Earnings Call Transcript - AXSM Q1 2026

Operator, Operator

Good morning, and welcome to the Axsome Therapeutics First Quarter 2026 Earnings Conference Call. My name is Kevin, and I'll be your operator for today's call. (Operator instructions). Please note, this call is being recorded. I will now turn the call over to Ashley Dong, Senior Director of Investor Relations. Ashley, please go ahead.

Ashley Dong, Senior Director, Investor Relations

Thank you. Good morning, and thank you for joining Axsome First Quarter 2026 Earnings Conference Call. With us today are Dr. Herriot Tabuteau, our Chief Executive Officer; Nick Pizzie, our Chief Financial Officer; and Ari Maizel, our Chief Commercial Officer, who will begin our call with prepared remarks. Mark Jacobson, our Chief Operating Officer, and Hunter Murdock, our General Counsel will be available for Q&A. Please note that today's discussion includes forward-looking statements regarding our financial performance, commercial strategy and operational plans, including research, development and regulatory activities. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our SEC filings, including quarterly and annual reports for a description of these and other risks. You are cautioned not to rely on these forward-looking statements, which are made only as of today, and the company disclaims any obligation to update such statements. And with that, I'll hand it over to Herriot.

Herriot Tabuteau, Chief Executive Officer

Thank you, Ashley, and good morning, everyone. In the first quarter, Axsome delivered strong year-over-year growth and execution across the business. This performance was driven by our commercial products and the advancement and expansion of our R&D pipeline, which is now composed of six innovative, potentially first-in-class or best-in-class product candidates. Starting with our commercial business. Total revenue for our three marketed products was $191 million, representing year-over-year growth of 57%, driven by AUVELITY and SUNOSI with contribution from SYMBRAVO. Building on the strong clinical profile of our marketed products in the quarter, we substantially expanded the sales force for AUVELITY, finalized plans for the expansion of the SYMBRAVO sales force and increased covered lives and quality of coverage for all of our marketed products. These initiatives will support continued strong revenue growth of the base business this year and beyond. Last week, we received FDA approval of AUVELITY for the treatment of agitation associated with Alzheimer's disease, an indication which received FDA breakthrough therapy designation and priority review. This approval introduces a first-in-class treatment option for this highly prevalent debilitating and critically underserved neuropsychiatric condition. As such, it marks an important milestone for the millions of patients living with Alzheimer's disease, their families and their caregivers. AUVELITY has now been approved in two indications that received FDA breakthrough therapy designation and were granted FDA priority review. The approval in Alzheimer's disease agitation combined with the health of the MDD business and the recent augmentation of the AUVELITY commercial infrastructure provide us with a clear line of sight to AUVELITY's market potential. Ari will provide an update to our peak sales estimate for the AUVELITY franchise based on these developments. The approval in Alzheimer's disease agitation is a testament to our research and development productivity. Since the start of this year, we have continued to advance and expand the rest of our industry-leading pipeline with a focus on developing first-in-class and best-in-class products. On the regulatory front, following the FDA approval of AUVELITY last week, we are pleased to share that we have submitted our NDA for AXS-12 for the treatment of cataplexy and narcolepsy. Clinically, our ongoing trials continue to progress, and we will be starting multiple Phase III trials within the next few months. Finally, we recently expanded our pipeline further with the addition of AXS-20, a potentially first-in-class PDE10A inhibitor for schizophrenia and Tourette syndrome. I will discuss each of these developments in detail later in the call. All in all, Axsome is advancing the commercialization of three differentiated marketed medicines across four highly prevalent indications as well as an innovative pipeline of potentially first-in-class and best-in-class medicines that includes six product candidates targeting ten different highly burdensome conditions in psychiatry and neurology. Looking ahead, Axsome is well positioned to realize robust growth driven by execution across our commercial portfolio, the long-term AUVELITY opportunity in Alzheimer's disease agitation and the advancement of the rest of our neuroscience pipeline. With that, I'll hand the call over to Nick to review our financial results for the quarter.

Nick Pizzie, Chief Financial Officer

Thanks, Herriot, and good morning, everyone. Our financial performance in the first quarter was strong with our three commercial products delivering continued double-digit revenue growth. Total revenue for the quarter was $191.2 million, a 57% increase compared to the first quarter of 2025. We expect revenue growth to continue in 2026. AUVELITY achieved net product revenue of $153.2 million in the quarter, up 59% compared to the first quarter of 2025. SUNOSI net product revenue for the quarter was $33.9 million, a 34% increase compared to the first quarter of 2025. SUNOSI revenue consisted of $32.6 million in net product sales and $1.3 million in royalty revenue associated with SUNOSI sales in out-licensed territories. Net sales for SYMBRAVO were $4.1 million in the quarter. AUVELITY and SUNOSI gross-to-net discounts for the first quarter of 2026 were both in the low to mid-50% range. We anticipate the gross-to-net discounts for both products to improve throughout the year, consistent with prior year trends. SYMBRAVO gross-to-net discount in the quarter was in the high 70% range, and we continue to expect it to remain elevated over the near term as access continues to evolve and awareness continues to build. Turning now to expenses. Cost of revenue was $14.7 million compared to $9.8 million for the first quarter of 2025. Our research and development expenses were $52.7 million in the quarter compared to $44.8 million for the first quarter of 2025. The increase in R&D spend primarily reflects a one-time acquisition-related expense booked in the quarter. Our selling, general and administrative expenses were $185 million for the quarter compared to $120.8 million for the first quarter of 2025. The increase was primarily driven by the acceleration of prelaunch activities for AUVELITY in Alzheimer's disease agitation and commercialization activities for AUVELITY, which included the national direct-to-consumer advertising campaign and sales force expansion, along with commercial activities for SYMBRAVO. Net loss for the quarter was $64.5 million or $1.26 per share compared to a net loss of $59.4 million or $1.22 per share for the first quarter of 2025. The $64.5 million net loss in the quarter includes $23.4 million in stock-based compensation expense. Our balance sheet remains strong. We ended the first quarter with $305 million in cash and cash equivalents compared to $323 million as of the end of last year. Our overall financial performance reflects continued top-line revenue growth and improving operating leverage driven by disciplined commercial execution. We anticipate that our current cash balance is sufficient to fund our operations into cash flow positivity based on our current operating plan. And with that, I'd like to turn the call over now to Ari, who will provide additional details on the key drivers behind our medicines and the broader commercial performance of the business.

Ari Maizel, Chief Commercial Officer

Thank you, Nick. The first quarter of 2026 was a pivotal period for Axsome's brands, reflected in ongoing demand for our medicines, meaningful improvements in payer coverage and sales force expansion activities. Our promotional efforts across HCP and patient audiences, combined with a broadening commercial infrastructure will support Axsome sales objectives throughout 2026. Starting with AUVELITY. More than 223,000 prescriptions were written in the quarter, representing 35% year-over-year growth and remaining consistent with the prior quarter. By comparison, the antidepressant market grew 1% year-over-year and declined by 1% compared to Q4 of 2025. AUVELITY performance in the quarter was highlighted by a continued shift towards earlier line use, with first-line, first-switch prescriptions increasing to 56% of overall demand. Primary care adoption also expanded in the quarter, now representing 35% of total AUVELITY prescribers. These trends reflect meaningful improvements in market access over the last two years, broadened awareness of the brand, driven by our national direct-to-consumer campaign and our concentrated effort in expanding use among primary care providers, a key driver of earlier line utilization and an important foundation to support early treatment in connection with the upcoming Alzheimer's disease agitation launch. Additionally, more than 5,500 new prescribers were activated in the quarter, bringing the total number of unique prescribers for AUVELITY since launch to approximately 60,000. We continue to make important progress with formulary access for AUVELITY. Commercial coverage is at 78%, and alongside Medicare and Medicaid coverage at 100%, total coverage is now at 86% of all lives across channels, establishing a strong foundation of access for AUVELITY in advance of the launch in Alzheimer's disease agitation. We expect both the quantity and quality of coverage to continue to expand and improve. AUVELITY's growth to date in the depression market continues to reflect its compelling clinical profile highlighted by rapid and durable symptom improvement and a distinctly favorable safety and tolerability profile. Last week's FDA approval of AUVELITY as a treatment for agitation associated with dementia due to Alzheimer's disease is a significant advancement for patients and a major milestone for the brand. We are very pleased with the product label, which provides compelling clinical information regarding AUVELITY's impact on agitation for Alzheimer's patients. AUVELITY is a first-in-class treatment for this patient population, demonstrating rapid and durable symptom improvement with a favorable safety and tolerability profile. AUVELITY is the only approved treatment for Alzheimer's disease agitation with efficacy on symptom relapse demonstrated in long-term trials. In a short-term study, the most common adverse reactions were dizziness and dyspepsia and only 1.3% of patients discontinued treatment due to an adverse reaction, the same rate as placebo. In market research, HCPs rate AUVELITY's clinical profile in Alzheimer's disease agitation as highly compelling from both an efficacy and safety perspective with clear potential for first-line use in appropriate patients. We are expanding the AUVELITY sales team to approximately 630 representatives, enabling Axsome to reach 68,000 HCP targets across primary care, psychiatry, neurology and geriatric specialists to treat both MDD and Alzheimer's agitation patients across community and long-term care settings. Our expansion efforts are substantially complete, positioning us well for the commercial launch in June. We believe AUVELITY has the potential to play a significant role in the treatment of Alzheimer's agitation, and together with the MDD indication, further broadens its use across serious neuropsychiatric conditions. AUVELITY's expanded sales force and strong foundation of coverage position the brand to drive growth across both indications throughout the second half of 2026. Taking into account the recent label expansion in Alzheimer's disease agitation, the clinical profile in this indication, the health and the trajectory of the MDD business and recent investments in our sales infrastructure, we are now able to update our peak sales outlook for the product. We now believe AUVELITY has the potential to generate at least $8 billion in annual revenue at peak, with approximately equal contribution from each indication. Over the extended life of the product, we see a clear path to achieving this growth potential, supported by the underlying fundamentals of the business as we continue to scale. Turning now to SYMBRAVO. More than 17,000 total prescriptions were written in the quarter, representing 36% growth versus Q4 2025. More than 5,000 new patients started SYMBRAVO treatment in the quarter. Neurology specialists accounted for approximately 60% of total prescriptions in the quarter with primary care representing approximately 32%, an increase from 20% in the first quarter of launch. While headache specialists will remain a critical prescriber segment for SYMBRAVO, the increase in primary care prescribing is an encouraging signal of SYMBRAVO's potential, and reinforces the early experience with SYMBRAVO as a safe and tolerable acute migraine treatment that provides fast migraine pain improvement sustained through 24 and 48 hours. Based on SYMBRAVO's growth within its launch year, increasing demand for education on the only branded multi-mechanistic acute migraine treatment in the market, we are increasing the SYMBRAVO sales team by approximately 50 representatives. Our expanded SYMBRAVO sales force of 150 representatives will support broader reach in the primary care market while deepening engagement with headache specialists and neurologists throughout the country. We are also pleased to announce a major commercial payer contract for SYMBRAVO effective this month, securing coverage for approximately 17 million lives. The agreement reflects SYMBRAVO's compelling clinical profile and its potential to address the needs of patients with inadequate response to triptans. Overall payer coverage for SYMBRAVO is approximately 57% representing 56% in the commercial channel and 57% in government channels. We expect coverage for SYMBRAVO to expand and evolve throughout 2026. And finally, in Q1, approximately 54,000 SUNOSI prescriptions were written, representing 16% year-over-year growth and a 3% decline sequentially. By comparison, the wake-promoting agent market grew 1% year-over-year and declined by 5% versus Q4 of 2025. Nearly 500 new clinicians prescribed SUNOSI in the quarter, bringing the total cumulative prescriber base to more than 16,500 since launch. Payer coverage for SUNOSI remained steady at approximately 83% of lives covered across channels. Overall, the first quarter of 2026 was marked by significant progress across Axsome's commercial business, including strong demand for our products, key advancements in market access, launch preparations for AUVELITY in Alzheimer's disease agitation and disciplined organizational growth designed to maximize the potential of our singular CNS portfolio. Looking ahead, Axsome is well positioned to deliver on our commercial objectives across our innovative portfolio through the balance of the year. We look forward to sharing our continued progress with you over the coming months. I will now turn the call back to Herriot to discuss our singular CNS pipeline.

Herriot Tabuteau, Chief Executive Officer

Thank you, Ari. I will now touch on recent developments and upcoming milestones for the rest of our pipeline. Starting with AXS-12, as I mentioned, we recently submitted our NDA for AXS-12 for the treatment of cataplexy in patients with narcolepsy. Narcolepsy is a rare and debilitating neurological condition that affects approximately 185,000 people in the U.S. We are excited by the potential of AXS-12 to provide a new and differentiated treatment option to patients living with narcolepsy. We look forward to announcing the FDA's decision on the acceptance of the filing. Beyond AXS-12 in narcolepsy, we are also developing the full suite of clinical programs in our leading neuroscience pipeline. Starting with AXS-05, we are on track to initiate a pivotal Phase II/III trial in smoking cessation this quarter. Moving on to solriamfetol. Our Phase III programs for the molecule continue to progress. These include ADHD, binge-eating disorder, MDD with symptoms of excessive daytime sleepiness and excessive sleepiness in shift work disorder. For ADHD, we are on track to initiate two pediatric Phase III trials, one in children and one in adolescents this quarter. For MDD, we recently initiated the CLARITY study, a Phase III, double-blind, placebo-controlled randomized withdrawal trial. In the trial, patients who achieved a sustained response during the open-label period will be randomized to continue solriamfetol or switch to placebo. The primary endpoint of that trial is time to relapse of depressive symptoms. For binge-eating disorder, our ENGAGE Phase III double-blind randomized controlled trial is progressing, and we anticipate topline results in the second half of this year. Finally, for shift work disorder, the Phase III trial continues to enroll with topline results anticipated in 2027. Turning now to AXS-14, our novel, highly selective and potent norepinephrine reuptake inhibitor for fibromyalgia. Enrollment is ongoing in the FORWARD Phase III trial. We look forward to sharing updates on this program as the study progresses. AXS-17, our novel oral selective GABAA-positive allosteric modulator for epilepsy, Phase II trial enabling activities are well underway. Lastly, we recently acquired AXS-20, or balipodect, a potentially first-in-class oral potent selective PDE10A inhibitor. We plan to develop AXS-20 for the treatment of schizophrenia and for Tourette syndrome. We plan to initiate Phase III trial-enabling activities for AXS-20 in schizophrenia later this year. I will now turn the call back to Ashley for Q&A.

Ashley Dong, Senior Director, Investor Relations

Thank you, Herriot. Operator, please open the line for Q&A.

Operator, Operator

(Operator instructions) Our first question today is coming from Ash Verma, from UBS.

Ashwani Verma, Analyst, UBS

Congratulations again on all the progress. So I know it was the second day of Q&A. But maybe just on ADA, are you thinking about the long-term care market in the long run? I mean, clearly, right now, 40% of these patients reside in long-term care but the current prescriber mix is really PCP. But when you think about the long run, how much of a focus does long-term care need to become in the long run for you to completely extract value out of this market?

Ari Maizel, Chief Commercial Officer

Thanks for the question. This is Ari. Our sales team of approximately 630 representatives will call on both community and long-term care facilities. And so for us, it's important to be present and to educate prescribers and care partners within both settings of care. Ultimately, it's a concentrated market that allows for efficient promotional activities. And we expect that it will grow over time as the brand ramps. But we believe the community and long-term care settings are both very important for this market and look forward to sharing some updates as we get going with the launch.

Ashwani Verma, Analyst, UBS

Got it. And can I ask a quick follow-up? So just on the ADA indication, I know that you're using this unique 30 mg dextromethorphan dose in the titration pack, which you haven't used for this launch. Is this supplied in the channels already? Or does this, in any way, become like a bottleneck for the whole launch at this point?

Mark Jacobson, Chief Operating Officer

As a reminder, we'll be launching next month. And Ari touched on the items that are being finalized right now for a launch. Do you want to recap those again, Ari?

Ari Maizel, Chief Commercial Officer

Yes. I mean we're finalizing our sales and marketing resources and training our sales force on the new indication. The titration dose will be available at the time of commercial launch.

Operator, Operator

Next question is coming from Marc Goodman from Leerink.

Marc Goodman, Analyst, Leerink

Those are pretty big peak sales numbers. Can you help us just understand like why did you feel like you had to raise them today? And second, can you just talk about what went into the forecasting there and the $4 billion in each indication?

Ari Maizel, Chief Commercial Officer

Thanks, Marc. While the FDA approval of AUVELITY in Alzheimer's disease agitation provides greater certainty regarding the long-term sales potential of the product, and as you know, Alzheimer's disease is a large and growing market, seven million patients, of which 76% are impacted by agitation symptoms. And of course, there are only two approved agents on the market. So when we review our proprietary market research on HCP perceptions and potential use of the product, taken together with the clarity around the final label, it really provides confidence that AUVELITY will be used as a frontline treatment in Alzheimer's agitation and we've seen growing frontline use in MDD. The foundation of market access that we built, along with growing adoption in primary care, which, of course, is a critical provider segment in the Alzheimer's space — I think these things taken together with our MDD penetration and growth trajectory and the increased sales force to support both indications give us confidence in the potential to achieve our updated peak sales estimate for AUVELITY.

Operator, Operator

Next question is coming from Andrew Tsai from Jefferies.

Lin (Andrew) Tsai, Analyst, Jefferies

I have a bigger picture question. Now with AUVELITY approved in Alzheimer's agitation, how does that embolden you guys to pursue even more indications? I'd imagine you could directly go to Phase III with AUVELITY for other indications? And this drug has a long tail, too. So maybe talk about when you might learn more about indication expansion opportunities? Or is that it with AUVELITY?

Mark Jacobson, Chief Operating Officer

Andrew, we did touch on the next indication that we've been working on for smoking cessation. So stay tuned for updates there. The next step with that program is initiating the Phase II/III pivotal trial. So we'll have updates there soon. The product is very interesting given that it targets NMDA and sigma-1 receptors, with high potential applicability to other neuropsychiatric conditions and that's something that the team is obviously exploring. But right now, the next formal step is moving to the smoking cessation trial initiation.

Lin (Andrew) Tsai, Analyst, Jefferies

Great. And then as a follow-up, with your new PDE10 asset that's starting Phase III-enabling studies this year, can you talk about the efficacy and safety profile, why it did not necessarily hit the primary endpoint in Phase II and why you think you can produce a different outcome in Phase III? And correct me if I'm wrong, but I think schizophrenia studies could be relatively fast. So could it be possible we get data maybe 2028?

Herriot Tabuteau, Chief Executive Officer

Sure. Thanks for the question on balipodect. With regard to the efficacy, there was a Phase II trial done in schizophrenia. This was a randomized double-blind, placebo-controlled trial. When we looked at the data there was clear separation; the magnitude of the treatment effect for balipodect was on the high end when you look at historical treatments for schizophrenia. Now, because of the size of the study, it was not powered for statistical significance. But despite that, there was a very clear trend, and there was statistical significance on various measures, including, for example, global measures. Clinicians were able to see highly significant improvements in schizophrenia, and there were also other positive measures. For example, the rates of discontinuations due to lack of efficacy showed a wide gap with half of patients on placebo discontinuing for lack of efficacy versus low double digits for balipodect. So clearly, there was a very strong signal there. And when you look at the safety profile, it is very distinct from typical antipsychotics. So very excited about this potentially first-in-class treatment. As it relates to timing of starting a Phase III trial, this is a Phase III-ready asset. What we need to do is restart manufacturing of clinical supplies. So the Phase III enabling activities are ongoing this year, and we would anticipate, we are targeting potentially starting a Phase III trial around the end of the year.

Operator, Operator

Next question is coming from Ami Fadia from Needham & Company.

Ami Fadia, Analyst, Needham & Company

Firstly, on SYMBRAVO, can you give us some more details around where you're seeing utilization and how you see the drug evolve with sort of this expanding payer coverage? How do you see the evolution of gross-to-net and also utilization as the year progresses? And then with regards to AUVELITY, just to follow up to a previous comment: you think about the IP runway you have. How are you thinking about expanding the number of indications where you explore this product ahead of the IP runway and the IRA? So could we expect to see you look at multiple other indications? Or will it be more sequential?

Ari Maizel, Chief Commercial Officer

Thanks, Ami. I'll start with the SYMBRAVO question. We've been really pleased that SYMBRAVO has found its way into the treatment paradigm for many headache specialists, and what we're seeing is approximately 60% of uses in the first and second line setting. The feedback that we get from HCPs is that SYMBRAVO has been particularly effective for patients with inadequate or partial response to triptans, and we expect those patients to be the primary focus moving forward. Obviously, the market access win that we're announcing today is an important step for long-term patient access. We think it will have a positive impact on gross-to-net in the future. But the focus of the team is to continue to expand access for patients, which will help to drive reductions in gross-to-net over time. For the short term, we expect gross-to-net to remain elevated as we build our access.

Herriot Tabuteau, Chief Executive Officer

Great. And as it relates to the question on new indications or additional indications for AUVELITY, given the IP runway, you are correct. We are in a very favorable position given that there is a very long exclusivity runway for AUVELITY and also the fact that the product is commercialized. We are not resource constrained as it relates to potentially developing for other indications. The other interesting thing about the product, which Mark touched upon, is that its unique pharmacology is applicable to a number of potential CNS indications. So we have very clear ideas internally around what these additional indications are. And we want to make sure that we move in a very measured way. If there is something that is worth doing, we think it's worth doing quickly. So stay tuned as it relates to other potential indications, which could further increase the value of the product long term.

Operator, Operator

Next question is coming from Jason Gerberry from Bank of America.

Jason Gerberry, Analyst, Bank of America

Another follow-up question on the PDE10 asset. My understanding was that when Axsome acquired this asset you plan to push dose relative to what was studied previously to get higher receptor occupancy. So wondering if you can speak to that dynamic, how high you'd be looking to push dose and confidence that the supportive data give you a safe dose strength to interrogate? And then as my follow-up, are there any signs or indications that antipsychotic use in nursing homes is coming down at all in the wake of the March OIG report that was dubbed inappropriate use of antipsychotics in nursing homes? So just curious if you have any insights as you prepare for your own ADA launch?

Herriot Tabuteau, Chief Executive Officer

Yes. Thanks for the question. With regards to the PDE10 inhibitor, we have not discussed dosing that relates to the product. However, the dose that was studied was effective, had a number of subjects per arm greater than what you would have seen in a typical Phase III trial in schizophrenia. Clearly, it would have reached statistical significance in a larger study.

Ari Maizel, Chief Commercial Officer

And regarding your question on antipsychotic use, there hasn't been an immediate, substantial drop in antipsychotic use overall. I think the report is still relatively new. But the awareness of that report and the sensitivity on using antipsychotics with this patient population is very high among providers and family members. So we think that provides a good foundation for the AUVELITY launch in the Alzheimer's disease agitation space, and expect there to be continued focus on antipsychotic use moving forward.

Operator, Operator

Our next question today is coming from Ram Selvaraju from H.C. Wainwright.

Raghuram (Ram) Selvaraju, Analyst, H.C. Wainwright

Firstly, on the commercial side, could you provide some additional details regarding the deployment of the field sales force: the degree to which sales reps currently promote more than one product or are dedicated to promoting a single product within your commercial product range and how you expect this to evolve going forward? In other words, to what extent do you expect to deploy sales representatives dedicated to a specific product in a specific indication versus having them promote more than one product at a time and to what extent will this strategy be reflected going forward in the deployment of the commercial sales force? And then with respect to clinical development directions, could you comment generally on your interest in muscarinic receptor modulation, particularly as this pertains to both the neuropsychiatric and cognitive dysfunction dementia fields? And if you could also give us a sense with respect to balipodect, where you expect the specific safety advantages of this product to lie within the neuropsychiatric indications that you expect to target?

Ari Maizel, Chief Commercial Officer

Yes, I'll start with the deployment of the sales force question. Up to this point, we largely had our sales teams focused on one specific brand. Part of that is related to the unique specialist audiences that are particularly important in the launch phase. For AUVELITY that's psychiatry, for SYMBRAVO headache specialists and neurologists and for SUNOSI, sleep specialists. With the Alzheimer's agitation launch, because of the high degree of overlap in call points for MDD and Alzheimer's disease agitation, that team will be supporting and promoting both indications. In terms of long-term potential or vision for the team, our portfolio and pipeline have many shared call points for certain therapeutic areas. That's something we'll continue to evaluate, and we'll share as we make some progress moving forward.

Herriot Tabuteau, Chief Executive Officer

Great. As it relates to the pipeline question on muscarinic receptor modulation, that mechanism of action does not fall into our current pipeline, so we don't have much to add there. And as it relates to balipodect and the potential safety advantages, as a reminder, this is a PDE10A inhibitor. It works by regulating cyclic AMP and cyclic GMP levels downstream from D1 and D2 receptors. So a potential safety advantage, shown in preclinical studies as well as in clinical studies, is that we have not seen changes in glucose or prolactin levels. As you know, with some antipsychotics, one of the major side effects has to do with metabolic side effects. We have seen preclinically as well as clinically that this could be a major benefit with balipodect.

Operator, Operator

Next question is coming from David Amsellem from Piper Sandler.

David Amsellem, Analyst, Piper Sandler

So just two for me. With the significant expansion of the commercial infrastructure, what's your appetite for the acquisition of a market-ready or commercial stage asset? I know you focused on expanding the pipeline, but you have a lot of infrastructure now that you can leverage. So maybe talk to that? And then secondly, a question on AXS-12, how you're thinking about the underlying commercial opportunity in the landscape where you're going to have Orexin-2 receptor agonists as options in this population?

Herriot Tabuteau, Chief Executive Officer

In terms of acquiring a marketed product, we have done that in the past, and we did that with SUNOSI, which was our first acquisition. Having said that, we have such a rich portfolio of marketed assets, new indications and also a very late-stage pipeline that we have enough to focus on to drive both near-term and long-term value. So right now we are focused on our current assets and pipeline to drive value inflections and sustainable long-term growth. With regards to the Orexin-2 agonists: if you look at narcolepsy, this is an orphan indication but a sizable one at about 185,000 patients, and there is a lot of heterogeneity in this patient population. There's a lot of polypharmacy and not every drug works for every patient. Also, there is side effect liability with current treatments and different drugs have different side effect profiles. What we like about our product, AXS-12, is a couple of things. One, it works very quickly — we have an onset of action as early as one week. Currently, some other products on the market take longer, about a month to see full effect. Secondly, the efficacy we've seen is durable; we have data up to six months. All of that efficacy comes with a very favorable side effect profile and a first-in-class mechanism of action for narcolepsy. Lastly, regarding some of the ancillary symptoms of narcolepsy, the data show that AXS-12 has the potential to beneficially affect excessive daytime sleepiness as well as cognition. So we're very excited by the potential to provide a new treatment option to patients.

Operator, Operator

Next question is coming from Yatin Suneja from Guggenheim Partners.

Yatin Suneja, Analyst, Guggenheim Partners

Congrats on all the success and progress. Just a question on ADA. Actually, two questions. One is how should we think about guidance — at what point you think you might be able to establish guidance if that's even possible? Two, if we're all trying to model the ADA ramp curve. Obviously, when you launched AUVELITY in MDD, awareness was not there. So how should we model the early launch in ADA? Any guidance there would be really helpful.

Nick Pizzie, Chief Financial Officer

Sure. Yatin, this is Nick. As it relates to guidance, first of all, we provided peak sales guidance: at least $8 billion for AUVELITY, $300 million to $500 million for SUNOSI and $500 million to $1 billion for SYMBRAVO. That's our peak sales guidance. Obviously, there is a lot of fluidity now with the approval, market access continuing to grow and evolve. From a short-term perspective there are many variables. So we want to see how they evolve, and then we can take a look at potential guidance down the road.

Ari Maizel, Chief Commercial Officer

Regarding the ADA ramp, it's very challenging to predict exactly how any launch will ramp over time. As you mentioned, the AUVELITY experience in MDD gives some analog but it's a different marketplace. On one hand, we're optimistic because there's greater awareness, better market access and a larger sales team. On the other hand, there are precedents in the market such as other agents in the agitation space that may give some sense of uptake patterns. I think we'll learn more as we get into the launch, and we'll be able to share details on what we're observing.

Operator, Operator

Next question is coming from Sean Laaman from Morgan Stanley.

Sean Laaman, Analyst, Morgan Stanley

AXS-12 — I'm just wondering what price and payer discussions, if any, have been like? And what's the kind of investment you think you need to make to ensure that this drug has a successful launch given there is such hot debate on the Orexin-2 agonist and the large market potential there?

Ari Maizel, Chief Commercial Officer

Thanks, Sean. We've been engaged with payers on early education around the clinical trial programs and the data, but we have not specifically engaged in pricing discussions yet. There is genuine interest in new narcolepsy products because of substantial inadequate responses, treatment switching and polypharmacy. Payers are mindful that new treatment options need strong efficacy, safety, and tolerability. In terms of investment required, we'll have more to share as we get closer to a potential approval. As we've mentioned previously, we have established a sleep team for SUNOSI that is in market today, and there is a near-perfect overlap in terms of target HCPs for SUNOSI and AXS-12 if approved.

Nick Pizzie, Chief Financial Officer

From a financial perspective, you would consider orphan drug pricing dynamics for a product like AXS-12. As Ari shared, we already have infrastructure set up with the sleep team, and we would expect a lot of synergies with AXS-12 and the current infrastructure, improving operating leverage within the P&L.

Sean Laaman, Analyst, Morgan Stanley

How excited are you about that product? It doesn't seem to get a whole heap of airplay amongst the investor discussions. So how excited are you about it?

Ari Maizel, Chief Commercial Officer

Very excited. We are very excited. The feedback we're getting from KOLs and early market research is really strong. These patients are very difficult to treat and are frankly dissatisfied with existing treatment options. We believe there will be significant room for AXS-12 to make a meaningful impact in this marketplace.

Operator, Operator

Next question is coming from David Hoang from Deutsche Bank.

David Hoang, Analyst, Deutsche Bank

Congrats on all the recent progress. First, I wanted to come back to the peak sales number that you put out there for AUVELITY. If I heard you correctly, I think you said 50-50 for the MDD versus ADA indications. The MDD number strikes me as a large one, and I'm just wondering if you look at other antidepressants or comparable products in the market to help you get to that number? And then maybe a follow-up there is, does that contemplate evolving competition in the field over the next few years? For example, do you see psychedelic therapies as competitors to AUVELITY?

Ari Maizel, Chief Commercial Officer

Thanks, David. We do consider market analogs, but our decisions are largely driven by our internal research and analysis. What we're seeing in terms of adoption rates, penetration, improvements in our commercial infrastructure related to sales force and market access, and now the additional data in Alzheimer's disease agitation — in some ways AUVELITY stands on its own in this marketplace because of its novel mechanism of action and the clinical profile it delivers compared to other treatment options. We're confident in the potential that we shared today, and we look forward to sharing additional updates as we grow the brand, particularly as we get into the Alzheimer's disease agitation launch.

Operator, Operator

Next question is coming from Myles Minter from William Blair.

Myles Minter, Analyst, William Blair

Congrats on the quarter. First of all, on the ENGAGE study of solriamfetol in binge-eating disorder: how are you thinking about what you'd like to see from an efficacy standpoint there? Should we be looking at the referenced dataset of about a 1.5-day reduction in binge-eating days over that week period, so that it will be about 18 to 20 days over your 12 weeks in ENGAGE? That's the first one. And then on AXS-14, curious about the randomized withdrawal nature of the trial that you're conducting in fibromyalgia — that seems great from a probability of success standpoint. Regarding FDA guidance, I think they made statements about randomized withdrawal designs and noting it's not necessarily robust for aspects of comparative safety. Was there any discussion that you're already over the hurdle on safety data requirements for AXS-14 with the previous data from Pfizer, so you don't have to do additional studies beyond this one?

Herriot Tabuteau, Chief Executive Officer

Thanks for the questions. As it relates to the binge-eating disorder study, it's hard to say exactly what we'll see. We powered the study to detect a treatment difference. One of the limitations of making predictions is that currently there are limited approved drugs and limited study experience in binge-eating disorder, so it's an evolving area. What we're looking for is a positive study — a statistically significant improvement with our drug versus placebo. Regarding AXS-14, we are very excited about the clinical trial we've launched. As a reminder, two randomized double-blind placebo-controlled trials have been conducted previously and both were positive. These were large studies. There were also two long-term safety trials with hundreds of patients treated out to at least a year. So we have substantial randomized as well as long-term safety data with AXS-14.

Operator, Operator

Next question is coming from Matthew Hershenhorn from Oppenheimer.

Matthew Hershenhorn, Analyst, Oppenheimer

Congrats again on the ADA approval. We were wondering about your overall BD strategy following the recent deals for AXS-17 and balipodect, especially in terms of additional capacity and other areas you'd like to add to. Do you consider psychedelics or neuroplastogens as a potential complement to your psychiatry portfolio? And if recent policy and regulatory dynamics as well as strategic interest inform your thinking there at all?

Herriot Tabuteau, Chief Executive Officer

Thanks for the question. We don't comment specifically on business development targets, but we do think carefully and are selective in what we add. We don't currently need to add anything urgently because our pipeline is deep, broad and late-stage. We announced two recent business development transactions which provide two new NCEs with potentially first-in-class mechanisms of action, complementing the rest of our pipeline. We've demonstrated our ability to generate inflection in the base business and we are ensuring that inflection will be sustained with the current pipeline.

Operator, Operator

Next question is coming from Ben Burnett from Wells Fargo.

Benjamin (Ben) Burnett, Analyst, Wells Fargo

I want to ask about the CLARITY solriamfetol study. It's a randomized withdrawal study — can you give a little color as to why that design was chosen? And I guess if it's positive, would you expect to have to do a parallel study after that?

Herriot Tabuteau, Chief Executive Officer

Thanks for the question. We do anticipate that we would need two positive trials — that's the standard for approval by the FDA in many indications. In terms of the rationale for the randomized withdrawal design, one of the challenges in neuropsychiatric indications and depression in particular is the high placebo response. In the prior studies with solriamfetol we saw a pronounced antidepressant effect in the active arm. We wanted to ensure we could demonstrate that this is a true drug effect while minimizing the impact of placebo response. That's the rationale behind selecting that study design.

Benjamin (Ben) Burnett, Analyst, Wells Fargo

Okay. And can I also ask just long term, how are you thinking about profitability? With the increased conviction in AUVELITY and what that could do from a sales perspective, does profitability start to become a goal for the company? Or is the focus more on revenue growth?

Nick Pizzie, Chief Financial Officer

Right now, our focus continues to be on revenue growth. If you rank priorities, revenue growth is number one, then getting to cash flow positivity is two, and then profitability follows shortly thereafter.

Operator, Operator

Next question is coming from Graig Suvannavejh from Mizuho.

Graig Suvannavejh, Analyst, Mizuho

Congrats on all of the progress and especially the ADA agitation approval. I've got questions on AUVELITY, and I'm curious if you could provide some color around how we should think about this year's quarterly sequential growth given seasonality dynamics. While AUVELITY is still growing year-over-year in MDD, as you get to bigger numbers it starts slowing down, but then you've got the ADA launch. So do you anticipate year-over-year growth in 2026 to be perhaps bigger than in 2025? And then a follow-up on AUVELITY: given the ADA approval, can you tell us how you're thinking about IRA implications and how we should think about as you add more Medicare patients, any impact there?

Herriot Tabuteau, Chief Executive Officer

I'll start with the quarterly sequencing question. We haven't provided specific guidance on sales ramp over the course of the year. Q1 is a quarter in which market seasonality comes into effect, but we believe it's transitory in nature, as evidenced by the early demand trends that we're seeing in Q2.

Nick Pizzie, Chief Financial Officer

A little bit on IRA: at the earliest, IRA negotiations will not impact AUVELITY until 2031, assuming AUVELITY meets the requirements for negotiation as a top spend Part D product. It is important to note that the $8 billion peak sales estimate we shared contemplates any potential IRA impact.

Operator, Operator

Next question is coming from Charlie on for Brian Skorney from Baird.

Charlie (for Brian Skorney), Analyst, Baird (covering for Brian Skorney)

So just following up on an earlier question, curious how you're thinking about positioning SUNOSI ahead of potential Orexin agonist launches later this year as well as with your expansion of the SUNOSI sales force. And wrapping up the expansion of the AUVELITY sales force, how should we think about the ramp of SG&A spend throughout 2026?

Nick Pizzie, Chief Financial Officer

Maybe I'll take the SG&A question first. SG&A increased this quarter primarily for four reasons. First, we typically see some phasing of higher spend in SG&A in Q1 versus the rest of the year just on the underlying business. Second, we accelerated marketing spend in preparation for the ADA approval to make sure the infrastructure was established and ready to launch in June. Third, the field force expansion was actually faster than we anticipated; we're pleased with where we are in preparation for a June launch. Fourth, we continued direct-to-consumer spend for AUVELITY in MDD. As we think about the rest of the year, we anticipate SG&A will likely increase in Q2, but at a slower rate than what we've seen from Q4 to Q1 and likely level out shortly thereafter. Importantly, we expect to see continued operating leverage as top-line revenue growth is anticipated to outpace the growth we expect to see in operating expenses.

Ari Maizel, Chief Commercial Officer

Regarding SUNOSI and positioning versus potential Orexin agonists, it's a great time for treatment developments in the narcolepsy and excessive sleepiness space and we're pleased with the performance of SUNOSI. Without commenting on specific competitor products, we are focusing on the clinical profile of our assets. For AXS-12, as Herriot mentioned earlier, we have significant reductions in weekly cataplexy attacks seen as early as week one, it's safe and well-tolerated, and benefits extend to excessive daytime sleepiness and cognition. We think there's a real opportunity for AXS-12 to make a difference for patients and will continue to prepare commercially.

Operator, Operator

Next question is coming from Madison El-Saadi from B. Riley Securities.

Madison Wynne El-Saadi, Analyst, B. Riley Securities

Congrats on progress. Regarding AUVELITY — our understanding is that long-term care formulary additions are gated by quarterly reviews that facilities have. Given the payer coverage, sales force expansion and the general profile of the landscape, could there be a bolus of Alzheimer's disease agitation patients? And as a follow-up, over the next 12 months, how many prescribers do you expect may prescribe AUVELITY for both depression and for Alzheimer's disease agitation?

Ari Maizel, Chief Commercial Officer

Thanks, Madison. Regarding a possible long-term care bolus, it's difficult to predict exactly, but our team has been actively engaged with payers and LTC organizations to ensure patient access for AUVELITY. We'll have more to share once we get into the commercial launch. In terms of MDD and ADA prescribing, we shared that we'll be calling on roughly 68,000 HCPs with our expanded sales team, and approximately half of those targets are considered high-volume treaters of both Alzheimer's disease agitation and major depressive disorder. That gives you a sense of the potential for AUVELITY to be used across both indications within a single prescriber's practice.

Operator, Operator

Next question is coming from Rudy Li from Wolfe Research.

Guofang (Rudy) Li, Analyst, Wolfe Research

Just a quick follow-up to your long-term guidance of AUVELITY sales. How should we think about the uptake maybe for the relatively near term, maybe in the next two to three years — any additional color on your key assumptions and what's going to give you confidence in the trajectory to AUVELITY peak sales? And secondly, can you talk about your outside-the-U.S. development plan for AUVELITY, since now you already secured two indications in the U.S.?

Ari Maizel, Chief Commercial Officer

When thinking about uptake in the next two to three years, there will be a lot to learn over the next several months as we see our expanded sales force in the market for both indications. The Alzheimer's disease agitation indication will be new at launch, so it's hard to share specifics on uptake, but we have seen strong growth in new patient starts and new prescriber activation within MDD, which we expect to continue. There will be additional opportunity with Alzheimer's disease agitation, which shares some common targets with MDD but also includes distinct targets added to the call plan this year. We'll have more to share as we get into the launch. The update to the peak sales estimate was guided by our internal analysis and the final label for agitation, which gives us confidence that both indications can drive first-line use.

Herriot Tabuteau, Chief Executive Officer

As it relates to outside-the-U.S. (OUS), our primary focus is executing the AUVELITY launch and successful commercialization in the U.S. while identifying an ideal partner ex-U.S. As we have said in the past, we plan to partner ex-U.S. and our primary focus is to ensure we find a partner that shares our vision for the drug's future.

Operator, Operator

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Herriot Tabuteau, Chief Executive Officer

Thank you, operator. Axsome today represents a singular CNS platform with our differentiated marketed products and a broad pipeline of potentially first-in-class and best-in-class treatments targeting unmet medical needs in psychiatry and neurology. We are well positioned to deliver substantial long-term value for patients and shareholders. We look forward to providing updates on our progress throughout the balance of the year. Thank you, everyone, for joining us this morning. Have a great day.

Operator, Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.