G ood morning. Thanks everyone for joining us at the 35th Annual Piper Sandler Healthcare Conference. I'm David Amsellem from the pharma team, and with us is Alkermes, and joining us is CEO, Richard Pops. Delighted to have you with us, and lots to talk about. So, I know everyone wants to talk about our favorite topic, our orexin agonist, 2680. I am not gonna start with that, however. So, we'll start with a high level question, if that's okay? Sure. Since you completed the separation of the oncology business. I'm particularly interested in now, how are you thinking about the neuroscience business, the standalone neuroscience business, particularly the cost structure, your margins, and ultimately your strategic vision for that business over the long term? Well, first of all, it's great to see you, and thanks for having us. I feel like I've been to 35 of them. But it's a cool moment because as simple as it sounds, separating the oncology bit from Alkermes is gonna reveal when we, particularly more explicitly, when we guide in 2024, of what this standalone neuroscience company actually looks like and how few comparables there are to this. This is gonna be a profitable company to billion-dollar-plus top line, growing products and a pipeline. And that pipeline will continue to expand, but the identified parts of the pipeline, 2680 and its derivatives, are really exciting areas of neuroscience drug development with a different risk profile than what we've historically done in psychiatry. We see this business as being a profitable business. We've established these profitability targets simply to put markers in the ground to make explicit the fact that we see it as a, as a profitable company, that we're cash generative. I think it, it provides an amazing platform for continuing to build a neuroscience franchise. Yes. So, I wanted to get your thoughts on M&A and in-licensing. I know this is something that you've talked about in the past, but wanted to get your latest thoughts on key strategic priorities. Is it bolstering the pipeline by acquisitions or in-licensing? Is it bringing in an asset where you can leverage the commercial infrastructure you have in place? Is it maybe both? How are you thinking about that these days? Well, I think that underscores the differentiated nature of this platform that Alkermes will be, because there's a scientific capability that we've honed over many years. We've gotten many drugs approved. We know how to develop drugs, but also we've built this commercial infrastructure that's quite distinctive. A commercial infrastructure that's not just the ability to sell pharmaceutical products, it's the ability to sell pharmaceutical products in complex reimbursement environments at lower price points, with higher gross-to-nets, with government overlays, payer overlays, you know, really challenging commercial settings. So to answer the question from, as you think about the standalone business, how do you grow that business? Ideally, it'd be wonderful to put additional commercial products into that infrastructure because we think we have a competitive advantage. If you're a small company with a single asset, building that infrastructure is perhaps cost prohibitive, and many of the large players aren't in these markets. So we sit with a very few number of other companies as a potential collaborator with those types of assets. On the R&D side, no major standalone biopharmaceutical company has made it from internally generated pipeline only. Right. When capital markets are difficult, and cost of capital is high, and options for smaller companies are limited, that's when Y ou don't have to buy whole companies also T here's licensing deals with milestones that are attractive for both parties, that we'll be looking at as well. Okay. When you think about transactions focused on the pipeline, how are you thinking about R&D risk? I mean, do you want to replenish the early-stage pipeline? Do you want to add something that's late stage? And this sort of gets into how big of a deal you'd contemplate, but just help us understand philosophically what you're thinking about. Think about it with two different parameters. One is R&D in a biopharmaceutical company is essentially a continuous process. So in order to have a robust, ongoing R&D enterprise, you have things sequenced all through early to late. Early being relatively inexpensive and higher risk. Later, as you narrow down and discount rates come down, you allocate more capital. But the other thing is operating within the constraints of these profitability measures that we've also established. But that actually is a good thing because it bounds your R&D spend. It says: Okay, we have to allocate capital competitively across different programs so the fittest survive. And I can tell you, having y ou know, often, when you build a company from scratch, when you're living completely on equity funding, where you spend every dollar that you raise, you don't have a commercial business. You really, you're limited only by the amount of money you can raise. Sure. When you're a commercial, ongoing enterprise, funding yourself, that capital allocation strategy becomes actually quite strategic, and it's, I think it's really healthy in terms of R&D allocation. So we'll expand the pipeline in earlier and mid-stage, most likely. But we'll do so within the constraints of the profitability targets that we're going to maintain. Okay, that's very helpful. So now we can talk about all things orexin. It took a while, s ix minutes. Six minutes, right? I mean, so that's a record these days. So, I'll start with some news flow, actually. So my understanding is that your one of your potential competitors, Jazz, this morning, talked about pausing their orexin agonist for safety reasons, and they're now evaluating a backup compound. So, that's JZP441. So, you know, this sort of leads me to a question about how these molecules behave. We saw Takeda have to discontinue one of their orexins due to liver tox. Now we have Jazz citing, I believe it was cardiovascular issues. So just talk philosophically about this class and what appears to be a wide variability in terms of how these agents are behaving from a safety perspective. Well, I smile because there's been so much investor interest in preclinical and phase I compounds. It should remind everybody that small molecule drug development is inherently very risky, and drugs fail for all kinds of reasons. Some of them are quite dramatic and some are quite prosaic. So our thesis from the beginning and the reason we got into the chemistry was that we realized that the number of parameters you would need to optimize to have a real viable orexin 2 receptor agonist were multiple. And the molecules that were in development were likely to be very different because of the various optimization parameters that need to be addressed. So to just a brief litany of that, you have to have very potent orexin 2 specific agonist. Okay? As small molecules. Pause for a second there. This is a G protein-coupled receptor in the brain. You need a small molecule agonist. That by itself is challenging. It has to be orally bioavailable, challenging. It needs to cross the blood-brain barrier, challenging. Yep. It can't be a substrate to get pumped out of the blood-brain barrier, out of the brain, challenging. And then it has to have a pharmacokinetic waveform that's consistent with the sleep-wake cycle. If you do all that and the drug only lasts for two hours in the CNS, you've got to give it five times a day o r if it lasts too long and people stay up all night, you don't have a drug. So the probability that all these various drugs were going to look the same in the clinic, we assumed, was going to be very low. So I'm not surprised to see them differentiating. So far, ours is hitting the parameters that we designed it to do. But I think that at the end of the day, not everybody's going to make it to the finish line, and the ones that do will be different from each other. I want to come back to safety and tolerability, but just wanted to ask you specifically about 2680. So you're, you're moving into a phase II. Can you talk about the contours of the phase II study in narcolepsy type 1, dosing, treatment duration, even how many sites? And maybe also talk us through how you're thinking, how long it will take to enroll such a study. Let me contrast it first to what we've done historically in psychiatry, wherey ou see a signal in phase II that might be elaborated in phase II. As you go to phase III, the studies get very big, very expensive, and even more risky. Because there's higher placebo response, there's more heterogeneous patient populations. It's a white knuckle ride until you unblind it and hope that you have an alpha less than 0.05. This is the exact opposite in many ways. The phenotype, the disease, narcolepsy type 1, is a deficiency of orexin. In our first cohort of patients, essentially, literally all the patients respond, and they respond very similarly. So the statistical powering is quite straightforward. I mean, we showed p-values with four patients. So the sample size is not driven by some percentage response rate that you're hoping to divine. It's really driven more by safety exposures and across the whole program. So a phase II program, very simple design. Now that we've honed in on NT1, what the doses would be, three doses likely versus placebo parallel design, Maintenance of Wakefulness Test over four to six weeks, and with an extension thereafter for safety. Okay. So is the pairwise comparison versus placebo will be on MWT. We've already shown that we're going to affect that. And so then you're really building the safety database throughout the phase II, phase III program to satisfy regulatory authorities for registration. Do you have a sense of how many sites and geography? We're figuring that out right now. It'll be global, for sure. Okay. Number of sites, TBD, but the cohort sizes typically tend to be 20-30 patients per arm. Okay, and you're going to look at Epworth as a secondary measure? We'll look at, s o the primary endpoint will be MWT. Yep. Cataplexy and NT1 is going to be an important- Cataplexy. -important point. Then we'll look at various quality of life, patient-reported outcome measures in phase II to figure out what the best one to capture for phase III will be. Okay, that's helpful. So wanted to come back to tolerability. One of the things, and I don't want to spend too much time on the Jazz compound, but one of the things they did cite is, my understanding, visual disturbances, and we've seen that. So how do you think about the incidence of visual disturbance with your molecule, and the extent to which that's just a byproduct of its wakefulness property? I think it'll be more fully elaborated in phase II. Sure. I'll be curious to see what the Jazz data are with respect to that. That was in sleep-deprived healthy. We saw very mild, transient, visual disturbances in a few patients i n healthy volunteers, but not sleep-deprived, but healthy volunteers. These are people with an intact orexin system hypocretin circuitry. We, albeit only in four patients, we've not seen it yet in the patients. Although in phase II, we'll be paying attention to that. And now, with another observation from Jazz. Now, back to the original point, though, about the differences in the molecules. Potency, we think, matters a lot, both with respect to cardiovascular effects as well as other on or off-target effects. So for example, you would have thought with certain earlier generation orexin agonists, that you might see blood pressure and heart rate moving concomitantly with your wakefulness. With our compound, it's separated dramatically. We did not hit the maximum tolerated dose in the healthy volunteer study, yet we see potencies on wakefulness between 1 and 8 milligrams without any effect on cardiovascular. So I think the drugs are going to separate based on their potency and their PK as well. Another AE that I thought was noteworthy, not troubling, I should say, but just noteworthy, is daytime urinary urgency. This is something we saw with the Takeda compound. We saw it, to some extent, with yours. How do you think about whether that's an on-target or off-target effect? And, and maybe help us understand, you know, I guess for lack of a better term, the, the extent to which it's troublesome. It's definitely on target. We think that absolutely on target. It's called polyuria, if you see it in the tables, and it's not necessarily frequency of urination, but the impulse to t he desire to. And w hat will be interesting is to see over time. We've heard some reports that that diminishes over time as patients get adapted to that sensation. And it's probably dose-dependent as well. So, we'll be looking at that in phase II, but I don't expect it to disappear. I think it's very much an on-target phenomenon. Yeah. So let's talk about efficacy and the wakefulness signal that you saw in the number of NT1, I think the four patients with NT1. How do you frame that signal relative to other daytime wakefulness agents? You know, thinking about products like pitolisant and solriamfetol. What's your general view? And I know it's a small n, but based on what we've seen, how do you think about positioning relative to these other wakefulness products? Well, I think this is why there's so much excitement in the field. Because our results build on previous clinical results from Takeda. That suggests that it is really quite a dramatic difference from what precedes. The two ways, as you know, of treating the disease now are: one is focused on the sleep side, which is by using oxybates to sleep better, and then the other, on the wakefulness side, it's been drugs like modafinil and other stimulants. So in the classic measure, this Maintenance of Wakefulness Test, where the sleep latency, patients with NT1 will fall asleep in this experiment where you put people in a dark room, low light, hooked up to an EEG. People with NT1 will fall asleep in our case, three minutes. With those agents, that three minute latency goes into the low teens of high single digits. So you gain a few minutes of latency. It's a 40-minute test, and what we and Takeda have shown with orexin agonist is you can max out the test. Not only that, but what we showed with our first four patients is that we ran that test every two days, every two hours in the dosing day. The classic measurement is over eight hours. We ran it for 10 hours. We maxed it out at 10 hours, and then after we stopped recording, the principal AE that we reported at 8 milligrams was insomnia, 'cause some of those patients stayed up all night. So really what we're showing is that we can target this wakefulness circuitry in the brain in a, with a very highly potent molecule, and with it, in dose-dependent way, modulate the duration of that effect. You have an NT2 cohort, you have an IH cohort. So two questions here. One is, when should we expect to see data in those cohorts? And then secondly, just remind us how to think about dosing in those cohorts relative to how you dosed NT1 patients. We're enrolling NT2 and IH patients now w e're in that same experimental design, where we'll do cohorts of eight, and we'll probably analyze the NT2s, the full eight, because we expect more variability in the NT2s. I H is a fairly consistent phenotype. NT2s have variable responses, we believe, to an orexin agonist. So the hypothesis is that the dosing would need to be 2-3x higher. That's based on earlier work in the clinic by others, but also just extrapolating based on our compound. So I hope that we'll get data from the IH and NT2 cohorts, so we can report top-line to you guys in Q1. Okay. And in IH, you have talked about advancing a different orexin two receptor agonist for that population. So with that in mind, any thoughts on when that could go into the clinic, or is this something where you need to see what the data looks like in IH and then make a go, no-go decision regarding development there? I think the way that we think about it now is the differential diagnosis between IH and NT2 is pretty fluid. So if we have a registered drug for NT1, NT2, we will pick up any IH patients. Their diagnosis will change. So if you stipulate that you have another orexin agonist. It's an attractive drug. I don't think you develop it for IH. Right. I think you develop for some other indications that we have in mind that also are characterized by a deficiency in this wakefulness circuitry in the brain. Okay, so let's move on to LYBALVI. We got about six minutes left, so I want to make sure we... Just on that final point, though. Yeah, yeah. Sure. yeah. Sure. Just to, s ome of those indications could be as big or bigger than the narcolepsy indication. Yeah. You think of it, they would be at a different price point, but they could be a much more generalizable phenomenon if the circuitry is relevant to patients that don't have an orexin deficiency in their brain. Yep. That's why even in our single ascending dose study, we were looking at EEG, quantitative EEG in healthies, and we saw changes in wakefulness bands that were consistent with activating that circuitry in healthies. That's provocative, a nd we're going to build on that in the lab. So if I'm hearing you correctly, and I think I've heard you talk about this before, but essentially other settings where hypersomnolence is a feature, you know, wouldn't necessarily be, probably wouldn't be an orphan disease setting, would be sort of a much bigger market where the pricing would be, you know, non-orphan-like? Correct. Right. You might want different PK, you might want different potency. Yep. There could be PRN medicines in that setting. Sure. There are a lot of different things to think about. Whereas think of, think of NT1 as sort of the enriched environment to show this, that the deficiency of orexin, you replace orexin, it's a, it's an orphan indication, high price point, high value for the patients, chronic therapy. Okay, now LYBALVI. I want to make sure we spend some time on that. So you do have a DTC campaign here that you kicked off earlier this year. Can you just talk about how that's going to evolve in 2024? And what I guess I'm getting at, without asking you a question about guidance, so it may be a cute way of asking you that. But how should we think about the level of DTC spend or expansion of DTC efforts in 2024 versus what you've been doing for LYBALVI this year? This is a category, the atypical antipsychotics, particularly focused in bipolar. There's a lot of data, there's a lot of predecessor drugs that have been commercialized in the space, a nalytics are pretty good. DTC becomes an ongoing part of your marketing mix. Sure. In the same way you have a field force, you have DTC, you have broadcast DTC, you have digital DTC. So what you try to do is tune it and optimize it each year to get the biggest ROI. We're early in it right now. Right. We can't calculate ROI right now because we're really just getting into it, but we'll carry on in 2024, for sure. When we guide, we'll guide to what we think the overall top line, bottom line will be for the drug. But, you know, we'll solve for the DTC based on our annual budgeting process. Yep. The payer landscape. I t seems what you've had been saying maybe a year ago regarding contracting has evolved and, you know, I don't want to put words in your mouth, but it seems like the payer landscape has proven to be pretty benign. Don't put those words in my mouth. Okay. Nothing benign. Fair enough. Okay. But I guess the question here is: how are you thinking about contracting and the extent to which you need to contract more aggressively, particularly as you're focusing on driving more patient activation in the bipolar setting? Yeah, we're in ongoing contract negotiations with payers, and those will continue into 2024. Hmm. Our strategy, as you know, has been in 2022, 2023, has been to hold the line on gross-to-net. Yep. Endure some amount of suppression in order to preserve the net price, because in our modeling, that drives a higher total net revenue over time. But as the LYBALVI grows in volume, when it's first introduced to payers, there's zero volume. Yep. They're not losing anything by not contracting, and they say, "Well, we want huge reb ates to put it on the formulary. Right. We say, "No." We begin to see if the drug has a following. As the drug starts getting used, the physicians want to use it, and patients want to be on it, they start reimbursing it without getting a rebate. Now every one of those restrictions is costing them notionally money because they don't have a rebate. So it allows you to have a little bit more equilibrium in the negotiation. But because three of them control 80% of the market u ltimately, they're going to get a contract from you. Yep. But we feel like as we go into 2024, we're, we're in a much better position now because we, you know, we're going to basically double what we did the first year. It's a real drug. It's going to be around for a long time. We're willing to contract at, at, at fair rates, and, and they'll want to contract. So we'll, we'll guide in 2024, just like we did in 2023, where we think we'll be from a gross-to-net, but we'll negotiate always, you know, to, to maximize the, the net revenue. Yep. And then maybe a longer-term question: Do you think the payer landscape will change at all to the extent that KarXT launches and more broadly, the muscarinic agonist come into the market? And I know it's only schizophrenia, so you know, that's not lost on me. But do you think that has any ramifications for, you know, your payer strategy and the payer landscape for LYBALVI? No. Okay. No. This is a category where the payers are in charge. There are so many generic drugs and many of the generic drugs are effective for patients, so they're going to cycle people through generics as much as they can. The activation energy to get somebody from the generics into a branded is really driven by the setting of care a place where an office can do the paperwork and go through what they need to go through to put somebody on a branded medication. But even when you get on a branded medication, the average length of therapy on the branded medication is so brief it's so tragic in the way the drug and the disease is treated, that there's this continuous flux in the marketplace. But even to the extent there is that flux, I mean, let's say you have a couple of muscarinic agonists that enter the market, and let's say they're cleaner and there's better persistence, does that at all impact LYBALVI and your ability to drive new starts and grow the patient footprint? I'm sorry, so your premise is that they're cleaner and what? The cleaner and potentially there's better patient persistence. I don't see why that would be the case. Okay. I don't see. So you don't. T he problem is not with the drugs, the problem is the disease. Yep. The most effective agent out there is olanzapine. Yep. Even with olanzapine, the duration of therapy is brief because people have schizophrenia, and so that's what you're up against. Unlike in narcolepsy, where patients are going to be motivated to take that drug every day and improve their quality of life, schizophrenic patients, unfortunately, after a period of being treated, often either feel like, "I'm feeling better. I don't need my medicines anymore," or because of the nature of their disease, feel that they don't want to take their medicine anymore. Yeah. So lots of changes in terms of new brands, but ultimately, you don't feel any differently about the LYBALVI opportunity? No. I think LYBALVI occupies a place in the market that's driven by its efficacy, and that derives from a long tradition of olanzapine use. So we don't have to establish our bona fides on efficacy. We just have to make sure that people see that as a branded alternative now, we've essentially made olanzapine usable again as a maintenance therapy. Great. Well, I know we're out of time because that light's blinking red. Thank you. So, with that, I'll leave it there. Thanks, Richard. Thanks to everyone in the audience.