ACADIA Pharmaceuticals Inc

NASDAQ:ACAD

Earnings Call Transcript 2024-Q1

[Operator]

Good day, everyone, and thank you for standing by. Welcome to the ACADIA Pharmaceuticals First Quarter 2024 Financial Results and Operating Overview Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications. Please proceed.

[Albert Kildani, executive]

Thank you. Good afternoon, and thank you for joining us on today's call to discuss ACADIA's First Quarter 2024 earnings. Joining me on the call today from Acadia are Steve Davis, our Chief Executive Officer, who will provide some opening remarks followed by Brendan Teehan, our Chief Operating Officer and Head of Commercial, who will discuss our strong commercial franchises, DAYBUE and NUPLAZID. Also joining us is [ Kimberly Manhard ], Senior Vice President of Global Strategic Planning and Execution, who will provide an update on our pipeline programs. And Mark Schneyer, our Chief Financial Officer, will review the financial highlights. Steve will then provide some closing thoughts before we open the call up for your questions. In addition, Parag Meswani, Senior Vice President, Trofinetide Rare Disease franchise will be available for the Q&A session. We are using supplemental slides, which are available on our website, Events and Presentations section.

Before proceeding, I would like to remind you that during our call today, we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events or future results, are based on current information, assumptions and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date.

I'll now turn the call over to Steve for opening remarks.

[Stephen Davis, executive]

Thank you, Al. Good afternoon, everyone, and thank you for joining us. Please turn to Slide 5. The foundation of ACADIA's business is built on our 2 first-in-class drugs on the market, a robust pipeline of late-stage assets with more behind them and a strong balance sheet that allows us to invest in future growth. During the first quarter, our commercial franchises delivered total revenues of $205.8 million, increasing 74% from the first quarter of 2023, which did not yet include sales of DAYBUE.

NUPLAZID remains a strong cash flow generating franchise that delivered first quarter sales of $129.9 million, up 10% from the first quarter of last year, as we continue to grow volume and gain share in the Parkinson's disease psychosis sector. We look forward to expanding on this growth. Sales of DAYBUE were $75.9 million in the first quarter our first time completing this calendar period since our April 2023 launch.

As we'll discuss on this call, 1 year into the launch, approximately 1 in 4 diagnosed Rett patients have initiated therapy with DAYBUE. The remaining 3/4 of diagnosed patients and those not yet diagnosed represent a very large opportunity to continue to grow this drug and reach families not yet benefiting from the only drug approved to treat Rett syndrome. Beyond our 2 commercial franchises, we have a deep and growing pipeline, including our Phase III Prader-Willi syndrome program and our seamless Phase II Phase III program in Alzheimer's disease psychosis.

ACADIA continues to operate from a position of financial strength. Revenues from our 2 commercial franchises enabled us to add $30 million to our cash position in the first quarter which is traditionally a seasonally weak quarter of the year in our industry. As a result, we continue to maintain a very strong balance sheet with total cash of $470.5 million as of March 31.

Turning to Slide 6. I'll now provide a high-level update on DAYBUE that both Brendan and Mark will expand on in their sections. We've just completed 1 year into the launch of DAYBUE. Let me take a moment to recap where we stand today. As you know, after launch, we experienced a surge of patients that initiated therapy quickly the first several months of DAYBUE's availability. As I referenced a moment ago, we have a sizable population to continue building share. Out of 5,000 diagnosed Rett patients in the U.S., as I mentioned, approximately 1 and 4 of these patients have initiated therapy with DAYBUE. In addition, we believe the prevalent population of Rett patients in the U.S. is between 6,000 and 9,000 patients. We expect, as DAYBUE's on the market longer, we will see more and more of the undiagnosed patients get diagnosed.

Importantly, we continue to see real-world persistency rates track about 10 percentage points above the time-based rates of persistency observed in the most relevant populations from our clinical studies. We believe that on average, the dose patients take following any period of titration up or down, is approximately 75% to 80% of the label dose. Today, we've established a very broad prescriber base with over 650 individual riders. Brendan will speak to the shift in mix of [indiscernible] observed since launch, together with our expectations going forward. We've established a broad access to DAYBUE with over 80% of Rett lives covered and conversion metrics that are consistent with industry norms and seasonality.

Let me turn to a few of the key dynamics we see today as we enter our second year on the market. In the last year, we've now accumulated a substantial body of real-world experience with DAYBUE. We're seeing more and more story shared on both the medical and caregiver communities regarding the benefits of DAYBUE, including alertness, engagement, communication and motor benefits. On the dosing and GI management front, while our data indicates [ that those patients ] take longer term, continues to be in the 75% to 80% range. We are seeing some variability in the application of strategies for titration and dose adjustments getting to the longer-term bets.

This represents an opportunity where we are focused on supporting dialogue in both the medical and caregiver communities regarding the establishment of consistent application of GI management strategies and best practices. Brendan will speak to both observed benefits of DAYBUE and GI management practices in his section.

During most of the first quarter, we saw a decline in active patients on therapy as we experienced first time seasonal dynamics, together with an increase in numerical discontinuations, primarily associated with the higher rate of new patient starts in the preceding 2 quarters. In other words, there is somewhat of a lag between numerical new patient starts and numerical discontinuations. Just to be clear, our overall rate of persistency continues to track well above our clinical trial experience despite the fluctuation of numerical discontinuations we see in any given month or quarter. Importantly, we now see net patient additions in each of the last 6 weeks and believe the lag based increase in numerical discontinuations we observed in the first quarter has peaked and is now largely digested.

To recap on DAYBUE, one year into the launch, we've established very healthy share with 1 in 4 diagnosed patients on therapy. Key long-term value drivers include a very large opportunity to continue adding share and rates of persistency attract approximately 10 percentage points above our clinical trial experience and are supported by a large prescribing population and broad payer access.

Let's turn to a snapshot of our current products and pipeline on Slide 7. NUPLAZID continues to contribute substantial revenues and share growth furthering our strategic objective of optimizing cash flow in this franchise. In addition to our 2 successful commercial franchises, we have numerous late and early-stage pipeline assets representing important opportunities. These include ACP 101 and Prader-Willi syndrome, where we are currently enrolling subjects in our Phase III study. Prader-Willi is a rare and debilitating genetic disease where patients have an unrelenting drive to eat, called hyperphagia. Sadly, the severity of this disorder translates into an average life span of only 30 years.

Here, too, there are no FDA-approved treatments. We are currently enrolling our seamless Phase II Phase III program with ACP-204 in Alzheimer's disease psychosis patients another disorder where there are no approved treatments. ACP-204 is our second-generation 5-HT2A blocker where we are leveraging our learnings from pimavanserin. And behind that, we have a rich pipeline of early-stage disclosed and undisclosed programs that position us for future growth.

I'll now turn it over to Brendan to discuss our commercial performance, beginning on Slide 8.

[Brendan Teehan, executive]

Thank you, Steve. Please turn to Slide 8, beginning with DAYBUE. Let me start by discussing the 3 key drivers of long-term value for DAYBUE and the continued growth potential they represent. First, with now 1 out of 4 diagnosed Rett patients having received treatment with DAYBUE, we still have a large remaining patient population in the market that has significantly higher physician and caregiver awareness about the product 1 year post approval. Launch to date, we've been successful penetrating centers of excellence, where we now have approximately 50% share of patients treated, so we have a lot of room to grow -- growth to pursue in this segment. In addition, we're also focusing on driving depth of prescribing outside of COEs where the majority of our patient potential exists. We're already seeing a shift in the source of prescriptions today and expect an increasing share to come from noncenter of excellence, high-volume institutions and community practices moving forward.

Second, a year into launch, we now have a foundation of real-world evidence providing us the following levers. Number 1 is real world benefits. We are describing the real-world benefits patients and families are seeing across a wide range of ages as well as severities of disease serving as examples of successful treatment with DAYBUE. In a moment, I will share some quotes from caregivers about the meaningful benefits they're seeing in their patients. Number 2 is GI management. We're sharing key learnings from successful GI management strategies. We've observed a wide range of GI management approaches, and we see an opportunity to further enhance and accelerate the establishment of best practices in the community.

Number 3 is that time to benefit is a key consideration. We know a majority of patients with their doctors guidance are starting treatment by titrating and of course, when you titrate over a period of several weeks, it may take longer to get to a therapeutic dose. It's therefore important to ensure that families and physicians have the right expectations regarding the time it may take to observe benefits. We have observed that many discontinuations happen early in a patient's treatment a time frame that may not have been sufficient to get to a dose that produces benefits or work out an appropriate GI management regimen. To further support these families, our messaging on treatment expectations emphasizes the importance of HCPs and caregivers working together on setting the appropriate time line to realize the benefits of DAYBUE and determine the appropriate GI management strategy for each patient.

Our third driver is persistency on therapy. We now have data out to the 9-month mark that demonstrates persistency tracking 10 percentage points above what was observed in the LILAC open-label extension study for placebo rollover patients. This continues the consistent persistency curve we've seen from the time of launch.

I'd like to take a deeper dive into each of these drivers. First, let's discuss market penetration and growth potential. One year into launch, we've started more than 1,300 patients on DAYBUE in a market with 5,000 diagnosed Rett patients. Many of these patients come from COEs, where we have approximately 50% patient share, which leaves us ample opportunity for growing in that setting. Our mix is shifting to an even more split of prescriptions with 1/3 of prescriptions coming from centers of excellence, 1/3 from noncenter of excellence high-volume institutions and 1/3 from community practices.

Since the level of experience with treating Rett patients outside of centers of excellence is lower, we're delivering enhanced messaging to these prescribers on both clinical benefits to expect from DAYBUE as well as tolerability management strategies.

Our second key driver is the real-world evidence and the success stories those have created to motivate both HCPs and families to initiate DAYBUE. Broad prescribing early post launch has led to many DAYBUE treatment success stories across a range of ages and disease severities. We're now utilizing these successes to educate prescribers and caregivers on what to expect when starting and staying on DAYBUE, which will encourage broader adoption.

Looking at GI management strategies, we've seen a pretty wide range of approaches. Some physicians and practices, particularly a few of the COEs, feel they have this very much dialed in, utilizing product labeling and GI management strategies to achieve success. However, implementation of these strategies in the broader community is variable, telling us there is an important opportunity to educate further on these guidelines.

While we continue to be very encouraged by the longitudinal rate of persistency we've been tracking, we believe that in addition to communicating debuts clinical benefits, implementation of more consistent best practices in GI management will further support building a sizable base of enduring patients over time. This leads to our next driver, persistency where we've seen a very consistent very consistent pattern since launch when comparing the post-launch rate of persistency to our clinical trial experience.

Let me now share our latest persistency data. With patient cohorts now out to 9 months, the real-world persistency rate is 58% compared with 47% seen for placebo rollover patients in LILAC at 9 months. As we described on our last call, approximately 40% of patients that initiated therapy on DAYBUE in Phase II remain on therapy today and have been on therapy for more than 2.5 years. This comparison underscores the opportunity we see to build a sizable enduring population on DAYBUE. If we continue to track approximately 10 percentage points above our clinical trial experience, we believe the enduring population could be approximately half of patients who initiate therapy.

Let me touch on the number of patients we have on therapy. As of the week ending May 3, we have 862 patients active on DAYBUE therapy compared with the figures we shared on February 27 of 860. During most of the first quarter, we saw a decline in active patients on therapy due in part to an increase in numerical discontinuations Steve described earlier. We've now seen net patient additions in each of the last 6 weeks, and we believe the increase in numerical discontinuation we observed in the first quarter has peaked and is now largely digested.

I'd like to recap our view of the U.S. opportunity as we now commence our second year on the market. With over 3,500 diagnosed patients who have not yet tried DAYBUE and several thousand Rett patients who have not yet been diagnosed, we have an opportunity to continue to substantially grow DAYBUE. Our persistency experience to date indicates we can build a sizable enduring population benefiting from DAYBUE. We have a strong foundation to build on, including a large prescribing population and broad payer access.

Please turn to Slide 10 for a discussion of our plans on DAYBUE outside the United States. Looking beyond the U.S., we are rapidly advancing toward making DAYBUE available in additional markets. Our pediatric investigation plan, or PIP, which detailed the previously completed clinical trials for DAYBUE has been agreed upon with the Pediatric Committee of the EMA, paving the way for an anticipated filing in the first quarter of 2025. In Japan, we now have a formal meeting scheduled with the PMDA later this quarter to discuss our proposed clinical plan. And in Canada, we recently announced that our new drug submission was accepted for filing and granted priority review by Health Canada, potentially leading to an approval in that market around the end of this year.

Let's now turn to Slide 11. Here, you see quotes from caregivers reinforcing some of the observations described above, each consistent with the feedback we've been hearing for many months, such as caregivers noting higher levels of engagement, improvement in speech with a broadening of vocabulary and improved engagement in conversations, more purposeful use of hands and decreased hand ringing and stereotypies. We also regularly hear feedback about the loved ones increased cognitive ability or increased alertness with patients now being able to better follow conversations. Caregivers tell us they view these improvements as meaningful enhancements in quality of life for the patients in their care as well as their families. These testimonials all speak to the promise of treatment with DAYBUE and underscore exactly why we at ACADIA do what we do to support and benefit those with greatest needs.

Let's turn to Slide 12 for a discussion of our NUPLAZID franchise. I'll start by reiterating that our primary financial objective with NUPLAZID is to optimize cash flow, and we do that in 2 ways. First, we're continuing to grow bottle shipments and market share in our eighth year on the market for PDP. The most effective lever to drive growth recently has been the broad educational campaign we launched last year, bringing attention to our real-world evidence studies. These efforts have allowed us to grow new patient starts faster than the market. The second way we optimize NUPLAZID franchise cash flow is by carefully managing expenses, and we'll continue to do that throughout 2024. These combined efforts have enabled us to generate over $300 million on a stand-alone, fully burdened basis in annual cash flow.

Now let's turn to Slide 13 to review our quarterly performance. In the first quarter of 2024, NUPLAZID delivered $129.9 million in net product sales. As evidenced in the prescription data presented on this slide, the Parkinson's disease market remains largely flat with both carbidopa-levodopa TRxs essentially flat versus their prior quarter while other antipsychotics and NUPLAZID both increased by 4% and 6%, respectively, in the first quarter compared with the fourth quarter of last year. Importantly, NUPLAZID outperformed growth in the PD market in both the office-based and long-term care channels. We are encouraged by these recent trends and look forward to continuing to grow this franchise.

I'll now turn it over to Kimberly Manhard, Senior Vice President of Global Strategic Planning and execution to provide an update on our pipeline programs starting on Slide 14.

[Unknown Executive]

Thank you, Brendan. In addition to our commercial products, we have a strong pipeline of late-stage clinical programs and early-stage disclosed and undisclosed programs, providing us with several opportunities to further expand our growth. I'll review our 2 late-stage programs. Please turn to Slide 15 to discuss our ACP-101 program, the treatment of hyperphagia and Prader-Willi syndrome, or PWS.

Let me start with just a brief background on the disease. Prader-Willi syndrome is a rare genetic neurobehavior disorder that affects approximately 8,000 to 10,000 patients in the U.S. The defining characteristic of PWS is hyperphagia, which is commonly begins between the ages of 3 to 8. Hyperphagia is characterized by unrelenting hunger that often leads to obesity and behavioral challenges such as anxiety and aggression. As you can imagine, it is extremely distressing for patients as well as parents and caregivers of patients with PWS to illustrate just how devastating this disorder is the average life expectancy is 30 years, largely due to obesity and resulting cardiovascular-related diseases. Hyperphagia and PWS represents a significant unmet need as there are currently no therapies approved to treat it.

Let's now turn to Slide 16, where we describe our clinical program in Prader-Willi syndrome. Late last year, we initiated a Phase III study of ACP-101 for the treatment of hyperphagia in PWS. This study builds on the prior Phase III experience and includes the 3.2 milligram dose that was shown to significantly reduced hyperphagia-related behaviors. As you see on this slide, the Compass PWS is our Phase III global multicenter randomized double-blind 12-week placebo-controlled study evaluating efficacy and safety of ACP-101 and approximately 170 Prader-Willi patients. the primary efficacy endpoint is improvement of hyperthasia as measured by the hyperphagia questionnaire for clinical trials or HCT scale, also used in the prior Phase III study. Those patients who complete this study are eligible to enroll in an open-label long-term extension study.

If data from the Phase III study are positive, we plan to submit a new drug application for the treatment of hyperdata to the FDA. The Prader-Willi community has incredibly high level of enthusiasm for this opportunity and interest in our study. We look forward to working with them and with clinical experts as we continue to advance this program.

Please turn to Slide 17 to review our second late-stage clinical programs, ACP-204. ACP-204 is our next-generation 5-HT2A compound that we're developing as a potential treatment for Alzheimer's disease psychosis. Similar to pimavanserin, ACP-204 was primarily as an inverse admit at the 5-HT2A receptor. With ACP-204, we are seeking to build on our learnings from pimavanserin and believe it is an exciting product opportunity. Our work completed today includes a comprehensive Phase I program that supports our target product profile for ACP-204, including no sign of QT prolongation at planned doses in our studies, a wide dose range established supporting the potential for dose equivalent to approximately 2x the approved pimavanserin 34-milligram dose and steady-state PK achieved in less than half the time of pimavanserin, suggesting potential for an earlier onset of activity. ACP-204's profile could represent a significant improvement over their already strong product profile for pimavanserin.

Please turn to Slide 18. Our seamless Phase II Phase III program for ACP-204, which we have aligned on with the FDA, built on our clinical experience with pimavanserin and is now underway. Our plan includes a Phase II study with over 300 patients which is designed to roll seamlessly into 2 Phase III studies. This Phase II study is ongoing and is designed and sized in such a way that if successful, it could be considered an adequate and well-controlled registrational trial. Once the full study allocation of patients for Phase II is complete, the results, by which time the 2 Phase III studies will already be underway. We are pleased to be advancing both of these promising late-stage clinical assets and look forward to providing future updates.

And now I'll turn it over to Mark for a financial update beginning on Slide 19.

[Mark Schneyer, executive]

Thank you, Kimberly. Let's review our quarterly financial performance on Slide 20. In the first quarter, we recorded $205.8 million in total revenue, up 74% from the first quarter of last year. DAYBUE net product sales were $75.9 million in the first quarter, which was a sequential decline of 13% as compared to the fourth quarter of 2023. The sequential quarterly change was comprised of a 10% reduction in bottles sold and a 3% reduction in net price due to higher gross to net.

In terms of the reduction in bottles sold, on our last call, we described the seasonal dynamics that were affecting our business in the first quarter, including fewer Rett clinic days and Rett patient visits as well as reductions in refills and conversion rates due to the beginning of the year insurance reauthorization and reenrollment process. In addition, for a period of time, numerical discontinuations outpaced new patient starts the dynamics of which were described earlier by Steve and Bren. As we are now back to a period of net patient adds and the first quarter seasonal dynamics are behind us, we are confident in our ability to grow DAYBUE sales on a quarter-by-quarter basis through the remainder of the year.

NUPLAZID net product sales were $129.9 million in Q1 and up 10% versus the prior year's first quarter. Gross to net for NUPLAZID was 33.1% in Q1. Our NUPLAZID franchise achieved 4% demand bottle growth year-over-year driven by increases in new patient starts in both segments. Selling growth increased by 6%, benefiting from the impact of a larger -- from a larger reduction in-channel inventory in the first quarter of last year, as compared to the level of in-channel inventory reduction we experienced in the first quarter of this year.

R&D expenses decreased to $59.7 million in the first quarter of 2024 and from $69.1 million in the first quarter of 2023. The decrease was mainly due to the trofinetide commercial supply build in Q1 2023 that was accounted for as R&D expense as those expenditures took place prior to the FDA approval of DAYBUE. We had a similar level of clinical spend year-over-year. SG&A expenses increased to $108 million in the first quarter of 2024 from $101.2 million in Q1 2023. The increase was primarily driven by annualization of DAYBUE expenses as well as foundational investments to commercialize trofinetide outside the U.S. We ended the quarter with a cash balance of $470.5 million which increased by $31.6 million from our 2023 year-end balance of $438.9 million. Turning to Slide 21, you can see that we are reiterating our guidance ranges for 2024.

And now I'll turn the call over to Steve for closing remarks.

[Stephen Davis, executive]

Thanks, Mark. Let's now please turn to Slide 22. Looking to this year and beyond, we are focused on penetrating the significant opportunity that remains in front of us for DAYBUE in the United States. Together with NUPLAZID, we expect our commercial franchises to drive strong growth. We're excited to bring DAYBUE to the markets outside of the U.S. and are making strong progress already this year.

We look forward to further enrolling our 2 late-stage programs, including our Phase III program for Prader-Willi syndrome and our seamless Phase II Phase III program in Alzheimer's disease psychosis. We're pleased to have these terrific opportunities ahead of us while at the same time being in a position to generate sustainable and growing cash flow from operations to fund future growth.

With that, I'll turn the call over to our operator for Q&A. Operator?

[Operator]

[Operator Instructions]. Our first question is from Tessa Romero with JPMorgan.

[Tessa Romero, analyst]

On the business development front, curious, you've previously talked a lot about an interest in rare disease and neuro. Just curious, how would you characterize your appetite today here? And can you speak to the amount of capital you would ideally allocate to BD activities and the amount of risk you would be willing to take on in terms of stage. And then a quick follow-up just on DAYBUE, you talked about net patient adds in each of the last 6 weeks. We just wanted to confirm with the correct interpretation be that you expect this to continue such that you are comfortable to reiterate the guide today?

[Stephen Davis, executive]

Thanks, [indiscernible]. I'll take the BD question and then I'll ask Mark to comment on your DAYBUE question. So in terms of BD, nothing has changed. It continues to be a very important part of our strategy. We are -- it's always a little bit difficult to predict the timing of transactions because a lot of things have to come together, obviously, but we continue to be very active on the BD front and looking at what I would characterize as some really interesting opportunities.

It is also likewise a little bit difficult to project exactly how much capital we would allocate to an individual deal or deals because it's really kind of fact dependent. But what I would say is we do see a what I would characterize as a very interesting opportunity set. And we will execute on deals that we think are additive and obviously add value to our base.

I think that was in on BD, Mark, do you want to take the DAYBUE guidance question.

[Mark Schneyer, executive]

Yes. On guidance, thanks for the question. And your interpretation is correct. We do expect to have net patient adds continue in a positive direction going forward, and that supports the reiteration of our guidance range.

[Stephen Davis, executive]

I just want to confirm -- did you have a third question on DB -- on BD, excuse me. I think I captured all, but I want to make sure.

[Tessa Romero, analyst]

Yes. Thanks, Steve. Thanks, Mark. Just on kind of stage of asset on the BD side that you'd be contemplating, how early could you go versus something more late stage?

[Stephen Davis, executive]

Yes, thanks. I appreciate the question. Also very opportunity-dependent. I would say we -- as an industry, we worked through several years there where the biggest challenger that we and other companies had doing deals where, honestly, the capital markets because things -- if there was capital is readily available, and that just made it more challenging or more expensive to do partnerships or acquisitions. It's a little bit different environment today, and I'm seeing a much more fertile environment for deal making.

And so having said that, historically because it was very challenging in very robust capital markets, we and other companies did a lot of -- intended to produce more -- that environment produces more early-stage deals, I guess, is the way I'd say it. We have an appetite for early and late-stage deals. I think our -- the sweet spot of our capabilities translates to more of a focus on pre-commercial assets, although we do from time to time look at products that are already commercialized. And so I would say there are no -- we're agnostic more or less to the stage of development of assets. We have a strong balance sheet. We have strong capabilities. We certainly would love to do more late-stage assets. DAYBUE and ACP-101 and Prader-Willi are 2 examples of deals that we've done at the late stage. And we'd certainly be eager to do more. It really is more a function of the kinds of opportunities that exist in the market.

[Operator]

One moment for our next question please. And it comes from the line of Ritu Baral with TD Cowen.

[Ritu Baral, analyst]

Can you guys talk about if we have this number, the percentage of diagnosed patients that have started DAYBUE at any time, given the 50% long-term prescription, does that mean that we have 25% market share, 50% of diagnosed patients have attempted to start DAYBUE?And can you speak a little to what you know about restart rates and how the GI management plan might factor into that?

[Stephen Davis, executive]

Ritu, I'm not sure we understood the full question, but I think Brendan thinks he caught it, so I'll let him answer.

[Brendan Teehan, executive]

I think I did Ritu. And thanks for both portions of the question. So the first is the percentage of patients -- diagnosed patients that are on DAYBUE. As Steve pointed out, 1/4 of patients, so -- actually a little north of 25% of patients are on DAYBUE. That would -- I would discuss that -- in terms of diagnosed Rett patients, forgive me, are on DAYBUE.

[Stephen Davis, executive]

Have initiated therapy on DAYBUE.

[Brendan Teehan, executive]

Have initiated therapies on DAYBUE. We have prescriptions, obviously, for more. As you know, we work them through the payer access process so that we would expect that we will -- as we have said, with conversion rates continue to convert those prescriptions we have on hand as we continue to get additional prescriptions in.

Your second question was around restart rates. We do see restarts of patients, and that happens for a variety of reasons. In some cases, a patient and family may have gone to a prescriber that is not necessarily a Rett expert, but it's close by. They may have started on the full dose and may not have had the best of experiences. That's one group that tends to come back as they've heard a bit more about titration as a potential strategy for starting. So we see that.

We also see patients that have gone through significant medical procedures and honestly take a break and then come back to therapy. That often happens. And as we've discussed, because of our family access manager team, we have very -- we stay very close in proximity to each of these families, offering support, whether they have decided to initiate DAYBUE or in some cases, if they have decided at least to take a temporary pause or to discontinue to just keep them up to date on what we're seeing and opportunities to restart.

[Ritu Baral, analyst]

Got it. On the first question, I don't think it was perfectly [ say ] on my part. But is the 25% the number -- I'm sorry, the proportion of patients that have attempted to start on DAYBUE? Or is it a bigger number of the percentage of diagnosed patients that have, at one point, started on DAYBUE, but may not have remained to long-term [indiscernible] through this?

[Stephen Davis, executive]

Yes. Thanks for the clarification. It is the former. 25% of patients -- of the 5,000 diagnosed patients are, as Bernard said, slightly more than 25%, have initiated therapy on DAYBUE. We do have -- obviously some of those that discontinued, but 25% have started therapy.

[Operator]

[Operator Instructions]. our next question is from Gregory Renza with RBC Capital Markets.

[Gregory Renza, analyst]

Just wanted to -- when it comes to the new patient starts, my question is just really around the rate of that. Certainly appreciate the discontinuations in the [ bowl ] that you commented on and kind of thinking those up with the totals. I'm just curious to what extent do you think there will be some degree of predictability or maybe some stability on anticipating a more stable rate of new starts, especially as you think about broadening to beyond the centers of excellence.

[Stephen Davis, executive]

Yes. Thanks much for the question, Greg. Brendan?

[Brendan Teehan, executive]

Yes. Thanks for the question, Greg. So in terms of new patient starts, as we described in the first quarter, it was slow in January but did begin to pick up in February, March, again in April. As we discussed in our guidance range, we do anticipate continuing an upward increase in new patient starts. The 2 factors, I would say that factor in most notably for us will be new patient starts and net patients. So as we've also described, we've seen a decline in numerical discontinuations, which we think is logical based on the bolus of patients that started and now a more consistent rate of patient adds week over week.

[Operator]

One moment for our next question, please. And it comes from Ami Fadia with Needham & Company.

[Ami Fadia, analyst]

You mentioned in your remarks that going forward, you expect a significant portion of the growth to come from non-high volume -- sorry, non-COE high-volume centers as well as community centers, which often tend to be more sort of spread out. How are you thinking about sort of the commercial effort in sort of educating and reaching these physicians so that they can start patients on therapy appropriately with the titration schedule that works and enables patients to stay on drug longer.

[Stephen Davis, executive]

Thanks much for the question, Ami. Brendan, do you want to take that?

[Brendan Teehan, executive]

Yes, sure. Thanks for the question. And maybe from my prepared comments, I would say that obviously, in the early days, we had a substantial number of patients come from centers of excellence. But we already had a good number of patients that were coming from those high-volume institutions non-COEs and from the community. And what I think -- I think we've seen is a very logical migration of where prescriptions are coming from. So well over 50% coming from COEs in the earliest of days now more like 1/3 coming from COEs and 2/3 coming from the others. From there, I think we have a base of experience in those 2 latter segments. What we're really focused on are the real-world benefits that have been seen for DAYBUE because I think the tangible conversations that take place with caregivers are more around what I'm going to see in my patient. What am I going to see in my loved one. So we've created vignettes that look at patients over the age of 20, teenagers as well as preteens in 2- to 5-year-olds to give a much clearer perspective on what the treatment opportunity looks like and the benefits that they can expect to see in DAYBUE.

And then I think embedded in the question was a question about our ability to get to these patients wherever they are. we have a great footprint to cover all of the Rett treaters. And we also have claims data that helps us more deliberately track down those physicians that will be the point person either at a high-volume institution or the community for us to engage in those conversations.

[Operator]

One moment for our next question. And it comes from Yatin Suneja with Guggenheim.

[Yatin Suneja, analyst]

Could you clarify what the -- what is gross to net right now? And then since you have reached 50% penetration in COEs, could you just comment on the level of penetration that you could reach in non-COE's over time? And then where you can push the COEs, can you add 50, where can you go?

[Stephen Davis, executive]

Thanks much for the question. Mark, do you want to take the others question, Brendan [indiscernible].

[Mark Schneyer, executive]

I presume you mean the question on gross to net is related to DAYBUE.

[Yatin Suneja, analyst]

Yes.

[Stephen Davis, executive]

So I think for us, as we talked about in the last call, we're tracking towards 20% for the year, and we don't expect that to fluctuate on a quarter-by-quarter basis. So we're not going to disclose it as we go along. And I would just say maybe qualitatively in the first quarter, we were -- we're just slightly below that target.

[Brendan Teehan, executive]

And for the second part of your question, I think, in 2 parts. For COEs, with 50% patient penetration, I think we have tremendous momentum in these core areas of where these patients are treated. We'll continue to work through that population. I think that as you get further and further up the curve, obviously, the engagement of those families with COEs is a critical factor for how far we'll get for penetration there. But we do see that in high-volume institutions and in the community. Some of these conversations are easier for us to engage in, in terms of our ability to get face-to-face with those physicians to talk about the benefits that they see for DAYBUE.

And then it's really a function of working very closely with them to make sure that they can get to their families alert them that a therapy is available and get them in for treatment. In terms of penetration, I think we expect to have similar rates of -- I think we expect to see rising rates of penetration of high-volume institutions, more closely replicating what we see in COEs. And then in the community, it really depends on kind of the physician level of engagement that we're seeing and the proximity of the last kind of discussions they've had with their Rett patients, but we're encouraged by what we're seeing early on.

[Operator]

One moment for our next question, please. And it's from David Hoang with Citigroup.

[David Hoang, analyst]

I just wanted to ask about whether you had any insight on whether persistency differs between COEs and the non-CE community segment. And if you could possibly tie that back to their GI management strategies, how are docs managing it in the non-OE segment? And how much room is there to improve?

[Stephen Davis, executive]

Thanks much for the question, Brendan, do you want to take that?

[Brendan Teehan, executive]

Yes, sure, David. Thanks for the question. At the top, I'll say that there are not wide disparities in persistency rates between COEs and non-COEs. What I think we see is more the proximity to patient and the work done on a GI management strategy so that there's a clear discussion upfront with the families about the treatment journey and the options that are available to make sure they manage that. So the more experience a physician gets, the more consistent, I think their approach to GI management becomes the better persistence to get. So I think it's more a function of that than it is whether you're in a COE or not.

[Operator]

One moment for our next question. And it's from the line of Joel Beatty with Baird.

[Joel Beatty, analyst]

The net numerical discontinuations in the first 6 weeks of the year or so, could you characterize those a little bit more, such as what was the cause? And was it driven more by lower patient starts during that time or higher-than-usual discontinuations?

[Stephen Davis, executive]

Thanks much for the question, Joel. Brendan, do you want to take that?

[Brendan Teehan, executive]

Yes, Joel, thanks for the question. numerical discontinuations were largely what we would expect, which is why we reiterated the point around the consistency of our persistency curve. We do think as -- from a seasonal perspective, there were some patients that started perhaps in the fourth quarter that discontinued early. It may not have been a great timing for them to have started DAYBUE around the holidays, for example, that may have contributed from a seasonal perspective to slightly higher numerical discontinuations than anticipated.

[Operator]

One moment for our next question. And it's from the line of Jeffrey Hung with Morgan Stanley.

[Unknown Analyst]

This is [ Catherine ] on for Jess. Just another one on these centers of excellence from us. Now that we're a year into launch, have you observed COEs increasing the number of right clinic days from the 1 month that you mentioned last quarter to a more frequent basis? And do you have an updated average number here?

[Stephen Davis, executive]

Thanks much for the question, Catherine. Brendan?

[Brendan Teehan, executive]

Yes, sure. Thanks for the question. In most cases, I would say that COEs are maintaining the process that they've had to engage families. There are a handful of centers that have increased COE -- increased Rett clinic days. There are a couple that have specific DAYBUE clinic days as well. But generally, I would say it's been consistent with how they've seen patients over time.

[Operator]

One moment for our next question, please. And it's from the line of Charles Duncan with Cantor.

[Unknown Analyst]

This is Elaine on for Charles. I just wanted to ask, I think at the last update, you said that the age range was comparable or spread throughout for DAYBUE. Would you say that the key drivers for demand such as real world benefit and establishing GI management strategy, does it depend per age range?

[Stephen Davis, executive]

Thanks much for the question, Brendan.

[Brendan Teehan, executive]

Yes, sure. Thanks so much for the question, Elaine. I would say that we're still seeing largely what we expected in terms of the existing prevalent population for Rett meaning that we're getting the age range and the respective weights that we would expect to see in terms of a patient mix. If anything, in the first part of 2024, we've seen slightly older and heavier patients that have been started on DAYBUE in terms of the patient mix. which might lead to somewhat of an increase in average dose as a function of that.

[Operator]

One moment for our next question, please. And it's from the line of Jason Butler with Citizens JMP.

[Unknown Analyst]

This is [indiscernible] for Jason. How do you think about the potential role of gene therapies in Rett syndrome? And how could DAYBUE be used alongside this therapy. We understand the therapies pretty early in development, but I was just curious about your thoughts.

[Stephen Davis, executive]

Yes. Thanks much for the question. I'll start by saying we hope that DAYBUE as the first of multiple drugs approved to treat this highly debilitating disorder. As it relates to gene therapy, I think that we know that gene therapy can be very challenging. We've even seen some of the challenges played out just in the last week with gene therapy, generally speaking. In Rett, it's a little bit more -- there's a little bit of an additional hurdle here because with Rett, there's kind of a goldilocks level of gen or expression that you want to operate with them because if you have too much expression, you get the same symptoms you give it too little.

And so there are a couple of companies that are in very early stages of testing on gene therapy. And I think there's just a lot more to come. It won't be rapid. Nothing is in this industry. It takes some time, but we're certainly hopeful that there will be -- again, that DAYBUE will be the first of many therapies for this population.

Having said that, as we think about additional drugs becoming available, including gene therapy, we don't see any reason that DAYBUE couldn't be prescribed alongside other drugs as well. And so these patients are so highly symptomatic that if you had another therapy, gene therapy or otherwise, that reduced symptoms by 50% or even 75%, they would still be highly, highly symptomatic in need of therapy. And so we envision DAYBUE operating in a world where if there are other therapies down the road, we believe that it'd be very compatible with those therapies and have the potential to provide additive benefit.

[Operator]

One moment for our next question, please. And it's from Ash Verma with UBS.

[Ashwani Verma, analyst]

I had 2. So for DAYBUE, I know in prior instances, you have actually soft-guided the sales for subsequent quarters. At this time, I think you just left it at sequential growth. Any reason for that? If anything, you sound very confident on the rebound. So I'm just curious what's sort of driving that dynamic?

And then secondly, I wanted to ask about your cost structure. Like have you considered revisiting that? I mean compared to last year, this year, we've seen NUPLAZID negative symptoms start working out favorably and the DAYBUE persistency coming in below I'm guessing where you would have originally assumed. Does that make you rethink where your cost structure is?

[Stephen Davis, executive]

Yes, Mark. Thank much Ash for the questions. Mark, I'll let you take both of them.

[Mark Schneyer, executive]

Yes, sure, sure. On the guidance, as we transition to annual guidance, you're no longer to give the kind of forward 1 quarter forward guidance. I guess the unique thing about the first quarter of this year is that we were expecting a sequential down quarter. So we thought it was just helpful in giving the full financial expectations for the year to give the first quarter guidance for this year as well as annual guidance. We don't expect to see sequential declines going forward. So we're going to keep the annual guidance just like we do for NUPLAZID.

On the cost structure, thanks for the question, as Chief Financial Officer, of course, I look at the cost structure every day. And -- but I think as we look at what's the right cost structure for the business, and the investments that we're making, there's no change there. Yes, we had our -- unfortunately, our negative symptoms of schizophrenia trial was not positive, but we hadn't made investments in commercial investments in negative symptoms of scizophrania before that readout. So there really is nothing to unwind. Our business is expanding. We're making investments for ex U.S. for DAYBUE that didn't exist last year. So that's kind of a new leg to the business that requires investment. And we're still investing appropriately for growth in DAYBUE in the U.S. So all of that together leads us to supporting the investments that we're making.

But as we've done over the last couple of years in NUPLAZID, right, we've looked at that franchise of making efficiencies and we look to make the right investments has additional investments or reduction in investments across our entire cost structure on an ongoing basis.

[Operator]

One moment for our next question, please. And it comes from the line of Marc Goodman with Leerink.

[Marc Goodman, analyst]

Yes. My question is around the Prader-Willi trial. And I'm curious that GLP-1 uptake has been hindering enrollment and just your general thoughts around how gliplons will play into potentially not needing as much therapy for Prader-Willi and the eating disorder there? And then secondly, can you just give us a sense of how many patients are on NUPLAZID these days? We haven't talked about it yet.

[Stephen Davis, executive]

Thanks much, Mark, for the question. I'll take the first one. So in Prader-Willi, we've seen no impact at all of GLP1 utilization. In fact, as we -- as Kimberly mentioned, that we have a very enthusiastic patient population and medical community and the enrollment is moving very well. We're enrolling ahead of plan. So we haven't seen any impact of GLP1 or anything else, honestly.

I'm sorry, second question, Brendan, do you want to take that on NUPLAZID.

[Brendan Teehan, executive]

Yes, sure. Thanks for the question, Mark. We're continuing to see increases in patients on therapy on a quarterly basis. So between the community and LTC and long-term care, obviously, we have great visibility into the community. And so we've added patients in the first quarter over the fourth quarter to the order -- on the order of about 8,500 in total patients and then an LTC, that's obviously more like 1/4 of our business, but you know that prescriptions are often split between patients. So we don't have absolute visibility into the number in long-term care.

[Operator]

One moment for our next question, please. And is from Sumant Kulkarni with Canaccord Genuity.

[Sumant Kulkarni, analyst]

On DAYBUE discontinuations, is there a sweet spot in terms of months on drug where discontinuations tend to cluster. And if a patient remains on drug after that, they tend to do so more easily after they pass that point? And are most discontinuations confirmed by clinical visits? Or are they patients that have gone greater than 60 days without a refill?

[Stephen Davis, executive]

Thanks, much. I'll answer the first part. Brendan I'll ask you to answer the second part in terms of the split on discontinuations. So Sumant, we do see -- we touched on this on the call, so let me just expand out a little bit. We do see more discontinuations in the first 2 fills of drugs. So it's a disproportionate number of discontinuations there. Now some of that you would expect. We see this pretty routinely with drugs that have subjective endpoints. We see it all the time in neuropsychiatry. We have a steeper level of discontinuations in the first 2 to 3 months. So we do see some of that.

We do feel, however, though, as we parse through that data, that given the level of titration that we're seeing across the brand and just recognizing that it takes longer than to get to therapeutic levels that we do think that some patients are discontinuing prematurely before they have an opportunity to see those benefits. And there's an opportunity for us there to improve on that. And it's a high area of focus for us to own. As Brendan discussed on the call, particularly around educating caregivers and medical professionals around their expectations around time. Setting your right expectation is about time to get the benefits and then managing to that is a very important area of focus for us.

Brendan, do you want to take the other question?

[Brendan Teehan, executive]

Yes. So Steve, obviously did a great job of kind of articulating where we are with when discontinuations take place, and it's probably intuitive. But the further out we get and fills the flatter the curve hits, right? There are fewer and fewer patients that are discontinuing when you get beyond 4 and 5 fills with DAYBUE. And I think we're encouraged by that on 2 levels. Number 1 is, obviously, our fans are very close with these families. We have weekly conversations with them, so we have good confidence that once they get through the early part of that patient journey and tolerability, GI management strategies, we do a nice job of keeping them on therapy. And we also know from talking to centers of excellence, how often they're seeing these patients. Many of the physicians want to see their patients regularly after they start. The vast majority of them, I think, want to see patients at the month 3 time period, partially because that's the length of the clinical trial, partially because some payers are asking for that information at that point.

And then I think they make judgment calls on how well the patient is doing, how often they want to see them after that. But with persistency rates now out to 9 months and what we're seeing, I think we feel confident in what we're seeing in terms of patients being able to start and stay on therapy after they get through the early part of the treatment journey.

[Mark Schneyer, executive]

I think I'd just add one thing to that. I think the question was also do we -- are more discontinuations happened because they're confirmed versus going over 60 days. And I think you asked it in the context of, is it a clinical decision. I think for us, with the connectivity we have with our fans, we do find for the data we receive the majority of discontinuations are confirmed discontinuations, and it's the minority of discontinuations that are deemed discontinued for greater than 60 days. many of which of those then subsequently become confirmed when spoken to the caregiver.

[Operator]

And we have -- one moment for one more question. One moment, please. And it comes from the line of Uy Ear with Mizuho.

[Uy Ear, analyst]

Yes, just some question on NUPLAZID. So you indicated that the real-world evidence has sort of grown new starts. I'm just wondering like is it -- what exactly is it? Is there anything that's kind of like -- that's changed in practice or patients, I don't know, less scared to come back in to the physician's office? Or is there anything fundamentally in the physician's office in the long-term care that is perhaps increasing the number of patients? And secondly, would you consider perhaps increasing your investment to drive further growth?

[Stephen Davis, executive]

Thanks much for the question, Brendan, do you want to take the first question?

[Brendan Teehan, executive]

For sure. So I think there are a couple of dynamics. If you'll recall, carbidopa/levodopa Scripts in the peak of the pandemic and even towards the end were declining over time and declining would suggest fewer Parkinson's disease patients overall. Even today, we'd say that's flat. So I wouldn't call that a rebound by any stretch of the imagination. I would call that stability. But I think also easing safety measures that have patients returning to clinics and hospitals are certainly giving us more shots on goal for NUPLAZID as the choice for PDP. I think that combined with real-world evidence has given us a very compelling story on why we should be the first and best choice and it's given us an opportunity to grow share.

And what we've seen in long-term care, I think, has been pretty logical in terms of resident counts in long-term care facilities. They obviously plummeted during the pandemic. Towards the latter part, they have increased -- they have continued to increase, but NUPLAZID's performance has outpaced both the resident counts and APs in that space.

[Stephen Davis, executive]

I'll take the second part of that. So as Brendan mentioned, when we look at metrics like carbide levodopa, it looks like the overall PDP market is relatively steady or flat, but we are seeing growth with NUPLAZID there. And I think that's the genesis of your question. So would we consider increasing our investment. And I think the answer is we do monitor that, too, on a day-to-day, week-to-week basis. we look for opportunity -- we're constantly assessing is just the right level of investment given the opportunity. And as we've said before, if there -- if we feel like there's opportunities to produce an appropriate ROI, we may make those investments. But at this juncture, that's just a key element of our overall objective of optimizing cash flow.

[Operator]

Thank you. And with that, I will conclude a Q&A session and pass it back to Steve Davis for final comments.

[Stephen Davis, executive]

Thank you, operator. Thanks again, everyone, for joining us today. We look forward to updating you on our progress next quarter.

[Operator]

And with that, we thank you all for participating, and you may now disconnect.