Avadel Pharmaceuticals Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 13 speakers on the call.

Operator

Greetings, and welcome to the Avadel Pharmaceuticals Third Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Austin Murtaugh with Stern Investor Relations.

Operator

You may begin.

Speaker 1

Good morning, and thank you for joining us on our conference call to discuss Avadel's Q3 2023 earnings. As a reminder, before we begin, the following presentation includes several matters that constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward looking statements. These risks and uncertainties are described in Avadel's public filings under the Exchange Act included in the Form 10 ks for the year ended December 31, 2022, which was filed on March 29, 2023, and subsequent SEC filings. Except as required by law, Avadel undertakes no obligation to On the call today are Greg Divis, Chief Executive Officer On the call today are Greg Divis, Chief Executive Officer Richard Kim, Chief Commercial Officer and Tom McHugh, Chief Financial Officer.

Speaker 1

Doctor. Jennifer Goodman, Senior Vice President of Medical and Clinical Affairs will join us for Q and A. At this time, I'll turn the call over to Greg.

Speaker 2

Thank you, Austin. Good morning, everyone, and thank you for joining us to review Avadel's Q3 2023 results. We're excited to share the progress we have made with the launch of BloomRise. Following my opening remarks, Richard will provide an update on our launch progress, Tom will provide a review of our Q3 financial results and we will conclude with a question and answer session. The Q3 was transformational for Avidol.

Speaker 2

As we fully transition to a commercial stage company and are very pleased with the robust early demand generated and important emerging launch trends we are seeing. There is a tremendous opportunity for Moonrise and Avadel that lies ahead as we execute our launch. We believe the foundation we are building during these early months positions us incredibly well for continued success building on the momentum built during this Q1 of launch. During Q3, this momentum resulted in growth across all key launch metrics, representing strong demand across all three patient segments of the eligible narcolepsy patient population and generated $7,000,000 in LumRise net revenue. There is no better evidence of this than the early launch KPIs we announced this morning.

Speaker 2

Greater than 1,000 patients enrolled in Rise Up and more than 400 patients who initiated therapy during the quarter, the majority of which are fully reimbursed. Expanded Lumine's payer coverage with key health plans representing approximately 60% of all commercial lines And this progress on the payer front continues to create even greater access for the 600 patients enrolled in our RISE UP patient services program and in process of obtaining coverage and getting on LumRise as of September 30. Additionally, there are nearly 1400 healthcare providers who have now completed the LumenRise REMS certification process, including providers who have never previously prescribed an oxybate. We're very encouraged by these early KPIs and believe they are indicators of the strong interest and positive engagement we have had with all stakeholders as we've advanced the launch of BloomRox. Furthermore, to support the robust clinical data of BloomRise, our team recently attended World Sleep in Rio de Janeiro, Brazil, where we shared 15 poster presentations and 2 oral presentations detailing new and encore data further demonstrating the clinical profile and clear benefit of LumRise for potential eligible patients.

Speaker 2

Looking forward to the future, our team is also advancing our lifecycle management opportunities as we believe this has the potential to expand the patient population who could benefit from LumRise and provide long term value to the company and our stakeholders. We are pleased to announce that yesterday we submitted a supplemental new drug application to the FDA for LumRise in the pediatric narcolepsy population for the treatment of cataplexy or EDS and currently expect an approval decision in the second half of twenty twenty four. Comprising approximately 4% to 5% of the current total activated treated narcolepsy population, expanding availability into the pediatric population not only increases the total addressable market for LumRise, but also has the potential to greatly alleviate the burden on families and caregivers who support children living with narcolepsy. We believe these families and caregivers will welcome a once a bedtime oxybate treatment option as the twice nightly dosing regimen of 1st generation oxybate inevitably requires potentially multiple people in the household to chronically wake up night after night to administer the second dose for their children. Additionally, we're making progress with our clinical planning to initiate a multicenter randomized controlled trial for idiopathic hypersomnia or IH.

Speaker 2

And we believe based upon our interactions with key opinion leaders that the value proposition of 1 to bedtime LUMRISE could be very compelling for those suffering from the deep sleep inertia associated with IH. And lastly on the life cycle management front, we are continuing our preclinical development of our potential no or low sodium once at bedtime OctoBate formulation for the small subset of sodium sensitive OctoBate eligible patients. As always, we intend to provide updates on these programs as appropriate. With a strong balance sheet to support ongoing operations and the significant progress achieved in the initial month of the launch, we remain hyper focused on the LoomRite launch and expanding our reach and our impact. We are committed to and remain relentless in delivering on the promise of Lumine for all stakeholders.

Speaker 2

And with this positive momentum coming out of Q3, we believe we are on track to command a meaningful share of the multibillion dollar oxybake market and maintain our view that BlueRite is a greater than $1,000,000,000 annual revenue opportunity. With that, I'll turn

Speaker 3

the call over to Richard for details on our recent commercial progress. Richard? Thanks, Greg, and good morning, everyone. It's still great to be on this call today to discuss our Q1 of launch. Let me start by saying it's a real privilege to bring Luminess to the Narpeps community.

Speaker 3

Since August, our full commercial team has been in the field seeing feed specialists across the country and the overall feedback has been extremely positive. We've heard for a long time about the impact about a once at bedtime oxfate that it could have for people in our feb seat. And now we are proud to see that impact of LUMIX happening each and every day. We consistently hear from the narcolepsy community that LUMIX has the potential to take people with narcolepsy beyond their expectations of other available treatment options. I'd like to start with one example of the many interactions we've had with sleep specialists and the impact LUMRISE is having.

Speaker 3

During a recent field ride, we met with the sleep specialist who enrolled his 1st person in the rise up in August. The patient started on LUMRISE a few weeks later. Now this patient was previously taking the 1st generation mixed salt product and switched to 7.5 grams of once at bedtime Lumerite. The patient has remained on 7.5 grams of Lumerite per night, is consistently sleeping through the night and she said we accept more refresh in the morning ready to start her day. Lumarite has been an absolute game changer for this patient.

Speaker 3

While this is just one example of the journey to gain initial hands on clinical experience, this new special had great initial success with BloomRise and subsequently committed 4 more patient enrollments into RIASopath. To echo Greg, we are super excited about this strong start we've had and believe our progress reflects the clinical benefit of Lumiere, our strategic preparation and the hard work and dedication of our team. We're pleased to share today that through our 1st full quarter launch there were greater than 1,000 patient enrollments in ORYSA, our patient support center. From our RISA data, enrollments in patients on therapy are coming from all three of our target patient segments. Switch patients from 1st generation to octavates, patients who previously tried to discontinuation discontinued 1st generation octavates and octavate naive patients.

Speaker 3

Thus far, we are seeing an early trend that majority are being sourced from 1st generation octavates, with slightly more coming from the twice not least mixed salts product compared to the twice not least sodium oxabate products. Through the end of September, there were nearly 1400 HCPs who were REMS certified. As a reminder, our core target HCPs includes the 1600 high volume octave prescribers who make up 80% of the total market prescription volume. The greatest penetration of our answer to 5 ATPs has come from these high volume OCTA prescribers and they account for about 3 quarters of all rise up enrollment thus far. Although the trends from RYZIP are early, with patients coming from previously discontinued 1st generation oxybate patients, also octavinate patients and prescribers who have previously never prescribed an oxalate, our early data supports Zumrides growing the market beyond the limitations of our 1st generation twice ended oxalate oxalates were used.

Speaker 3

Supported by the increasing number of RYZIP enrollments, today we also announced in the Q3, we had greater than 400 patients who initiated treatment on Lumerise. We saw the number of patients on Lumerise grow within a quarter as more payer coverage begins to come online. The majority of patients initiated with LUMRIES are commercially reimbursed. Additionally, and although early in launch, we're seeing discontinuation trends that are lower than the 25% discontinuation rate at 1 month from 1st generation octavates. When we think about all the time it takes to fulfill enrollment and get patients to shift when they arise, there are generally 2 main patient segments that are emerging.

Speaker 3

1st, those who have coverage of prior authorization criteria. These patients can be processed and shipped product on average in about a month. As our coverage of payers expands, this segment of patients will continue to grow. Now for patients going through medical necessity without a formal coverage policy decision, this generally consists of paired denials and ACP appeals, a process that could take longer, more like a couple of months on average with some occurring a bit sooner and some taking even a bit longer. This segment is getting smaller as our coverage grows.

Speaker 3

However, and very importantly, despite these cases taking longer to fulfill, we also see very few people dropping out of the Riva process. At the end of September, approximately 600 patients were in the RIPA process bill, going for the benefits investigation or pending or for shipment. Based on early launch trends through Q3, we currently anticipate that the majority of these patients will convert onto Lumiride as they complete their Rise Up process. Product fulfillment is very dynamic and we are in a a fundamentally stronger place with the use of Rise Up and our services than we were just a couple of months ago. More important is that SEEK specialist offices are getting increased experience with the enrollment process and are beginning to send additional patients to Ryza.

Speaker 3

Now that's a nice segue to transition to payers, where we continue to make strong progress in securing broad coverage for LUMIRA. Currently, LUMIRA has coverage policies with over 100,000,000 insured lives, representing approximately 60% of the totally commercially covered lives. We recently added coverage of policies in place with key national insurers like Aetna and Cigna in addition to several regional and state plans. We also completed the zinc GPO contract where importantly, LUMIRIS will be moved to a preferred status within CVS commercial formularies effective January 1, 2024. Currently, Lumiere is in non preferred position.

Speaker 3

We are very pleased with our care progress. And importantly, the VFAC listing specialist offices has generally been very positive for the early success rate from reimbursement they've been seeing. These first few months have set a great foundation for our launch. As we see demand for LUMRIGHTS continue to grow, offices and our teams improving the efficiency for getting patients started and staying on LUMRIGHTS and more covered lives of payers. We could not be prouder of the collective work of our team and in bringing LUMRIS in our subsea community, along with the progress and trends we've seen to date.

Speaker 3

We look forward to providing more updates on future calls. And now, I will turn the call over to

Speaker 4

Thank you, Richard. I'll note that full financial results are available in the press release and the 10 Q. We're pleased to report that we generated $7,000,000 in net revenue for the Q3 ending September 30, 2023 and $8,500,000 in total revenue since our launch began in June of 2023. We're continuously monitoring inventory levels in the channel And during the course of Q3, we estimated that it was consistently between 3 to 4 weeks of demand, including as we exited the quarter. Turning to operating expenses, we reported a total of $42,000,000 of GAAP operating expenses during the quarter ended September 30, 2023, which includes $39,200,000 of SG and A costs and $2,800,000 of R and D costs.

Speaker 4

Operating expenses includes $4,600,000 of non cash charges for stock based compensation and depreciation and amortization. After adjusting for these items, cash operating expenses were $37,400,000 for the quarter. And we are currently expecting cash operating expenses in the 4th quarter to be in the range of $38,000,000 to $40,000,000 With respect to the balance sheet, we executed Q3 in a strong position. As of September 30, 2023, we had $153,200,000 of cash, cash equivalents and marketable securities, which includes $30,000,000 received in August from the first tranche of the $75,000,000 royalty financing commitment we secured earlier this year. A second tranche of $45,000,000 is available if we achieve $25,000,000 of quarterly net revenue by June 30, 2024.

Speaker 4

And as a reminder, while the $45,000,000 could be available, we are not required to draw the 2nd tranche. As we look ahead, we believe based on current plans and expectations that we can achieve cash flow breakeven from operations when there are approximately 1300 to 1500 reimbursed patients being treated with LUMRISE. Our expectations take into account a number of assumptions, including capital resources currently available to us, patient demand, net pricing of LUMRISE and ongoing cost structure to support the launch of LUMRISE. Actual results versus these assumptions in addition to ongoing planning for growth initiatives such as an IH study could impact our expectations regarding future capital requirements. And on a final note, at September 30th, we had approximately $21,000,000 of convertible notes shown as debt on the balance sheet.

Speaker 4

This last remaining tranche of debt was settled in cash at the beginning of October and effective with that pay down, the balance sheet is now completely free of convertible debt. And I'll now turn the call back to Greg for closing remarks.

Speaker 2

Thank you, Tom. We believe our strong foundation has supported our successful initial launch of BloomRise and we are laser focused on continuing to execute on all our priorities. Our goal since the inception of Aperdal has been to provide treatment that can transform the lives of those living with narcolepsy and we believe we've made significant progress in this area and look forward to our continued launch execution and positively impacting even more patients. We thank you for your support and look forward to providing future updates on our progress. And with that, we will open the call for questions.

Speaker 2

Operator?

Operator

Thank you. Our first question comes from Amy Fadia from Needham. Your line is open.

Speaker 5

Hi, good morning. Congrats on the nice update on the launch. I have 1 or 2 quick questions. Firstly, can you talk about the rate at which you're seeing enrollment in VIZUP? And maybe give us some more color on where these patients are coming from in terms of whether they're coming from Xyrem, Xyve or new patients, if you can give us some more color there?

Speaker 2

Yes. Thanks, Ami. Richard, do you want to?

Speaker 3

Yes. Thanks, Ami. It's really been fantastic to see the interest that Seqfletion has had in NURAISE. And we're super pleased that when we gave our first update about 2 months into launch, there were about 400 patients enrolled into Ryza. And then in the next 2 months, about an extra 600 patients have come on board, so really good momentum.

Speaker 3

Maybe holistically as we start to think about the launch, the first thing we first say is when we see specialists, we have really yet to see lines who haven't seen the clinical value proposition of LEMIRIS. And when we think about the trends going forward, we haven't really sort of seen what I would describe as bold as many offices, but really more of a sort of steady influx of patients being seen in their regular course of follow-up, which is about every 3 to 9 months. So when we start to think about sort of going forward, we just continue to sort of see continued state demand for liver ice. We also know that the holidays are coming up sort of as we get into November, December, so it's just something to account for. But our focus remains very much on the launch execution and obviously patient activation.

Speaker 3

I will also say in the future, we do think things we've seen when coverage policy changes have occurred, they can act as catalysts as we bought for CVS earlier. That's going to preferred should help us as we go to January and also the continued work that we have with our MSR GPO contract as well. Now speaking to the types of patients, we consistently sort of see sourcing from all 3 patient segments, which discontinued previously and naive. And thus far through the launch, we're seeing the majority coming from previously experienced or currently on AQUES patients with more tending towards coming from the unique salt and the twice monthly sodium oxidase as well. So it's out there, Ami.

Speaker 3

It's real. It's been awesome to be in this field for all of us. There's always more that we can do, but we're super pleased with the progress we've made so far.

Speaker 5

Great. And maybe just on the payer coverage front. You talked about currently having over 100,000,000 insured lives. How should we think about the remaining? And then when give us some sense of the timeframe into 2024 where we could see coverage expand?

Speaker 5

Thank you.

Speaker 3

Yes, sure. We're pretty selfish. We want as many covered lives as we possibly can get because that's really the gateway to getting patients onto therapy. So the general process is you get on you get the GPO contract spine, then we have a pull through with the major PBM or the PFAS. So we've been doing that under both the Ascent or the ESI contract, now the ZYNX CVS contract as well.

Speaker 3

The third one is the MSR sort of Optum United lives. It always takes long goods, but we made very good progress there. And we clearly anticipate growing our covered lives as we go forward here as well. So I mean to be where we are sort of through our Q1 of launching to have this coverage has been pretty impressive. And I think what should be said on the marketplace is the general feedback we hear from providers being maybe pleasantly surprised with the reimbursement rates that they're seeing.

Speaker 3

So sort of like many of our metrics, we're looking sort of upward into the right to grow our covered lives going forward.

Speaker 5

Great. Thank you.

Operator

Thank you for your question. One moment please. Our next question comes from Andrew Tsai with Jefferies. Your line is open.

Speaker 6

Hey, just wanted to say congrats myself as well. It's really great to see the launch going very well. So, first question on the conversion rate. It looks like you got 1,000 sign ups in the quarter, 400 essentially getting treatment. So loosely speaking, seems like a 40% conversion rate give or take.

Speaker 6

And I think you said in the prepared remarks, the majority will convert from RiseUp. So is it fair to assume that 40% conversion rate moves up meaningfully going forward? And then secondly, if you were to take another cut of the KPIs as of today, November 8, how would those leading indicators look? Just want to make sure these numbers are not a one time bolus that you're seeing even more patients signed up and treat and things are moving up and to the right? Thanks.

Speaker 2

Yes. Thanks, Andrew. Here's how I'm going to answer those questions. First off is in terms of your 40%, it's really apples to oranges a little bit. And the 40% is certainly not the majority.

Speaker 2

And our commentary is what we've seen for patients who have been in the system for at least some period of time that our conversion rates to on therapy is certainly the majority of patients. So, we would expect 40% not as the right proxy currently in terms of what we're seeing early on in the launch. And obviously, that's a number we want to continue to improve on and payer coverage decisions and whatnot are really important advances. But the progress made on the payer front has certainly been beneficial to us in seeing a majority of patients converting on to therapy and the majority of those converting on to reimbursed drug. Secondly, to your comment about what are the how does the early part of Q4 look?

Speaker 2

Again, I think we've seen we continue to see more enrollments and more people go on therapy and growth continue. So, yes, I mean, I think we feel yes, I mean, I think we feel really good where we sit and the progress we're making across all fronts and knowing that there's

Speaker 3

a whole lot more to

Speaker 2

do, but we're really pleased where we sit today.

Speaker 6

Thanks very much.

Speaker 7

Thanks, Andrew.

Operator

Thank you. Our next question comes from Mark Goodman with Leerink Partners. Mark, your line is open.

Speaker 1

Hi. Thanks for taking

Speaker 8

the question. This is Rudy on the line for Mark. So I have a question regarding your patient dynamic here. So you mentioned that most of patients switching from 1st gen AXTIBATE products. Just curious what are the feedbacks you've been hearing from these patients, especially those who switch from XIAVE?

Speaker 8

Wave? And what are your strategy to penetrate patients who are out of space naive and who previously treated and discontinue? Thanks.

Speaker 3

Yes. Hey, thanks for the question. Yes, as we talked about in our prepared remarks, when we think about the source of patients thus far, the majority are our most first generation octavate. The patient narrative that I gave early on was one that represents many of the conversations we've had about patients switching from sideways. And one of the insights we had from that even a couple of years ago were a lot of the patients who had gone on to the mixed cell version early on, they tended to be early adopters of product.

Speaker 3

They tend to be diagnosed for a short period of time, switching, looking for more to do for their treatment. So we haven't been horribly surprised the fact that we've had mixed cell patients coming on to the rate that we have thus far. And as we think about going forward, the really nice thing about our execution is when we think about narcolepsy treaters and prescribers, it's a very concentrated physician base. 4,500 make up the entire universe, 1600 make up 80% of volume. So those extra naive and discontinued patients generally are in the same offices as the people that we're seeing where these switch opportunities are as well.

Speaker 3

So I think what we've seen is it sort of depends where the patient, the physician is on their journey, but we've also sort of seen a nice uptake in both the previously discontinued and naive patients as well. So we're just very pleased to sort of see the pull through of our strategy and growth coming from all three patient segments.

Speaker 2

Yes. I think, Ruby, to some extent, it's also a bit of a math equation as well because there are just meaningfully more patients in offices who are on existing therapies today than those who are truly newly diagnosed. If the average annual newly diagnosed rate is around 3,000 patients per year and 80% of those are on our primary targets. The average target has 1 or 1.5 patients per year. So again, those will continue to come in the ordinary course as they come in and we certainly are messaging around the importance of BloomRinse for new starts as well.

Speaker 2

But I think also you're seeing just a manifestation of early in the launch kind of the math equation of more intervention opportunities for those who are on therapy than those who are coming in as potential new centers.

Speaker 8

Got it. That's very helpful. Can you also talk about the gross to net? Any color would be helpful.

Speaker 2

On the gross to net?

Speaker 3

Yes.

Speaker 4

Yes. So listen, at this stage of the launch, we're early and we haven't quite reached a steady state in gross to nets. There's more payer contracts to be done. Payor mix is certainly going to affect the gross to nets. But as we're looking forward, what we think continues to be a reasonable target to assume really on a net revenue per patient basis is about $120,000 per year.

Speaker 4

We're not there today, just to be clear. We have patients that are starting therapy, going through a titration schedule on lower doses. But ultimately, as we move forward to a steady state, we think that $120,000 per year per patient is a reasonable assumption.

Speaker 8

Got it. Thank you.

Operator

Thank you for your question. Our next question comes from Matt Kaplan with Ladenburg Thalmann. Your line is open.

Speaker 7

Hey, good morning guys and congrats on the nice quarter. Just wanted to dig a little bit more into the process of patients passing through or working their way through the RISE UP system. And can you give us a little bit more detail in terms of the percentage of patients that start and rise up that actually initiate therapy?

Speaker 3

Yes. Hey, Matt. Thanks for the question. As far as the process concerned, it's really sort of broken up into 3 key steps. The first is really the enrollment form, which is almost anonymous with the prescription really beginning the process.

Speaker 3

And that really gets me going where then the next phase is really the benefit investigation, really sort of checking out the insurance that the patient has. And clearly that amount of time is going to be very depending on whether or not there's coverage or not. But then the 3rd step is in the process is when the specialty pharmacies get to be involved and they begin to triage patients to ultimately confirm the shipment date with the patients. So those are, I would call, are relatively standard processes. Maybe one that's a little bit unique to us is one last requirement that is aligned to our REMS process as well as our specialty pharmacies for Lumirides have to confirm whether or not there's an ovalopinib treatment with another oxybate.

Speaker 3

So that does take a little bit longer, adds a little bit to the process, but those are really the 3 key steps that go forward. And what we can say is our processes are working very well. We're seeing that with the fulfillment today. And we do expect the timelines to fulfill rates to continue to improve as well. And your second question again, Matt?

Speaker 7

And kind of the percentage of patients that actually that enter the rise up and then initiate therapy at this point?

Speaker 3

Yes. I mean, the way we can sort of maybe do the math right now, sort of go through where we are thus far is like, we have we announced over 1,000 enrollments through September, 4 hundred initiated and I think Greg has some commentary also on the 600 patients who are still

Speaker 2

in the process. What we would

Speaker 3

foresee first is we've seen very few of those drop power and we do expect going forward that the majority of these remaining 6 year patients to be initiated on telomeritis. So the numbers are some of the math is somewhere between those numbers there as well. We also expect the majority of those to be initiated on to reimbursed product as well. So once again, like it's these are probably the parts that are the most focal point for us really on the launch, but we're really pleased with the progress that we've made. We're pleased that we're actually getting patients on to Lumaris.

Speaker 3

And as we said, we believe that our conversion rates will just improve as time goes on as well.

Speaker 7

And in terms of the time to move through the rise up process, do you expect that to improve as similarly with getting the preferred position with CVS starting at the beginning of the year with other payers coming online as well and moving to preferred physician? Or do you think it will kind of still remain the same in terms of kind of 1 month to treatment for prior auth patients?

Speaker 3

Yes, it's a great comment, Matt. Yes, I think you sort of nailed it. First is sort of that mix that sort of pace coming through with coverage versus those who don't. And obviously, we sort of see the covered lives continue to improve as we go forward here as well. So yes, that should absolutely improve our overall timelines.

Speaker 3

And then what happens as well is the offices just get more experienced and more familiar with our process. So both of those are occurring. It's very dynamic, but we see both of those as drivers for us to improve our efficiency going forward.

Speaker 7

And then maybe last question. One of the goals you have is expanding the existing oxybate subscriber base. Obviously, that's a longer term goal. You're very early in the launch. But can you tell us a little bit about what you're seeing so far early in the launch in terms of expanding the prescriber base to new prescribers?

Speaker 3

Yes, sure Matt. Right now at the FDA launch, we're much more hyper focused on those with OXOBI experience and the 1600 who have who manage 80% of total prescription volume. But here's what's been going on. First, you go into office, there may be some who had previously never prescribed. That's now you want to come to the mix when we've been going in to see 1 of the more highly experienced OXB prescriber.

Speaker 3

But the other thing that's been going on is we've just sort of seen spontaneous people come into our REMS certification that we hadn't called on who have put their hand up and it's beyond the enrollment process as well. So although it's not been a

Speaker 2

focal point for us,

Speaker 3

it's been nice for us to sort of see people coming to the woodwork that maybe weren't really our intention to call on as well. So we're going to stay hyper focused on where sort of the oxybate volume is today. But clearly as time goes on, we see the opportunity to gain more people to come into the prescribing mix as well. Okay. Makes sense.

Speaker 3

Thanks.

Operator

Thank you, Matt. Our next question comes from Francois Brisebois from Oppenheimer. Your line is open.

Speaker 7

Hi. Thanks for taking the questions. Congrats on the early progress here. Can you maybe touch on we talked about the 3 buckets of patients and where they're coming from, but can you maybe help us understand how the AGs are maybe affecting each bucket and what you're seeing so far in terms of a patient going through an authorized generic first?

Speaker 3

Yes. Hey, Brian, thanks for the question. So yes, super pleased with the progress so far and it's nice we are seeing enrollment of the ones coming from all three of the patient pockets as you mentioned. So obviously what's been nice is reading them from all three segments. But the AG overall, we are actually also converting patients who are currently on an AG coming on telomerase.

Speaker 3

And as far as discontinued, we haven't really seen that many AGs who have discontinued, they've been relatively new. So the source of the AGs is predominantly coming from those who are switching from an oxybate. And we are also seeing clearly naive patients never being exposed to any 1st generation oxybate as well. So it's still a bit early, but the real source for us if where AGs are concerned are switching concurrent OCTOBATE patients. And we really haven't sort of seen what I would call as seen as an impediment of AGs impacting the ability to get on some of the most far.

Speaker 7

Great. Thank

Operator

you. Thank you very much. Our next question comes from Marianne Belgidi with LifeSci Capital. Your line is open.

Speaker 9

Hi, good morning. Thank you for taking my question and congratulations on the progress. So my question is around payers. Congratulations again on gaining preferred status with CVS. Just can you provide a little more detail with regard to discussions with payers?

Speaker 9

And if you have any kind of what's your expectation for other payers when it comes to preferred status? Is this something you're actively trying to achieve? And a quick other question, just more color on the pediatric opportunity. What are the main reasons there for not taking oxybate? And are the dynamics different from adults when it comes to both sodium and middle of the night dosing?

Speaker 3

Sure. Hey, Miri, thanks. I'll start with the payer question. So, yes, our overall strategy with payers has been to sort of have unencumbered access through any oxivate to sort of be at the best sort of status with the best of the oxibate thus far. So thus far with the first 3 of the G field contracts that we've achieved and that is our goal going forward as well.

Speaker 3

I mentioned the fact that we have ongoing conversations with MSR in the United Optimize. So whatever is in best status, which is generally a preferred status for the OXWAY that is our goal and thus far we've been very pleased with what we've been achieving thus far. I'll turn the pediatric question over to Jan.

Speaker 10

Thanks so much for the interest in pediatrics. We have heard for years now of the desperate need for a seeking this expanded indication. In regard to whether it's different, the clinical needs compared to adults, while it's really important for adults to not have to chronically wake up and it's true that sometimes in adult patient waking up, they also wake up their bed partner. The reality is for children who are 7 to 17, they are typically having at least 1 parent, if not both parents chronically waking up in the middle of the night to administer the dose. I've had conversations with parents who were happy to submit letters of support for the pediatric supplement describing how challenging it was to never have an uninterrupted night sleep for both their children and for themselves.

Speaker 10

For the second part of the question in regard to sodium, what we see with clinicians is they may identify a very small subset of their adult population who they consider to be sodium sensitive. This has not been an issue as we've been discussing sodium with the many KOLs who implore us to bring this option to them as quickly as possible.

Speaker 3

Yes. The only thing

Speaker 2

I would add regarding pediatrics the next two questions you get from them universally is when are you going to get pediatrics and when are you going to study at NIH. So it's very consistent when we talk to doctors about that. So hence why we're going down those path.

Speaker 9

Thank you for the clarity.

Operator

Thank you for your question. Our next question comes from David Amsellem from Piper Sandler. Your line is open.

Speaker 11

Hey, just a few here. One is, can you talk about sales force sizing longer term and also how you're thinking about any DTC spend or view that your competitor disease awareness lay the groundwork for you with its initiatives. So talk about that. And that's number 1. Number 2 is, I may have missed this.

Speaker 11

Can you talk about the mix between Arcolepsy-two? Are you getting any traction in one subgroup versus another? And what's your expectation regarding the mix between 2 going forward? Thank you.

Speaker 3

Yes. Hey, thanks, David. So as far as sales force size is concerned, to your point today, we're at 49 sales representatives. We also have our field reimbursement team. Once again, we find it's really going against the opportunity for Oxbase right now in that 4,500 prescribers.

Speaker 3

Our 49 representatives sort of allow us to cover up to about 6,000 maybe 6,500 physicians. So that gives us the space to cover our current opportunity and benefit. I'd say longer term, I mean, right now, we that's really where our focal point is, is getting OXBED experience prescribers comfortable with using LumRise as well. Longer term, we'll sort of see what the mix is. But I would say for at least the foreseeable future, we really don't see the need to expand the size of our sales force.

Speaker 3

Now when it comes to DTC, so we would really call it more sort of patient activation and patient media here. First, any news and media on narcoxit, we think is a good thing for a rare condition. Secondarily, our plans have really been try to meet patients where they are and they spend a lot of time digitally being active as well. So we've been very targeted about placing media and engagement through the sources where they go, Reddit, Facebook and other sources. And we have a couple other novel approaches that we're doing in and around speech specialist offices as well.

Speaker 3

So our approach with patients is, I would say, a little bit more surgical than a close to shock type approach. And then as far as the NT1, NT2 MYC is concerned, it's a little bit muddled from our data as we're looking at that. But what we know historically is even though the prevalence shows about a 30% NT1 to 70% NT2, for OxoBase it actually historically has been the exact opposite use of 70% NT1 usage and 30% NT2. So I think maybe in the future we can provide some insights into some of those trends as more usage of glioglymorides increases.

Speaker 2

Okay. Thank you.

Operator

Thank you. Our next question comes from Chase Knickerbocker with CH. Your line is open.

Speaker 12

Good morning, guys. Thanks for the questions.

Speaker 3

Just first,

Speaker 12

I wanted to ask another question. Sorry to belabor the point here on pull through from Rise Up. Maybe just asking in a different way, if we look specifically at the patients within the 400 that were on Rise Up that exited Q2, not on exited Q2, not on therapy. What was the conversion percentage specifically with those patients within Q3?

Speaker 3

Yes. Hey, Chase. The majority of those patients who were enrollments at the end of our Q2 or going through Q2 earnings did convert on to product. Now we haven't given specifics on the exact percentage because some of it is dynamic. I'll give you one example.

Speaker 3

We have patients who enrolled in June who just got reimbursed and shipped product in October. So when we think about the 2 sort of buckets of covered lives versus not, the card lives going through will be quicker than those who aren't. Our general philosophy is if a physician prescribes Lumiere, we're going to go to the ends of the earth to get them on it if we see a fair pathway forward. And like I said, we have examples of June enrollment taking unfortunately several months, but actually getting them across finish line as well. So I think it's still dynamic.

Speaker 3

So the majority did and we just received with more time that that number should be increasing from that cohort and every cohort as well.

Speaker 12

Is there an amount of time where they're on within Rise Up that you do start to see some dropouts? Is there like is it 3 months? Is it 4 months? And then just another quickly, any feedback from the field as far as anecdotal kind of experiences of how the titrating has gone for new patients? And whether or not there's a difference for whether or not a patient's been experienced with the 1st gen sodium oxybates for years versus they've been on for 6 months?

Speaker 12

Any sort of color there would be helpful.

Speaker 3

Yes. No, starting with the titration for the new patients. I would sort of say from the physicians it tends to be a bit of a mix. Sometimes you have slow titrators who want to sort of take their time to sort of get up to that. And I think on the other side, you have people who get there a little bit more quickly and I think that's predominantly positioned depending on sort of their approach.

Speaker 3

So it's been a bit of a mix bag. And sorry, Chase, what was your first question again?

Speaker 12

Just for the patients that you do see dropout of rise up even if it is a small number, is there like in a number of months that you start to see some fallouts or is there not really been a clear trend there?

Speaker 3

Yes. No, no, you're I mean, we're sort of getting to that time where some of these early enrollment, they may tend to drop out a bit. Some of that may be after exhaustion of going through the medical necessity pathway or from the patient. So we will start to see some of those patients start to drop off here as more time has gone by. From past launches, what may happen is they may revisit the conversation again in their next visit with their sleep specialist again.

Speaker 3

But definitely after some period of time the success rate after sort of 4 or 5 months definitely starts to go down.

Speaker 2

Yeah. I would just add that to your question around the 400 cohort, we're very pleased with the percent that has converted. You described it as the majority. But I think across all cohorts, there's an opportunity to continue to get better. And when someone decides to predominantly when someone decides to exit Rise Up, it really is one of 2 reasons.

Speaker 2

It's just a payer denial that we haven't been able to get over or that patient has gone through the process and then at the end decided they're not going to go in therapy, right, which happens. It happens for all therapy. So, but again, that's a relatively small percentage as we've described and we're pleased with people sticking with it and the conversion rates we've seen early on and knowing that those opportunities will only get better and they're already coming from a

Speaker 11

good place.

Speaker 12

Great. Congrats again on the really nice progress.

Speaker 3

Yes. Thanks.

Operator

Thank you. This concludes our question and answer session. I would now like to turn it back to Greg Divis for closing comments.

Speaker 2

Thank you. And thanks everyone for your time and for joining us today on our Q3 2023 call. We wish you a great rest of the day and look forward to follow-up. Take care.

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Earnings Conference Call
Avadel Pharmaceuticals Q3 2023
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