Alkermes plc (ALKS) Q3 2025 Earnings Report, Transcript and Summary

Greetings, and welcome to Alkermes' Third Quarter 2025 Financial Results Conference Call. My name is Rob, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Thanks, Rob. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended September 30, 2025. With me today are Richard Pops, our CEO; Blair Jackson, our Chief Operating Officer; Todd Nichols, our Chief Commercial Officer; and Joshua Reed, our Chief Financial Officer. A slide presentation, along with our press release, related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors section of alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this morning and our most recent annual and quarterly reports filed with the SEC for important risk factors that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we will open the call for Q&A. And now I'll turn the call over to Richard for some opening remarks.

That's great, Sandy. Thank you. Good morning, everyone. So Alkermes delivered a strong third quarter. It was marked by solid commercial execution, significant progress in our development pipeline, robust financial performance and continued execution across our strategic priorities. Today, we're raising our financial expectations for 2025, reflecting our confidence in the momentum of the business. Before we dive into the results for the quarter and our increased expectations for the remainder of 2025, I'd like to take a moment on the announcement we made last week regarding our proposed acquisition of Avadel Pharmaceuticals. This transaction is an important step forward in Alkermes' strategic evolution for 3 compelling reasons. First, we gain an FDA-approved medicine with significant growth potential. LUMRYZ is the first and only FDA-approved, once-at-bedtime oxybate for the treatment of cataplexy or excessive daytime sleepiness in patients 7 years or older with narcolepsy. It has already shown strong market uptake since launch. In 2025, it is expected to generate [between] $265– to $275 million in net revenue. Once the transaction is complete, it will immediately diversify our commercial portfolio and strengthen our profitability. Second, this acquisition will accelerate our commercial entry into the sleep medicine market. It will provide a well-established foundation for the potential launch of 3 alixorexton, our promising orexin 2 receptor agonist in development for narcolepsy and idiopathic hypersomnia. Avadel is a recognized leader in sleep medicine and has successfully built and scaled a high-performing commercial organization. With positive Phase II data for alixorexton in narcolepsy type 1 now in hand, data from Vibrance-2 in NT2 that we expect to report in November, and plans to initiate a global Phase III program early next year, we have reached a new level of conviction in the potential of our orexin platform. And third, the financial strength of the combined company will enhance our ability to support a diversified development strategy in sleep disorders. This will include alixorexton, as well as our additional orexin 2 receptor agonist candidates, ALKS 4510 and ALKS 7290, which recently entered the clinic. Avadel’'s development pipeline also has the potential to broaden our offerings for the sleep community, with an ongoing Phase III study of LUMRYZ in idiopathic hypersomnia and valiloxybate, a no-salt oxybate candidate in early-stage development. The proposed acquisition reinforces our commitment to neuroscience. It gives us additional scale and builds on our legacy of innovation in complex psychiatric and neurological disorders. The transaction is a compelling opportunity to accelerate our growth trajectory and is squarely aligned with our financial and strategic priorities. Upon closing, which we currently expect in Q1, we'll be able to provide more color on our expectations for the combined business. So with that as an intro, I'll turn it over to Joshua, who will walk through our third quarter financial results.

Thank you, Richard. I'm pleased to join you today for my first earnings call as Chief Financial Officer of Alkermes. I'm excited to be part of a company with a strong financial foundation, a clear strategic vision and a deep commitment to delivering value for shareholders while advancing innovative medicines that have the potential to make a meaningful difference for patients. Since joining, I spent time getting to know our teams, our operations and our financial priorities. I've been impressed by the discipline and focus that drive our performance, and I look forward to building on that momentum. Now turning to our financial results. Our third quarter results were strong, reflecting continued commercial and operational execution. Financially, the year is tracking ahead of our expectations. And based on our performance through the first 9 months, we are raising our full-year 2025 guidance today. For the third quarter, we generated total revenues of $394.2 million, driven primarily by our portfolio of proprietary products, which generated net sales of $317.4 million, reflecting 16% year-over-year growth. These results were driven by strong underlying demand, which Todd will address in his remarks, and gross-to-net favorability, primarily related to Medicaid utilization rates, which drove a onetime gross-to-net benefit of approximately $8 million for VIVITROL and approximately $5 million for ARISTADA. As we move into the fourth quarter, we expect Q4 net sales from this portfolio in the range of $300 million to $320 million. Manufacturing and royalty revenues were $76.8 million for the third quarter, including revenues of $35.6 million from VUMERITY and $30.2 million from the long-acting INVEGA products. Turning to expenses. Cost of goods sold were $51.6 million, which compared favorably to $63.1 million for Q3 last year, primarily reflecting efficiencies following the sale of our Athlone-based manufacturing business last year. R&D expenses were $81.7 million compared to $59.9 million for Q3 last year, reflecting investments in the Vibrance Phase II studies of alixorexton across narcolepsy and idiopathic hypersomnia and first-in-human studies and development efforts for our next orexin 2 receptor agonist candidates, ALKS 4510 and ALKS 7290. SG&A expenses were $171.8 million compared to $150.4 million for Q3 last year, reflecting the expansion of our psychiatry field organization earlier this year and promotional activities related to LYBALVI. In Q4, we expect a modest increase in SG&A, primarily reflecting activities related to the Avadel transaction. This performance generated strong profitability of GAAP net income of $82.8 million, EBITDA of $96.9 million and adjusted EBITDA of $121.5 million in the third quarter. As we look ahead, based on our strong commercial performance and momentum through the first 9 months of the year, we are on track to deliver record revenues from our portfolio of proprietary products in 2025. As a result, we are raising our 2025 full-year guidance to reflect our current expectations of total revenues of $1.43 billion to $1.49 billion, GAAP net income of $230 million to $250 million, EBITDA of $270 million to $290 million and adjusted EBITDA of $365 million to $385 million. Our full expectations are outlined in the press release issued this morning. Turning to our balance sheet. We ended the quarter in a strong position with $1.14 billion in cash and total investments. For the acquisition of Avadel, we will use cash from our balance sheet in conjunction with bank debt to finance the transaction. As we close the transaction and finalize the financing, we will be in a position to provide more details. Taking a step back, Alkermes is one of the few biopharmaceutical companies that has successfully transitioned into a fully integrated profitable commercial organization with an exciting development pipeline. I stepped into this role at a time when the company is operating from a position of financial strength with a clear growth trajectory and near-term opportunities with the potential to drive meaningful value for shareholders. I'm energized by the opportunity to help shape that next phase of our growth, working closely with the rest of the leadership team to support our strategic priorities and drive long-term value creation. I look forward to engaging with many of you in the weeks ahead and to contributing to the continued success of Alkermes. With that, I will turn the call to Todd for a review of the proprietary portfolio.

Thank you, Joshua, and good morning, everyone. In the first 3 quarters of the year, we executed with discipline against our targeted growth initiatives. The focus drove strong consistent performance across our 3 proprietary brands, underscoring the strength of our commercial strategy and our capabilities. We're encouraged by the momentum we've built and remain confident in our ability to carry it forward. In the third quarter, we recorded net sales from our proprietary product portfolio of $317.4 million, reflecting 16% year-over-year growth. We drove strong end market demand across VIVITROL, ARISTADA and LYBALVI. Starting with VIVITROL. Net sales in the third quarter were $121.1 million. VIVITROL performance continued to be driven by growth in the alcohol dependence indication market and our ability to capitalize on highly localized market dynamics in certain states and payer systems. For the full-year 2025, we now expect VIVITROL net sales in the range of $460 million to $470 million compared to our prior expectation of $440 million to $460 million. Turning to our psychiatry franchise. The expansion of our psychiatry sales force earlier this year was a key strategic initiative designed to enhance our competitive share of voice. With our expanded footprint, we have been able to significantly increase the frequency of our call volume for high-priority prescriber targets across LYBALVI and ARISTADA. This increased share of voice, along with strong execution has driven increased breadth of prescribers for both brands. For the ARISTADA product family, in the third quarter, net sales were $98.1 million. Leading indicators related to underlying demand were encouraging with increased prescriber breadth and strong new-to-brand prescriptions during the quarter. For the full-year 2025, we now expect ARISTADA net sales in the range of $360 million to $370 million compared to our prior expectation of $335 million to $355 million. Turning to LYBALVI. Net sales grew 32% year-over-year to $98.2 million. Underlying TRx growth was 25% year-over-year, driven by new patient starts and prescriber breadth. Gross to net adjustments were approximately 28% in the third quarter. For the full year, we now expect LYBALVI net sales in the range of $340 million to $350 million compared to our prior expectation of $320 million to $340 million. Across the portfolio, we are pleased with our performance through the first 3 quarters of the year and entered the final stretch of the year with strong momentum and a clear focus on delivering against our full year objectives. With that, I will pass the call back to Rich.

Thank you, Todd. Well done. I think you can see from the results that the company is performing well across each of the key aspects of our business. During the quarter, our commercial teams delivered strong operational financial performance, our R&D teams made major strides in advancing our expanding development pipeline. So I want to make comments about both aspects of the business. First, commercial. We entered the final quarter of the year ahead of plan and with good momentum into year-end. Over many years, we've developed capabilities necessary to operate in challenging payer and policy environments. By design, we manufacture our proprietary products in the United States, and we do not commercialize these products outside the U.S. We are growing our business by growing demand based on the clear clinical attributes of our medicines and maintaining a disciplined contracting strategy consistent with our view of their significant value. Now R&D. Our portfolio of orexin 2 receptor agonist is advancing rapidly, led by alixorexton. The first Phase II data set of alixorexton was presented at World Sleep in September. In the Vibrance-1 study, alixorexton demonstrated compelling therapeutic benefits in patients with narcolepsy type 1 with a profound effect on excessive daytime sleepiness and cataplexy, along with a generally well-tolerated safety profile. Taken together with the clinically meaningful improvements in fatigue and cognitive function demonstrated in the study, we believe alixorexton has the potential to transform the treatment of NT1. At World Sleep, the competitive positioning for alixorexton in NT1 also came clearly into focus. In this large randomized, double-blind, multi-week study, alixorexton administered once daily across a range of doses demonstrated new potential best-in-class features. With data from this rigorous Phase II study now in hand, we're confident in the profile of alixorexton in NT1, and we're moving rapidly to initiate the Phase III registrational program in the first quarter of next year. We expect to be first to market in narcolepsy type 2 and idiopathic hypersomnia. We completed enrollment in Vibrance-2 in patients with narcolepsy type 2 toward the end of the summer, and we expect to report top line data in November. In idiopathic hypersomnia, Vibrance-3 is enrolling well, and we expect data from that study in mid-2026. Like Vibrance-1, these are both large, well-powered Phase II studies designed to provide substantial data sets informing potential Phase III development. We are building a significant body of clinical data that deepens our understanding of orexin biology and its therapeutic potential in central orders of hypersomnolence and beyond. Equally important, the Phase II studies are yielding key learnings related to study design and implementation that we believe will be invaluable for Phase III and help support alixorexton's competitive position in narcolepsy. Beyond alixorexton and sleep disorders, additional candidates from our portfolio of orexin 2 receptor agonists are advancing well. ALKS 4510 is in the clinic and progressing quickly through single and multiple ascending dose studies in healthy volunteers. We expect to complete this Phase I work early next year and move quickly into proof-of-concept studies in the disease areas that we plan to pursue. For ALKS 7290, we have filed the IND and recently initiated our first-in-human study. Across our orexin development programs, we have demonstrated in clinical or preclinical models that orexin 2 receptor agonist may have powerful effects, not only on wakefulness, but also across domains related to fatigue, cognition, attention and mood. We look forward to sharing more on both of these candidates next year as they complete their Phase I healthy volunteer studies. So to wrap up, the third quarter was a clear demonstration of Alkermes' strong execution, commercial momentum and scientific leadership. We continue to operate from a position of financial strength as we advance our pipeline and generate a growing body of data and insights that inform our strategy and reinforce our conviction in the opportunities ahead. With disciplined focus and a commitment to innovation in the patients we serve, we're well positioned to deliver long-term value for our shareholders. So we look forward to sharing our progress. With that, I'll turn the call back to Sandy to manage the Q&A.

Thanks, Rich. Rob, we'll open the call now for Q&A.

[Operator Instructions] And our first question is from the line of Marc Goodman with Leerink Partners.

Yes. Can you talk about LYBALVI just a little bit, seem to be a lot stronger than expected and the gross to net seem to be a little lower than expected. We were expecting that to kind of creep up some. Just give us a sense of what's happening with the product and just how you're thinking about gross to nets into the next year?

Yes, absolutely, Marc. This is Todd. Yes, we're really pleased with performance for Q3. As I said in my prepared remarks, expansion of our psychiatry footprint really drove a strong share of voice in the quarter. We were able to significantly increase our call volume, which was our strategic plan. We did that in Q3. We believe that, that momentum will carry into Q4. And so the result of that is we saw year-over-year TRx growth of about 25%. But what's even more encouraging is we saw new patient start year-over-year NBRx has increased almost 16%. So the underlying demand is really encouraging, and we believe that's a really direct reflection of the expansion of our sales force. So for context, breadth of prescribing over the quarter increased 7%. So that's 2 consecutive quarters, Q2 and Q3, we saw a strong breadth of prescribing. To your question on gross-to-net, gross-to-net was a little bit lower in the quarter than from Q2. That's the result of just as deductible resets throughout the year, lower co-pay utilization, some small little dynamics like that actually had a lower gross-to-net for the quarter.

And Marc, it's Rich. I'll just add and Todd can expand on it. But the story about LYBALVI over time in the marketplace other than just our strong commercial execution is its efficacy. And that efficacy message is resonating, and I think it's supported now by multiyear data in the real world.

How do we think about gross-to-net into next year?

So we're not going to provide any guidance today, Marc, for next year. We do expect that going into Q4 that the typical seasonal patterns would show up. So we do expect a little bit of expansion of gross-to-net in Q4, but we'll give you a full-year guide in February.

Our next question is from the line of David Hoang with Deutsche Bank.

So I just wanted to ask about, I guess, expectations once the NT2 alixorexton data are in hand. How does that inform the next steps with the FDA? And when will we know more about the Phase III program and design? And then maybe just a follow-up on VIVITROL, just kind of the expectations heading into Q4 for that product.

David, it's Rich. I'll take the first, and then Todd can answer on VIVITROL. So we expect that we're on track for data from the NT2 study in November. And as we've said along, when we get those data in hand, that coupled with the Vibrance-1 in NT1 data will comprise the package for our end of Phase II meeting with FDA. So we'll request that meeting as soon as we get the NT2 data. We'll have that meeting and then we'll launch the Phase III program as our expectation early next year. Go ahead, Todd.

Yes. In terms of VIVITROL for the fourth quarter, I think the basis of that is what we saw in Q3. We saw strong AD demand. AD sales continue to drive the substantial majority of the brand. We hear very encouraging feedback from the market from HCPs and patients. So our expectation is that we would continue to see AD growth going to the fourth quarter. I think it's also just important to keep in mind that this is a mature product. So we think it will perform like a mature product, but our focus is really driving AD sales in Q4.

Our next question comes from the line of Umer Raffat with Evercore ISI.

I just wanted to dial in on the NT2 study a little bit. Could you perhaps lay out for us your expectation of how much of an MWT benefit is reasonable to expect, knowing there's a bit of tachyphylaxis off of single-dose work in Phase I. But on the flip side, patients are starting off at 10 to 12 minutes at baseline. So how much MWT improvements are you expecting? And then also any broad parameters around what do you know as of right now on blinded safety for NT2?

Umer, it's Rich, I won't comment on any of the blinded data. We'll get the full data set here just in a matter of weeks. So we'll look at the data in the aggregate in a large multi-week randomized, placebo-controlled study, the blinded information is only -- is not particularly useful to us. So we'll look forward to seeing the whole data set right away. Our expectation is that based on the Phase Ib study is that we know that orexin 2 receptor agonist from that study can drive wakefulness in patients with NT2 and NIH. But we really don't have a numerical threshold at the outset because we also expect a lot more variability in the patient population. So from a Phase II perspective, what we're looking for is we've identified a range of doses like we did in the NT1 study. What we'd like to see is the safety tolerability profile across that range of doses and clear evidence of efficacy across the various efficacy parameters, all to inform our dose selection for Phase III. So that's the goal. If we can come out of the NT2 study with clear evidence of safety, tolerability and efficacy and a design for Phase III, we think we're going to be the first to market in NT2. And the same thing applies for IH. And this is the virtue, by the way, of running these large Phase II studies. When you're talking about cohorts of 90 patients or so over multiple weeks. And remember, it's not just the 6-week or 5-week double-blind period or 8-week double-blind period. It's also the extension period where we have dose variability and selection for patients. So between these 2 phases, we just learned a tremendous amount about patient preference as well as dose response, and that all goes into the calculus for Phase III.

Our next question comes from the line of Paul Matteis with Stifel.

Just to piggyback off that, can you confirm what details you'll give us in the top line release? Will we know the actual effect size? Or are you going to be saving some of this for a medical meeting? And then on the safety point, how are you thinking now looking ahead as to whether you might employ some sort of titration to try to attenuate certain side effects given that in the OLE and the NT1 study, we weren't really seeing much in the way of new onset visual AEs or things like that?

So yes, we have a good sense of how we're going to provide the top line data. You'll see that in the next few weeks. What you learned from the Vibrance-1? Probably, there's a lot of data that comes out of these studies. So what we'll do is as soon as we get the data, we'll start submitting the abstracts for the various medical meetings as they roll into 2026. But you can expect a fair amount of data coming out, but the top line, we have a good sense of the structure of it, and you'll see that in relatively short order. We have made a lot of decisions following Vibrance-1 about the structure of the dosing in Phase III. We're going to keep most of that proprietary right now because we feel like there are some real learnings. Some of them probably you can think through and derives from the comment that you made is that we really saw a very, very low incidence of new-onset adverse events for patients who had already been exposed to alixorexton in the double-blind period. So all that information from Vibrance-1 has been put into our modeling. And I think we've settled on our Phase III design, and you'll see that when the study gets underway.

The next question is from the line of Akash Tewari with Jefferies.

This is Manoj for Akash. Just 2 questions. When you release the top line Vibrance-2 data, will you be releasing data points over time like 4 weeks and 8 weeks because both TRK-994 and 861NT2 data showed some deterioration of efficacy, primarily in MWT going from 4 weeks to 8 weeks. Do you see any biological rationale for this? Or is this just like a noise related to a small number there? And also, do you expect a dose response in Vibrance-2 in terms of ESS? And also lastly, what kind of PK profile do you look for the next-gen orexin agonist?

So on the point about the tachyphylaxis that you referred to or Umer referred to as well, we don't see based on previous data, a significant evidence of tachyphylaxis or degradation in efficacy signal between 4 and 8 weeks or even 8 and 12 weeks in other data sets. So at the top line, I wouldn't expect all the detailed data of time course. But I just want to let you know at the outset, that's not our pretest hypothesis that we expect to see a degradation. Now, to the extent that one did, one way that you could overcome it is with a range of doses. And we've always thought that having a range of doses could be a real competitive advantage in this category. We are hopeful to see dose response across the various efficacy measures, but we won't know until we see the data. The 3 doses that we modeled for NT2 were designed to give us a spectrum of dose response, but we won't know until we see the final data set. And the PK profile of -- I think you asked about the next orexin agonist. We're really not going to disclose any of those particular attributes of the next wave of molecules coming in. I wouldn't necessarily describe them as next generation because I don't feel like they're improving necessarily on deficiencies the alixorexton has. They're just different. And so they're designed for different patient populations in different clinical settings. And as such, they share common features of potency and selectivity, and we think that's essential for interrogating the circuitry in the brain, but they will be different.

Our next question is from the line of Joseph Thome with TD Cowen.

Maybe for the NT2 data set, can you talk a little bit about the importance of also showing the benefit on the ESS? Is this important for both the FDA? Or is this more of a European measure? If you can kind of put that into context a little bit? And then for the Phase III programs, can you talk a little bit about your expectation for ocular monitoring on one side of it, I could see that it would be helpful if you do see some early visual disturbances to kind of say that this was not impactful. But obviously, on the flip side, it would probably make the Phase III a little bit more complicated. So kind of your latest thoughts on that would be helpful.

Yes, we think in the NT2 study, both MWT and ESS or Epworth Sleepiness Scale are primary endpoints. And they capture different things. The virtue of the MWT is it's sort of a numeric quantitative assessment of the sleep latency. And ESS captures the patient experience, their self-described degree of sleepiness. And they both -- I think they both are quite important. And in Phase II, we're interested in looking at where the sensitivity is, where -- what scales move the most reliably across the doses. And that includes, [I'll throw] cognition, fatigue, narcolepsy severity scale, global impressions, and all the endpoints that we're looking in Phase II because that informs your Phase III structure and design. So we're hoping to see signs of efficacy across all those various parameters. Phase III, it's too early to say. Just for counting, I think that in Vibrance-1, what we saw was really generally very mild, one moderate and one severe ocular in the form of blurred vision. And so it was generally very well tolerated. And that along with the rigorous ophthalmic exams that were conducted in all the patients, I think really answered the question about are there any structural issues that derive from using an orexin-2 receptor agonist. And so I don't know the answer yet whether we'll have to do any monitoring in the Phase III study. We hope that we don't. And to the extent that we do, it's quite mild. But I think in some ways, that will be more of a discussion with the regulators.

Our next questions come from the line of David Amsellem with Piper Sandler.

Just a couple of quick ones on the additional orexins that are going into the clinic. I know, Richard, you talked about properties in mood and attention. So is it safe to say that the -- at least one additional disease setting is going to be in a psychiatric setting once you move into proof-of-concept studies next year? Maybe elaborate a little more on how you're thinking about that? And then secondly, I don't know if this has been asked, but any thoughts on alixorexton outside of the United States? And what kind of discussions, if any, have you had with European regulators there?

Yes, I think we've said about the next candidates that we're interested in 3 broad domains: psychiatry, neurology and interestingly, certain rare neurodevelopmental or neurodegenerative settings where we think a significant part of the clinical presentation is excessive daytime sleepiness, anhedonia, fatigue, depressed mood, things like that. So we won't be more specific than that right now. But as I mentioned in the earlier remarks, our goal is as we get through the SAD/MAD to move right into those types of patient-focused studies to get signal early on. And you'll -- what I'm hopeful is that by the end of 2026, people see how this program has expanded well beyond narcolepsy. And the essential prerequisite of that is getting these 2 candidates through their SAD/MAD credentialing them as bona fide development candidates for these indications. That's well underway. So we're quite excited about how that's going to mature in 2026. The second question was alixorexton in ex U.S. We're developing in ex U.S. We're running clinical trials in Europe and in Asia. And there's a strong demand, I think, for this type of product for patients around the world. So given the state of pharmaceutical pricing discussions across the world, I think it's -- we can say comfortably, we wouldn't expect to bring alixorexton to patients outside the U.S. at significantly lower prices than in the U.S. But our goal is to bring this patient -- to patients in the U.S., in Europe as well as in Asia.

Our next question is from the line of Ash Verma with UBS.

This is [indiscernible] on for Ash. For NT2, how are you thinking about these patients' hypersensitivity to exogenous orexin? What's the most concrete evidence that you see why this hypersensitivity could be lower in NT2 patients versus the NT1?

Yes, I wouldn't describe it as hypersensitivity. I think it's the other direction. I think NT2 patients based on the data are less sensitive to orexin agonist administered exogenously. So NT1, recall, is the disease, is a deficiency of orexin. So in NT1 patients, small doses are driving significant efficacy benefits as low as 1 milligram in our hands with alixorexton, we've shown meaningful changes in wakefulness. Whereas in the NT2 patients, and we know this from our Phase Ib study, you can drive higher doses in order to elicit more wakefulness as well as they tolerate higher doses before you see adverse events. So the basic hypothesis going into the NT2 and IH studies is that there's a frame shift, there's a dose response curve shift to the right so that you need more alixorexton in order to drive wakefulness and patients will tolerate more alixorexton before seeing adverse events.

The next question is from the line of Leonid Timashev with RBC Capital Markets.

I just want to ask how you're thinking about the NT2 versus IH populations and sort of the differences in your ability to actually accurately capture them in separate trials, sort of what you're hearing from physicians on how those are diagnosed and bucketed. And then ultimately, whether these are differences that are meaningful in the real world and how that may impact how you're thinking about the relative opportunities of NT2 versus IH?

I think it's an important question. I think we won't really know the answer until we complete the 2 studies. And I think there's differences based on our learnings in multiple discussions with clinicians and patient groups in the U.S. and Europe, there could be regional differences too, in the way that the differential diagnosis is made. What's interesting though, Leonid, is the hypothesis -- there's no pretest hypothesis that suggests there might be a difference in the response between the IH/NT2 diagnosis or the subcategorization within those 2 diagnoses. As you know, within IH, there are long sleep IH patients, there are shorter sleep IH patients. They have different phenotypes that present. What we know from our Phase Ib study, albeit small, was just taking all comers with NT2 and IH, we were able to show changes in wakefulness and well-tolerated profile. So I think this is de novo clinical research. No one's ever tested orexin 2 receptor agonist at these doses in these patient populations. So I think the whole community is going to be fascinating to see what the distribution looks like, what the variability looks like and what the overall effect of various doses in these patients. And then I think with that information, we can better design Phase III, too, are there ways of tuning up or focusing that response in the Phase III studies. But a priority, we're enrolling patients without any discrimination between the differential diagnosis. Interestingly, in NT2s, you tend to use MWT as an endpoint, whereas that's not used in IH, they use idiopathic hypersomnia severity scale and Epworth. So it's -- it will be interesting to see how the 2 patient populations look when we're finished with the studies.

Our next question comes from the line of Luke Herrmann with Baird.

Congrats on the quarter. Just a couple of time line questions on the earlier pipeline. For the next-gen orexins, are you expecting to share Phase I data from 4510 next year? And do you think there's a possibility of 7290 first-in-human data reading out next year as well? And then similarly, I know it's sensitive right now before deal close. But in general, do you see a possibility of some new data on the low-salt oxybate next year?

Yes. The 4510 and 7290, I think -- I can't say right now whether we'll show you data "per se from the SAD/MAD." I think it's more of the gating -- the go decision to say if we're through SAD/MAD at doses we think are target engaging and therapeutically relevant, then we're going to -- you'll know that we're moving into the patient-focused studies. The timing of the readout of those translational studies remains to be disclosed. I think we're getting a sense of it right now, but it just depends on how fast we move into those translational studies and how quick the readout is. So give us some time to give a little bit more refinement about that as we move into 2026. But our goal is to finish SAD/MAD for 4510 first and move right into some translational studies. Same thing with 7290, get through the SAD/MAD and then go right into a different set of translational studies. We're obviously quite interested in the no salt once-daily development program within Avadel. And as we complete the merger, we will -- or the acquisition, what we'll do is we'll give you more sense of -- in our hands, what we'll be doing with that program. But we think it's a very logical extension to the business that LUMRYZ has built.

The next question is from the line of Ami Fadia with Needham & Company.

With regards to impact on nighttime sleep, can you talk about the 2 mechanisms, orexin versus oxybate and how you're thinking about the 2 mechanisms being complementary and how you intend to study that further going forward? And just separately, with regards to ARISTADA, can you talk about where you expect the gross-to-net to land for the full year?

It's Rich. Yes, I think your question about nighttime sleep is going to be a very fertile one for additional clinical research. What we've heard from clinicians, you've probably heard the same thing, is notwithstanding the powerful daytime wakefulness that orexin agonists are driving, there is still some interest in understanding how that coexists with consolidation of sleep at night for certain patients. Recognizing that most patients don't take oxybate, but the ones who do see real benefit from it, I think there's a real opportunity for some clinical research now to understand how the 2 can coexist, particularly in once-nightly and once daily forms that we would control both. So that's an exciting area for further research for patients and I think for the full field because I think that the full effect of an orexin agonist on nighttime sleep architecture is still yet to be learned. We're developing those data in our Phase II program with extensive polysomnography. So we'll be analyzing that data as we complete the Vibrance program. But in the meantime, I think that there's a -- we see that there's a place for the oxybates on a going-forward basis for the patients who really benefit from them, and we want to further elaborate that. Todd, do you want to talk about the GTN?

Yes, absolutely. For ARISTADA, for the full year, we expect it to follow the consistent historical patterns, which should be approximately 53%.

Our next question is from the line of Uy Ear with Mizuho.

Congrats on the quarter. So maybe just a quick question on the gross-to-net favorability. You benefit from the last quarter and this quarter for both -- for ARISTADA and VIVITROL. Just wondering, could you maybe just help us understand whether there's more benefit going forward? Like what is being -- like -- yes, help us understand why these adjustments? And secondly, in the quarter, could you also sort of speak about inventory, whether it's -- is there any stocking or is that normal level?

Yes, absolutely. Yes, as we said in our prepared remarks, we did see a benefit for VIVITROL and ARISTADA in relation to Medicaid utilization. Going forward, we're not assuming or planning for any additional gross-to-net favorability within Medicaid. I think it's important just to note that the Medicaid volume, the absolute volume for Medicaid patients is stable. This is just related to the percentage of Medicaid across our overall channel mix. That was -- that's the favorability. In terms of inventory, there's always seasonal patterns during the fourth quarter, and it can be a little bit difficult to predict, but we are expecting a little bit smoother of a pattern from Q4 of this year into Q1 of next year.

The next question is from the line of Ben Burnett with Wells Fargo.

I wanted to see if you could just maybe talk about some of the Phase III scenarios for alixorexton. I think we're assuming sort of 2 Phase IIIs would be needed. I guess, number one, I guess, do you agree with that? And then if so, like would a Phase III NT2 study maybe be sufficient along with an NT1 Phase III to get approval in both of those indications?

Ben, it's Richard. That's our assumption right now, but we'll confirm that, obviously, with FDA. Our expectation is that we'll seek labeling for alixorexton for the treatment of narcolepsy. And the Phase III program will be a well-controlled Phase III study for NT1 on a stand-alone basis and a similar study in NT2.

The next question is from the line of Douglas Tsao with H.C. Wainwright.

Congrats on the progress. I guess -- I know it's early, Richard, and a lot of uncertainty. But just given the fact that you're always thoughtful on public policy issues, I'm just curious if you thought much about the potential impact of sort of lapse on ACA subsidies and what it could have for your commercial business in the near-term. And I have a follow-up.

Yes, it's a good question, Doug. And I think everybody is watching that. I think my sense is that there's a strong political virtue to continuing the ACA subsidies at some level. And recall that in reconciliation and the One Big Beautiful Bill, what we were able to make sure is that patients in our population, i.e., patients with serious mental illness and addiction are treated differently. They're the ones who are the explicit target of programs like Medicaid because if these patients are not treated, they end up in the emergency rooms and in the criminal justice system in the community. So the price points of our medicines treating these patients are lower and the gross-to-nets are high. So they're not breaking the bank. So our view from a policy perspective is that there's a reason -- there's a political reason to keep ACA subsidies in place, a; and b, to the extent that we have changes that are focused on Medicaid population, in particular, serious mental illness and addiction patients, we're going to continue to fight to have them carved out.

And I guess just a follow-up on LYBALVI. I'm just curious, just given the success you had with the sort of additional promotion and detailing the product, do you have the sense was it physicians just weren't writing and they just needed that consistent reminder? Or was there just sort of some extent lack of awareness of the product and its attributes?

Yes. In terms of LYBALVI, I think the first thing is over the last several years, we've had a really strong focus strategically on building awareness around the efficacy profile. And that's really resonating. It resonates every single quarter. So that's a big driver is just the underlying value of the product. It's also important to remember that LYBALVI has a broad label, right? So we have a broad addressable population. So we're seeing strong growth with schizophrenia and bipolar. The mix is still roughly about 50-50, but new patient starts are definitely growing more towards the bipolar population. And so I think with the strong efficacy, along with our commercial execution and then also the resourcing that we've put behind the brand, we actually really saw a very positive quarter, and our expectation is that -- and our focus is really growing that demand going into the fourth quarter as well.

I guess just sort of what was driving it? Do you think some clinicians just weren't familiar that you had the breadth of label for bipolar and the efficacy? Or was it just those are competitive markets and you just constantly need to stay in front of reps?

Yes, it's a good point. The competitive landscape is fierce as we know. And so we're very practical with this to make sure that we're putting resources in our highest growth driver. So we felt and the data showed us that we needed a stronger share of voice. But number 2 is physician research tells us that HCPs need experience. So once they get experience with one patient type, schizophrenia or bipolar, in general, patients are having a good experience. They're more open to expanding their breadth of prescribing. And so we're very pleased. As I said earlier, breadth of prescribing has expanded by approximately 7% for 2 consecutive quarters, and we're seeing encouraging trends with depth. So it's really those 2 things. It's our commercial investment, but it's also the experience of the HCP and the positive experience they're hearing from patients.

Our last question is from the line of Jason Gerberry with Bank of America.

This is Chi on for Jason. I want to follow up on the visual AE commentary earlier for Vibrance-1. The commentary that I heard was that most visual AEs were mild, and there was one moderate and one severe case. Can you contextual like one constitute a severe vision blur and how long did that AE last? And secondarily, is there a dose response relationship with that -- with the visual AE in Vibrance-1? When I look back at the Vibrance-1 AE table, there was a severe case of AE of any cost in the 4-milligram dose and 2 severe cases of AE of any cost in 8-milligram dose. Can you clarify which dose level did that one moderate case of visual AE and which dose level did the one severe visual AE case occurred in?

Yes. The vast preponderance of the visual AE, they were actually reported as blurred vision were mild cases. There was one moderate that became a mild after 4 days, I believe. And there was one that was categorized as severe, but that was part of a constellation of symptoms that led to an early termination of that patient after the third day, I believe, in the study. So -- there was dose response. We saw more at the 8-milligram dose than at the 4 and the 6. But interestingly, in the extension period, after patients have been in the double-blind period and could choose their dose, if patients had been on a previous dose of alixorexton then moved to the 8 milligram, we saw no new incidence of visual AEs of burn vision. So we think that there is dose response. We think the phenomenon is largely mild, meaning it's noted by the patient, but doesn't affect them and largely occurred in the first week and are largely transient as well. But we'll see now in the NT2 data set, what that looks like in the IHs as well. But as we build a bigger and bigger data set, the overall conclusion, I think you have to draw from this class so far is that they're largely generally well tolerated and the side effects are generally mild-to-moderate and transient. And the top of the list of the AEs that are on target, you're going to see with these drugs are insomnia and pollakiuria which is urinary frequency.

That will conclude our question-and-answer session. I'll turn the floor back to management for closing comments.

All right. Thanks, everyone, for joining us on the call today. Please don't hesitate to reach out to us at the company if there are any follow-up questions.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and have a wonderful day.