Earnings Call Transcript - ALKS Q2 2024

Operator, Operator

Greetings and welcome to the Alkermes' Second Quarter 2024 Financial Results Conference Call. My name is Rob and I'll be your operator for today's call. All participant lines will be placed on mute to prevent background noise. Please note 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 now begin.

Sandra Coombs, SVP, Investor Relations and Corporate Affairs

Thank you. Welcome to the Alkermes Plc conference call to discuss our financial results and business update for the quarter ended June 30, 2024. With me today are Richard Pops, our CEO; Todd Nichols, our Chief Commercial Officer, and Blair Jackson, our Chief Operating Officer. During today's call, we will be referencing slides. These slides, along with our press release related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors section of alkermese.com. 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 will open the call for Q&A. And now I'll turn the call over to Blair for a review of the quarterly financial results.

Blair Jackson, Chief Operating Officer

Thank you, Sandy. Our second quarter results reflect robust profitability and solid execution across our business, delivering double-digit year-over-year growth for our proprietary commercial product portfolio. The year is proceeding as planned and we enter the second half in a strong position with clear priorities to deliver on our 2024 financial expectations, which we are reiterating today. For the second quarter, we generated total revenues of $399.1 million, driven by our proprietary product portfolio, which grew 16% year-over-year. Starting with VIVITROL, net sales in the quarter were $111.9 million, compared to $102.1 million in the same period last year. For the ARISTADA product family, net sales were $86 million compared to $82.4 million for the same period last year. For LYBALVI, net sales were $71.4 million, compared to $47 million for the same period in the prior year, which represented 52% year-over-year growth driven by robust underlying demand. Across our proprietary commercial products, inventory in the channel returned to normal levels on a month's on-hand basis during the second quarter following the drawdown we experienced in the first quarter of this year. Moving on to our manufacturing and royalty business, in the second quarter of 2024, we recorded manufacturing and royalty revenues of $129.9 million. Revenues from the long-acting INVEGA products were $78.7 million compared to $321.2 million for Q2 last year, which included $245.5 million of back royalties and related interest following the successful resolution of our arbitration with Janssen. As previously disclosed and reflected in our financial expectations for the year, our royalties and net sales of INVEGA SUSTENNA in the U.S. will end in mid-August of this year. We expect the impact on our third quarter results will be approximately $20 million. We will continue to receive royalties on net sales of INVEGA TRINZA and INVEGA HAFYERA in the U.S. and on the long-acting INVEGA products outside the US. Revenues from VUMERITY were $35.2 million, compared to $32.3 million for Q2 last year. Now I'll turn to our operating expenses and our financial results from continuing operations following the separation of our oncology business late last year. Cost of goods sold were $61.5 million, compared to $63.2 million for Q2 last year. R&D expenses were $59.6 million, compared to $68.2 million for Q2 last year. This reflects focused investments in our neuroscience development programs, primarily related to the ALKS 2680 clinical program and support activities for our proprietary commercial products. We expect R&D expense to remain relatively steady at this level through the end of the year. SG&A expenses were $168.1 million compared to $195.8 million for Q2 last year. The decrease was primarily driven by operational efficiencies and a number of non-recurring expenses that were recorded in the second quarter of 2023. Looking ahead, we continue to expect SG&A expenses to decrease in the second half of 2024, primarily reflecting the timing and mix of commercial promotional activities. We continue to focus on driving profitability and during the second quarter, we delivered GAAP net income from continuing operations of $94.7 million, non-GAAP net income from continuing operations of $123.4 million, and EBITDA from continuing operations of $118.6 million. Turning to our balance sheet, we ended the second quarter in a strong financial position with $962.5 million in cash and total investments. In May, we completed the sale of our Athlone, Ireland manufacturing facility to Novo Nordisk and received a cash payment of approximately $91 million for the facility and related assets. This transaction represents a key element of our multi-year strategy to drive operational efficiency and further align our infrastructure and cost framework with the anticipated needs of the business. Additionally, as part of the $400 million share repurchase program authorized earlier this year, the company repurchased approximately 3.5 million of our outstanding shares during the quarter for an aggregate purchase price of $84.7 million, and we have since continued to be actively repurchasing shares opportunistically in the market. Taking a step back, we are pleased with the progress we have made as we've continued to deliver on our multi-year plan to streamline the business and strengthen our financial operating profile while advancing ALKS 2680 rapidly in the clinic. As we look at the second half of the year, we're in a strong financial position as we work to execute on our strategic priorities, drive momentum across our business, and deliver robust profitability. With that, I'll now hand the call to Todd.

Todd Nichols, Chief Commercial Officer

Thank you, Blair, and good morning, everyone. We generated strong growth for our proprietary product portfolio in the second quarter. This was an important priority for our annual plan, and we delivered on that objective. During the quarter, our team drove net sales of our proprietary product portfolio of $269.3 million, reflecting 16% year-over-year growth. With two remaining quarters in the year, we are on track to achieve our previously announced financial expectations of our proprietary net sales in excess of $1 billion in 2024. I'll focus on LYBALVI, followed by quick updates on VIVITROL and ARISTADA. During the second quarter, we generated LYBALVI net sales of $71.4 million. Total prescriptions of LYBALVI grew 12% sequentially and 44% year-over-year to approximately 55,300 during the quarter, reflecting strong underlying demand and continued expansion of prescriber breadth and depth. Optimizing LYBALVI's access profile continues to be an important element of our long-term growth strategy for the brand, and compared to the beginning of the year, approximately 50 million additional lives now have improved access to LYBALVI. These enhancements are the result of our disciplined contracting strategy. During the quarter, we entered into a second major commercial contract as well as a contract that further improved formulary positioning on an important Medicare Part D plan, both of which took effect on July 1. Similar to the commercial contract we announced last quarter, these contracts are not expected to significantly impact our anticipated gross to net adjustments. Looking ahead for the full year, we continue to expect LYBALVI net sales in the range of $275 million to $295 million. Turning to the ARISTADA product family, net sales in the second quarter were $86 million. While the long-acting antipsychotic market experienced some softness, ARISTADA new to brand prescriptions demonstrated encouraging growth. For the full year, we continue to expect ARISTADA net sales in the range of $340 million to $360 million as we focus on commercial execution and continue to differentiate ARISTADA in the long-acting antipsychotics space. Moving to VIVITROL, net sales in the second quarter were at $111.9 million, representing 10% year-over-year growth driven by underlying demand. VIVITROL performance continued to be largely driven by the opportunity of the alcohol dependence indication, which currently accounts for more than 75% of VIVITROL volume. For the full year, we continue to expect VIVITROL net sales in the range of $410 million to $430 million. With a solid Q2 now behind us, looking ahead, we expect to see typical summer demand patterns across our proprietary commercial product portfolio. Against that backdrop, our team will maintain its sharp focus on strong execution, highlighting the differentiating features of our medicines and driving uptake of our products. We look forward to sharing our progress with you. With that, I will pass the call to Richard.

Richard Pops, CEO

That's great. Thank you, Todd. Good morning, everyone. So, we're now midway through the year and making excellent progress across the objectives we set for 2024. Those objectives are driving commercial and financial performance, advancing ALKS 2680 in our neuroscience development pipeline, completing the sale of our Athlone manufacturing facility, and using our strengthened balance sheet to return capital to shareholders as opportunities present themselves. Alkermes is now a biopharmaceutical growth company with multiple proprietary commercial products, an efficient operating structure, and a development pipeline with significant potential value. This is the result of a multi-year evolution from a legacy business as a partner to larger pharmaceutical companies to an integrated, pure-play neuroscience company with a financial profile driven by the performance of a proprietary commercial portfolio. Our proven ability to bring new neuroscience medicines with significant medical and economic value to market is the foundation for new growth opportunities. This is an important transition, and we're well positioned to execute our plan to become a leader among neuroscience companies. ALKS 2680 is becoming an important element of our growth strategy. ALKS 2680 is our novel, investigational, once-daily oral orexin-2 receptor agonist for narcolepsy, currently in Phase 2 development. During the quarter, we provided key data updates and met significant operational milestones in our expanding clinical program. As we enter Q3, ALKS 2680 is the only orexin agonist proceeding into Phase 2 in both narcolepsy Type 1 and Type 2, supported by positive early clinical data in both indications. So, let's start with our work in narcolepsy Type 1 or NT1. During the quarter, we initiated our Phase 2 study, Vibrance-1, which is a randomized, placebo-controlled, multinational study evaluating the safety, tolerability, and efficacy of three different doses of ALKS 2680. We are initiating sites and beginning to enroll patients in the study. The Vibrance-1 Phase 2 study was informed by data from our phase 1b proof of concept study. Last month at the 2024 SLEEP Meeting in Houston, we presented data from the full NT1 cohort from the phase 1b study. This medical congress gave us the opportunity to share the data set with thought leaders and physicians within the broader clinical community, along with patient advocacy organizations that play a key role in this therapeutic space. Feedback from these stakeholders bolstered our belief that the orexin-2 receptor agonist mechanism represents an opportunity to transform the treatment of narcolepsy. In early April, we also announced positive top-line data from the 1b cohorts with narcolepsy Type 2 or NT2 and idiopathic hypersomnia. We plan to present additional data from the phase 1b study at the upcoming SLEEP Europe meeting in September. The data from the 1b in NT2 support advancement into a planned Phase 2 study, which will be called Vibrance-2. Vibrance-2 will leverage much of the work we've been doing launching Vibrance-1, so we're moving quickly and expect to initiate that study and open it for patient enrollment toward the end of the summer. NT2 represents a significant potential opportunity for ALKS 2680, and advancing in the clinic in this patient population is becoming an important differentiating feature for ALKS 2680. A key element across the Phase 2 program is the range of doses that will be evaluated, 4, 6, and 8 milligrams in NT1 and 10, 14, and 18 milligrams in NT2. Exploring this continuous dose range will allow us to comprehensively establish the dose response curve and the safety and tolerability profile of ALKS 2680 in narcolepsy Type 1 and Type 2. This range of doses also presents the potential to accommodate a spectrum of patient profiles and treatment objectives. Beyond narcolepsy, data from across our phase 1 study of ALKS 2680 support our hypothesis that orexin-2 receptor agonists such as ALKS 2680 may have utility in treating a range of neurological disorders where excessive daytime sleepiness is a serious clinical consideration. The positive results in idiopathic hypersomnia or IH in the phase 1b study begin to build supporting evidence for this hypothesis. IH by itself represents a meaningful potential opportunity, and we are evaluating our strategic development plan in that underserved disease area. But more broadly, the IH data further suggests that ALKS 2680 can drive meaningful changes in wakefulness in patients with relatively normal orexin levels and provide additional support for the evaluation of broader clinical uses for these agents. The work to explore these broader opportunities and advance our portfolio of preclinical orexin-2 receptor agonists is well underway. We have been active with our preclinical experimentation, and new IP filings are in process. We plan to share more about our development strategy later this year. I'm going to end with a brief update on our capital allocation strategy. The business is in a strong position to generate considerable excess cash flow while investing in the growth of our commercial portfolio and advancing our pipeline, as evident in our results year-to-date. Based on the progress we're making in the business measured against the current valuation, we see a substantial opportunity to capture value for shareholders. In Q2, we activated our share repurchase program. We will continue to be active in the market, informed by the ongoing needs of the business and evolving market conditions. Across the business, we generated a strong financial and operational performance in the first half of the year. Looking ahead, we have clear goals and priorities to advance the business and we'll maintain a sharp focus on execution and efficiency to deliver on those objectives. So, we look forward to sharing our progress with you. And I'll turn it back to Sandy to run the Q&A.

Sandra Coombs, SVP, Investor Relations and Corporate Affairs

Great thanks. Rob, we'll now open the call for Q&A please.

Operator, Operator

Thank you Sandy. Please proceed with your questions.

Umer Raffat, Analyst

Thank you for taking my question. I have a couple today, if I may, but not specifically about orexin. I'm curious about the value of the base business and the trajectory of your underlying earnings per share, which is now profitable. Richard, how are you approaching the M&A priorities and the types of assets you're considering? Are you focusing more on pipeline opportunities or on assets that could enhance earnings or profitability in the short term, if not immediately? I think this will be very relevant for understanding the direction of earnings per share. Additionally, based on my calculations, it appears there may be about $4 million related to inventory build or recovery on liabilities this quarter. Could you clarify that as well? Thank you.

Richard Pops, CEO

Sure. I'll take the first one over, and then I'll let Blair and Todd weigh in on the inventory side. Yes, I think that our M&A priorities are consistent quarter to quarter, and we're actually really interested in both of those domains. EPS augmentation through commercial products that would drop profits to the bottom line, as well as expanding the pipeline. So, if we fast forward in a couple of years to look at this company, what should it look like? It should have a robust, growing top line, strong profitability, and an expanded pipeline. So, we need to build across each of those axes. Blair?

Blair Jackson, Chief Operating Officer

Yes. And then I think with regards to inventory, your math is great. So, we did see it. Remember, a shortness of inventory in Q1. We've recovered in LYBALVI in Q2 and the same goes for all of our other programs as well.

Charles Duncan, Analyst

Hey. Good morning. Thanks for taking the question, and congrats on a good quarter. I had two questions, one on pipeline, one on commercial. The first is on the pipeline. With regard to Vibrance-1, you said that you've begun enrolling patients, and I guess I'm wondering, with that cadence, can you give us a sense of timing to data with Vibrance-1? And then with regard to the commercial question on LYBALVI, give us a little bit of color on in-market kind of dynamics. And what would you expect with a possible coming approval for KarXT and how that could be impacted? Thanks.

Richard Pops, CEO

Good morning, Charles. It's Rich. I'll start. Regarding Vibrance-1, our main focus right now is on activating sites. We will be activating sites throughout the summer and into the fall. This is a large multinational study, so it’s still early for us to draw conclusions as we are just starting to enroll participants. However, as we gain more insights with the activation of sites, we will certainly share that information with you. I’ll now turn it over to Todd and Blair to discuss the current market dynamics for LYBALVI.

Todd Nichols, Chief Commercial Officer

Yes, absolutely. In general, our perspective on LYBALVI and what we observed in Q2 shows strong underlying demand, leading to approximately a 12% increase in TRx growth, which is quite encouraging and aligns with our expectations. This growth was primarily driven by new patient starts, which experienced about a 17% increase quarter-over-quarter. We have observed solid growth in new patient starts, driven by an expansion in the breadth of prescribing. Year-over-year, we saw a 23% increase in the breadth of prescribing, and we expect this trend to continue, supported by our market research. When we engage with healthcare professionals in our target audience, over 90% indicate they plan to continue expanding their prescribing practices, which we view as a positive trend. Regarding the overall market dynamics, we are closely monitoring the competition. We are aware that KarXT is approaching a further PDUFA date later this year; it is a product likely to be approved specifically for schizophrenia. As it transitions from promise to market reality, we recognize that schizophrenia is a complex market where we have extensive experience. We expect them to compete aggressively, and we are prepared for that. This development does not alter our strategy for LYBALVI as we continue to focus on driving growth both within schizophrenia and bipolar disorder.

Charles Duncan, Analyst

Excellent, helpful information. Thanks.

Chris Shibutani, Analyst

Good morning. Thanks very much. With the enrollment timelines, we appreciated that in terms of thinking about how you move Vibrance-1 and Vibrance-2. I believe you would be the only program advancing into NT Type 2. Would we expect, therefore, that there's potential for a quicker pace of enrollment there given that opportunity? And then secondly, you mentioned about some additional assets that you're looking to move in. How are you thinking about the potential to move into IH? I know you've made some comments before about the broader commercial considerations like IRA, but help us with some hints, possibly, on what you think would be your strategy for thinking about a different asset, more of a backup to NT1, NT2, or a different market target? Thank you.

Richard Pops, CEO

Good morning, Chris, and thank you for your insightful questions. They are insightful because you will notice our company's growing focus on the wakefulness circuitry in the brain and its significance for various human diseases. Our primary focus is narcolepsy, which includes both NT1 and NT2. We are pleased with the Vibrance-1 and Vibrance-2 studies, as we are tackling narcolepsy in its entirety with a series of contiguous doses, which is crucial. One major takeaway from the SLEEP Meeting in Houston, where we shared this data, is the strong demand from the IH community for new treatments. This population is considerably underserved. Consequently, we are actively re-evaluating our plans for 2680 and the subsequent molecules we intend to bring into the clinic for IH. We will definitely be entering the IH space, and you should stay tuned for updates. The overall program will broaden, and we will provide more information in the fall about our forthcoming molecules and the disease areas we are exploring. There has been a significant amount of preclinical work and related intellectual property filings over the past year, so we will soon start discussing this publicly. Stay tuned, as the data we have collected so far has been very promising and indicates an expansion of the program.

Paul Matteis, Analyst

Hey, this is James filling in for Paul. Thanks for taking our question. I have just one inquiry. We've observed other companies with significant Medicaid exposure mentioning that Medicaid disenrollment is increasing and affecting their numbers. VIVITROL had an impressive quarter in Q2. Can you discuss any related dynamics on your end, if it's having an impact, and how we should consider the rest of the year? Thank you!

Blair Jackson, Chief Operating Officer

Yes, absolutely, James. I'll take that one. You know, that's something that we watch very closely, Medicaid enrollment. We've watched that for years. We look at that not only for VIVITROL, but across our entire portfolio. And what we see is that the mix of business is not really experiencing any type of dramatic changes. We're going to continue to monitor, but at this point right now, we haven't seen any reduction in Medicaid claims across our product portfolio.

Joseph Thome, Analyst

Hi there. Good morning and thank you for taking my questions. Maybe a couple of tips on dosing for the orexin programs with some of the other competitive agents. We've seen that some of the AEs maybe attenuate with time or patients tolerize to the therapies, especially in relation to maybe insomnia or other things. Have you ever considered maybe doing dose titration, maybe to get to the target doses? Do you think that would help with AEs? Maybe why or why not? And then when you think about the ideal number of doses to take forward to pivotal or commercial, is the goal from these Phase 2 is to identify one dose, or would you potentially take forward multiple? And then just one quick question on the commercial side. Can you talk a little bit about the potential impact of those new contracts coming online July 1, maybe? What have you seen so far for LYBALVI and how should we think about maybe what kind of revenues that could unlock going forward? Thanks.

Richard Pops, CEO

I'll take the first two, and then I'll ask Todd to comment on the third. What's interesting about the data we've generated so far with ALKS 2680 is its tolerability profile is really good, and we've disclosed a lot of detail about that. And in NT1, the doses that we're using are quite low and quite well tolerated, and that can be the same also for NT2. So, the way we're going to run the Phase 2 is in these fixed lanes of doses. And that's where we'll fully elaborate the tolerability profile over time, over a six-week period in a large number of patients. And then you'll have the information to say, is a titration necessary? Or our pretest hypothesis is that it won't be necessary, but the virtue of having a range of contiguous doses that for any individual patient, then they have the ability to modulate the dose, they and their physician, to whatever level of activity or tolerability that is suitable for their particular circumstances. So, we think that's actually one of the major clinical advantages and ultimately the commercial advantages of the product. So therefore, answering your second question, for sure, we're interested in a range of doses for a commercial presentation rather than a single dose because humans are variable and people's expectations and desires for the pharmacotherapy will vary. So, it's a market that's suited for a range of well-tolerated options.

Todd Nichols, Chief Commercial Officer

Yes. And I'll provide a little bit of color just on how we're thinking about market access. You know, as I said in my prepared remarks, since the beginning of the year, we've added approximately $50 million additional lives, which is something that we're really excited about. This has been part of our strategy since the launch of the brand. So, we're very focused right now on just optimizing the access profile, but the core element of this is really net sales. Right? So, we look at net sales and profitability for each unit. I can't get into a lot of detail in the specifics of the contracts for competitive reasons, and we're always having ongoing discussions overall, but it can take several quarters for these types of contracts to actually flow through all the way to the planned sponsors, all the way down at the local level. So, that's something that we're actively managing right now, is just the pull-through and the push-through element of this. When we thought about our full-year range, we did anticipate that we could have some movement in some of our contracting strategy. So, if we think about just the guidance range overall, which is volume and gross to net, that really reflects and captures a range of scenarios. So, we've already embedded the thinking that we would have some positive market access changes into that range. And today, obviously, we reiterated what the guidance range would be for LYBALVI.

David Amsellem, Analyst

Thank you. I have two questions. First, regarding LYBALVI, could you share your thoughts on commercial spending as we head into 2025? Is the sales force appropriately sized? Are you stable in terms of direct-to-consumer efforts? Please discuss your perspective on this, especially considering the promotional sensitivity in the bipolar market. Secondly, regarding Orexins, I'd like to ask a broader question. Richard, you mentioned narcolepsy being a primary focus, and there's also idiopathic hypersomnia. I'm curious if, as you consider additional molecules in this category that are part of your portfolio, you are exploring other therapeutic areas or related symptoms as you expand the development program in this class. Thank you.

Todd Nichols, Chief Commercial Officer

Yes, absolutely. So, I'll start first with just the commercial spend questions. Yes, for LYBALVI, strategically, we're focused on really three elements. And first and foremost, it's driving HCP adoption through depth and breadth. Secondly, it's building and driving patient awareness, which continues to grow through our DTC efforts. And then thirdly, it's optimizing the access profile. So, that's not going to change going into '25. At this point, right now, we think our spend is appropriate with where the brand is, but as we move into '25, the market obviously is dynamic and we could add additional spend into '25 and it's something that we're looking at. But at this point, right now, we think the spend level is appropriate for where the brand is.

Richard Pops, CEO

And David on the Orexins without giving too much specificity until later this year, I'd say that there are three categories of adjacencies that immediately come to mind within the context of our CNS focus. One is in psychiatry, where the affect or the sleepiness or tiredness during the day is an important feature of certain psychiatric conditions. The second is other neurological conditions where excessive sleepiness is a feature of the process, and then certain, even neurodevelopmental or neurodegenerative diseases, where that's also a major clinical feature. A number of these have relevant preclinical models, and so we've been mapping different compounds and different pharmacology onto those models, and that's what's maturing this year, and you'll hear more about.

Marc Goodman, Analyst

Yes. Rich, I heard you talk about business development. You mentioned commercial products that are already on the market. Obviously, those are pretty expensive. So, I was just curious, what level of transaction are you talking about here that's certainly a scenario? You know, are we talking about multiple billions? Are we talking about issuance of debt? Or how are you thinking about how big a product to do in the context of that, you know, and the share buyback that you're doing? Just give us a sense of how you're thinking about this.

Richard Pops, CEO

Yes, Marc, I often describe the current environment as challenging for identifying targets, but the opportunities that Wall Street has highly valued are not ones we will pursue. However, we have a specialized commercial infrastructure and our focus on addiction and serious mental illness allows us to identify assets that may not be mainstream commercial products but could significantly benefit our bottom line and be a good fit. I won't go into specifics about scale, but we currently have a billion dollars in cash and are generating more. At this moment, we don't anticipate large merger transactions, which are seldom successful. Nevertheless, we believe our specialized commercial infrastructure is valuable, and we are interested in leveraging it.

Marc Goodman, Analyst

So, the size is, we're not talking about major products. We're talking about just opportunistic type of deals that are small.

Richard Pops, CEO

Major being in the eye of the beholder. You know, I think that ones that could have a meaningful impact on EPS going forward; sometimes you can do that over a series of deals, or you could do it in one fell swoop, but we look at all those things. Well, I think there's an early mover advantage, and you know, not to make the direct analogy, but look what's happening in the GLP1 space, where if you make new medicines that are really value added for patients, there are huge commercial and clinical opportunities that present themselves. The chemistry space here, as you know, is limited. There are a number of aspirants, but there's not that many companies that have data that show that they're going to be meaningful competitors in this space. So, you know, I think that we can only rely on what we know in terms of the data that's been generated clinically. And we are in a very strong position, so we're going to move as fast as we can and cover as much of the waterfront as we can. So, I don't think at the end of the day there's going to be lots and lots of players. I think there's too many optimization variables for the molecules, and I think better molecules will do better than inferior ones, and inferior ones won't find a place in the market as attractive as the ones that are better. So, we're going to exploit our advantage right now and move as quickly as we can. You know, Blair, I don't know if you have any thoughts on that as well.

Blair Jackson, Chief Operating Officer

No, I agree. I think we've already started to see that shake out in some of the early development, as we've seen competitors kind of come and go, and we would anticipate that moving forward.

Joel Beatty, Analyst

Hi, congrats on my quarter, and thanks for taking the questions. The first one is on LYBALVI. What trends have you been seeing in the split of scripts between bipolar versus schizophrenia? And then on Vibrance-1, I believe this is a six-week randomized controlled trial followed by a seven-week extension phase. What is the design of that extension phase, particularly as it relates to how dose adjustments will be allowed and how that could add to a differentiated profile compared to other agents that may not have that same type of dose ranging available?

Blair Jackson, Chief Operating Officer

Yes, absolutely. I'll start with LYBALVI split, kind of the contribution to business, which has been relatively stable over the last, you know, two quarters. We saw some similar patterns from Q1. So overall, the split still in terms of overall TRx's is approximately 50:50 between schizophrenia and bipolar. The movement that we're starting to see and it's becoming more pronounced as we headed into this year is just with new patient starts. So, when you look at just overall share of NBRx's quarter-over-quarter, Bipolar 1 disorder prescriptions for new patient starts represent about 57% right now. Obviously, year-over-year and quarter-over-quarter, we saw some really robust volume growth for bipolar and schizophrenia. But new patient starts, we're clearly seeing a leading indicator with bipolar right now. So, it's very encouraging for us. It's part of our long-term strategy, obviously through HCP adoption, also through our DTC campaign.

Richard Pops, CEO

Your question about the Vibrance-1 extension is insightful and it seems to be highlighting some of the potential advantages of C. In the seven-week extension phase, after participants complete the six-week randomized controlled trial, they will have the option for dose adjustments between the 4 milligram, 6 milligram, and 8 milligram doses. It will be interesting to observe how this develops, especially if we notice a reduction in side effects over time and the tolerability profile proves to be as favorable as we expect. We look forward to seeing that data. The insights we gain from this will inform the design of the phase 3 protocol, alongside the data from the open-label safety study we will conduct independently.

Akash Tewari, Analyst

Hey, it's Manoj standing in for Akash. Earlier this year, in your orexin program at SLEEP, you reported about 60% insomnia at the 8-milligram high dose in NT1. What do you anticipate these rates could look like with longer-term dosing? What would be considered an acceptable rate? Additionally, did you observe any similar rates of insomnia in your NT2 and IH data? Thanks.

Richard Pops, CEO

Yes, I don't have the data immediately at hand, but I think one of the interesting things from competitive data that was shown at SLEEP in Houston was the attenuation of the side effect of insomnia after the first week. So, we think that's probably more of a class-wide phenomenon as patients get accustomed to being on orexin agonist. Our overall rates of insomnia were very acceptable and dose dependent. So, what we hear from clinicians is what I just mentioned, which is that you see an attenuation of it in real life over time, and we'll more fully elaborate all that in our Phase 2 study.

Jason Gerberry, Analyst

Hey, good morning. Thanks for taking my questions. I guess first one is on ARISTADA and if there's any expectation that gross to nets, if they should be relatively stable next year, you know, when IRA shifts the catastrophic coverage costs onto payer plans, there's sort of an open debate of is there a risk that rebates materially increase in that category? And then my second question on the Orexins in lieu of Takeda's data and roughly mid 20 minutes MWT's placebo adjusted, should the street be focusing on this metric as the key area for differentiation in NT1? Or do you think that, you know, it's really more about a broader risk benefit evaluation and having breadth of indications like NT2 and IH, you know, that's ultimately kind of your area of focus? Thanks.

Todd Nichols, Chief Commercial Officer

Yes. Hey, Jason, it's Todd. I'll start with ARISTADA and the gross to net figures. This quarter and for the full year, they remain relatively stable. Next year, we anticipate some slight increases. We're closely monitoring the implications of the IRA. We believe the near and mid-term impact across our portfolio will be minimal. We do not foresee significant inflation penalties due to our responsible pricing strategies. None of our medications are included in the Medicare Part D negotiations. Additionally, our company Alkermes is classified as a specified small manufacturer regarding the Part D redesign, which allows us to manage our overall liability better. This makes the situation manageable for us and reduces our risk starting in 2025.

Richard Pops, CEO

And this is Rich. I'll take the question about the Orexin. I think the way to think about the category is the Orexins relative to what precedes them and then the Orexins relative to each other. In the former category, you know, MWT's that have been shown by Takeda and others, they're really good, they're really beneficial for patients. But recognize that MWT, the maintenance of wakefulness value is really just one dimension of the experience of being on a medicine for the treatment of a serious condition. It's an important metric. It's an approvable metric and has the virtue of being, you know, so quantitative. But I think relative to each other, if you stipulate that more than one orexin agonist crosses the finish line, then the question becomes them relative to each other. And this is exactly where a range of doses, tolerability and then also a range of indications. So, the differential diagnosis doesn't have to be quite so precise between NT1 or NT2 or IH. You basically have agents that can be dosed at multiple doses across a range of those indications. I think that's where the competitive dynamic really gets sharpened.

Jessica Fye, Analyst

Hi, this is Na Sun on for Jessica Fye. Just wanted to ask about ARISTADA. First, was there an inventory benefit for ARISTADA, specifically in the quarter? And second, can you talk about what gives you confidence of hitting the guidance range for that product this year? Thanks.

Blair Jackson, Chief Operating Officer

Hi, Na Sun, this is Blair. With regards to inventory, just like with our other programs in Q1, we had a shortfall of inventory purchases, and so we saw with ARISTADA a rebound into Q2. The net effect of that for across the quarters was $2 million.

Todd Nichols, Chief Commercial Officer

Yes. Regarding the outlook for ARISTADA, we have confirmed our guidance range. We are closely monitoring market dynamics, particularly how they have developed over the past few quarters. Last year was quite dynamic for the long-acting injectable category. Our primary focus is the performance and outlook for ARISTADA. In the last two quarters, we've observed some positive trends in new-to-brand prescriptions, both in the broader category and specifically for ARISTADA. Additionally, we have seen promising trends in our non-retail sector for ARISTADA as well. These factors give us significant confidence that we are on track to meet our objectives for the year.

Sandra Coombs, SVP, Investor Relations and Corporate Affairs

Great. Rob, we have time for one more question.

Operator, Operator

All right. Next will be coming from the line of Douglas Tsao with H. C. Wainwright.

Douglas Tsao, Analyst

Hi, good morning. Thank you for taking my questions. Richard, you mentioned the significance of your finding regarding the impact on patients with normal orexin levels. I am interested in whether, when considering follow-on molecules or different developments, there might be specific pharmacological adjustments to the molecule that could enhance its suitability for treating IH, particularly in contrast to the more generalized approach that others might be taking.

Richard Pops, CEO

Hey, Douglas, I don't think I'm prepared to answer that question publicly at this moment. I think that there's some learnings that we're learning both clinically and preclinically that inform that decision. But I'm not quite ready to go there yet. Other than to say what I said earlier, which is that I think we're pretty convinced that IH is a separate opportunity from narcolepsy. You might be lulled into thinking that NT2 and IH are interchangeable, but I think the more time that we spend with patients and clinicians treating patients with a differential diagnosis, they are different patients. And, you know, a single drug could be useful, but also more than one drug may be useful as well.

Douglas Tsao, Analyst

Okay, great. And then just as a follow-up, I mean, obviously there have been questions around the impact of KarXT. I'm just curious, from talking to clinicians, do you get a sense that they are targeting sort of the different patients that are the two drugs that sort of go after initially different patient sets, meaning LYBALVI in the early going, just because obviously they're very different drugs and LYBALVI has the sort of proven efficacy of olanzapine? Thank you.

Blair Jackson, Chief Operating Officer

Yes, returning to KarXT, it's still uncertain. We need to see product approval and labeling, and the company will need to promote it according to that label. This development does not alter our perspective on LYBALVI, which is our priority. LYBALVI has a wide label, providing a significant advantage for the brand. Additionally, the underlying trends indicate a strong mix of patients with schizophrenia and bipolar disorder, suggesting a large addressable population for LYBALVI.

Douglas Tsao, Analyst

And in terms of the growth you're seeing for schizophrenia, is that coming from new prescribers or just greater depth within the existing prescriber base? Thank you.

Blair Jackson, Chief Operating Officer

Yes, absolutely. We're seeing depth of prescribing really grow within our existing prescriber base. And it's healthy right now if you look at a quarter-over-quarter and year-over-year. And it's very consistent with the market research. Prescribers tell us once they start on LYBALVI, they get a positive experience, which we're hearing a lot of that, very positive experiences from HCPs and patients that they will prescribe utilization. So, we see a lot of the depth being driven by existing prescribers while driving breadth at the same time.

Sandra Coombs, SVP, Investor Relations and Corporate Affairs

Great. Thanks everyone for joining us on the call today. Please don't hesitate to reach out to us at the company if you have any follow-up questions. Have a great day.

Operator, Operator

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