Axsome Therapeutics, Inc. (NASDAQ:AXSM) Q4 2023 Earnings Call Transcript February 20, 2024
Axsome Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-2.08 EPS, expectations were $-1.21. Axsome Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello and welcome to the Axsome Therapeutics Fourth Quarter and Full-Year 2023 Conference Call and Webcast. [Operator Instructions]. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Chief Operating Officer, Mark Jacobson. Please go ahead, sir.
Mark Jacobson: Good morning, and thank you all for joining us on today's conference call. This morning, we issued our earnings press release providing a corporate update and details of the company's financial results for the fourth quarter and full-year of 2023. The release crossed the wire a short time ago and is available on our website at axsome.com. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, the efficacy, safety, and intended utilization of our investigational agents, our clinical and non-clinical plans, our plans to present or report additional data, the anticipated conduct, and the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity, and our pipeline products, revenue projections, and possible intended use of cash and investments.
These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today's date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau, Chief Executive Officer; Nick Pizzie, Chief Financial Officer; and Ari Maizel, Executive Vice President and Head of Commercial.
Herriot will provide an overview of the company and progress made in the fourth quarter of 2023, as well as key upcoming milestones. Following Herriot, Nick will review our financial results, and then Ari will provide a commercial update. We will then open the line for questions. And questions will be taken in the order they are received. And with that, I will turn the call over to Herriot.
Herriot Tabuteau: Thank you, Mark. Good morning, everyone and thank you for joining Axsome Therapeutics fourth quarter and year end 2023 financial results and business update conference call. 2023 was another strong year for Axsome, built on focused commercial execution for our first-in-class marketed products and continued advancement and expansion of our industry-leading neuroscience pipeline. During our first full-year as a commercial company, Auvelity, our first-in-class oral, NMDA receptor antagonist and sigma-1 receptor agonist for depression, and Sunosi our DNRI, and agonist for excessive daytime sleepiness, generated combined net product revenue of approximately $205 million. We expect continued revenue growth in 2024, aided by our completed sales force expansion for Auvelity and increasing awareness of our differentiated products.
Later in the call, Nick will provide details on our quarterly financials, and Ari will provide additional information on our commercial performance. During 2023, our innovative development pipeline also progressed and expanded. We made solid progress in the preparation of our NDAs for AXS-07 in migraine and AXS-14 in fibromyalgia. We advanced our Phase 3 trials of AXS-12 in narcolepsy and AXS-05 in Alzheimer's disease agitation. We initiated a Phase 3 trial program for solriamfetol in ADHD and announced three additional new indications for solriamfetol. This progress positions us to deliver on multiple, potentially value driving milestones throughout 2024. I will provide a brief update on our industry-leading neuroscience pipeline and expected milestones.
Starting with our two NDA stage products. AXS-07 for the acute treatment of migraine is on track for an NDA resubmission in the first half of 2024. The NDA submission for AXS-14 for the management of fibromyalgia is also tracking for submission in the second quarter of 2024. Now moving on to our late-stage clinical programs. We have completed enrollment in the Phase 3 SYMPHONY trial of AXS-12 for the treatment of narcolepsy and we are on track to report top-line results for SYMPHONY during the first quarter. For AXS-05, the Phase 3 ADVANCE-2 trial in the treatment of Alzheimer's disease agitation is tracking for completion in the second half of 2024 based on anticipated enrollment trends and recent treatment market dynamics. Turning to solriamfetol, the active molecule in Sunosi.
In December, we held an Investor Day event where physician experts provided the scientific and clinical rationale underlying the exploration of solriamfetol in new target indications including major depressive disorder, binge eating disorder, and shift work disorder. We expect to initiate Phase 3 trials in each of these indications in the first quarter. These new trials complement the ongoing Phase 3 FOCUS trial of solriamfetol in adults with ADHD. FOCUS is tracking for top-line results in the second half of 2024. Overall, our development portfolio encompasses five innovative late-stage patent-protected product candidates for 10 serious psychiatric and neurologic conditions. If successfully developed, these investigational medicines have the potential to transform the treatment landscape for serious and difficult-to-treat CNS disorders, which affect more than 150 million people in the U.S. alone.
I will now turn the call to Nick who will provide details of our financial performance.
Nick Pizzie: Thank you, Herriot, and good morning. Today we'll discuss our fourth quarter and full-year results and provide some financial guidance. Total product revenues were $71.5 million and $204.9 million for the fourth quarter and full-year of 2023, representing year-over-year growth of 193% and 309% respectively. This consisted of net product sales of $70.7 million and $202.5 million for the fourth quarter and full-year of 2023 and royalty revenue of $800,000 and $2.4 million respectively. Total product revenues for the comparable periods in 2022 were $24.4 million and $50 million. Total revenue for the full-year of 2023 was $270.6 million, which includes license revenue of $65.7 million from out-licensing Sunosi in certain ex-U.S. territories.
Auvelity net product sales were $49 million and $130.1 million for the fourth quarter and full-year of 2023, respectively, representing the first full-year of commercialization for Auvelity. Auvelity was launched on October 19th, 2022, and had U.S. net sales of $5.2 million for the fourth quarter of 2022. Sunosi net product revenues were $22.5 million and $74.8 million for the fourth quarter and full-year of 2023, representing 17% and 67% year-over-year growth, respectively, and consisting of $21.7 million and $72.4 million in net product sales and $800,000 and $2.4 million in royalty revenue associated with Sunosi sales in out-licensed territories respectively. Sunosi net sales for the comparable periods in 2022 were $19.2 million and $44.9 million.
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Total Sunosi revenue for the full-year of 2023 was $140.5 million, which includes license revenue of $65.7 million from out-licensing Sunosi in certain ex-U.S. territories. Total cost of revenues were $7.4 million and $26.1 million for the fourth quarter and full-year of 2023. Total cost of revenue for the comparable periods in 2022 were $2.3 million and $5.2 million. Total cost of revenue for the full-year of 2023 included a one-time cost of $5 million associated with the revenue received on out-licensing Sunosi in certain ex-U.S. territories. Research and development expenses were $30.8 million and $97.9 million for the fourth quarter and full-year of 2023, respectively, compared to $14.7 million and $57.9 million for the comparable periods in 2022.
The increase was primarily related to the FOCUS trial of solriamfetol in ADHD, the advancement of ongoing trials of AXS-05 and AXS-12, manufacturing costs associated with the anticipated NDAs for AXS-07 and AXS-14, post-marketing commitments for both Auvelity and Sunosi and higher personnel costs, including non-cash stock-based compensation. Selling, general, and administrative expenses were $86.8 million and $323.1 million for the fourth quarter and full-year of 2023, respectively, compared to $61.5 million and $159.3 million for the comparable periods in 2022. The increase was primarily related to commercialization activities for Auvelity and Sunosi, including salesforce and marketing expenses and higher personnel costs related to organizational growth, including non-cash stock-based compensation.
Net loss for the fourth quarter of 2023 was $98.7 million, or $2.08 per share, compared to a net loss of $61.2 million or $1.41 per share for the comparable period in 2022. The net loss in the fourth quarter of 2023 includes $63.7 million in non-cash charges comprised of $43.2 million in acquisition-related contingent consideration expense, reflecting our updated sales projections for recently announced new indications for solriamfetol. $18.9 million for non-cash stock-based compensation expense and $1.6 million of non-cash intangible asset amortization. Net loss was $239.2 million, or $5.27 per share for the full-year of 2023 compared to a net loss of $187.1 million, or $4.60 per share for the full-year of 2022. The net loss for the full-year includes total non-cash charges of $117.9 million, which includes $62.6 million of stock compensation expense, $48.9 million in fair value of contingent consideration expense, and $6.4 million in intangible amortization compared to $37.7 million, $3.3 million, and $4.1 million respectively for the full-year of 2022.
Auvelity and Sunosi GTN discount in Q4 of 2023 were both approximately 50%. Q1 typically has a negative seasonality effect on GTN. As a reminder, the GTN discount for Auvelity in Q1 of 2023 was in the high to upper 50s and in the mid-50s for Sunosi due to the seasonal Q1 GTN dynamics. We would therefore expect a similar GTN in Q1 of 2024 for both products. We ended 2023 with $386.2 million in cash and cash equivalents compared to $200.8 million at December 31, 2022. We believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on the current operating plan. I would now like to turn the call over to Ari who will provide a commercial update.
Ari Maizel: Thank you, Nick. Axsome completed our first full-year as a commercial company by delivering strong performance for both of our on-market products. Starting with Auvelity. In the fourth quarter, approximately 84,000 prescriptions were written for Auvelity, representing 23% quarter-over-quarter growth. This performance contrasts with a decline of 1% for the overall antidepressant market during the same period. Additionally, nearly 17,000 new patients started Auvelity in the quarter, bringing the total number of unique patients treated with Auvelity since launch to approximately 71,000. In the fourth quarter, more than 3,500 first-time Auvelity prescribers were activated by our sales team, increasing the cumulative total number of prescribers since launch to nearly 17,000.
Payer coverage was stable in Q4 as Auvelity remains accessible to patients representing approximately 70% of covered lives. We continue to progress in conversations with major plans in PBMs across all channels as we pursue access improvements for patients. Auvelity performance in the quarter was primarily driven by specialists in psychiatry practices, with both Psychiatry MDs and nurse practitioners and physician assistants, or NPPAs contributing to robust growth in the quarter and over the course of 2023. In addition, we observed meaningful traction within the primary care segment among both MDs and NPPAs as the early impact from our recent sales force expansion began to take hold with increased call activity in primary care offices. In a recent survey of providers in psychiatry and primary care who treat a significant proportion of depression patients, key drivers of Auvelity prescribing cited by respondents include rapid onset of action and low impact on weight gain and sexual dysfunction.
In addition, adopters note the positive impact of Auvelity has demonstrated on day-to-day patient functioning and its improvements in patient perceptions of quality of life. Axsome has established a strong commercial foundation to support continued Auvelity growth in 2024, with approximately 260 sales representatives calling on 44,000 health care providers and continued investment in our industry-leading digital-centric commercialization platform. We are well-positioned to accelerate our education and awareness objectives across the predominant depression treaters in the U.S. An enhanced brand story for 2024 has been created to augment provider perceptions of Auvelity and is anchored on Auvelity's key attributes. Auvelity is a rapid acting antidepressant that works fast and lasts with rapid symptom improvement observed at week one, substantial symptom improvement observed at week two, and both sustained and substantial symptom improvement observed at week six.
Auvelity has a well-established safety and tolerability profile that includes low impact on weight and sexual dysfunction and no risk of movement disorders or extrapyramidal symptoms. Further, Auvelity is the only oral antidepressant that modulates both glutamatergic and monoaminergic pathways, a key point of consideration as the role of glutamate in depression is increasingly understood and accepted across the clinician landscape. We are very optimistic about Auvelity's growth prospects in 2024 and its long-term blockbuster potential. Transitioning now to Sunosi. Total prescriptions were just over 42,000 representing 2% sequential quarterly growth and 18% growth versus Q4 of 2022. Approximately 3,600 new patients started Sunosi treatment during the quarter, bringing the total number of unique patients treated with Sunosi to 65,000 since launch.
Although excessive daytime sleepiness is a smaller market with a more limited prescriber base, we continue to activate new prescribers including more than 400 during the fourth quarter alone, for a total cumulative prescriber base of more than 12,000 since launch. The field team is focused on communicating the needed urgency to treat excessive daytime sleepiness symptoms and obstructive sleep apnea and narcolepsy, with disproportionate focus on the nearly 2000 active weekly prescribers in the space. Payer coverage for Sunosi was consistent in Q4, with a total of 83% of lives covered across all channels. In a recent survey of Sunosi adopters, key attributes driving demand for the product cited by respondents include significant and sustained impact on the Epworth sleepiness scale, a market leading nine plus hours of wakefulness observed in Phase 3 clinical trials and significant improvement in patient-reported outcomes at week 12.
We are very proud of our commercial effort for Sunosi and expect continued growth in 2024. In closing, Axsome delivered compelling commercial performance in Q4 2023 as the optimization of our commercial infrastructure took shape and we completed our first full-year as a commercial company. Anecdotal feedback from providers and patients continues to reinforce our belief that Auvelity and Sunosi are unique and differentiated treatment options in their respective indications and supports our growing confidence that Axsome is reshaping the treatment landscape for CNS conditions. I will now turn the call back to Mark for Q&A.
Mark Jacobson: Thank you, Ari. Operator, may we please have our first question?
