Axsome Therapeutics, Inc. Q1 FY2024 Earnings Call

Good morning, and welcome to the Axsome Therapeutics conference call. As a reminder, today's conference call is being recorded.

Good morning, and thank you all for joining us on today's conference call. This morning, we issued our earnings press release providing a corporate update and details of the company's financial results for the first quarter of 2024. The release crossed the wire a short time ago and is available on our website at axsome.com. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding, amongst other things, the efficacy, safety, and intended utilization of our investigational agents, our clinical and nonclinical plans, our plans to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity, and our other pipeline products, revenue projections, and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today's date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; Mark Jacobson, Chief Operating Officer; and Ari Maizel, Executive Vice President and Head of Commercial. Herriot will provide an overview of the company and progress made in the first quarter of 2024, as well as key milestones. Following Herriot, Nick will review our financial results, then Ari will provide a commercial update. We will then open the line for questions. Questions will be taken in the order they are received. And with that, I will turn the call over to Herriot.

Thank you, Darren. Good morning, everyone, and thank you for joining Axsome Therapeutics First Quarter 2024 Financial Results and Business Update Conference Call. The first quarter of 2024 was marked by strong financial performance for our own market products, which are delivering important and differentiated treatment options for patients living with depression, narcolepsy, and obstructive sleep apnea. Total net product revenue in the quarter was $75 million, representing year-over-year growth of approximately 160%. We will share additional details on our financial and commercial performance later in the call. We also significantly advanced our innovative neuroscience pipeline in the quarter, including announcing positive top-line results for AXS-12 in narcolepsy, advancing AXS-07 and AXS-14 towards NDA submissions, initiating pivotal trials in new indications with solriamfetol, and advancing and expanding our Alzheimer’s disease agitation program for AXS-05. We expect to continue the commercial and pipeline momentum in the balance of 2024. I will now provide a brief update on our industry-leading neuroscience pipeline and expected milestones. Starting with our migraine products, AXS-07 for the acute treatment of migraine is on track for NDA resubmission this quarter. Additionally, we are conducting the EMERGE study, a multicenter Phase III single-group trial evaluating the efficacy and safety of AXS-07 in a dose for patients with a prior inadequate response to an oral CGRP inhibitor. We anticipate top-line results from this trial in the second half of 2024. For AXS-14, which we are developing for the treatment of fibromyalgia, pre-submission activities for the NDA for this product are near completion. We continue to target submission later this quarter. In March, we announced that the Phase III SYMPHONY trial of AXS-12 in narcolepsy achieved its primary endpoint and significantly reduced the frequency of cataplexy attacks as compared to placebo. AXS-12 also reduced excessive daytime sleepiness severity, improved cognition, and reduced overall narcolepsy severity. An open-label safety extension trial for AXS-12 is ongoing with results expected in the fourth quarter of 2024. We are excited about the potential of AXS-12 to provide a differentiated treatment option to patients and hope for this debilitating condition. Moving on to AXS-05, we continue to anticipate completion of the Phase III ADVANCE-2 trial in the treatment of Alzheimer's disease agitation in the second half of 2024. To date, we announced that we launched the ACCORD-2 study, a double-blind placebo-controlled randomized withdrawal trial to evaluate the efficacy and safety of AXS-05 in the treatment of Alzheimer's disease agitation. This study is similar in design to the completed positive ACCORD-1 trial. With ACCORD-2, the clinical development program will now include four controlled efficacy trials. Importantly, ACCORD-2 further increases the robustness of our clinical program in Alzheimer's disease agitation without impacting our overall development timeline. Enrollment in ACCORD-2 is very robust, and we expect a strong competition around the year. With respect to solriamfetol, our dopamine and norepinephrine reuptake inhibitor and TAAR1 agonist in addition to continued commercial performance, we launched the Phase III PARADIGM trial in major depressive disorder in the Phase III ENGAGE trial in binge eating disorder in the first quarter. Results from both trials are expected in 2025. We are on track to initiate a Phase III clinical program in shift work disorder this quarter. Solriamfetol is also being evaluated in the FOCUS Phase III trial in ADHD, for which we continue to anticipate top-line results in the second half of this year. Overall, our innovative neuroscience portfolio encompasses five late-stage patent-protected product candidates for ten serious psychiatric and neurologic conditions with substantial market opportunities. Each product candidate has the potential to transform the treatment landscape for serious and difficult-to-treat CNS disorders, which affect more than 150 million in the U.S. I will now turn the call to Nick, who will provide details of our financial performance. Nick?

Thank you, Herriot, and good morning. Today, I will discuss our first quarter results and provide some financial guidance. Total product revenues were $75 million for the first quarter of 2024. This consisted of net product sales of $74.1 million and royalty revenue of $900,000. Total product revenues for the comparable period in 2023 were $94.6 million, which consisted of net product sales of $28.6 million, royalty revenue of $300,000, and $65.7 million in one-time license revenue received from the out-licensing of Sunosi in certain ex-U.S. territories. Auvelity net product sales were $53.4 million for the first quarter of 2024, representing year-over-year growth of 240%. Auvelity net product sales for the comparable period were $15.7 million. Sunosi net product revenue was $21.6 million for the first quarter of 2024 and consisted of $20.7 million in product sales and $900,000 in royalty revenue associated with Sunosi sales in out-licensed territories. Sunosi net product revenue for the comparable period in 2023 was $13.2 million, consisting of $12.9 million in product sales and $300,000 in royalty revenue. Total cost of revenue was $6.3 million for the first quarter of 2024. Total cost of revenue for the comparable period in '23 was $7.6 million, which included $5 million in Sunosi licensing transaction fee sharing expense. Research and development expenses were $36.8 million for the first quarter of 2024 compared to $17.8 million for the comparable period in 2023. The increase was primarily related to the initiation of the solriamfetol PARADIGM trial for major depressive disorder, the solriamfetol ENGAGE trial for binge-eating disorder, the advancement of the solriamfetol FOCUS trial for ADHD, ongoing trials of AXS-05 and AXS-12, manufacturing costs associated with the anticipated NDA for AXS-07 and AXS-14, post-marketing commitments for both Auvelity and Sunosi, and higher personnel costs, including non-cash stock-based compensation. Selling, general, and administrative expenses were $99 million for the first quarter of 2024 compared to $74.2 million for the comparable period in 2023. The increase was primarily related to commercialization activities for Auvelity and Sunosi, including sales force and marketing expenses and higher personnel costs related to organizational growth, including non-cash stock-based compensation. Net loss for the first quarter of 2024 was $68.4 million or $1.44 per share compared to a net loss of $11.2 million or $0.26 per share for the comparable period in 2023. The net loss in the first quarter of 2024 included $21 million in non-cash charges, the majority of which was comprised of non-cash stock-based compensation expense. The 2023 comparable period included approximately $62 million in net gain from the Sunosi out-licensing. Q1 typically has a negative seasonality effect on GTN, which we saw on both Auvelity and Sunosi versus the prior quarter. Auvelity GTN discount for Q1 was in the low to mid-50s, and Sunosi GTN discount was in the mid-50s. We ended the first quarter of 2024 with $331.4 million in cash and cash equivalents compared to $386.2 million as of year-end. We believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on the current operating plan. I would now like to turn the call over to Ari, who will provide a commercial update.

Thank you, Nick. Axsome delivered solid brand performance in the first quarter of 2024. Auvelity demand trends in Q1 once again outpaced growth rates for the market and branded competitors with approximately 95,000 prescriptions, representing 12% quarter-over-quarter growth and 206% growth compared to the first quarter of 2023. Nearly 18,000 new patients started Auvelity in the quarter, bringing the total number of unique patients treated with Auvelity since launch to more than 89,000. Our sales team continues to activate new prescribers at a consistent rate, with more than 3,600 first-time Auvelity prescribers in Q1, illustrating strong underlying demand for the product and expanded use among depression treaters in both psychiatry and primary care offices. We're especially proud of this performance in light of seasonal dynamics, which were compounded by the industry-wide Change Healthcare cyber attack. Payer coverage was stable in Q1 as Auvelity remains accessible to patients representing approximately 70% of covered lives. As noted in our press release this morning, we just contracted with a large group purchasing organization for a potential formulary coverage of Auvelity, laying the groundwork for future increases in covered lives. Pharmacy benefit managers and health plans under this GPO are now able to make coverage decisions for Auvelity based on the contracted terms. With this agreement, Axsome is now contracted with two of the three largest GPOs for potential coverage of Auvelity. We are very pleased with the strong commercial foundation we have created to support Auvelity performance, including our expanded psychiatry sales team, a recently enhanced sales and marketing campaign, and expansion of digital capabilities to maximize reach to targeted healthcare professionals. Of note, we observed an inflection in weekly new patient starts or NBRx in March, a positive signal of both the impact of our optimized commercial footprint and continued adoption of Auvelity as a go-to treatment option for adults with major depressive disorder. Transitioning now to Sunosi. Total prescriptions were just over 41,000, representing a 1.6% decline versus Q4 2023 and 14% growth versus Q1 2023. Demand in the first quarter was impacted by typical seasonality in the EDS market, as evidenced by the 3% decline observed in the weight-promoting agent market this quarter. Approximately 3,700 new patients started Sunosi treatment during the quarter, bringing the total number of unique patients treated with Sunosi to approximately 68,000 since launch. More than 400 new writers were activated in Q1, resulting in a total cumulative prescriber base of more than 12,600 since launch. Payer coverage for Sunosi in Q1 remained 83% of lives covered across channels. In closing, Q1 was a very positive start to 2024 for both Auvelity and Sunosi, with leading indicators such as trends with new patient starts and newly activated prescribers reinforcing our confidence that Axsome will deliver strong commercial performance in our second year as a commercial company. We continue to receive compelling feedback from healthcare professionals and patients about the positive impact our products are having in real-world settings. And we are proud of Axsome's growing reputation as a leader in the CNS space that delivers differentiated and impactful products for serious psychiatric and neurological conditions. I will now turn the call back to Darren for Q&A.

Thank you, Ari. Operator, may we please have our first question.

Our first question comes from Charles Duncan with Cantor Fitzgerald.

Congrats on a great quarter and appreciate you taking our questions. I had a commercial question and then one on the pipeline. Regarding the commercial question, I'm not sure if I heard it, Ari was speaking fast. Can you give us a sense of new-to-brand versus refill rates for Auvelity?

Yes, thanks, Charles. New to brand currently makes up about 25% to 30% of weekly prescriptions, which is a strong figure. We anticipate that new brands will continue to grow, but total prescriptions should naturally exceed that due to the existing patient base and refill rates, with which we feel quite confident at this time. We're observing good performance in persistency overall. I hope that answers your question. Please let me know if you have any specific follow-ups.

Just a little more color on persistency. I know it's probably too early, but how do you feel about that so far with Auvelity?

Yes, I feel very positive. Recently, we engaged with a group of key opinion leaders for feedback. Although this is anecdotal and we don't have specific claims data, they have reported that adherence appears to be about twice what they have historically seen with SSRIs, which is very promising for the brand. This indicates that the clinical profile is having a significant impact on patients, leading them to stay with it longer than other initial antidepressants from the past.

Okay. Can you provide any information on the expected responder rate from the first part of the ACCORD-2 study? How do you think brexpiprazole has addressed the unmet need? Do you anticipate AXS-05 becoming a primary treatment option, or will it follow brexpiprazole use in patients?

Regarding the responder rate in the ACCORD-2 study, I don’t want to provide incorrect information about the precise percentage, but it aligns with the modeled inclusion criteria from the first quarter. The studies are designed quite similarly. Additionally, the ACCORD-1 trial effectively identified the signal. Concerning brexpiprazole and the unmet need, we believe that brexpiprazole has not altered the requirement for a safe and effective long-term treatment for agitation associated with Alzheimer’s disease. Patients have been treated off-label with other medications, and breakthrough results fall into that category. Therefore, we do not see the opportunity for AXS-05 changing significantly because of that approval. Assuming we continue to generate data consistent with what we observed in ADVANCE-1 and ACCORD-1, we fully expect AXS-05 to become a frontline treatment for agitation related to Alzheimer’s disease.

Our next question comes from Leonid Timashev with RBC Capital Markets.

Congrats on the quarter. Can you guys talk about the price volume impact you'd expect from this latest GPO add? And should we expect some acceleration in scripts with an impact to gross to net in the near term? Or would it be more incremental, gradual change? And then maybe just related to that, with two out of the three major GPOs in hand, can you talk about maybe the progress of the third that you've made?

Yes, thanks, Leonid. This is Ari. Regarding the price volume trade-off, it's a bit too soon to discuss the impact on gross to net for this particular agreement. We are currently focused on effectively implementing the contract terms with the PBMs under the GPO umbrella. However, we do anticipate volume growth once we can expand coverage, and we'll provide updates on the gross to net impact when it's appropriate. As for the third GPO, we are having productive discussions with all major payers and PBMs, including the GPOs. These negotiations are complex. It's crucial for us to expand coverage while also being mindful of long-term profitability, given our growing portfolio. While I can't provide specific details about the negotiations, we feel optimistic about the nature of the dialogue and look forward to sharing future updates.

Our next question comes from Ash Verma, UBS.

Congrats on the progress. So I have two. One is just on this last comment that you had about the GPO win. Can you maybe elaborate like what percentage of commercial lives are covered through this GPO? You have 48% coverage prior to this, I believe. And then second, regarding this new study for AD agitation, can you remind us like is that something that you need for a regulatory package? Or do you think that the ADVANCE-2 study would be sufficient? Like why do this study now versus you already have another study going on, and you had a successful randomized withdrawal study earlier? So just wanted to get your thoughts on that.

Thank you for the question. I will address the second part first and then let Ari respond to the first part. Regarding the ACCORD-2 trial, we do not need it for regulatory submission. This trial presents us with an opportunity to strengthen the program without impacting the timeline for NDA submission. Our goal is to submit the most comprehensive and convincing package for NDA review, especially for such a critical indication. It is important to generate additional data, which can be beneficial not only for regulatory purposes but also for future publications, adding value from a commercial standpoint. We believe this is the right approach as it efficiently utilizes a large population of patients who are showing stable responses in the open-label trial.

Yes. Ash, this is Ari. Your question around percent of lives with new GPO. Obviously, as you know, the GPOs represent a pool of payers and so because each of the payers is a different number of lives covered and has the ability to make their own coverage decisions, I can't give you a specific number of the incremental percentage of lives covered. But it is meaningfully above the 48% that we have publicly stated today. And so part of our focus moving forward is to ensure that the majority of the payers underneath those GPOs are accessing the rates that we've agreed to. So it is a meaningful percentage increase if we were successful with all of the payers underneath the umbrella.

Our next question comes from Ram Selvaraju with H.C. Wainright.

Just very quickly on the commercial front. I was wondering if there are specific factors that you expect to impact discussions with the third of the three largest GPOs that you are currently looking to secure contracting for Auvelity with? And if so, what those factors might be? And then on the development side, I was wondering, Herriot, maybe if you could comment on the profile of AXS-12 relative to the existing approved marketed agents, and whether you believe the impact on cataplexy is likely to be the most significant selling point. And if you anticipate that the impact on sleepiness is going to be sufficient for AXS-12 to be positioned commercially in a competitive way in this indication.

Sure, I'll start with the first question. So factors that impact negotiations generally speaking are the demand growth that we're driving in the marketplace. And in fact, all of the recent access discussions we've had really focused on how quickly the brand is growing, and so the best way to secure access is to show volume growth in the absence of formal coverage. I think it's important to note that as a rule, while we negotiate for coverage with major plans and pharmacy benefit managers, one of the areas of focus has been to optimize our patient savings and reimbursement support services to support continued demand growth within the existing access paradigm. Our ability to drive growth is the primary factor in driving interest with GPOs and major plans in pharmacy benefit managers. And so we're really proud of the growth that we've seen to start off the year. I mentioned on my opening comments that we've seen about a 30% increase in weekly new patient starts in March compared to December. And that's with the existing access we have. So that only strengthens our ability to negotiate and ultimately have meaningful discussions with the insurance companies.

Have you started doing DTC promotion of Auvelity? And if so, to what extent?

Well, we have DTC largely in the digital space at the moment. We do not currently have a TV or video ad that's running, but that is something that is under consideration at the moment, and we'll share updates when appropriate.

So Ram, regarding your question about AXS-12 and its profile, what we observed in the subsequent trial mirrored the findings from the CONCERT study and was quite significant, particularly in its effect on cataplexy. There was a notable reduction in cataplexy incidents, and when examining complete remission of cataplexy, the results were quite striking. One-third of the patients experienced a total elimination of cataplexy attacks, compared to less than 10% in earlier studies. We also noted an effect on the severity of excessive daytime sleepiness and cognition. We are pleased with the profile, which is very favorable compared to current market agents. We understand that some existing treatments do not work for all patients and that many are unable to tolerate them. This indicates a significant unmet need. Additionally, we conducted a large patient survey in collaboration with the narcolepsy network, which revealed that 77% of patients still experience cataplexy despite being on current treatments.

As it relates to your question around whether around the outcomes data that we generated, if that will be enough for clinicians and patients to think about without getting the product. What we saw in the study was a clear impact on cognition. And we also saw a clear impact on overall narcolepsy severity. So AXS-12 reduced daytime sleepiness severity, also improved overall narcolepsy severity along with quality of life. So there should be strong interest in this product when it becomes available to clinicians and to patients.

Our next question comes from Marc Goodman with Leerink.

Nick, could you discuss whether there was any inventory of Auvelity in the quarter and if anything unusual contributed to sales? Additionally, can you explain your thoughts on gross to net and how you envision this for the rest of the year with the new contracts in place? What should we anticipate over the next couple of years? Herriot, could you briefly touch on AD agitation? Last quarter, there was a delay in completing ADVANCE-2, but we're unclear about the timing. Can you provide more details? Are we back on track, and will this be addressed early in the second half of the year, or will it come later? Also, I'd like to confirm that the new study you mentioned involves patients who have already participated in the open-label study, so it isn't in direct competition, correct?

Marc, it's Nick. So for inventory, inventory remains a channel at two weeks. So nothing has changed specifically around inventory for Auvelity or Sunosi, remains continuing at two weeks. And then the Auvelity GTN discount for Q1 was in the low to mid-50s. Sunosi GTN discount was in the mid-50s for the quarter. As you know, Sunosi does have a seasonal negative effect on GTN, which we both saw in Auvelity and Sunosi versus the prior quarter. For Auvelity, GTN did fluctuate in Q1 and ended the quarter with March being in the mid-50s. And right now, we have no reason to expect it to vary significantly from that level moving forward.

Marc, as it relates to the questions around Alzheimer’s disease agitation. So starting with ADVANCE-2, the guidance is the second half of this year. We're very comfortable. We remain very comfortable with that guidance based on enrollment trends itself. So what we're seeing is very positive with regards to how that study is proceeding. And then as it relates to ACCORD-2, it is not competing with the ADVANCE-2. So you are correct. So we do have a large number of patients who are in the open label portion and who are experiencing stable responses. So that allows us to efficiently enroll ACCORD-2. So we expect more enrollment in ACCORD-2 to complete in midyear. And the reason for the confidence around that is that the study is very far along in terms of enrollment.

I have a couple of questions on the pipeline. First, for reboxetine in narcolepsy, can you just remind us of the path forward? In other words, are you expecting to file after you complete the extension? Or are there any other gating items to an NDA filing? So can you talk about that and your timeline to filing on reboxetine and narcolepsy/cataplexy? Then solriamfetol, can you talk to your pediatric ADHD study plan? I believe that's a gating item to a filing in ADHD. So it would be helpful to talk to that. And then lastly, esreboxetine and fibromyalgia, how big of a commercial priority is that? And what's the extent to which you're going to need to expand the commercial organization to support that product commercially?

Thank you for those questions. So I'll take the first two and then let Ari comment on esreboxetine. So in terms of the timing for NDA filing for AXS-12, the gating factor is the completion of the ongoing trials, which we expect to complete in the second half of this year. Then it will take us some time to put together the NDA filing, but that is a new factor. So once that study is completed, we will then be able to file the NDA. As it relates to solriamfetol, in the pediatric ADHD study plan, you are correct that, that trial needs to be part of the NDA package, and we've been working on that as you can imagine in terms of speaking to the FDA to get that in place. We have not yet provided the precise guidance, but we will be targeting to start this year.

Yes. Thanks for the question. I think for AXS-14 in fibromyalgia, we do view this as a meaningful commercial opportunity. There are three approved agents, but there’s a lot of room for improvement in terms of overall clinical profile for patients and we feel very optimistic about the profile that AXS-14 offers for patients. As it relates to how it will impact the sort of commercial footprint, part of what we're analyzing this year is how to effectively size and structure our sales force to accommodate a growing portfolio of products. Although fibromyalgia is not a psychiatric product, there is a lot of overlapping comorbidity with major depressive disorder that will influence some of our thinking. And so it's a little too early to say how many additional representatives we would want to build into the plan or how we would structure it, but we do think that there is a way to promote AXS-14 efficiently while also putting plenty of attention on the other approved products on the market.

Our next question comes from Yatin Suneja with Guggenheim Partners.

I have two quick ones. One is a clarification one. With regard to the ACCORD-2 study. So that's a new study. And this is a full study within the ADA umbrella. Is that a requirement from the FDA that you have to do two randomized withdrawal studies, and then will the NDA package be contingent upon completion of that study or the outcome of that study? So that's one. And then with regard to Auvelity, I mean, very nice quarter. So congrats on that. Any thoughts on thinking about providing guidance for the product, maybe one quarterly or on a yearly basis? Thank you.

Yatin, thanks for the question, Nick. It's just too early to provide sales guidance given the fluid nature of some of the market dynamics and the unpredictability of external factors that could have different impacts. We have shared that we believe peak sales for Auvelity and MDD alone are in the $1 billion to $3 billion range and Sunosi, $300 million to $500 million for its current indications.

Yatin, regarding the second quarter, this is not an FDA requirement. However, it does enhance the robustness of the package, and it is a crucial trial. We appreciate having four studies in our NDA package. Essentially, ADVANCE-1 and ADVANCE-2 are our two pivotal studies, while ACCORD-1 and ACCORD-2 serve as two randomized withdrawal studies. This provides a strong combination of evidence generation with both pivotal studies. As for the filings, we will proceed upon completion of that study. It's not required and is not contingent upon it. However, based on our current enrollment progress for that study, we expect full enrollment by midyear. Additionally, considering the timing of relapses in the ACCORD-1 trial, which had positive results, there is potential for that study to read out around year-end. This is not formal guidance and will depend on the number of new assets and their timelines, but this gives you an idea of how we might approach it.

Our next question comes from Jason Gerberry with Bank of America.

Regarding ACCORD-2, it appears that the study is being viewed as a marketing study. Is there a chance to combine the data from ACCORD-1 and ACCORD-2, considering that ACCORD-1 had a very small sample size? Additionally, you mentioned the cyber attack in the first quarter, and while some of your peers noted it was not a significant impact on their numbers, could you provide specifics on how the cyber attack influenced Auvelity revenues in that quarter?

Sure. Regarding ACCORD-2, it can certainly be utilized for marketing purposes, but it is fundamentally a registration product, which we value. It offers a reliable source of revenue and is associated with ACCORD-1. The two studies can indeed be merged, and this is a common practice in new product applications.

Yes. And regarding the Change Healthcare cyber attack, the impact for Auvelity was really focused on two weeks at the end of February and beginning of March. Basically, what we saw was roughly a 30% to 40% impact on weekly prescriptions for those couple of weeks. During that time, we put in several technology optimization and patient savings optimizations. We saw a very quick bounce back in early to mid-March for our demand trend. And it has been stable since then, stable to growing since then. So it's largely behind us at this point. We don't expect any new disruptions. And for some brands, it was more impactful just related to time and market, whether patient savings cards were tied to the Change Healthcare system to that nature. And so that's why it impacted us, but it was transient in nature. We feel really good about the solutions we put into place, and we've seen really nice growth since.

Our next question comes from Joon Lee with Truist Securities.

Regarding on quarter 2, what's the rationale behind a randomized trial? I get those to pivotal trials, which appears to have a significant impact, and are the endpoints in ACCORD-2 similar to those in ACCORD-1?

So thanks, Joon. You were somewhat muffled, so I'll try and answer the question the way that I interpreted, but not necessarily what you said. But I think the question was around ACCORD-2 and what was the rationale for the design versus other designs. So the rationale was to take advantage of the fact that we had a study which was randomized and therefore would allow assessment of stable responses. So it made a lot of sense that it is our open-label study that conducted. So that was the rationale. And in terms of the endpoint as compared to ACCORD-1, it is identical. So this is a way for us to be able to take the learnings from ACCORD-1 and apply them to ACCORD-2 to generate additional data.

Our next question comes from Joel Beatty with Baird.

First one is on Auvelity. Can you provide the breakdown between users in earlier line and new line therapy? And with the second large contract, could the use of an earlier line therapy be impacted at all?

Yes, this is Ari. Thanks for the question. We have seen a significant increase in line of therapy since last quarter, with about a 5% rise in first and second line use. Currently, approximately 50% of Auvelity prescriptions are for patients in the first or second line, which is a strong trend that we anticipate will continue. Regarding the GPO contract and its impact on therapy, when we negotiate with pharmacy benefit managers, we aim for first or second line access for patients. Therefore, if we are successful in implementing those contract terms, we expect that it will further boost the use of Auvelity in earlier lines of therapy.

And last question is, can you provide any kind of context on how this spending trajectory is looking going forward?

Thank you for your question. Our R&D expense for the quarter was $37 million, which saw a slight increase from the previous quarter. We anticipate that R&D spending will continue to rise gradually as two pivotal trials began during the quarter, with a third trial set to start in Q2. This increase will be somewhat mitigated by the completion of the second trial for AXS-12. Additionally, in Q2, we plan to submit the NDA for fibromyalgia, which will incur a one-time expense for the filing. Regarding SG&A, total expenses for the quarter reached $99 million, which was higher than we expected due to sales force expansion. We expect SG&A expenses to remain in this range in the coming quarters.

Our next question comes from David Hoang with Citi.

Congrats on the quarter. I want to ask about the impact of the GPO negotiations in terms of timing on any increases in the number of commercial covered lives. Just I guess, what's the cadence in covered lives that you pick up look like? And can we look towards next quarter as potentially seeing a meaningful step up in the number of covered lives?

Thank you for the question, David. We do expect an increase in covers, but predicting the exact timing is challenging. It's important to understand that GPOs act as gatekeepers for PBMs, which means that the first step to securing access is finalizing contract terms, including rebate and utilization management parameters. The agreement we announced today allows the PBMs affected to access the contracted rates. While I can't specify a percentage increase in covered lives from the current 48%, I can say that the number could meaningfully exceed that depending on how many of the PBMs utilize the rates. However, the timing remains uncertain. Regarding next quarter, our goal is to enhance this situation as soon as possible, and we will share updates at the right time.

Our next question comes from Graig Suvannavejh with Mizuho.

I have a question about AXS-05. Have you considered the branding for AXS-05 in AD agitation? Will you keep it under the Auvelity brand? Congratulations on the quarter.

Thank you for the question. When introducing a new indication, especially one that differs significantly, like AXS-05 compared to major depressive disorder, it requires careful consideration. This is not a decision to make lightly, and we need to engage in thorough analysis and quantitative work. We will keep you updated, but we won’t announce anything prematurely, as this is a matter we are actively working on.

No, I think you're spot on. And I think the reality is that there are advantages and disadvantages to either maintaining the same name or having an alternative brand name, and we're going through the work right now in anticipation of a filing down the road.

Our next question comes from Vikram Purohit with Morgan Stanley.

We had two. One on Auvelity, one on the pipeline. So for Auvelity. Could you talk a bit more about how you expect the sales force expansion that you completed recently to help kind of inflect scripts and inflect sales throughout the rest of the year and whether you'd expect there to be kind of a visible lift in either of those metrics over the next couple of quarters? And then secondly, for solriamfetol in ADHD, can you confirm, is this Phase III readout expected in the second half of the year? Is this going to be the study based on which you can submit potentially a filing for the indication? And then also if you could just kind of frame out for us, what you'll be reporting and what you would think constitutes successful readout here that would be helpful.

Sure. Yes, I'll start with the Auvelity question. So field force expansion, we are seeing an impact certainly on activity levels and effort with customers. We're seeing a roughly 40% increase in weekly calls to customers. We are engaging with a broader group of providers that includes a primary care audience. And we are seeing that a meaningful increase in new prescriptions and total prescriptions from primary care, which is sort of commensurate with the additional focus we've been able to provide with the expanded sales team. I would say that we're in the early phases of seeing the impact from a demand perspective, referenced in my opening comments that we've seen a 30% increase in weekly new patient starts, that is typically the first indicator that demand growth is reaching an inflection, but it's still early days in many ways, and we expect that net growth to continue at that time. So we feel really optimistic about the impact the sales force expansion has thus far and expect that to continue to build over the course of the year.

Great. And with regards to solriamfetol and ADHD studies. That's a pivotal trial. So this is the study that would enable an NDA filing along with a study in AD agitation. So we do need to include the data and efficacy data from pediatric patients that's required for an ADHD NDA filing. So we're looking forward to both trials in the second half of the year. So we're on track for that.

As for what we're looking for, I think the first thing that we're looking for is to demonstrate efficacy in the first large multicenter randomized controlled trials. So that's what we're looking for. The result of that will inform the profile of the product. There has been one prior study with solriamfetol in ADHD, which we sponsored — that was an investigator-initiated trial. That was a smaller study. So this will be the focus study that will be the first multicenter trial.

Our next question comes from Matt Kaplan with Ladenburg Thalmann.

Congrats on the quarterly results. Just a quick follow-up on the ADHD program for solriamfetol. Will you, I guess, wait for the readout of the adult study prior to starting the pediatric study in ADHD?

No, we would not. Our goal is to start the pediatric study as soon as practical.

We have time for questions from two more analysts. Our next question comes from Myles Minter with William Blair.

Just on the Alzheimer's disease agitation program. You're enrolling from the open-label expansion of ADVANCE-2 into this new ACCORD-2 study. So does that imply that you've already got all of the long-term safety data that is required for a potential filing for that indication? And the second one is about the messaging that ACCORD-2 could be a pivotal study if it is required. Why is that the case when I believe that ACCORD-1 went through some protocol amendments and was obviously concluded early? And I think the messaging was that that may have been pivotal when it first started, then it turns out it wasn't. So I guess, what has changed there to say that ACCORD-2 would be pivotal and ACCORD-1 wasn't?

Thanks for the question. With regards to the open-label extension study, we continue to enroll in the open-label safety extension trial. As a reminder, that requires what we're trying to do under guidelines, which are 300 patients treated for six months and 100 patients treated for one year, and we're on track to accomplish those goals. So, of course, that study will not impact that. And the patients who are completing ACCORD-2 are also able to then go on and continue to be dosed. So we're very confident with regards to the number of patients. As it relates to ACCORD-2 being a pivotal study, we completed ACCORD-1, and so all of the learnings in terms of outcomes around the endpoint, which could be necessary in a study like this, we have, and so we're able to design ACCORD-2 very prospectively. We have also received feedback from the FDA that this could be a registration trial based on the design. So I think that it's the fact that ACCORD-2 is different, and we have designed it with the benefit of the knowledge for ACCORD-1, which is a benefit in this case.

Our next question comes from Troy Langford with TD Cowen.

On AXS-14, how confident do you feel that the FDA has all that it needs from a clinical efficacy perspective to approve the application? And then on Sunosi, can you just provide any additional color on the powering assumptions for the Phase III trial in MDD?

Sure, I'll take AXS-14. This is Mark. We're targeting this quarter, and in terms of content, that's substantially complete. So we're finalizing the submission. We're going through that. We think we tend to get that as robust as possible, but the work is substantially complete.

In relation to the efficacy of solriamfetol in major depressive disorder, we designed the study in a similar manner to our other studies in this area. As you know, you have considerable experience with the Auvelity program, so you can view the study design in a comparable way. Overall, the expected effect sizes for these drugs are well established, with ample precedent. Hence, that’s how we structure our studies. To sum up, we aim for 90% power to detect an effect size that aligns with what we observed in the Auvelity program.

Since there are no more questions, I will now turn the call back over to Axsome's CEO for concluding remarks.

Thank you for taking the time to join us for today's quarterly update. The first quarter demonstrated strong progress for Axsome. We look to continue our focus on commercial and pipeline execution throughout the balance of the year with the goal of delivering innovation and value to patients, healthcare professionals, and investors alike. Thank you, and have a great rest of your day.

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