development program. So we'll be ready to advance it as quickly as appropriate. I'll finish with the separation of the Mural Oncology business. Mural Oncology will be a new independent public company. We are on track with our original timeline to complete the separation in the second half of the year and have made important progress as we approach the final stages of this process. Most notably, we announced the appointment of Dr. Caroline Loew as the Chief Executive Officer designate of Mural Oncology. Dr. Loew joined us in June as a strategic adviser, and she'll transition to CEO of Mural Oncology upon completion of the separation. Dr. Loew's deep knowledge of the oncology field, extensive leadership experience, and strong track record of execution and strategic business development make her uniquely qualified to lead Mural Oncology when it begins its journey as a stand-alone company. With Caroline in place, we're building out the independent members of the Mural's Board and other senior members of the Mural leadership team. I'm pleased with the caliber of the candidates that are coming through this process. The separation will provide shareholders and investors with an independent and more direct opportunity to realize value from the oncology investments that we've made. It will also reveal the value of our neuroscience business. Following the separation, Alkermes will become a pure-play profitable and growing neuroscience company. With a strong top line driven by the growth of our proprietary products, including LYBALVI, which is still early in its launch, a specialized commercial infrastructure, proven drug development capabilities, and an important pipeline opportunity in ALKS 2680, we see significant opportunity to unlock value in the near future. The coming months will be an inflection point in the evolution of the company and look forward to sharing our progress with you. So with that, I'll turn it back to Sandy to manage the Q&A.

Great. Thanks, Maria. We can start the Q&A polling, please.

Thank you. Our first question comes from Chris Shibutani with Goldman Sachs. Please proceed with your question.

Thank you. Good morning. Two questions, if I may. First, on the Orexin program. I think we are all anticipating in the investment community the data that will come by year-end. I think you've highlighted NT1 is data that we would see from the Phase 1b. During the first quarter call, you did reference the importance of the different segments, potentially for different levels of potency. And also, we know that you have expertise with probably a test of tool compounds that are also available. So how should we be thinking about the Phase 2 program that you alluded to as being able to be prepared into? What would you need to see in terms of thinking about whether you would possibly take additional doses, do more work for the other segments from NT2 and IH, or bring other compounds into the clinic? Then the second question would be on profitability. You highlighted that, particularly regardless of the outcome of VIVITROL, the level of intensity and support would be the same in 2023 and 2024. And when you talked about how the commercial complexities make it so it won't be a typical generic erosion curve. But regardless of the timing, it seems as if VIVITROL at some point may have an entrant. Should we think that the opioid segment is more protected and the alcohol is the one that's more vulnerable? And should we think that your level of spending and support would decrease when there's a competitive entrant that potentially could be at a discount? Thanks.

Hey Chris, it's Rich. I'll try both of those, and I'll ask Todd and Iain to chime in if they need to. First on the Orexin, first of all, just to be clear, the distinction between NT1, NT2, and IH, it won't be one based on potency. The potency is inherent in the compound. And so far, work in the clinic suggests that we're very happy with where we're seeing the potency. The difference may be in dose. And that actually informs the design of the 1b study, whereas I mentioned, each patient is serving as their own control, and we're escalating doses in single dose format using the maintenance of wakefulness test and placebo to give basically a small dose response curve for each patient. In that way, by starting with the NT1, we anchor the base potency of the compound. And then we have a way to then, as we move into NT2s, where we'll begin the dosing in the NT2s with the expectation that we'll have to go a bit higher in NT2s and perhaps in the IHs as well. So that's why the NT1 cohort is an anchoring cohort and that's well underway. And so by the end of the year, I expect to have patient exposures in NT1, NT2 at a minimum, perhaps IH as well. How those get assembled into presentation at World Sleep or other scientific meetings is still to be determined, but we're advancing as many of those cohorts as fast as we can in order to inform in Phase 2 then establishment of those dosing ranges that we will use for the differential diagnosis. I hope that makes sense. Does that make sense?

Yes. No, that's helpful in terms of thinking about Phase 2.

Okay. On the profitability of VIVITROL, I think it's probably the most constructive way to think about it is – it depends on how somebody came into the market. And someone came into the market with a pure generic strategy, i.e., trying to contract at lower rates; we see the business the way it's distributed now across Medicare, Medicaid, and commercial. We really see the major opportunity to do that would be in the commercial space, which is only about 20% of the business. I also don't think that would be a particularly smart thing to do because the market is growing, and the price point is relatively good. So our expectation, our hope would be that if someone came in at more like a branded generic—at a, I’m sorry—at more like a biosimilar at a high price, allowing the market to continue to grow, we would maintain our promotional intensity. I mean, obviously, we pay attention to the profitability of the brand at all times. But I think the distinction is not between opioid and alcohol; it's more between commercial versus government business. And so we see that the opportunity for entry is more in the commercial space. With that said, the market is so new in alcohol, and it's growing so rapidly. The logic for a new entrant into the market, given how hard it is to get into this market would be to come in and continue to grow the market. Todd, do you have any thoughts?

Yes, absolutely. Let me just add on to that, Rich, as well. Yes, Chris, we made—I made the statement in our prepared remarks that it's not typical brand to generic erosion. The way to think about this is, typically with small molecules, switches in a small molecule switch, you typically see rapid price erosion. And then you also see a focus on point-of-sale switches typically what happens to a retail pharmacy as well. We don't believe you would see any type of rapid price erosion here. And the way that the fulfillment of the VIVITROL business works is that retail pharmacy is very small. It's less than 20% overall. You highlight opioid versus alcohol dependence, and to Rich's point as well, this actually makes it even more complex to commercialize the product because those segments actually operate independently and separately. We are really pleased with our strategy over the last couple of years to drive alcohol dependence. In fact, we have approximately 11,000 HCPs now that have written a prescription for VIVITROL and alcohol dependence. We're seeing about a 5% year-over-year growth with that. Secondly, we're seeing about a 9% demand growth right now for alcohol dependence. So we believe that there's still a lot of runway for VIVITROL within that channel. To Rich's comment as well, too, we have complex manufacturing. The fulfillment channels are complex; also the settings of care are complex. And there's not one setting that actually dominates the market. So anyone coming into the market would have to have a deep understanding of how to commercialize, and we believe we are well positioned to continue to drive VIVITROL and also defend if a competitor came into the market.

Thanks. That's helpful thinking about the durability of that asset potentially long-term. Appreciate it.

Our next question comes from David Amsellem with Piper Sandler. Please proceed with your question.

Thanks. So on LYBALVI, understanding what you said on commercial payer contracting. So I wanted to ask about the long-term picture. One of your peers that distributes CAPLYTA has talked about more commercial exposure and more contracting. And obviously, that product has a label in bipolar, a different label, but nonetheless, in the bipolar setting. So I guess the question is, what is it about LYBALVI that's different where you feel like you don't have to contract more aggressively? And longer term, does that change as you're getting more and more exposure to the bipolar population and you're activating more patients? So this is really not a 2023 question, but sort of longer term. And that's number one. And then number two, just to be clear on VIVITROL. To the extent there is an early generic entrant, does that put your profitability targets, your long-term profitability targets at risk? And what is the extent to which you can manage the cost structure to continue to maintain those profitability targets to the extent there is an early entrant? Bearing in mind everything you’ve said, but just wanted to drill down on profitability in case that did come to pass. Thank you.

Yes. So I’ll start first with LYBALVI. I would say the way we think about this is we’ve learned a lot over the last seven years, specifically with ARISTADA. We’ve been in this space serious mental illness for a long time. And so we really understand the dynamics that’s happening in health systems, the payer environment, and with HCPs. One of the things we’ve learned over time is that you have to be very thoughtful on how you balance volume and profitability. Once you start offering rebates, especially in the commercial space, you can’t retract those rebates. And so we watch that very carefully. We also stay very close to our HCPs and our prescribers. HCPs and prescribers are very astute at being able to navigate hurdles that are in the space. Right now, we believe this is a manageable dynamic. And I also want to make sure that we clarify that we do have commercial contracts right now. We do have some commercial contracts. We look at each commercial contract independently. Our focus right now is really making sure that we’re maximizing profitability and net revenue for the long time. We do believe that the space will continue to evolve. So our focus, our strategy long term would be to do additional commercial contracts, but at least for the remainder of this year, we think our gross debt and our commercial profile will remain stable.

Thanks, Todd. And then on the profitability question, we intend to manage the business to achieve the profitability targets that we have out there for 2024 and 2025. I think as you heard, there are a lot of dynamics and they’re going to play out certainly with the VIVITROL space; it’s really too early to speculate on how things are going to work out. But we’re going to continue to assess the situation with the goal of maximizing profitability from the franchise and be able to hit those profitability targets.

Thank you.

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

A couple on the Orexin program. Can you talk about just what you’ve seen in your SAD/MAD as it relates to tolerability? Is there anything discernible that drives a maximum tolerated dose for your lead compound? And then as we think about the data coming up in NT1 and then also the wakefulness test in other populations against NT2, IH, how do you think about the predictive validity of that test onto a registrational study in each indication as you extrapolate to things like cataplexy attack, TGI, or other endpoints that are relevant in different populations? Thank you.

Good morning, Paul. Yes, we haven’t hit an MTD yet in the SAD and MAD, which is encouraging. In fact, based on the way the protocol was designed, we moved off of the SAD to move into the MAD and then Ib, without hitting the MTD. We’ll go back and reinterrogate that to make sure we can establish if possible a maximum tolerated dose, which is quite encouraging. As you well know, there are certain, what you expect on-target adverse events that you would be looking for that our view is that it looks like the wakefulness component of orexin 2 receptor agonism can be decoupled from some of these other side effects. So that’s encouraging. The validity, as you know, the approvable endpoint in registrational studies is this EEG-guided maintenance of wakefulness tests. But there are other sleep scores, as you know, qualitative PROs, as well as measurements of cataplexy that are useful in NT1, in particular, where cataplexy is a hallmark feature, not so in NT2. So, I think that the anchor, the most predictive for us, we view as the maintenance of wakefulness test, which is, again, not just maintenance away from us, it’s also EEG driven. And then we will be collecting these other endpoints in our Phase 2 study. And then as we line up for the pivotal study, we’ll prioritize the primary and secondary endpoints in consultation with FDA and because there are a number of players in this field, there’s a certain consensus building around the way to best assay the efficacy of these drugs to patients.

And do you still think, Rich, that this compound is likely to address all those populations? Because I think you’ve spoken previously about the concept of needing to potentially dose higher outside of NT1.

Yes. I think that—as I mentioned to Chris earlier, I think the answer to that question will be driven by the potency in NT1. If you have a highly potent compound in NT1, you have the ability then to escalate without much fear even if you had to go five to tenfold higher. It’s not clear yet in the whole field how much higher one needs to go in NT2. I think the expectation is that whereas NT1 is clearly a deficiency of orexin-producing neuron. In NT2 and IH, that differential diagnosis is somewhat fuzzy, but also there may be a continuum or a distribution of orexintone in the brain. So for certain patients, you might need a certain amount and for another patient mining more or less. So our hope and expectation, I’d say right now is that for many patients outside of NT1, you may titrate to effect. And that’s the flexibility by potency and allows you to move across a range of doses would be a really attractive clinical feature. And that’s what we’re figuring right now in the clinic.

Makes sense. Thanks very much.

You’re welcome.

Our next question comes from Umer Raffat with Evercore ISI. Please proceed with your question.

Hi guys. Thanks for taking my question. I just wanted to revisit the long-term guidance 2024 for a quick second. Maybe putting VIVITROL aside for a second. And keeping in mind, obviously, that J&J royalties are not part of the 2024 guidance. Would you agree that the business needs to track north of consensus to make the 20% EBITDA to revenue guidance that you have out there for next year? And again, it could track North either on LYBALVI or you do more of a cost cut. I’m just curious how you’re thinking about the key levers to get to those numbers because I’m sure you’ve thought about it at length.

Yes, I think as we think about the long-term profitability targets, obviously, they’re focused on revenue growth on the top-line and then continued focus on disciplined expense management. So it’s really a combination of those two levers within the business. And we reiterated the guidance when we went out with the J&J news in the June timeframe, and we’ll talk about them at some point in the future.

Our next question comes from Uy Ear with Mizuho Securities. Please proceed with your question.

Hi guys, thanks for taking my question. So Rich, I think you mentioned that you could be presenting something at World Sleep. And so that’s a few months away. Could you sort of give us maybe just some color on what we should expect to see, the kind of data we expect to see there? And I guess secondly on SG&A, I guess if you take out the $28 million one-time this quarter would be something like 177 and if you sort of flatline, it suggests that you’ll spend more than your—the high end of your guidance. Could—should we expect SG&A to come down in the second half? Thanks.

Good morning, Uy Ear. World Sleep is in October, and what we’re trying to do is enroll as much of the NT1 cohort as possible, as well as get into the NT2s as well. We’ll see how far along we get as we take those cohorts and compile the data and put it together for scientific presentation. That will also be coupled with data from the SAD and the MAD study. So we’ll hope to give a pretty comprehensive view of what we’ve learned at the clinic so far this year. Iain, you want to take the SG&A?

Yes. And then on the SG&A side of things, I think there are really two components to that on the sales and marketing side, as you talked about, we had the investment—initial investment in DTC certainly on the TV component side of things. Todd talked about us pulsing that investment as we go through the remainder of the year. Typically, the summer months are a little bit slower from a TV perspective. So we’d expect the DTC spend to come down and then potentially rebound in the fourth quarter as we get into the finale season, assuming the writer and actor strike doesn’t impact that. And then on the G&A side of things, we had a pretty busy Q2, if you think about it with the J&J arbitration, the Teva litigation, the Annual Shareholder Meeting. So there’s a certain level of spend in Q2 that we don’t expect to recur in the second half. And then lastly, we also are incurring some spend on the separation of the oncology business which we wouldn’t necessarily expect to run at the same level through the year. So there are a few factors in the second quarter, which we don’t anticipate necessarily running through the—in a similar way through the rest of the year.

Thank you.

Our next question comes from Marc Goodman with Leerink Partners. Please proceed with your question.

Yes. On that DTC, can you just give us a sense of how you’re measuring returns and what you’ve seen so far as far as the return on that investment? And how much money are you planning on spending on the DTC program for the full year? Thank you.

Yes, absolutely, Marc. I’ll take that. It’s early with our DTC investment. We started our digital component of the DTC investment at the beginning of the year. We were really pleased to launch the TV component in May. Right now, a lot of our metrics are qualitative in nature. So we don’t believe that we’re seeing any type of inflection on our DTC campaign. We believe that the ROI will play out really over the next six months to 12 months. The metrics that we’re really watching right now are awareness levels, which are building, we’re watching our website traffic. We’re watching search engine traffic. We’re watching overall the number of people that we’re able to reach through TRP levels. And they’re very consistent with our expectations, and the trends are very encouraging as well. In terms of the overall investment, as we’ve talked about previously, we think the DTC investment on an annual basis for this year will be in the range of about $70 million to $75 million. And then we’ll be taking a look at what that investment will look like in 2024 and beyond later this year.

Thank you. Our next question comes from Jason Gerberry with Bank of America. Please proceed with your question.

Hey guys. Thanks so much for taking my question. I just wanted to come back to the 2024 net margin guide of 25%. Mindful that you’re waiting to February to address this. But just trying to get conceptually an understanding here because it seems like perhaps two-thirds of the net profit step up can be achieved through net product sales, if they’re all kind of operating leverage and the R&D cuts with Mural. But it would seem like you need to take a healthy cut to SG&A and there’s a lot of talk about pulse investment in DTC. So wondering how much that discretionary SG&A could be a lever in 2024 to get to that net margin guidance? And then just as my follow-up, we’re getting some questions, just is getting this orexin data at the World Sleep Medical Meeting in October a priority for you guys? Thanks.

So on the profitability targets, again, we’ll be providing detailed 2024 guidance on our year-end earnings call in February to answer all those questions more specifically. But we’re anticipating continued growth with the proprietary products, VIVITROL, ARISTADA, and especially LYBALVI—especially LYBALVI driven by the DTC investment that we’ve talked about. We continue to expect growth in VUMERITY. And then on the expense side of things, as we said, we very much focus on operating efficiencies that’ll continue. We have the ability to flex some of the spend within the P&L such as DTC, as you alluded to. As Todd said, we’re going to be assessing both the return on investments and the level of investment on DTC as we go forward. But there’ll be a lot more detail to follow on that on the February earnings call.

And Jason, with respect to World Sleep, we expect to present data at World Sleep.

Okay. That would be the NT1, Phase 1b data at World Sleep?

Excuse me. Yes, I expect to have the—at least the first cohorts of the NT1 complete.

Our next question comes from Douglas Tsao with H.C. Wainwright. Please proceed with your question. Doug, are you there?

All right, Maria. I don’t think we have...

It appears we don’t have any more questions now. So I’m going to turn the floor back over to you, Sandy, for closing comments.

Great. Thank you everyone for joining us on the call today. Please don’t hesitate to reach out if there are any follow-up questions we can be helpful with. Thank you.

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