ACADIA Pharmaceuticals Inc

NASDAQ:ACAD

Earnings Call Transcript 2022-Q2

[Operator]

Good day, ladies and gentlemen, and welcome to the ACADIA Pharmaceuticals Second Quarter 2022 Financial Results Conference Call. [Operator Instructions].

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Mark Johnson, Vice President of Investor Relations at ACADIA. Please go ahead, sir.

[Mark Johnson, VP, IR]

Thank you. Good afternoon, and thank you for joining us on today's call of ACADIA's Second Quarter 2020 Financial Results. Joining me on the call today from ACADIA are Steve Davis, our Chief Executive Officer; will provide an overview of our second quarter performance and a review of our business; Mark Schneyer, our Chief Financial Officer, will discuss our financial results and guidance; Brendan Teehan, our Chief Operating Officer, Head of Commercial; will provide updates on our commercial performance; and Kathie Bishop, our Chief Scientific Officer and Head of Rare Disease, will provide an overview on trofinetide. Stankovic, our President, will then discuss our pipeline progress before turning it back to Steve for final remarks and opening the call up for your questions.

I would also like to point out that we are using supplemental slides, which are available on the Events and Presentations section of our website. Before we proceed, I would first like to remind you that during our call today, we'll be making a number of 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 results are based on current information, assumptions and expectations that are inherently subject to change and involve a number of risks and uncertainties that may cause actual 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 under reliance on these forward-looking statements, which are made only as of today's date. I'll now turn the call over to Steve.

[Stephen Davis, CEO & Director]

Thank you, Mark. Good afternoon, everyone, and thank you for joining us today. Please turn to Slide 5. Our business plan is focused on following priorities: maximize the value of our Parkinson's disease franchise with NUPLAZID, deliver trofinetide to market is our second commercial product and the first FDA-approved treatment for Rett syndrome, complete our second pivotal study in symptoms of schizophrenia, disciplined early-stage development to selectively advance molecules into late-stage development; and finally, positioning ourselves to leverage an increasingly attractive opportunity set in business development, by carefully allocating capital as we fund our current business from our existing balance sheet and move to cash flow positive.

Let me get into these in greater detail. Let's start with our NUPLAZID PDP performance on Slide 6. Second quarter of 2022, NUPLAZID achieved $134.6 million in net sales, representing a 17% year-over-year increase. Importantly, NUPLAZID continues to outperform the basket of top branded drugs in the neurology segment, the TD market and in long-term care facilities. I'm proud of our execution to continue to outperform market competitors and grow market share in a Parkinson's market environment, which continues to be negatively impacted by the pandemic. Given the current market dynamics, we have been and continue to be focused on efficiently managing and optimizing our PDP commercial spend. As Mark will describe in a moment, by carefully allocating capital to PDP opportunities with the highest ROI, we expect to keep overall SG&A relatively flat in 2023, while funding the projected launch of trofinetide in Rett syndrome. Longer term, our outperformance against market competitors and ability to continue to gain share in what is currently a downsized market, gives us confidence in our ability to continue to grow the brand, while maximizing the value of NUPLAZID PDP. Before NUPLAZID, I want to provide some clarity on our patent protection for the franchise. Our composition of matter patent in the Orange Book was recently updated with patent term extension out at the end of April 2030.

In addition, we are conducting clinical work in pediatric autism that should result in a 6-month pediatric extension, taking our composition of to the end of October 2030. As a reminder, we have additional method of use and formulation patents that protect the currently marketed tablets and capsules of NUPLAZID out to 2037 and 2038, respectively. Let's now move to Slide 7. As announced last month, we submitted our NDA for trofinetide for the treatment of Rett Syndrome in adults and pediatric patients 2 years of age and older. The submission is based on our pivotal Phase III LAVENDER study, which delivered positive top line results on its co-primary endpoints and on the key secondary endpoint. trofinetide, it's been granted fast track status and orphan drug designation for Rett Syndrome, and it's also been granted rare pediatric disease designation by the FDA.

As such, we expect this NDA to receive a priority review with an action date most likely in the first quarter of 2020. And if approved, we would expect to receive a pediatric priority review Our commercial and medical teams are working diligently on preparing for launch, including market development, disease state education, customer profiling and broader care team identification. As a reminder, our patent for trofinetide consists of a method of use patent with expected patent term extension out to early 2036, with additional patents pending. Moving now to pimavanserin for the treatment of negative symptoms of schizophrenia. Pimavanserin has already completed 1 positive pivotal study, ADVANCE-1. As we previously noted, negative symptoms has been a particularly difficult area for the industry with many failed studies and no FDA-approved therapies. Our second pivotal study, ADVANCE-2, is ongoing. ADVANCE-2 is virtually identical to ADVANCE-1 with 1 important difference. In ADVANCE-1, we explored a range of doses and determined that the top dose, 34 milligrams, the same dose approved for PDP performed meaningfully better than lower doses. So in ADVANCE-2, we are only using the 34-milligram dose. As Serge will discuss as a result of the ongoing Russia/Ukraine war, we are extending our projections to complete enrollment to around the middle of next year.

As a reminder, this is a study with a 6-month treatment period. Let's now turn to Slide 8 to discuss the further evolution of our early-stage portfolio. One early stage program we've not previously discussed is an internally developed new molecule, ACP-204, which is currently in Phase I development. ACP-204 builds on of pimavanserin. At this point, the compound is looking very good. And if Phase I is successful, we plan to develop it as a potential treatment in neuropsychiatric symptoms, which may include Alzheimer's disease psychosis. We expect ACP-204 to complete Phase I development around year-end. Of course, making disciplined decisions in early development is a threshold requirement to success in late-stage development.

We've also made the decision to discontinue the development of ACP-044 in acute and chronic pain based on an evaluation of the final data set from a previously completed Phase II bunionectomy study. We're also discontinuing ACP-319 and PAM modulator based on a profile that does not support advancement to Phase II. Moving to the bottom of the slide, I just want to go back to a point I made when I opened my remarks and that is that we are positioning ourselves to leverage what we believe will be an increasingly attractive business development environment. We're positioning ourselves by being very focused in our investments in PDP, prioritizing investments with ROI. As I mentioned, this will enable us to appropriately fund our launch in Rett Syndrome and SG&A relatively flat. We will also continue to be very disciplined in allocating capital in our R&D portfolio as I described above. the Markets Day joined and it appears they will for the foreseeable future, what we've seen in the past in these cycles is that the tables still dramatically in favor of companies like us. Companies with a strong balance sheet, solid revenues and established commercial and R&D infrastructure.

In addition, we have established an infrastructure across all 4 quadrants you see here in both psychiatry and neurology and across broad indications and rare disease. Of course, trofinetide is a good example of our past success in business development. Our strong financial position and established infrastructure position us extremely well to leverage the evolving development opportunity set for further success. And with that, I'd like to now turn the call over to Mark to discuss our financial position, guidance and strategy in more detail.

[Mark Schneyer, EVP & CFO]

Thank you, Steve. Let me start by building upon what you just talked about as we turn to Slide 10. As a company, we continue to refocus our expense base to align it with our key strategic priorities. This includes the optimization of our SG&A expenses as well as the prioritization of our R&D expenses. At the same time, we continue to ensure that we're able to fund our existing business without the need for additional capital. Now let me provide some additional color. First, we expect to invest in the launch of trofinetide, while maintaining a relatively flat SG&A expense base in 2023 as compared to 2022. This means we will continue to redeploy resources from PDP commercial and G&A to the trofinetide commercial Second, we have prioritized our R&D portfolio with a number of programs advancing, continuing, completing and terminating. Based upon our prioritization efforts, we expect R&D expense from program costs to decrease by approximately $50 million. We expect a reduction of $15 million for the remainder of this year and another approximately $35 million next year. And finally, with a current cash balance of $436.4 million, we have more than sufficient resources to fund our business until we turn cash positive. Of course, this is subject to the scope of future PD.

Now let's turn to our quarterly performance on Slide 11. In the quarter, we recorded $134.6 million in net sales, an increase of approximately 17% compared to $115.2 million of net sales in Q2 of 2021. Year-over-year demand and selling volume were down 1% and 2%, respectively. During the current quarter, our selling volume matched our demand volume. And for the first 6 months of 2022, demand growth was up over 1% year-over-year. Our gross to net adjustment for Q2 was 15.4%, down from 18.4% last year. Gross to net for the first half of the year was 20.2%, which is essentially flat as compared to 20.4% for last year. GAAP R&D expenses increased to $75.6 million in the quarter compared to $56.9 million in Q2 2021. The increase was primarily due to development activities for ACP-044, which has now been discontinued, investment in trofinetide commercial supply, which is expense in advance of approval and expenses related to early-stage programs.

GAAP SG&A expenses decreased to $89.9 million in the second quarter from $96.8 million in the second quarter of last year. And finally, we ended the quarter with a healthy cash balance of $436.4 million. Please see our adjusted guidance ranges on Slide 12 now that we are halfway through the year. At the beginning of the year, we deliberately provided a wide net sales guidance range to reflect various scenarios related to the pandemic. At that time, I mentioned that the top end of the range reflected a significant improvement -- significant improvement in PD market and we've not seen that yet so far this year. As a result, we are reducing the top end of our net sales guidance range. Regarding gross to net, we have reduced our range slightly to 19.5% to 20.5% for the year. On the expense side, we are reducing our R&D guidance by $15 million and maintaining our SG&A guidance. While R&D will come down in 2022, we expect most of the cost reductions I referred to earlier, another approximately $35 million to be realized next year. We are raising the bottom end of our expected year-end cash balance are now guiding to the range of $375 million to $405 million.

To reiterate, we are confident in our ability to generate sustainable growth with our existing cash resources. And now I'd like to turn the call over to Brendan to discuss our PDP business.

[Brendan Teehan, EVP, COO & Head of Commercial]

Thank you, Mark. Please turn to Slide 14. I'm pleased with our team's performance this quarter, delivering net sales of $134.6 million, representing 17% year-over-year growth. Today, I want to address 4 key themes regarding our commercial organization and performance. First, the PD market dynamics and our relative performance; next, optimizing growth for the NUPLAZID brand; and I'll shed some light on exciting new real-world studies on pimavanserin safety profile, and we'll finish off discussing our preparation for trofinetide.

Let's start with the PD market dynamics and our relative performance. Our demand volume grew slightly in the first 6 months of 2022 compared to 2021, which is encouraging given the very slow incremental improvements in the PD market dynamics seen to date. As shown on this slide, we are further encouraged as NUPLAZID's growth outperformed foundational Parkinson's medications, including carbidopa levodopa as well as a market basket of branded LTC products across multiple therapeutic areas. This performance continues to indicate our strong brand support from our treating audience and has allowed us to continue to increase our market share, which has grown despite the pandemic and is up approximately 15% through since 2019. Second, as Steve alluded to, we have continued to optimize our PDP commercial spend in the current market environment to evaluate growth opportunities more efficiently and increase cash flow from the business. We will, as always, be opportunistic when the PD market dynamics improve and move closer to prepandemic levels. Third, and recently, several real-world studies have been published or presented that make important comparisons when treating patients with pimavanserin as opposed to off-label multi-receptor atypical antipsychotics in PDP patients.

One of these studies was recently published in the American Journal of Psychiatry. The authors of this study concluded the pimavanserin was -- use was associated with approximately 23% lower mortality rate than other atypical antipsychotics over 360 days. These are important findings, which Serge speak to in a moment. Let's now turn to our preparations for the launch of trofinetide for the treatment of Rett syndrome on Slide 15. ACADIA is preparing to reach yet another important milestone in the company's history, launching a second commercial product and building a rare disease focused commercial organization. Our teams are already working on shaping and developing the market for what will potentially be the first therapy approved to treat Rett Syndrome. Patients with Rett Syndrome generally have a dedicated care team, which includes their caregiver, usually family as well as their health care providers. In order to achieve our goals in the near term, we have several prelaunch activities ongoing, including building best-in-class patient support and educational resources to further generate awareness for trofinetide upon launch and identify and engage the families of Rett patient. Secondly, we are continuing to engage the community to build awareness, including leveraging our strong partnerships with Rett advocacy groups to best understand care team needs and perspectives. And finally, we're increasing our community outreach for disease education and establishing trofinetide's clinical impact through publications, scientific presentations and KOL engagement. Our ultimate launch objective will be established trofinetide as the foundational treatment for Rett Syndrome and ensure access to all patients in need.

I'll turn it over now to Kathie to discuss Rett and trofinetide from a clinical perspective.

[Kathie Bishop, SVP and Head, Rare Disease & External Innovation]

Thank you, Brandon. Let's start on Slide 17. As you know, Rett Syndrome is a serious and debilitating rare disorder for which we estimate there are between 6,000 and 9,000 patients in the new United States. There is no FDA-approved treatment for Rett Syndrome in the U.S. The debilitating symptoms of Rett Syndrome include severe neurodevelopmental and motor impairment, including gait abnormalities and loss of loss of ability to communicate both verbally and nonverbally and GI issues, including severe constipation. Ultimately, Rett Syndrome patients who lose their ability to maintain independent functioning on a daily basis and require round-the-clock support. Let's review the LAVENDER results on Slide 18, which formed the basis of our recent NDA submission to the FDA.

In the LAVENDER study, positive results were observed for the prespecified co-primary endpoint. At week 12 for the RSBQ, the P value was 0.0175 with an size of 0.37. As a reminder, the RSBQ is a validated caregiver completed rating scale, assessing a wide range of neural behavioral and neural developmental core symptoms known to be impaired in Rett Syndrome. trofinetide patients improved on average, 5 1 points from baseline at week 12 on this scale, which is very meaningful. In addition, at week 12 with the CGII, the P value was 0.003 with an effect size of 0.47. CGII is a clinician completed divestment of how much the individual illness has improved or worsened relative to baseline, scored using a standardized that is specific to the clinical Rett Syndrome. This size is quite meaningful for these patients and their families. Furthermore, in the study, statistically significant separation from placebo on the key secondary efficacy endpoint was also achieved.

This important endpoint was designed to assess the communication skills of the patients. Although initially designed for infants the skills applicable to and has been applied to older age groups for patients with neural developmental disorders such as Rett Syndrome. Lack of ability to communicate verbally and nonverbally is a significant challenge for Rett patients and their families. On this endpoint at week 12, the P value was 0.0064, with an effect size of 0.43. The consistency of these results was observed across all age groups and severity of disease in the study. This helps reinforces meaningfulness and trofinetide's potentially in all patients with Rett Syndrome. In addition, these results are also consistent with what was observed previously in Phase II studies.

And now I'll turn it over to Serge for an update on our other pipeline programs.

[Srdjan Stankovic, President]

Thank you, Kathie. Good afternoon, everyone. Let's discuss the evolution of our CNS portfolio on Slide 20. First, to reiterate what Steve and Mark said, we believe that the business development opportunity set will continue to get more and more attractive over the course of the next year and favor companies like ours that are well capitalized and have existing infrastructure in place to transact and expand. Therefore, it is important to stay discipline and make the right investment decisions for each program and the portfolio as a whole. As a result of our prioritization efforts, today, we announced that we have discontinued development of ACP-044 in acute and chronic pay; and ACP-319, the lead molecule from our M1 PAM program. On the other hand, we are investing further in an internally developed molecule ACP-204. This molecule is being evaluated in Phase I, and we expect to complete Phase I development around the end of this year. ACP-204 upon the learnings of pimavanserin in the treatment of neuropsychiatric symptoms.

We are also investing in our ASO programs with collaboration among the early-stage programs. Now let's discuss pimavanserin in PDP and the negative symptoms of schizophrenia. Building upon what Brendan stated, I would like to discuss a couple of real-world studies on Slide 21 that compare treatment with pimavanserin in patients with PDP to off-label multi-receptor atypical antipsychotics. First, the recent publication in the American Journal of Psychiatry; and second, a recent poster presented at the 2022 American Society of Clinical Psychopharmacology Annual Meeting. Both the publication and the presentation were made public in June of this year. The publication described findings from the retrospective Medicare claims analysis comparing the risk of all-cause mortality associated with pimavanserin versus other atypical antipsychotics in patients with Parkinson's disease to treat psychosis. The out of conclusions were that pimavanserin use was associated with an approximately 23% lower mortality than other atypical antipsychotics over 360 days.

The risk of mortality was approximately 35% lower in pimavanserin patients than with other atypical antipsychotics during the first 180 days of use, while the risk was similar thereafter. This data is very encouraging, and our team is proud to continue to make NUPLAZID available to patients with PDP and their families. Let's move on to our second potential indication for pimavanserin starting on Slide 22. There are over 700,000 patients in the United States who are currently treated for schizophrenia, but still have persistent and potentially debilitating negative symptoms such as social withdrawal, lack of emotions and blunted affect, among others. These symptoms lead to low social functioning, long-term disability and significant burden, and there is currently no FDA approved treatment.

As part of our advanced program, we have 1 positive pivotal study where we observed statistical separation on the primary endpoint overall and even more robust results in patients receiving 34 milligrams of pimavanserin. These positive results were published in Lancet Psychiatry. Today, I want to focus on the results of the 34-milligram group, which appears to be optimal therapeutic dose, which we are evaluating in our second pivotal study, ADVANCE-2. The graph on Slide 23 shows the improvement for only the patients who received 34-milligram dose of pimavanserin. You can see that significant improvement from placebo was achieved at week 26 with an unadjusted p-value of 0.0065, with an observed effect size of 0.34. The separation began as early as week 2 which continues to increase throughout the 6-month treatment period. We look forward to keeping you updated on our progress in this high unmet need.

And with that, I will turn the call back to Steve for closing remarks.

[Stephen Davis, CEO & Director]

Thank you, Serge. Please turn to Slide 25. Today, we are executing on our promise to deliver NUPLAZID to patients with PDP where there's an attractive long-term opportunity to continue to grow the brand. In addition, we are preparing our second commercial product launch with trofinetide, advancing our Phase III program for the negative symptoms of schizophrenia, and developing several additional programs while pursuing strategic business development. With a strong balance sheet and the projected launch of our second product early next year, we are well positioned for long-term growth.

In closing, I would like to thank our employees for their accomplishments and their ongoing commitment and fashion as we continue our mission to I'll now open up the call for questions. Operator?

[Operator]

[Operator Instructions]. Our first question, that will come from the line of Charles Duncan with Cantor Fitzgerald.

[Charles Duncan, Cantor Fitzgerald & Co.]

Thorough update today. Let's say, I'll try to ask 1 question, and it will probably be a multiparter perhaps for Kathie. I guess, I'm wondering if you could provide any further color on whether or not she anticipate an given that trofinetide is a first-in-class, first-in-indication drug and what's going on to prepare for that? And then maybe the second part is for Brendan, relative to target product profile, if he can share any feedback from payers that you've gotten so far on trofinetide.

[Stephen Davis, CEO & Director]

Kathie, do you want to take the first part of that question, Brendan, the second.

[Kathie Bishop, SVP and Head, Rare Disease & External Innovation]

Yes. Happy to. And thanks for the question, Charles. As we announced, we filed our NDA in July. And as Steve mentioned, given that Rett Syndrome is a severe rare pediatric disease, we are anticipating priority review. At day 60 since the filing, we will hear about acceptance of the NDA. So that would be in September, and we are anticipating at that time hearing about a PDUFA date officially and is where the FDA is leaning on an advisory committee meeting. I will say we are preparing in case they are going to have advisory committee meeting. But in my experience, having worked in disease for about 20 years, it is not necessarily so that for that first drug in a given indication they have advisory committee meeting. In our case, I think the data is pretty straightforward, so there's potential that, that would not happen.

[Brendan Teehan, EVP, COO & Head of Commercial]

Great. Thanks, Kathy. And Charles, thanks for your question as well. Brendan. Yes, we've had a chance to engage payers since the LAVENDER trial result. They are very understanding of this being an area of high unmet medical need. They understand the devastating nature of Rett Syndrome. They also have had a chance to see trofinetide's target product profile. They understand the importance of being able to treat across the core symptoms of Rett Syndrome. And they have given us, I think, favorable feedback on that product profile, expecting that the project would be in -- like other rare diseases in the pediatric space that they would expect to see trofinetide in that same category.

Operator

Next question, that will come from the line of Ritu Baral with Cowen.

[Ritu Baral, Cowen and Company]

I wanted to ask about ACP-204. When you say building upon the learnings of pimavanserin, is that a statement on the mechanism of 204? Is that also an agonist and is this year forward ADP strategy or Phase II strategy?

[Stephen Davis, CEO & Director]

Thanks for the question, Ritu. Let me ask Serge to comment on the first part of that question, and then I'll take the second part regarding ADP cohort strategy, Serge?

[Srdjan Stankovic, President]

Yes. Thanks, Ritu. Great question. We are developing ACP-204 and internally developed compound with a similar but different and differentiated pharmacology from pimavanserin. So as a compound in a target system, similarly as pimavanserin, it has potential advantages that are stemming from differences in and some properties of the molecule. So that perspective, we anticipate that this molecule is deploying successfully so far through the Phase I to pursue after the our work and pursue aggressive development into the symptoms. Obviously, among others, Alzheimer's disease but we are looking at a whole area that this compound may be. One thing that I would add here particularly of the important different of this compound is higher potential in terms of the efficacy, which again, is related to the properties of the molecule and the data that we have from our preclinical -- and preclinical work. And the second, there is as well as differentiation in terms of lack of liability -- QT liability, which is differentiation compared to pimavanserin.

[Stephen Davis, CEO & Director]

Thanks, Serge. Ritu, On my end of the line was breaking up a little bit. Did you hear his answer.

[Ritu Baral, Cowen and Company]

I heard about the QT. I heard about the I wasn't exactly sure about the differential pharmacodynamic middle portion.

[Stephen Davis, CEO & Director]

Okay. Let me just sum up. So 204 is similar, but not identical from a biochemical perspective. So from a binding profile perspective, very similar, but not identical. That, together with other properties of the compound, we think give us important perspective, very similar, but not identical. That, together with other properties of the compound, we think give us important potential differentiating factors from pimavanserin. Of course, this all has to play out in the clinic. We're eager to get -- to continue advancing the compound, but we think it has very great potential, and we're excited about it given that it's an early-stage compound. In terms of our ADP go-forward strategy, as we previously stated, we do not plan to conduct another PDP study with pimavanserin. That kind of decision is always multifaceted. It partly rises on the amount of time that it would take to run another study. This is a population and pandemic, there's the potential for that taking longer than otherwise would. Juxtaposed against the -- where the product is in its life cycle and other considerations. And in this case, it also included ACP-204. So it certainly wasn't the only consideration, but it was a consideration. ACP-204 will have a patent life that will go into the early 2020s. And so it was -- going forward, we will not be running another study pimavanserin. We've not yet determined if we will with ACP-204, but certainly, that will be one very high priority indication for us to consider. At this point, we just need to wrap up Phase I, get a full profile of the compound and we're back to you and others with a more definitive development plan.

[Operator]

Next question. That will come from the line of Neena Garg with Citi.

[Neena Garg, Citigroup]

I was just wondering if you could clarify some of the dynamics on the quarterly pimavanserin gross to net, specifically. Maybe if you can describe kind of what drove the the steep drop-off in the gross-to-net discount there. And then if you can clarify what we should expect for the full year. That would be great.

[Stephen Davis, CEO & Director]

Sure. Mark, do you want to take that?

[Mark Schneyer, EVP & CFO]

Yes, sure. Thanks for the question. The decline for the -- just for the second quarter in comparison to the second quarter of last year was really a timing difference that happened in accruals between the first and second quarter of 2021. So I think that's why we're importantly noted kind of the gross to net for the full 6 months year-to-date, which is essentially basically the same and flat. And as we look forward to the year, we announced or I commented that we are bringing our guidance range for gross to net a little bit from 19.5% to 20.5%, and that's just as we're seeing kind of less of a growth in 340B dynamics, which has been kind of the main driver of growth in the last year or so as gross to net has ticked up.

[Neena Garg, Citigroup]

Got it. That's helpful. I guess, then maybe if you can talk a little bit about just the dynamics and kind of how we should think about kind of the pace of new starts in the second quarter just because it seems like most of the sequential growth in sales was driven then by the gross to net.

[Stephen Davis, CEO & Director]

Mark, go ahead.

[Mark Schneyer, EVP & CFO]

Yes, I think as we continue to just be in this kind of, I guess, flat to modest growth period, that won't last forever, but it remains where we are now. So we're confident that over the long term, that has kind of PD market dynamics going to return to a more favorable environment, a normal environment as we would expect, timing of which is hard to predict that will return to greater growth period as we continue to outperform and gain market share in this market. I think for the remainder of this year, we lowered the top end of our guidance range, just that was reflective of a PD market dynamic that would have been significantly improving. As I mentioned, we haven't seen that yet. So our current range is that kind of demand would be in kind of the slightly negative to positive range for demand growth. Selling will be slightly less than is our expectation as we had last year. A little bit of sell-in growth that exceeded demand growth, and we don't necessarily expect that dynamic to increase to continue this year. And we'll see where we wind up this year and look forward to growing the brand over time.

[Stephen Davis, CEO & Director]

Maybe just to quickly echo Mark's comments. One other thing to just note is that the PD market environment is smaller today than it was prior to the pandemic. We see that when we see the scripts for carbidopa levodopa growing at a very slow rate, much lower than it was part of the pandemic that we see it in occupancy rates in long-term care facilities, patients in-person offices, et cetera. So we've talked about those dynamics a lot. Importantly, despite a smaller -- what is today a smaller market, which we will grow again in the future, throughout the pandemic, we've gained about 15% market share. So our market share prior to the pandemic versus where we're seeing today has gone up about 15%. So that is another consideration in terms that gives us confidence that as pandemic conditions only improve, and we're able to continue to grow market share that we'll go back to the kind of longer-term growth rates that we've seen historically.

[Operator]

Our next question, that will come from the line of Chris Howerton with Jefferies.

[Unidentified Analyst]

This is A.J. on for Chris Howerton here. Are you thinking about NSS any differently following today? Do you maybe see atypical antipsychotics as it sort of holdover if physicians are willing to go out and get preauthorizations for that?

[Stephen Davis, CEO & Director]

Sure. Serge, do you want to take that?

[Srdjan Stankovic, President]

Yes, absolutely. Thanks for the question. Although I'll probably leave it to point on the authorization and all that. But scientific perspective, I would say, that the indication that is pursuing is very from the indication that we are pursuing with pimavanserin in negative symptoms schizophrenia, First of all, program is on a therapy in acute schizophrenia symptoms, short-term studies. And the results, I would say, we are very pleased to see that there is another potential treatment option for this serious condition. But it's very different from negative symptoms schizophrenia, where it's a long-term treatment with requirement that a positive symptoms of schizophrenia -- acute symptoms of schizophrenia are under control and the remaining negative symptoms in terms of social withdrawal, emotional withdrawal and so on are treated with most frequently adjunctively and that's exactly how we are pursuing that. So we are not seeing a direct read through from the Karuna data because it's a different competitive environment than what we are pursuing. I will remind you, there are no approved treatment for negative symptoms schizophrenia, while there are multiple treatments for for acute schizophrenia symptoms. I will only add 1 other thing is that movement on the negative symptom subscale PAM in the context and paradigm of the acute short treatment is something that we regularly see in our trial because with the reduction of acute symptoms, you are seeing a movement or some movement on the negative symptoms as well. So -- but that's not accepted as evidence of the efficacy for -- in the treatment of negative symptoms schizophrenia. The only long-term 6-month studies in a context of stable positive symptoms and improvement of negative symptoms is accepted by regulators as an appropriate paradigm for evidence of efficacy.

[Operator]

Our next question, that will come from the line of Greg Renza with RBC Capital.

[Gregory Renza, RBC Capital Markets]

Great. I just wanted to give you a chance to perhaps close the loop on the recent CRL with pimavanserin. I know that it's been communicated from a team as disappointing and certainly telegraphed over this recent time. But just perhaps you can provide a punctuation mark on or I should say, final point on what it means for the company, you made some changes today that are certainly meaningful across the pipeline and the profile. How is that feeding into how you're looking at going forward?

[Stephen Davis, CEO & Director]

Yes. Thanks very much for the question, Greg. Look, there's no drug approved for the treatment of Alzheimer's disease psychosis and it's a dramatic unmet need. So of course, we continue to be very disappointed that we didn't have a positive outcome with our resubmission in ADP. Look, going forward, we haven't given up on the indication. I think we've given a clear signal that today still remains a very significant unmet need. And maybe one of the key elements of success in ADP is just the recognition that this is a very frail in elderly population, and they take a lot of other medications. And so an ideal drug to treat them is one that resolves the -- or at least mitigate the psychosis, but also does it without a lot of side effect or tolerability baggage. And so that's been kind of a hallmark of our approach working through the system. And so we'll continue to be interested in trying to help the 600,000 patients and their families that are currently taking atypical antipsychotics that have a lot more side effect baggage than what we see with our approach. So we'll continue to be very interested. Obviously, we much prefer to be helping these patients today, but we'll continue to press forward on multiple fronts.

[Operator]

Our next question, that will come from the line of Marc Goodman with SVB Leering.

[Marc Goodman, SVB Securities]

Steve, can you tell us what is your strategy for Europe? Are we still thinking about bringing NUPLAZID to Europe at all? And then just on the pain product that you killed, why kill it before we get the chronic pain data?

[Stephen Davis, CEO & Director]

Sure. I'll let -- I'll take the first part of the question. I'll let Serge take the second. So in terms of Europe, our strategy has not changed. The reality is for drugs like this, like NUPLAZID is the pricing environment outside of the United States is very different. And in many cases, it's difficult to get pricing that would even make the venture profitable or even breakeven. And so it's just a very challenging environment in Europe. And of course, if the whole world operated with similar pricing structures, which wouldn't have any drug. So it's -- I wish the situation were different, but it's a very difficult situation today for lots of drugs in terms of getting appropriate pricing outside of the United States. So our strategy there has been to consider advancing NUPLAZID with additional indications above and beyond PDP. We'll come back and take a look at that when we get the results of negative symptoms of schizophrenia. We do have in Europe as well as Japan, 10 years of data exclusivity. So the product life would not be governed by patents. And so we'll take a look at it down the road. But today, with only a indication, it just makes us a very challenged environment to launch in.

[Srdjan Stankovic, President]

Yes. On the second question about ACP-044, first, let me just find that early-stage small molecule drug development has a high attrition rate. And therefore, it's our approach that we consider very important to be disciplined with the data. We have a high internal threshold for future investment. And this particular candidate, ACP-044, did not meet it. The decision to discontinue ACP-044 was more faceted, but ultimately, the efficacy data we observed in the bunionectomy study, and we spend quite a bit of time analyzing that data as well as when that's positions with safety and tolerability profile, overall, the totality of data just did not reach our threshold for further investment in the molecule. Having said that, I will say and remind you that we acquired a battery of molecules with this mechanism of action, and we will be realigning our focus to earlier-stage molecules and evaluating their further development.

[Operator]

Our next question, that will come from the line of Danielle Brill with Raymond James.

[Unidentified Analyst]

This is Alex on for Danielle. Forgive me for getting a little I just want to look at trofinetide and some of the open label studies that are happening. So when you top line LAVENDER, you spoke about some diary mitigation strategies, including the removal of anti-constipation meds, given that could be administered in an unblinded fashion. So we were curious what percent of patients stopped taking anti-constipation meds in the open-label LILAC studies and also what the rates of diarrhea in patients in LILAC who were not on anti-constipation meds.

[Stephen Davis, CEO & Director]

Thanks for the question, Alex. Kathie, do you want to take that?

[Kathie Bishop, SVP and Head, Rare Disease & External Innovation]

Sure. Thanks, Alex, for the question. So as we had patients enrolled in the LILAC-1 and LILAC-2 open-label extension studies, which are continuing, we -- as we talked about previously, we instituted a diarrhea management plan to help deal with the diarrhea. It's important critical to note that these patients have severe GI issues through to their Rett Syndrome, which in about 80% of patients is severe constipation, which in this patient population that is unable to communicate verbally and nonverbally, is very difficult to manage both the parents and the physicians who manage these patients, and this constipation can be very severe leading to hospitalization. So they are on multiple anti-constipation medication.

So what we suggest now and what we're planning for as we think about commercial launch is implementing a diarrhea management plan in which we ask them to stop taking those anti-constipation medications as they start on trofinetide as you could imagine that those medications along with trofinetide would contribute to the diarrhea. And in addition, we asked them to manage the diarrhea using over-the-counter medications as well as fiber supplements. And we have seen a reduction in the severity and incidence of diarrhea with this management plan, and we have patients that have remained on trofinetide for a very long time now. I don't think we provide specifics in terms of percentages, but we are optimistic that this diarrhea management strategy as we work towards commercial launch will be effective in managing the diarrhea that we see with trofinetide. Also, going to remind you that the diarrhea is mild to modern severity, it does not lead to dehydration or hospitalization. So when you compare that to the constipation that the patients have, this could be preferred.

[Operator]

One moment for our next question. That will come from the line of Sumant Kulkarni with Canaccord Genuity.

[Sumant Kulkarni, Canaccord Genuity]

On the business development environment, you mentioned that your potential situation to take advantage of that. How quickly would you to do that? What's the sweet stage for a product in terms of the pipeline stage in? And how would you balance that against the potential recovery in the Parkinson's disease market?

[Mark Schneyer, EVP & CFO]

Yes. Thanks much for the question. This is Mark. So let me just start by reflecting on what we've seen in cycles like this in the past. And it's been quite a while since we've had a significant and sustained downturn in the capital markets in the biotech industry. What we've seen in the past is as these kind of closed windows or just joined capital markets going for 2 quarters, 3 quarters, 4 quarters, companies just naturally become more engaged and interested in partnering because it just becomes more and more difficult to -- for them to fund all of their programs independently. And so that's what we anticipate happening. We're beginning to see some early signs of that. companies that maybe were not as interested in talking earlier now more engaging. But for this to really result in a meaningful change in the attractiveness of the business opportunities at the capital markets to stay just joining for another quarter or 2 or 3, which at this point in time is anyone's guess, but it doesn't look like this is going to turn around anytime soon. And so while in some respects, it's a difficult time for the industry, why ensuring probably a net positive for us and companies like us because what happens is the PD table, as we said, just tilt dramatically in favorite companies with our kinds of resources and infrastructure. So as we go forward, we're poised to take advantage of that. The most -- by far, the most challenging competitor we've had in business development for the last 5 to 7 years has been the capital markets. And that's a very, very different dynamic today as we go forward.

[Operator]

Next question, that will come from the line of Paul Matteis with Stifel.

[Unidentified Analyst]

This is James on for Paul. You mentioned ADP as a potential indication for ACP-204. I guess in your recent communications with the FDA around pimavanserin, I guess did they provide any specific guidance or anything around what development should look like, for example, running acute versus relapse prevention studies or any learnings that you can carry forward as you potentially pursue that indication.

[Stephen Davis, CEO & Director]

Yes. Thanks much for the question, Serge, feel free to jump in if you have additional thoughts. So first of all, let me just say, with ACP-204, we've not had discussions about late-stage development yet with the FDA, that will be a part of the process in due course. But what I would say is, of course, we learned an awful lot about Alzheimer's disease psychosis throughout the development of pimavanserin. And so we'll leverage those learnings. We have a very, very good feel for what the appropriate safety and tolerability profile needs to be, what how to run these studies, et cetera. So I think we're very, very well positioned to leverage the institutional knowledge that we have in ADP. And of course, if ADP -- if we pursue 204 in ADP, which as we've indicated, we think we've a very attractive indication, then we'll certainly be able to leverage all those learnings. Serge, anything you'd like to add?

[Srdjan Stankovic, President]

Yes. I would just briefly add that circumstances around pimavanserin development in psychosis and/or ADP were different -- are different than any new chemical entity that you would bring into development. In that, that at the time were contemplating doing and agreeing with FDA to do a randomized withdrawal trial. We already have behind us 2 acute trials in neurodegenerative -- in psychosis associated with neurodegenerative disease. So there was already evidence of efficacy in the acute treatment and paradigm for treatment of psychotic symptoms. Any new molecule that you would bring would have a different circumstance than obviously, the development program we just have to be designed to accommodate those circumstances.

[Operator]

Our next question, that will come from the line of Yatin Suneja with Guggenheim.

[Eddie Hickman, Guggenheim Securities]

This is Eddie on for Yatin. So on trofinetide, given the lack of approved therapies, do you expect a bolus of patients hung on drug quickly after the launch? Or should we except some sort of education or sales work to temper that ramp? And related to that, how many of those 6,000 to 9,000 U.S. patients have you identified so far? And then quickly, if you can comment just a bit more on why you terminated the M1 program?

[Stephen Davis, CEO & Director]

Sure. Brendan, do you want to take everything down to the M1 portion of the question, then Serge, I'll let you ask you to take that.

[Brendan Teehan, EVP, COO & Head of Commercial]

Sure, Eddie. Thanks for the question. The desire to trial trofinetide, whether you're speaking about HCPs or families is high. In all of our market research, we see a high level of enthusiasm for that. With that said, we've been able to look at other analogs of rare disease, pediatric product launches. There is the early stages where, of course, you would expect patients that have been part of our studies to be able to roll over on to a commercial drug relatively seamlessly.

And we're working very closely with centers of excellence and high-value institutions to make sure we're very well aware of the patient population already diagnosed to be ready to treat. And with that said, we will work closely with payers to make sure we're doing our best to make sure that access is available as readily as possible, but we do anticipate in the first few months post launch that there will be work to be done to make sure that every patient that wants to -- that is seeking therapy will have an opportunity to be treated. I think your second question was around how many of these patients are we already aware of. We've done a lot of work with multiple databases to confirm the already identified and diagnosed Rett population. And of that 6,000 to 9,000, I would say that roughly 2/3 of patients are diagnosed. And we expect, as is the case of many rare disease products post lunch, that diagnosis rates would increase when people are aware that there is a therapy available. I don't expect that to be overnight, obviously. But as more and more people become aware that there's a novel treatment for Rett Syndrome, it's very likely that families will seek additional diagnoses.

[Srdjan Stankovic, President]

In regards to M1 program, let me just make a first start with a clarification. We did not discontinue M1 PAM program. we made a decision to discontinue development of the ACP-319. And the story there is very similar to what I described with the ACP-044 that we defined a certain profile that we were anticipated on the basis of the preclinical animal data and early Phase I data. And the molecule just did not rise to the level of reaching that high threshold of our anticipation for the competitive molecule. But I will remind you that we have additional backup molecules in our M1 PAM collaboration and we will be further evaluating these molecules as we move forward.

[Operator]

Our next question, that will come from the line of with Needham. .

[Unidentified Analyst]

On for Ami. One question from our side. Do you have visibility on how looks like it likely to trend next year in light of the increasing of 340

[Stephen Davis, CEO & Director]

I'm sorry, I couldn't hear the question. Could you ask it again?

[Unidentified Analyst]

So do you have any visibilities on -- into how GTN for NUPLAZID is likely to trend like in light of the increasing 340B mix?

[Stephen Davis, CEO & Director]

Got it. Okay. Thank you very much. Mark, you want to take that? .

[Mark Schneyer, EVP & CFO]

Yes, sure. Thanks for the question. We'll -- we don't forecast kind of out for next year at this time, we'll release guidance when we publish our fourth quarter results. I think what we've seen thus far this year is that the growth in volume of 340B is moderating. So I think that is the component of why we've reduced kind of our guidance for this year for gross to net, and we'll continue to monitor that as we proceed through this year and consider that as we share guidance with the sweet for next year.

[Operator]

Our next question, that will come from the line of Jay Olson with Oppenheimer.

[Jay Olson, Oppenheimer]

Since you have two programs for Rett Syndrome with trofinetide and then a collaboration with Stoke Therapeutics. Can you just talk about how these 2 programs would complement each other and potentially be used in combination.

[Stephen Davis, CEO & Director]

Yes. Sure. Thanks much, Jay. Kathie, do you want to take that? .

[Kathie Bishop, SVP and Head, Rare Disease & External Innovation]

Sure. Yes. And we think that the 2 different programs because they have different mechanisms, we complement each other very nicely. So not compete with each other. But trofinetide could be a foundational treatment, hopefully approved next year. The Stoke program is in clinical has a very different mechanism in that the goal is to increase the MECP2 protein in these patients. And so patients on trofinetide could also undergo that therapy as well having an additive maybe even a effect. And I think I'll just add that all the work Brendan and his team is doing now for the potential launch of trofinetide and Rett Syndrome kind of established us as the leader in that disease. So any follow-on program we'll be able to use all those learnings as we develop and commercialize the second program.

[Operator]

And we do have time for one more question, and that will come from the line of Ritu Baral with Cowen.

[Ritu Baral, Cowen and Company]

I wanted to ask about the SG&A, which you guys indicated should stay relatively flat despite the launch. And you mentioned sort of redeploying some of that capital from PDP to Rett. Can You discuss where you're pulling the Rett Syndrome dollars from? And I guess, your connection that it won't be stabilized the PDP franchise.

[Stephen Davis, CEO & Director]

Sure. Mark, do you want to start?

[Mark Schneyer, EVP & CFO]

Sure. Thanks, Steve, and thanks for the question, Ritu. I think importantly, as we look forward to next year and kind of develop some of our investment for both PDP and trofinetide, we did it independently to find -- figure out what the right resources are to put on each product. And that is a consequence of that evaluation kind of results in an overall flat SG&A, wasn't the flat SG&A in and of itself wasn't a specific target. And I think for us, on trofinetide, we want to make sure we have the right resources and budget to launch, we -- and on PDP, we just remain in this kind of modest to -- modest growth period, flat growth period and as we get deeper into the life cycle of drug kind of what are the best return on investment tactics and how do we drive growth and value for And we're confident that we're putting the resources and the drug to achieve that as we move forward.

[Stephen Davis, CEO & Director]

Yes, just again, echoing Mark. The only thing I would add is -- we mentioned this before, but just try to be a little bit more precise. With PDP right now in the current market, which is smaller, for instance, things like DTC advertising on television, don't produce the same kind of return on investment if patients are going to -- a patient business to their doctor are down 20%. So however, digital DTC continues to be very effective. So we're far enough into the pandemic now to have a good feel for what are the drivers that are driving growth, exposure directly with physicians, physicians talking about at patients, long-term care, rates and new patient admissions, very good feel of what the levers are to pull in this kind of environment. And so as a consequence, there just some investments that you don't pass the test to invest in having nothing to do with Rett or launch there, but just because just being disciplined about how we invest our dollars. The last thing I'll add is, I just want to impact something that Brendan mentioned earlier. There's important new real-world information out that's just been published that, that I think does really help underscore the benefits of pimavanserin. And so that's the kind of thing, of course, that we are investing heavily in to make sure that our medical affairs team is very well equipped to describe those differences and help physicians understand the data when they have questions about it. So we're -- I feel like we're pressing on all the right buttons and the resource dollars are, as Mark mentioned, purely a consequence of our assessment of what's working and warrants investment at this moment in time in this environment and one doesn't.

[Operator]

Thank you. I would now like to turn the call back over to Mr. Steve Davis for any closing remarks.

[Stephen Davis, CEO & Director]

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

[Operator]

Ladies and gentlemen, thank you for participating in today's conference call. This concludes the presentation. You may now disconnect. Good day.