Alkermes plc (ALKS) Q3 2026 Earnings Report, Transcript and Summary

And welcome to the Alkermes Third Quarter 26 Financial Results Conference Call. My name is Dylan, and I will be your operator for today's call. All participant lines will be placed on mute to prevent background noise. If you should require operator assistance during the call, please press star 0 from your telephone keypad. Please note this conference is being recorded. I will now turn the call over to Sandra Coombs, senior vice president of investor relations and corporate affairs. Sandra, may now begin.

Welcome to the Alkermes PLC conference call to discuss our financial results and business update for the quarter ended September 30, 26. With me today are Blair C. Jackson, our chief executive 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 will 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 or issued this morning, and our most recent annual report filed with the SEC for important risk factors that could cause our actual results to materially from those expressed or implied in the forward looking statements. 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. Now I will turn the call over to Blair for some opening remarks.

Thank you, Sandra. Good morning, everyone. My first quarterly call as CEO of Alkermes, I would like to start with a few thoughts on the opportunity ahead and the priorities that will guide us. We have a clear strategy and a strong foundation. Our focus now is on execution. That means advancing our pipeline with rigor and urgency. Driving strong commercial and financial performance, and allocating capital thoughtfully to our highest value opportunities. Our commercial business is an important element of our strategy, and provides a strong financial foundation to invest in innovation. Our greatest opportunity for growth and value creation lies in our pipeline. Particularly our leadership in orexin research, and the potential of our orexin development portfolio. To yield important new treatment options in neuropsychiatry. I will discuss the significant momentum across our development pipeline in more detail following the discussion of the quarterly results. The combination of commercial strength, financial performance, and a differentiated pipeline positions Alkermes well for its next chapter and the potential for meaningful long term value creation for shareholders. I am incredibly proud and honored to lead Alkermes at this important point in its evolution and I am confident in our strategy, our people, and the opportunities ahead. With that, let's turn to the quarter, Todd.

Thank you, Blair. Good morning, everyone. I am pleased to report that we delivered strong performance across our commercial portfolio in the third quarter, reflecting contributions across addiction, psychiatry, and sleep medicine. Our teams remain focused on driving demand, broadening patient access, and building on the opportunities across our 4 proprietary products. In the third quarter, net sales from our proprietary product portfolio increased 31% year over year to $417.3 million reflecting the addition of LUMRYZ, and continued demand growth across our established commercial portfolio. Starting with VIVITROL. Net sales in the third quarter were $127.6 million. VIVITROL continued to see strong demand driven by penetration in the alcohol dependence market. Net sales also benefited from approximately $8 million gross to net favorability, primarily driven by favorable patient mix. For the full year, we continue to expect VIVITROL net sales in the range of $460 million to $480 million. We remain confident in the strength and durability of our Vivitrol business and look forward to continuing our impact with this important medicine. Turning to our psychiatry franchise. Third quarter net sales for ARISTADA product family were $103.9 million. ARISTADA continued to see demand growth driven by expansion in HCP adoption. Net sales also benefited from approximately $7 million of gross to net and inventory favorability. We are encouraged by ARISTADA's continued strong performance within this category. For the full year, we continue to expect ARISTADA net sales in the range of $365 million to $385 million LYBALVI net sales were $95.9 million in the third quarter. With underlying TRx growth of 18% year over year. Supported by new patient starts and broader prescriber adoption. Net sales also reflected approximately $2 million of inventory benefit. Last quarter, we implemented a strategic expansion of the LYBALVI market access profile that we believe will position LYBALVI for long term growth. Access now stands at approximately 80% of covered lives, as a result, we have already seen positive trends on volume demand in prescription fulfillment. As expected, gross to net adjustments were approximately 42% in the third quarter. For the full year, we continue to expect LYBALVI net sales in the range of $380 million to $400 million Looking ahead to next year, we expect gross to net adjustments for LYBALVI to be in the 45% range. We expect the benefits of expanded payer access to be reflected first in prescription volume, which we expect will continue to grow nearly 20% year-over-year with an acceleration in net sales growth expected to follow. Beyond 2027, we expect volume growth and net sales growth to track more closely together again. Turning to our sleep franchise. LUMRYZ net sales were $89.9 million in the third quarter. We reached approximately 4.1 thousand patients on therapy at quarter end, reflecting strong underlying demand, broader prescriber adoption, and increased use among existing prescribers. Net sales also reflected the drawdown of approximately $7 million of inventory build that we highlighted in our second quarter results. Last month, we presented results from the positive phase 3 REVITALIZE study of LUMRYZ in idiopathic hypersomnia at the Sleep Europe meeting. IH is a fast growing segment for the oxybate market. The REVITALIZE data will serve as the foundation for the sNDA submission for IH with the potential launch in March 2028, if approved. IH represents an important potential growth opportunity for LUMRYZ, and we look forward to updating you on our progress. For the full year, we continue to expect total LUMRYZ net sales of $350 million to $370 million of which Alkermes expects to record $315 million to $335 million reflecting the mid February close of the Avadel transaction. Supporting LUMRYZ, we have an established sleep medicine platform that includes an experienced commercial and medical organization with a deep understanding of the market dynamics and HCP and patient journeys. This platform provides a strong foundation to support the potential launch of elixorexan and our broader ambition to become leaders in sleep medicine across multiple treatment modalities. Across our proprietary portfolio, we expect net sales to be in the range of $400 million to $420 million in the fourth quarter. We are pleased with what we have accomplished so far this year and remain focused on delivering against our 2026 objectives. As we enter the final quarter, our priorities remain clear. Drive demand for our medicines, expand patient access, and position our brands for continued growth. With that, I will pass the call to Joshua to review the financial results for the quarter.

Thank you, Todd. We delivered solid financial results in the third quarter, supported by the strength of our commercial portfolio, and disciplined management of the business. Through the first 9 months of the year, our financial position has provided the flexibility to advance our strategic priorities and invest in key opportunities that we believe will support our future growth. During the quarter, we generated total revenues of $480.1 million As Todd outlined, our portfolio of proprietary products generated net sales of $417.3 million. These results reflect contributions from all 4 of our proprietary products, and positive underlying demand trends across the commercial business. Manufacturing and royalty revenues were $62.9 million for the quarter including $29.5 million from VUMERITY, and $26.4 million from the long acting INVEGA products. Turning to expenses. Cost of goods sold in the third quarter was $94.2 million, which includes the purchase price fair value accounting of LUMRYZ inventory that we described last quarter. This compared to $51.6 million in Q3 of the prior year. R&D expenses in the quarter were $121.1 million, compared to $81.7 million in Q3 of the prior year, reflecting continued investment in our orexin development portfolio. Of note, our development activities during the quarter included the elixorexan Phase III studies initiated earlier this year and clinical development activities to advance ALKS 7.29 thousand in ADHD and MDD, as well as ALKS 4.51 thousand in fatigue associated with Parkinson's disease, or multiple sclerosis. SG&A expenses were $208.5 million for the quarter compared to $171.8 million in Q3 of the prior year. With the addition of the Avadel commercial infrastructure, as the primary driver of the year over year change. During the quarter, we also recorded amortization of acquired intangible assets of $19.7 million, net interest expense of $21.1 million. In Q3, we recorded GAAP net income of $16.3 million and EBITDA of $63 million. Adjusted EBITDA was $120.1 million, which we believe provides a useful measure of the underlying cash generating performance of the business during the quarter. From a balance sheet perspective, we entered the third quarter in a strong position with approximately $787 million in cash and total investments. For the year, we are reiterating our 2026 financial expectations provided in July across all line items. Our performance through the first 9 months of the year positions us well to deliver against these expectations. Our 2026 financial performance and operating expense reflect a number of Avadel transaction related costs. As we look ahead to our 2027 operating expense profile, there are a few important dynamics to keep in mind. Beginning with cost of goods sold. With the vast majority of the noncash LUMRYZ inventory fair value step up, associated with the Avadel acquisition being recognized in 2026, we expect cost of goods sold to be lower in 2027 reflective of more normalized patterns. For SG and A, excluding the transaction related costs, recorded early 26, we expect a broadly similar expense profile for 2027. For R&D, our 2027 investment will reflect the growing number of programs across the portfolio and the broader level of clinical activity planned. Importantly, we expect to deliver strong cash generation and adjusted EBITDA performance in 2027 while continuing to invest in the significant opportunities across our pipeline. We believe this balance demonstrates our ability to fund future growth drivers while maintaining financial discipline. We will provide our full 2027 expectations on our February call. With that, I will now hand the call to Blair.

As you have heard from Todd and Joshua, our commercial business continues to perform well with a proprietary product portfolio expected to deliver net sales of nearly $1.6 billion in 2026. That foundation allows us to advance an increasingly broad pipeline led by our portfolio of orexin 2 receptor agonists. We are in the early stages of understanding the full therapeutic potential of orexin biology. Over the past several years, we have been generating a substantial body of clinical evidence across central disorders of hypersomnolence. And we are now generating our first clinical datasets from our orexin portfolio in broader areas of neuroscience. Starting with elixorexin, our most advanced orexin candidate, we reached several important milestones across the development program during the quarter. Our Phase III BRILLIANCE studies in narcolepsy type 1 and type 2 are underway and we are pleased with enrollment progress across the program. We continue to expect top line results from these studies beginning in mid-2027. In idiopathic hypersomnia, we completed enrollment in the VIBRANCE-3 Phase 2 study, which enrolled approximately 130 participants. And will represent the first multi week clinical dataset of an oral orexin 2 receptor agonist in IH. The study is evaluating wakefulness and IH symptom severity with the Epworth sleepiness scale and idiopathic hypersomnia severity scale as primary and secondary endpoints, respectively. Beyond evaluating the safety, tolerability, and efficacy of elixorexan in patients with IH, we expect the study to provide important insights to inform a potential registration program including dose selection, dosing regimen, and endpoint strategy. The study also includes our first evaluation of split dosing in a hypersomnolence disorder. Which we believe could provide additional flexibility to address the diverse needs of patients. We expect top line results around year-end or in early 2027 and look forward to sharing those data. Hypersomnolence disorders represent a significant market opportunity, And this month, the first orexin 2 receptor agonist is expected to become commercially available for the subset of patients with narcolepsy type 1. As this new therapeutic category enters the commercial landscape, we believe that if approved, elixorexin's wide therapeutic range dosing optionality, and broad anticipated utility across narcolepsy types 1 and 2 and potentially IH will support a differentiated profile with the potential to provide an important new treatment option to providers and patients. While the commercial opportunity begins to take shape in hypersomnolence disorders, we are advancing our strategy to develop orexin 2 receptor agonist for a range of neuropsychiatric and neurodegenerative disorders. Last month, we reported the first clinical results for ALKS 7.29 thousand in adults with ADHD This was a 50-subject Phase 1b proof of concept study designed primarily to evaluate safety and tolerability and to generate initial data characterizing the effects of ALKS 7.29 thousand across a range of established clinical scales for ADHD, CNS biomarkers, and objective cognitive performance tests. In the study, ALKS 7.29 thousand was generally well tolerated, with no serious treatment emergent adverse events and no treatment discontinuations among participants who received ALKS 7.29 thousand. Most treatment emergent adverse events were mild and largely consistent with on target effects for orexin 2 receptor agonist. Across the 2 doses evaluated, ALKS 7.29 thousand demonstrated dose dependent clinically meaningful improvements from baseline on exploratory endpoints evaluating established measures of ADHD symptoms and disease severity. We were pleased to observe improvements across both inattentive and the hyperactivity impulsivity subscales of the adult ADHD investigator symptom rating scale or ACES with effects emerging as early as the first assessment on day 6. ALKS 7.29 thousand also demonstrated clinically meaningful improvements from baseline in overall ADHD disease severity as measured on the CGIS scale. In addition, we observed treatment effects across objective measures related to processing speed, information processing, working memory, and attention. These findings provide the first clinical evidence of the effects of an orexin 2 receptor agonist in the treatment of adults with ADHD, and further support the dose range selected for the ongoing phase 2 study. That Phase 2 study is already enrolling adults with ADHD, and is designed to evaluate once daily in split dose regimens. Of ALKS 7.29 thousand with change from baseline in AISRS total score compared with placebo at week 4 as the primary endpoint. We expect the ADHD phase 2 data in the second half of 2027. Building our momentum in diseases outside of hypersomnolence, last week we announced the expansion of the ALKS 7.29 thousand development program into major depressive disorder or MDD. With the initiation of a 150-patient phase 2 study evaluating ALKS 7.29 thousand as an adjunct to antidepressant treatment in adults with MDD who have had a partial response to standard antidepressant therapy. This randomized double blind placebo controlled study is designed to evaluate the safety and tolerability of ALKS 7.29 thousand over 6 weeks while also assessing its effects on depressive symptoms, as measured by change from baseline on the MADRS and CGIS compared to placebo at week 6. The study will enroll adults with and without excessive daytime sleepiness which will allow us to evaluate potential effects of ALKS 7.29 thousand in the overall MDD population as well as in this important subgroup. Turning to orexin biology and neurodegenerative disorders. We plan to initiate a randomized double blind placebo controlled phase 2 study evaluating ALKS 4.51 thousand in people with fatigue associated with multiple sclerosis or Parkinson's disease. Fatigue is 1 of the most common and consequential symptoms across a broad range of neurological and systemic diseases. Yet effective treatment options remain limited. Fatigue associated with multiple sclerosis or Parkinson's disease are compelling initial areas for development with clearly defined patient populations, significant unmet need, and established clinical scales focused on fatigue. We believe these disease areas offer attractable development pathway for established clinical proof of concept for orexin 2 receptor agonism in fatigue while also representing meaningful commercial opportunities in these patient populations. Importantly, the study is intended not only to evaluate the potential of ALKS 4.51 thousand in these specific disorders, but also to deepen our understanding of the role of orexin biology in fatigue more broadly. We believe these insights generated could help establish a foundation for evaluating additional disease areas where fatigue remains a significant source of patient burden and unmet need. Elixorexan and hypersomnolence disorders ALKS 7.29 thousand and broader neuropsychiatric disorders, and ALKS 4.51 thousand and fatigue are components of a broader orexin portfolio development strategy that allows us to evaluate these distinct molecules across a range of patient population and disease settings. As we advance and expand these development programs, we are also continuing to advance additional orexin compounds through preclinical development. We are just beginning to explore the potential clinical utility of orexin compounds and Alkermes is at the leading edge of research for this emerging therapeutic class. Our focus will remain in neuroscience applications. But with the potential to reach across a broad range of disorders, We believe the opportunity for this class is vast and will be the focus of significant research and development for years to come. Looking ahead, the next year will be a pivotal and data rich period for Alkermes. With 6 important studies expected to read out across our orexin portfolio. We start with anticipated data from the VIBRANCE-3 Phase II study of elixorexin in idiopathic hypersomnia in the coming months. Followed by top line results from all 3 BRILLIANCE Phase 3 studies in narcolepsy beginning in mid-2027. For ALKS 7.29 thousand we expect phase 2 data in ADHD in the second half of 2027, followed by Phase 2 data in MDD in late 2027. And for ALKS 4.51 thousand phase 2 proof of concept data in fatigue, toward the end of the year. Taken together, these studies have the potential to significantly expand our understanding of where orexin based therapies can make a meaningful difference for patients. Our focus remains on executing with urgency and discipline. Generating the clinical evidence needed to unlock the potential of this novel class and building what we believe can become a leading franchise addressing some of the most significant unmet needs across sleep, neuropsychiatric, and neurological disorders. We plan to pursue these opportunities while continuing to deliver strong commercial performance and investing thoughtfully to support long term growth and value creation. With that, I will turn the call back to Sandra for the Q&A.

Thanks, Blair. We will now open the call for Q&A.

Thank you. We will now be conducting a question and answer session. Ask that you limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 1 moment, please, while we poll for questions. Our first question comes from Leonid Timashev with RBC Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my question. Just wanted to ask 1 on IH and how you are thinking about what to expect there. Maybe can you talk us through when you see that data, how you will think about moving forward with the split dose, maybe with the once daily doses, and, you know, maybe how you are thinking about what you could see on the relative magnitude between those. Thanks.

Sure. Sure. Thanks for the question, Leonid Timashev. it is Blair. I think when we look at the IH dataset that is coming out, there is a wealth of information that we are going to be getting from that trial. As you alluded to, first and foremost, we are going to be getting the once daily dosing for that program. And as we have spoken before, we see the IH population as somewhat similar to the NT2 population in that it is highly variable. These-- these patients have a range of disease and different responses to orexin agonism. So we would expect something similar to that NT 2 dataset. The main difference though being that with IH population, they do have 1 separate population, which is the long sleepers. And those long sleepers, we have less experience with. We expect that we will have a similar response within them, but this dataset will tell us more on that piece. With regards to the split dosing, the split dosing, as you know, is an important of our overall program in that it provides both flexibility for patients across NT1, NT2 and IH but also could provide some additional efficacy for those patients who need it in the later afternoon. And so we will-- this will be the first opportunity we will be able to see that split dataset as part of a patient program. So all this data will be coming out towards the end of the year, and we are pretty excited to see it.

Thanks. We will take the next question. Our next question. Yes, my apologies. Our next question comes from Paul Matteis with Stifel. Please go ahead.

Hi, this is Emily on for Paul. We were just wondering, where do you think Takeda may price and, like, if there was a chance that they price on the lower end, do you think that you have the possibility to kind of, like, adjust their with the different doses you will. You plan to have available across the disorders. Thank you.

Thanks for the question. This is Blair. I think that you know, Takeda's going to be pricing imminently and we will see that in the next few weeks. And obviously, that will set the range for the overall market. As you alluded to in your question, though, we have a lot of flexibility on our pricing moving forward. So we will see where they price, and we will adjust accordingly.

Our next question comes from Uy Ear with Mizuho Securities. Please go ahead.

Good morning. Thanks for taking my question, and congrats on the progress in the quarter. Just on the pipeline and obviously on the franchise, I was intrigued by the movement into major depressive disorder and psych psychiatry. Could you give us perhaps a little bit more of the rationale there and can you give us maybe a sense of if there are other psychiatric indications beyond MDD that you think anorexin might make sense? Thanks so much.

Thanks for the question, Uy. Yeah. We have looked extensively at other areas outside of hypersomnolence where you could apply orexin agonism. And we did some comprehensive preclinical work really looking at the basic biology behind the orexin agonism and identified a number of different domains where you could apply this, some of them being cognition, fatigue, mood, wakefulness, all these different areas And so as part of that, we did some translational work in many of these areas. And within mood, some of the things we noticed is that we saw a really strong synergistic increase in serotonin in the prefrontal cortex when orexin agonism was given with SSRIs or SNRIs and so synergistically. And I think that is that is really telling that there is there is a benefit you could have here by having adjunctive therapy with orexin agonism. We also did use the highly translational model as part of that early research which is the chronic social defeat test which is really a way of establishing rodents who have really a depressive phenotype and then providing them with therapy and seeing how they respond to treatment. And what we found is we found similar effects to what you would see with. If those animals were dosed with ketamine, or with fluoxetine. So we feel. We felt pretty strongly that there is a potential signal here. And so the desire to move into patient population is something we have had for some time. And so part of this study that we are looking at is exploratory in that we will be looking at not only the full MDD population, but we will also be looking at a subgroup of the population who also have some excessive daytime sleepiness So that gives us an opportunity to really learn a lot as part of this program and really design our program going forward. To the to the first last part of your question regarding other things, yes, we have a number of other areas that we are looking at within neuroscience, both neurodegenerative and neuropsych and we will talk about those as we get closer to additional activity.

Thank you. Our next question comes from Akash Tewari with Jefferies. Please go ahead.

Hey, thanks so much. This is Albert on for Akash. Given that your ADHD program will likely need to demonstrate efficacy comparable to existing stimulants to be competitive, you discuss the rationale for not modifying the trial design to target a specific patient type and what gives you confidence that the current trial design can demonstrate a clinical meaningful treatment benefit.

Hi, Albert. Thanks for the question. So first, I would I would like to correct a little bit of what you said there. I think there is a wide range of efficacy outcomes that are that are commercially attractive for a new entrant in the ADHD space, especially an entrant like an orexin agonist, which could bring broader response profiles over and above what you see with existing therapies that are there. So I think for us, the goal moving forward is to, establish that efficacy level flush out some of those broader domains that we started to see in the Phase 1b study. and demonstrate that this is a safe profile within this patient within this patient area. And I think the early data that we saw in our Phase 1b program support all of those goals. 1 of the key things that we looked at through that Phase 1b study was our dosage range, making sure we were at the right region of targeting those receptors and engaging that circuitry. And what we found was exactly that yes, we are right in the-- we do not need to lower or raise our dose. We can use the doses that we have. We also found that we were seeing a really robust response early within treatment. And so I think there is no requirement for us to modify the study in any way nor would it benefit from us based on what we have seen to look at individual subtypes.

Our next question comes from Rudy Lee with Wolfe Research. Please go ahead.

Hey, thanks for taking my question. Just a quick follow-up question on 7.29 thousand MDD study. The changes showed good efficacy data in MDD for its orexin antagonist. But in patient with insomnia, Can maybe talk about the rationale for orexin agonist for MDD I mean, what will be the key difference in the study population, the trial design versus J&J? And what will be the key differentiator versus current standard of care. Thanks.

Thanks, Rudy. it is a good question. And I think it is important to recognize that using orexin agonism, a fundamentally different approach than using orexin antagonism. In orexin antagonism, what J&J was trying to do there was sort of address the sleep disorder and hoping it would have a knock on effect on potential mood. This is very different what we are doing. We believe that we directly impact centers of mood within the brain and we are actually looking at treating the depressive symptoms directly. Now because we are using a subgroup who has excessive daytime sleepiness because we think we might be able to drive additional signal through that group. But this is a fundamentally different view than what J&J did with their orexin antagonist.

Our next question comes from David Amsellem with Piper Sandler. Please go ahead.

Thanks. Got a couple of LUMRYZ questions. So regarding the launch of Takeda's daridorexant, do you perceive any potential impact to LUMRYZ in terms of new starts? Next year in n t 1. that is number 1. And then looking longer term with the IH launch for LUMRYZ in 2028, how are you envisioning uptake? Do you think there is going to be a sizable switch market from Xywav to LUMRYZ? Do you think you will be able to expand the overall oxybate footprint in IH? Or is it a little bit of both? Thanks.

Yeah. Good morning, David. This is Todd. I appreciate the questions on LUMRYZ. Yeah. We are really excited and pleased with the performance of LUMRYZ this year and specifically in Q3. Strong net sales, really strong patient demand, up to 4.1 thousand patients. We are watching very closely and thinking very deeply about the impact of orexins. As you know, we are big believers in the mechanisms actually believe they are complementary, and we hear that pretty consistently from HCPs around the belief and the desire to use both mechanisms. So we think there is a long term durability in the oxybate market and a lot of excitement with orexins. Initially, we are going to have to see how this plays out with the Cadence product entering the market. We think initially that will be a switch population for earlier lines of therapy, patients looking to switch. But we hear pretty consistent that patients that are on oxybate, specifically LUMRYZ, and that are stable, like to stay on the product overall. So we do believe that there will be an impact on oxybates, but we think it will be somewhat marginal at the beginning. And we think the category overall will be will be will be durable. In terms of IH, yeah, this is something we are really excited. We did present the data recently at Sleep Europe. there is a lot of anticipation on the IH launch. If it is approved, we will be commercializing no sooner than March 1, 2028. And there is a lot of anticipation there. This will be the second product potentially approved in the market. We think it is underpenetrated at this point right now. We think that LUMRYZ actually will compete for new starts in IH, but also there will be switch market and that LUMRYZ will compete in that switch market.

Our next question comes from Jessica Fye with JP Morgan. Please go ahead.

Hi, this is Paul Jeng on for Jessica Fye. Thanks for taking our question. Any feedback from physicians regarding the ADHD dataset? Wonder if you could tell us when. How the placebo group did in the recent study. Or when we could see more detailed data including placebo response rates. Thank you.

Yeah. So we have had a lot of discussions with physicians with regards to the ADHD data. I think there is a lot of excitement about the fact that we are able to move a number of these different tools using orexin agonism. And I think in particular, folks were interested in the fact that you were seeing consistent response across these measures. And so not only the internal consistency between patient reported outcomes but also physician reported outcomes as well as the objective measures. Just as a reminder, the study itself was a safety study that was designed to look at the wide therapeutic potential that we could have and the therapeutic window we would have with an orexin agonist. And I think that read out really, really well. As such, it. it is not really appropriate to have a placebo comparison. So what we rely on for that is the objective measures and the subjective measures that we included in that study that we shared in our in our press release.

Thank you. Our next question comes from David Hoang with Deutsche Bank. Please go ahead.

Hi, there. Thanks for taking my question. Want. Wanted to ask, once you are post Vibrance-3 data in IH, either year end or early 2027. Once that data in hand, How quickly would you look to move into a phase 3 program for IH? And what would that study design potentially look like? Thank you.

Hi, David Hong. Thanks for the question. I think we are going to want to move as quick as we can. Obviously, our goal is to get into the Phase 3 following that dataset. What we would like to do though is meet with the agency first And so that actually will probably be our rate limiting step as making sure we get that meeting and we will obviously hope that they will be very responsive, because this is an important patient population. As for the size, our expectation is it is probably going to be a similar size to the NT2 study, but that will obviously depend on the signal that we see in the phase 2 program. And so that will help set that. But ballpark wise, think of the phase 2 is for planning purposes. Sorry. Think of n t 2 for planning purposes.

Our next question comes from Marc Goodman with Leerink Partners. Please go ahead.

Just back on, oxybate. Could you just give us a little sense behind the scenes what you thought happened in the quarter as far as was it a normal quarter or just new patient starts, discontinuations? The pricing, just how the market dynamics are just shaping up, since you have owned the asset as a generally kind of consistent with what you thought? Any major changes in the quarter?

Yeah. Absolutely, Marc. This is Todd. I will take that. Yeah. Again, we were we were pleased with the quarter. We were assuming some seasonality. Which you typically would during Q3, and I think we saw a little bit of seasonal dynamics, but overall, the growth in LUMRYZ was really driven by patient demand. You know, we saw nice increases in overall patients for narcolepsy, 41 hundred patients. That was driven by some of sub metrics that we watch very closely, which are new enrollments, conversions, and actually patient persistency. So all 3 of those dynamics, we believe, really contributed to the NICE patient growth which. And then also contributed to the net sales growth, which was 16% year-over-year.

And pricing?

Yeah. We did not see any significant pressures on pricing overall. The pricing was within our range of expectations, and, you know, as we have said before, historically, LUMRYZ has a really strong market access profile. We did not see any changing dynamics there. As well, and we are not anticipating any strong changing dynamics as we head into the last part of the year. Thanks.

Our next question comes from Joseph Thome with TD Cowen. Please go ahead.

Hi, this is, Jason on the line for Joseph. Thanks for taking my question. On the MDD study for 7.29 thousand was actually just curious if we might expect any kind of prespecified subgroup analysis by excessive daytime sleepiness or, like, stratification by excessive, daytime sleepiness. And whether we might expect, powering to be sufficient to determine any differences, between those patient populations. Or whether we could have an endpoint like ESS where we could see if the effects on mood were being mediated by sleepiness. Thanks.

Hi, Jason. Thanks for the question. Yeah. As I said in the prepared remarks, actually, we do have a prespecified subgroup, which is a group that has excessive daytime sleepiness. And our goal here is to look at the 2 populations, both the all comers MDD versus the group that has the excessive daytime sleepiness. And, you know, 1 of the goals there is see, do we see an enriched signal within that group? And you may expect to see that because as you look at the MADRS scale, for example, there is some question there that at supplier are highly related to sleep or the anhedonia associated or lack of urgency and things that people get. So we want to see that, and we wanna test that in the study. And then that will allow us to then determine our development path moving forward.

Our next question comes from Joon Lee with Truist Securities. Please go ahead.

Hey, guys. Thanks for taking the question. Another 1 on ADHD. For the Phase 1b portion, could you explain your rationale why you utilized an inpatient setting and possibly how that may have impacted, if at all, baseline characteristics and if those baseline factors or the inpatient setting may have led to an outsized or suppressed treatment response, I am just curious if you think you had a representative ADHD population where you believe the results will translate in future clinical studies. Thanks so much.

Yep. Thanks, Joon, for the question. So as we look at the ADHD program, we had 2 programs that are studies that we were running at the same time. We have first and foremost our large phase 2 outpatient study that we are running that is placebo controlled, multiple doses, etcetera. And what we wanted to do in the Phase 1b study was to ensure that we had some information that would inform on, 1, what are some of the types of signals that we would see, and 2, whether we were in the right dosage range overall. In order to do that, what we needed to do is learn a lot about how patients respond to orexin agonism. Because remember, this is actually first asset of this mechanism that is ever been tested outside of hypersomnia indications. And so we needed to learn what we are doing, and that meant we had to put a lot of different tools within the phase 1 program. And in order to do that, you tried to do that in an outpatient type setting, that would be exhausting for the patient. So it would be very hard for you to operationalize that So that is why we chose an inpatient setting. What it allows us to do is put those patients in a in a clinic, look at those different outcomes in a more in a more staggered pace that. that is appropriate for the patients. And we do not think that has any change on the overall baseline characteristics. I think overall, when we look at the incoming baseline characteristics, that is consistent with what we see with other ADHD studies. I think where it would. Where inpatient settings tend to have an impact on some of some things is on your safety outcomes. Because that. Sometimes what you tend to see in inpatient settings is those patients talking about their side effects. And that can sometimes amplify side effects here and there. Again, we saw a very good AE profile from this program. So I think I think all in all, we got exactly what we wanted from this study. I think it validates the approach. And as we have always said, the phase 2 study that is ongoing is going to be the 1 that is gonna determine what is the characteristics or what is the signal size, related to this, to this drug treatment in this population. Great. Thanks so much.

Our next question comes from Umer Raffat with Evercore ISI. Please go ahead.

Good morning, guys. Thanks for taking my question. I wanted to touch up on 7.29 thousand as well, and a couple of points. First, I saw you guys used split dosing when conducting the inpatient ADHD trial. Do you think split dosing could be driving placebo response? And are you intending to continue using split dosing only? Your ongoing outpatient ADHD as well as MDD trial? And then secondly, the fact that you used up to 50 milligram dose of 92, what does that tell us about the potency relative to your narcolepsy Thank you very much.

Hi, Umer. it is nice to hear from you. I think, on the first question on the split dosing, so as we went into the ADHD study, 1 of the things we wanted to do as we are trying to learn on the signals is we did not want to confound some of the PK differences of single day dosing versus split dosing. We wanna take that out of the equation. So we use split dosing just because it was-- it is a more it just allowed us to standardize. I think as you look at our ongoing Phase 2 study, we are actually using both once daily and split dosing. And I think that is important because, as you know, in the ADHD population, it is a bit of a lifestyle drug in some in some respects in that it-- patients have different needs. According to what-- whether they are working, whether they are students, what is happening in the evening, what happens in the morning, etcetera. And so I would envision that we will probably introduce other dosing types, maybe PRN and other things in the future after original registration. But we are going to do both. Moving forward, single day dosing as well as split dosing. Through the development program. With regards to the upper dose of 90, it is actually. You cannot really use that to relate to narcolepsy. This is a fundamentally a different drug. It has different. It has a potency. It has different pharmacological characteristics. And then also keep in mind that the pharmacologic dose level that you need to activate the ADHD circuit may be different than what you need to activate, say, a wakefulness circuit. And so there is a lot of dynamics that are going on there that really do not-- do not really allow you to make that comparison.

Our next question comes from Ashwani Verma with UBS. Please go ahead.

Hi. This is Leonid on for Ashwani. Thank you for taking our question. For the IH study, is it fair to assume that the baseline ESS scores are similar to what you had in the NT2 study? Also, is it fair to assume that the placebo arm in this IH study could closely resemble how the placebo did in the NT2 study?

Yeah. I mean, look, we have established very similar entrance criteria as in IH versus NT2. Now who ends up enrolling in the study depends on the study and which patients show up. So we will know that as we as we look at the data moving forward. I think as we as we look at this area overall, I think, you know, we feel pretty good that we are controlling placebo. Obviously, with wakefulness, 1 of the things to keep in mind is you do not tend to see such a big placebo response like you see in neuropsychiatric indications. So you tend to actually. It really depends more on the treatment arm than it depends on the on the placebo arm. But, again, we will. We do what we can to control that, and we have done that in this in this program by really trying to standardize how we do the tests. Really making sure we have high quality control on our clinical sites.

Got it. Thank you. And if I may have a follow-up I think you alluded to the long-form IH patients earlier. Can you talk about roughly what percentage of your IH patients would be the long-form IH?

So in our in our study, we have not disclosed what that is. I think as we look at the general population, though, with NIH, typically you see something in the order of around 25%. patients can be can be deemed long sleepers.

I see. Thank you so much.

You are welcome.

Our next question comes from Ami Fadia with Needham and Company. Please go ahead.

Yeah. Good morning. Thanks for taking my question. With regards to the upcoming IH study readout, I am trying to understand what. How you are sort of thinking about the outcome of a result, especially in the split dosing arm? If we think about the trade off between efficacy of having split dose and maybe potentially implications on safety, Are there any guardrails in terms of those trade offs beyond which you may decide not to pursue a split dosing? And then secondly, is there some process within the study of determining which patients may be best suited for a split dosing, versus not, that could inform your next clinical trial. Thanks.

Hey, Ami, thanks for the questions. I think I think with the split dosing, you know, the-- there is-- we have a wide therapeutic range with this drug. So we remember when we went into our programs before, we studied in the NT 2 trial up to 18 milligrams. So. And we have an ability to go to go higher if we want to. So split dosing, we do not see sort of a safety question as to what is going to determine whether we move to split dosing. Now obviously, the data will tell us that. When we look at the NT2 data, if we see something unexpected, we will adapt accordingly. But a priori, we anticipate that being a gating factor. What we are really looking for with split dosing is really a comparison to the once daily dose and in the subset of patients who require additional efficacy in the afternoon, do we see a difference? And if we do see that difference, that is gonna add additional flexibility for physicians to provide that dosage option to the patients. And remember, you know, in our NT2 study, we normalized I would say, about 70 percent of the of the patients on the ESS scale using the once daily dose So we anticipate even in IH that we are gonna see a good response on both dosage forms. But we wanna have that added flexibility and that added efficacy for patients and that added flexibility that split dosing would provide. The second question was which again? Sorry, what I was trying to ask is there a way to learn from the study? As to a priori, patients may be best suited for a split dosing. Yeah, no, thank you. Thanks for the reminder. Yeah. Yeah. So you know, it is interesting. it is it is a priori what we do not know when patients come into the study is, are. Would you be better on a split dose or an-- or would you be better on a single dose? And patients obviously in our study are gonna be randomized randomly into that into those categories. We will see if we learn anything from study of whether or not there are any patient characteristics that drive that? I think it would be surprising. I think 1 of the challenges when you get into NT2 and IH populations is there is this-- The science underlying the ideology of the disease is a little unclear. And so, in many ways, it is hard to. You cannot just use a standard biomarker to say a patient's gonna be responsive or nonresponsive or need an afternoon split dose. So, we will learn in the NT2 study and it may just be that after this study, doctors are gonna have to empirically decide, see how their patients respond to the once daily dose. And then move them on to split dose if it is required. But the data will tell us, and we will adapt from there.

Got it. Our next question comes from Jessica Fye with Goldman Sachs. Please go ahead.

Hi, this is Paul Jeng on for Jessica Fye. Thanks for taking our question. For ALKS 7.29 thousand in MDD, given antidepressants typically fail to address residual fatigue and anhedonia, what magnitude of difference on matters do you consider clinically meaningful for this? Novel mechanism? Thank you.

Yeah, it is interesting that as you look at the MADRS scores and you look at things that are that are out there, I mean, I think, typically, people see a change versus placebo of somewhere between 2 and 5 as being a meaningful difference on MADRS And in fact, the. What the drug that is out now, Vraylar, which only had a 3-point change, 3.5-point change or so relative to placebo. Has strong uptake because it has unique characteristics. And so it has, a, a different mechanism, and, b, it has a rapid onset. And I think as you look at the MDD space, there is a number of areas where you can provide improvement. Cognition, anhedonia, fatigue, as you alluded to. And we have seen things like cognition and fatigue benefits in some of our other trials. And so I think you. You know, I think the goal for us is to be able to show a statistical difference between placebo as part of MADRS, under the domains of where we see response, And if we can show something that is different that provides a different a broader profile than you see with the SSRIs, SNRIs, I think there is a there is a lot of opportunity there. Because remember, this is adjunctive therapy. About 40% of these patients have an inadequate response. I think there is there is a lot of room for improvement for these patients.

Thank you. Our next question comes from Jason Gerberry Bank of America. Please go ahead.

Hey. This is Chi Meng Fong on for Jason Gerberry. Thanks. I have a follow-up on the expectation for Vibrance-3. What do you expect to see from the data for advancing the program to Phase 3? Is it driven by whether the study meeting the primary endpoint And what do you want to see as differentiated relative to other market offerings such as Do you want to see sort of magnitude of benefit on ESS or IHSS for the IH study? And just quickly as a follow-up on your earlier commentary around expecting to see a similar response as in the Vibrance 2 study Is that commentary related to QD dosing in ESS scale as we think about the overlapping element between Vibrance-2 and Vibrance-3? Thanks so much.

Yeah. I mean, there is a lot in your question there. I think as you look at the Vibrance-3 study, you know, as you look at it, obviously, endpoints are ESS and IHSS. And we wanna be able to show a benefit within there. And for us, a phase 2 study, remember, is about is about trying to ensure and understand your signal. it is trying to understand your signal relative to your safety profile. And can you design your phase 3 trial in order to get over the line, show the statistical significance, show a benefit to those patients. Obviously, we wanna hit statistical significance as part of our phase 2 study if we can. If we were to fall a little bit short, does that mean we would stop the program? No. As long as we feel that we have an appropriate signal that trial design would be able to overcome. That being said, you know, when we look at our early within this patient population, remember we had a once daily dosing. Similar to what we did with the n t 2 population. We saw a similar effect size between NT2 and IH. So our hope is that we see something similar. We hope that we will provide additional benefit through the split dosing and that we will be able to we will be able to then design our phase 3, meet with the agency, and then and then move that into our phase 3 program. So, you know, with regards to my previous comment, with regards to Vibrance 2 versus Vibrance-3, what I am really just trying to say is that there is a lot of heterogeneity in the patient populations both in NT 2 and IH. there is also a lot of overlap between diagnoses. Patients move between an NT2 diagnosis and an IH type diagnosis, sometimes frequently. So I would expect that there is an overlap of population there. And that if you have a similar population that the once daily drug would perform would perform similarly with the caveat I mentioned earlier that you have this other patient group in there that we are gonna be learning about that long. The long sleepers. So, again, what I am what I am hoping is that, we have designed the study in a way where we can learn what we need to from this program and move forward quickly into phase 3.

Thank you. Our next question comes from Luke Herrmann with Baird. Please go ahead.

Hi, team. Thanks for the question. So just a follow-up on the Orexin and oxybate dynamic. Given the view that orexins and oxybates can be complementary by HCPs and, you know, that is intuitively sound that they can be complementary, I guess what is your early thinking on payer dynamics if a set of patients could theoretically be in position to step up from 1 to 2 branded therapeutics?

Yeah, Luke, this is Todd. I will take that. Yeah, we are spending a lot of time right now talking to payers overall. As you know, the access profile for oxybates and for LUMRYZ is quite strong at, you know, north of 80%. And we do not we do not see that changing over time. there is a significant value to HCPs and to patients. I think a lot will be determined pretty quickly here when we see what the pricing dynamic looks like for the Takeda product overall. As you know, there is a lot that goes into pricing, and 1 of the considerations that we will be thinking through is not only just the overall value of with a very broad label and how we plan to differentiate, but also making sure we take into consideration what the reimbursement profile looks like So our expectation is that we will put forward a profile in a pricing dynamic that will allow broad access to both products.

Our next question comes from Douglas Tsao with H. C. Wainwright. Please go ahead.

Good morning. Thanks for taking the questions. Just on 7.29 thousand in term into MDD, I was just curious It sounds like you are looking into the drug's effect on sort of some of the specific domains of the MADRS. I am just curious. Are you looking at things like shaps Because I think there is a rationale to think that a orexin could have an effect on anhedonia, and, obviously, that is sort of a more refined measure of looking at that specific aspect of the disease. Thank you.

Yeah. I mean, I think as we as we move forward in the program, we are gonna be we are gonna be looking at a lot of different things. I think for the ongoing study right now, our primary is really on the MADRS. We are really. Yes. Are we are we looking at the individual domains Of course, we do, but we are we are designed to look at the overall response overall. So our goal here is to really show whether or not we see an overall effect size understand the patient population. And as we move into the next phase of the program, we will dive deeper into some of the areas that we see.

Okay. Our last question comes from Benjamin Burnett with Wells Fargo. Please go ahead.

Good morning, Benjamin Burnett. This is on for Benjamin Burnett. he is out from the progress. Hi, this is Charles on for Ben. Thanks for the questions, and congrats on the progress. You have described this as complementary, and we have also heard similar feedback from my KOLs. With that in mind, could you remind us of your plans to generate data of an orexin agonist in combination with an oxybate And if you do run such a study, would your oxybate of choice be LUMRYZ, or valnoctamide? Thank you.

I think it is a great question. And, actually, we do wanna generate a lot of data with, oxybates and orexins together because just like you are hearing, we are hearing from our patients that would be a desirable to be able to have a nighttime with an oxybate and a daytime treatment with an orexin. And we wanna be able to support that. We wanna support patients and doctors in how to use it. How to use it safely and also to payers to support it and show those benefits. That being said, what we wanna make sure is that we do those studies as we are further along in the registration program. We do not wanna put our core registration program at risk, so it will take a little time. And we will we will move to that. And, of course, we will use LUMRYZ as the comparator. We think that is that is the dominant drug moving forward, and that is what we will wanna show.

Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Sandra Coombs for closing comments.

All right. Thanks, everyone, for joining us on the call today. If you have any follow-up questions, please do not hesitate to reach out to us at the company. Thank you.

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