ACADIA Pharmaceuticals Inc

NASDAQ:ACAD

Earnings Call Analysis

Acadia Pharmaceuticals Records Strong Growth

Acadia Pharmaceuticals has reshaped its business for robust growth, ending 2023 with a 40% surge in revenue and a strong cash position of $438.9 million, despite investing over $100 million in business development. DAYBUE, treating Rett Syndrome, amassed $87.1 million in Q4 and projects 2024 sales of $370-420 million. Another flagship product, NUPLAZID for Parkinson's psychosis, brought in $143.9 million in Q4, with the full year predicting $560-590 million. Expenses in R&D and SG&A are due to increase, funding further clinical and commercial expansion. The prognosis is healthy with expected year-end cash in 2024 between $585-655 million.

Transformation and Growth in 2023

2023 marked a milestone year for the company, characterized by a transformation into a cash flow positive entity with two pioneering commercialized products. The successful launch of DAYBUE, the first and only treatment for Rett Syndrome, and the continued strong performance of NUPLAZID, a treatment for Parkinson's disease psychosis, led to a record-breaking fourth quarter with $231 million in revenues. This achievement represents a substantial 40% growth in revenue for the full year, amounting to $726.4 million. This financial upsurge was accompanied by an expansion in the company's drug pipeline, with significant advances in treatments for conditions such as schizophrenia, Prader-Willi Syndrome, and Alzheimer's disease psychosis.

DAYBUE's Early Triumph

DAYBUE's impressive market reception yielded $87.1 million in sales in just its second full quarter since launch. This only drug approved for treating Rett Syndrome not only filled a significant unmet medical need but also showcased the company's innovative strength. Reflecting on the vast potential, management is keen on DAYBUE's future prospects.

NUPLAZID's Sustained Success

NUPLAZID, which stands alone in being approved for Parkinson's disease psychosis, contributed strongly with $143.9 million in sales for the fourth quarter. It asserts the company's capability to increase market share and revenue, while effectively managing costs to ensure sustainable cash flow.

Expand and Innovate: Strategic Development

The firm's strategic moves in 2023 included the launch of DAYBUE that added striking growth potential, and anticipation of top-line results from the ADVANCE 2 study in schizophrenia by the quarter's end. Moreover, the company currently has several late-stage pipeline assets and ongoing clinical programs for the treatment of Prader-Willi Syndrome and Alzheimer's disease psychosis, citing no current FDA-approved treatments for these conditions, thus emphasizing the high unmet need.

DAYBUE's Market Penetration and Positive Impact

Ten months post-launch, DAYBUE has already established a strong prescriber base, with Centers of Excellence accounting for around 40% of new patient prescriptions. The uptake was driven by strong demand from families seeking treatment, bolstered by high persistency rates and real-world efficacy feedback from caregivers and patients. The company aims to tap into the substantial opportunity offered by the approximately 5,000 diagnosed Rett patients in the U.S., which is expected to fuel revenue growth well beyond the current year.

Predictable Seasonal Fluctuations

December saw increased refill rates due to holidays and health plan changes, followed by a temporary decline in January with reduced clinic visits. However, the recovering trend observed in February indicates that these variations are merely seasonal and can be anticipated for future planning.

Persistency Rates and Real-World Efficacy

Persistency rates for DAYBUE continue to excel, with over 80% at month four, showcasing the drug's positive reception and effective treatment profile. In terms of real-world benefits, caregivers report significant improvements in patients' engagement, hand use, and alertness, highlighting DAYBUE's profound impact on the quality of life for Rett patients.

International Expansion plans

Building on the momentum of DAYBUE's domestic success, the company is exploring launches in Europe and Canada, estimating a combined Rett patient population of 9,600 to 15,000. Filings for marketing authorization in these regions are expected to take place in the coming year with potential approvals by end of 2024.

NUPLAZID's Continued Growth

NUPLAZID's sales rose by 6% to $549.2 million in 2023. This increase is attributed to initiatives like broad educational campaigns highlighting NUPLAZID's effectiveness, which have led to a 12% year-over-year growth in new patient starts.

Advancing Clinical Trials for Prader-Willi Syndrome

The company is progressing with a Phase III study for the treatment of hyperphagia in Prader-Willi Syndrome and is preparing for a subsequent FDA submission if the trials yield positive outcomes.

Promising Developments for ACP-204

The company is advancing ACP-204, a next-generation compound, which promises improved dosing and tolerability over pimavanserin, potentially offering enhanced therapeutic outcomes.

Forward-Looking Guidance for 2024

The company provided net sales guidance for 2024, with projected NUPLAZID sales ranging between $560 million and $590 million. This forecast accounts for expected stable gross to net levels, volume growth, and net price growth. Additionally, anticipated R&D expenses are slated to be between $305 million and $325 million, and SG&A is projected to fall between $455 million and $480 million. The projected year-end cash balance is optimistic, with the company expecting it to be in the range of $585 million to $655 million—excluding any future business development expenditures.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals Fourth Quarter and Full Year 2023 Financial Results Conference Call. My name is Abigail, and I will be your coordinator for today.[Operator Instructions]

I would now like to turn the presentation over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications at ACADIA. Please proceed.

[Albert Kildani, executive]

Good afternoon, and thank you for joining us on today's call to discuss ACADIA's fourth quarter and full year 2023 earnings results. 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. Doug Williamson, our Head of Research and Development, 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 up the call to 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. We transformed our business in 2023. Today, we are a cash flow positive company with 2 first-in-class commercial assets. We have 3 late-stage assets and a robust early-stage pipeline, and we continue to invest in future growth through business development. Let's begin with our Commercial franchises, which delivered record revenues of $231 million in the fourth quarter of 2023 and $726.4 million for the full year. DAYBUE the first and only drug approved to treat Rett Syndrome generated fourth quarter sales of $87.1 million in its second full quarter of sales since it was launched in April of last year. We're proud of our early success with the launch and excited about the future of DAYBUE.

NUPLAZID continues to deliver and be strongly cash flow positive. Sales in the fourth quarter were $143.9 million and reflect our ability to gain market share and grow the revenue base while continuing to manage the expense base. In addition to our 2 successful Commercial franchises, we have a deep and growing pipeline, which is making significant advances, including programs in the negative symptoms of schizophrenia, Prader-Willi Syndrome and Alzheimer's disease psychosis. Acadia has never been in a stronger financial position. We delivered 40% revenue growth in 2023 on the strength of our successful DAYBUE launch. We are now in a position to generate substantial, sustainable cash flow to fund further growth in our business.

We ended the year with $438.9 million in cash, even after deploying a little over $100 million for business development and expect our cash balance to grow to between $585 million and $655 million by the end of 2024. The [indiscernible] is relatively unique amongst our biotech peers, combining successful commercial franchises, batting late- and early-stage assets and the financial strength to capitalize on these opportunities. This includes further expanding our portfolio and building on our success with DAYBUE and NUPLAZID in central nervous system and rare diseases. Let's next turn to a snapshot of our current products and pipeline on Slide 6.

NUPLAZID is our treatment for Parkinson's disease psychosis, which today remains the only drug approved for the treatment of this condition. In 2023, we added significant growth potential to our business, with the introduction of DAYBUE for the treatment of Rett Syndrome. Here too, DAYBUE is the first and only drug approved for the treatment of Rett. Behind these 2 successful commercial franchises, we have numerous late and early-stage pipeline assets, including our negative symptoms of schizophrenia program with pimavanserin. There are no FDA-approved treatments for this disorder, so the unmet need is high, and we look forward to having top line results of our ADVANCE 2 study by the end of this quarter. As a side note, obviously, we do not have results as of today.

ACP-101 in Prader-Willi syndrome, where we are currently enrolling subjects. Prader-Willi is a rare and highly debilitating genetic disease where patients have an unrelenting drive to eat [ alpapraphagia ]. The severity of this disorder translates into an average life span of 30 years. Here, too, there are no FDA-approved treatments. We're also 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 beyond that, we have a rich pipeline of early-stage disclosed and undisclosed programs that position us for future growth. I'll now turn the call over to Brendan to discuss our commercial performance on Slide 7.

[Brendan Teehan, executive]

Thank you, Steve. I'm pleased to provide additional commentary on our 2 commercial franchises DAYBUE and NUPLAZID and the terrific performance both delivered in the quarter. Please turn to Slide 8, beginning with DAYBUE. We're now roughly 10 months into launch, and I'd like to begin by summarizing our accomplishments to date. The launch of DAYBUE is one of the most successful [indiscernible] launches in rare disease. We've had the privilege of bringing this therapy to Rett patients and their caregivers who previously had no approved therapeutic options to help them deal with the debilitating condition. With an estimated 5,000 diagnosed Rett patients in the United States and a prevalent population of 6,000 to 9,000 there is a substantial opportunity in front of us to bring the benefits of this therapy to many more patients.

We anticipate this will drive meaningful revenue growth well beyond this year. As the first drug approved for the treatment of Rett syndrome, we've experienced strong interest and demand from Rett families. As we've previously reported, this strong interest produced a surge of new patient starts in the first 4 months of the launch, followed by a demand curve that is much closer to our prelaunch expectations and the linear shape curve we typically see in rare disease drugs. From a prescriber perspective, this initial surge was concentrated in Rett Centers of Excellence, or COEs, and we have since significantly expanded the breadth and depth of prescribers. This surge has produced multiple benefits. It's enabled us to reach a critical mass of experience in the medical and caregiver communities dramatically faster than we otherwise would have. This has also enabled us to rapidly gain real-world insights that we've been able to use to further educate the medical and caregiver communities.

10 months into the launch, COEs continue to represent a rich source of new patient starts. In fact, today, approximately 40% of our new patient prescriptions come from COEs and we are continuing to add depth in this sector. Non-COE high-volume institutions account for approximately 30% of our new patient prescriptions. This sector represents an additional important growth opportunity as we continue to increase our breadth and depth in these institutions. I'd like to focus now on seasonal dynamics we observed in the latter part of the fourth quarter and early part of the first quarter. In December, in particular, we experienced higher-than-average refill rates as families prepared for the holidays and health plan changes or reauthorizations in the new year. In January, we saw a decline in new prescriptions written driven by seasonal and significant decline in Rett clinic visits following the holiday period, where approximately 50% of COEs had either no clinic days or reduced clinic days available.

We have since seen a return of Rett clinic days in February tracking back to historical levels and new patient prescription rates returning to the trends we observed prior to January. In January, we also saw a reduction in resales and conversion rates due to typical beginning of the year reauthorization and re-enrollment processes. This resulted in delays in patients receiving their first paid shipments in the new year. We are working through those authorizations and do not see any long-term issues associated with processing these. Let's turn to persistency on Slide 9. What you see on this slide is updated persistency information. There are two key points I'd like to highlight. First, we continue to track at least 10 percentage points above our clinical trial experience, specifically the LILAC-1 open-label extension, where patients rolled over to trofinetide from placebo and this differential has continued to be very consistent for several months now.

Second, when we look at these monthly milestones, they're improving. For example, our month 4 persistency number was 75% when we reported on our earnings call in November. And now at month 4, you see that with many more patients we're at 80% persistency. And our month 6 persistency, which we reported at JPMorgan last month was 68% and now has risen to 70% and we continue to see this data improve at all time points thus far. We are seeing improvements in persistency as patients and HCPs gain more experience with the safety and tolerability profile of DAYBUE. For clarity, the persistency rates we're including here are calculated based on the confirmed discontinuations, plus those that are 60 days beyond their scheduled refill date counted as a discontinuation. Please turn to Slide 10.

As I mentioned earlier, we continue to generate a shared data supporting the long-term benefits observed in patients treated with DAYBUE. Here, we describe two important posters that we presented recently at the American Epilepsy Society or AES meeting, in December that underscore the benefits of DAYBUE. The first poster details the long-term outcomes in patients who completed our LAVENDER study and then continued into our open-label LILAC-1 and then LILAC-2 studies. Data presented in the poster demonstrated that patients treated with trofinetide and LILAC-2 continued to experience improvement in symptoms for up to 32 months. In addition, safety and tolerability were consistent with prior studies. Let's now turn to Slide 11 for the second poster presented at AES. This poster presented the results of the caregiver exit interviews for Rett patients treated with trofinetide in the LAVENDER and LILAC studies.

You can see in the table on the left, some of those specific real-world improvements caregivers cited in their interviews. Consistent with the unmet need often highlighted by caregivers, the top 3 areas of improvement noted by these respondents in their children were improvement in engagement, improvement in hand use and improvement in eye-gaze. We're pleased to have the feedback regarding the impact of trofinetide on the very symptoms that matter most to Rett families, and we're using this information to educate HCPs and Rett families about the potential benefits of debut. Let's turn to Slide 12. These quotes from caregivers reinforce some of the observations described above, which are consistent with the types of things we've been hearing for many months, such as caregivers noting higher levels of engagement, improvement in speech with a broadening vocabulary and improved engagement in conversations, more purposeful use of hands and decreased hand ringing and stereo [indiscernible]. We also regularly hear feedback about [ a loved one's ] increased cognitive ability or increased alertness with patients now being able to better follow conversations.

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 next turn to our plans to make DAYBUE available to patients outside the United States on Slide 13. We see a clear opportunity to launch DAYBUE outside the United States and leverage the insights and learnings from the very successful U.S. launch to help many more patients suffering from Rett syndrome. Starting in Europe, it's estimated there are 9,000 to 14,000 Rett patients between Europe and the U.K. We've engaged with EMA this quarter, and we anticipate filing a marketing authorization application with the European Medicines Agency in the first half of next year.

In Canada, it's estimated there are 600 to 900 Rett patients. We expect to file our new drug submission later this quarter with a potential approval around year-end 2024. And in Japan, there are an estimated 1,000 to 2,000 Rett patients. And this year, we're engaging the Japanese regulatory agency to kick off our efforts to pursue approval. Let's turn to Slide 14 for a discussion of our NUPLAZID franchise. Product sales of NUPLAZID in 2023 were $549.2 million an increase of 6% over 2022 as we continue to grow new patient starts and increased market share. Our primary financial objective for NUPLAZID is to optimize cash flow in that franchise, and we do that in two ways.

First, we're continuing to grow bottle shipments and market share. The most effective lever to drive growth recently has been the broad educational campaign we launched last year to bring attention to our real-world evidence studies. These efforts have allowed us to grow new patient starts faster than the market. In fact, in 2023, new patient starts were up 12% year-over-year. 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 and annual cash flow. We look forward to continuing to grow this franchise. I'll now turn it over to Doug Williamson, our Head of Research and Development, to provide an update on our pipeline programs starting on Slide 15.

[Doug Williamson, executive]

Thank you, Brandon. In addition to our commercial products, we have a strong pipeline of clinical programs, providing us with several opportunities to further expand our growth. Let's start with pimavanserin as a potential treatment for the negative [indiscernible] symptoms of schizophrenia on Slide 16. Predominant negative symptoms remain of the largest unmet needs in schizophrenia, and as of today, there are still no approved treatments for these symptoms. It's important to understand the distinction between treating the positive and negative symptoms of schizophrenia. Positive or psychotic symptoms are hallucinations, delusions and thought disorders that typically resolve with antipsychotic treatment. Negative symptoms are social withdrawal, restricted speech, lack of emotion, loss of motivation and [ blended affect ]. Our adjunctive pimavanserin program is designed to treat the approximately 700,000 patients in the U.S. whose positive psychotic symptoms are adequately controlled in antipsychotic treatment but who still suffer from persistent and uncontrolled negative symptoms, inhibiting their ability to lead a normal productive life.

Please turn to the next slide to discuss our pimavanserin clinical program for negative symptoms of schizophrenia. Let's discuss the details of our program. The ADVANCE-2 study is designed to treat patients whose positive symptoms are adequately controlled but still suffer from persistent uncontrolled negative symptoms. Negative symptoms of schizophrenia have proven to be an exceedingly difficult drug development challenge with multiple industry failures over several decades. Therefore, with our previous positive ADVANCE-1 study of pimavanserin we achieved something very rare in this population. ADVANCE-2, our second 6-month study is designed to evaluate the impact on persistent negative symptoms in patients with acute psychosis has been controlled with antipsychotic treatment.

As Steve said, we don't know the results yet, but remain on track to share them by the end of the quarter. Please turn to Slide 18 to discuss our late-stage ACP-101 program for the treatment of Hyperphagia in Prader-Willi Syndrome. Let me start with just a brief reminder of the disease. Prader-Willi Syndrome is a rare genetic neurobehavioral syndrome that affects approximately 8,000 to 10,000 patients in the United States and represents a significant unmet need. There are currently no therapies approved to treat the hyperphagia in patients with PWS. Hyperphagia is the defining characteristic of PWS and commonly begins between the ages of 3 and 8. It's characterized by unrelenting hunger that often leads to obesity, and behavioral challenges such as anxiety and aggression and is extremely distressing for patients, parents and caregivers. To illustrate just how devastating this disorder is, the average life expectancy is approximately 30 years largely due to obesity and cardiovascular-related disease.

Please turn to Slide 19, where I'll speak to 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. Before getting into the details of the study, I'd like to note that the PWS community has shown an incredibly high level of enthusiasm for this opportunity and interest in our study. On this slide, we've laid out the design of the COMPASS Phase III Global, Multicenter, Randomized, Double-blind 12-week Placebo-controlled study evaluating the efficacy and safety of ACP-101 in approximately 170 Prader-Willi patients. The primary efficacy endpoint is improvement of hyperphagia as measured by the Hyperphagia Questionnaire for clinical trials or HQ-CT scale. Those patients who complete the study will be eligible to enroll in an open-label long-term extension study.

If data from this Phase III study is positive, we plan to submit a new drug application for the treatment of hyperphagia in PWS to the FDA. We look forward to working with the Prader-Willi Community and clinical experts as we continue to advance development of this program. Please turn to Slide 20. We're advancing ACP-204, our next-generation 5-HT2A compound, which we're developing as a potential treatment for Alzheimer's disease psychosis. As we previously described, ACP-204, like pimavanserin works primarily as an inverse agonist of the 5-HT2A receptor. With ACP-204, we're seeking to build on our extensive learnings from pimavanserin, I believe it has an exciting future. Our work completed to date includes a comprehensive Phase I program and supports our target product profile for ACP-204, including no sign of QT formation at planned doses in our studies. A wide dose range supporting the potential for a dose approximately equivalent to 2x that of 34 milligrams of pimavanserin and a steady-state concentration achieved in less than half the time of pimavanserin.

As you can see on the slide, ACP-204's profile could represent a significant improvement over an already strong product profile for pimavanserin. Please turn to Slide 21. Our seamless Phase II Phase III program for ACP-204 is now underway. This plan includes a Phase II study with over 300 patients which we've aligned on with the FDA and which is designed to roll seamlessly into 2 Phase III studies. The Phase II study has been designed and sized in such a way that if successful, it could be considered a pivotal registration study. Once the full study allocation of patients for Phase II is complete, we will analyze and report Phase II results by which time the 2 Phase III studies will already be underway. This plan will ultimately provide 3 potential pivotal studies for a submission. We look forward to continuing to advance this program and providing future updates. And now I'll turn it over to Mark for a financial update beginning on Slide 22.

[Mark Schneyer, executive]

Thank you, Doug. Let's start by reviewing our fourth quarter and full year performance on Slide 23. In the fourth quarter, we recorded $231 million in total revenue, up 69% from the fourth quarter of last year. For the full year 2023, we recorded $726.4 million of total revenue, up 40% from the prior year. Fourth quarter DAYBUE net product sales were $87.1 million. Full year DAYBUE sales were $177.2 million in the first 8.5 months of commercialization. Fourth quarter NUPLAZID net product sales were $143.9 million, up 5% versus the prior year, and our gross to net adjustment was 27.5% in the quarter for NUPLAZID. For the year, NUPLAZID net product sales were $549.2 million, up 6% compared to $517.2 million in the prior year.

Our NUPLAZID franchise achieved 3% demand bottle growth year-over-year, driven by increases in new patient starts in both market segments. Selling growth increased by 2% and as we experienced a modest reduction in-channel inventory over the course of the year. The NUPLAZID gross to net adjustment for the full year was 24.3% as compared to 20.8% last year. This increase was primarily due to increased accruals related to the Inflation Reduction Act. For 2023, our NUPLAZID franchise generated over $300 million of cash flow on a fully allocated cost basis. R&D expenses decreased to $351.6 million in 2023 from $361.6 million in 2022. The decrease was mainly due to the trofinetide commercial supply build in 2022 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 and business development investments year-over-year. SG&A expenses increased to $406.6 million in 2023 from $369.1 million in 2022. The increase was primarily driven by DAYBUE commercialization expenses partially offset by reductions in NUPLAZID [indiscernible]. Our cash balance increased year-over-year as we ended the year with $438.9 million of cash compared to $416.8 million at the end of 2022. Let's turn to Slide 24 for a discussion of our 2024 guidance. Beginning with DAYBUE, we expect net sales for DAYBUE in 2024 to be in the range of $370 million to $420 million. In our 2024 full year guidance, we project new patient prescriptions from the beginning of February forward that are consistent with the linear growth trend we observed in the fourth quarter. Persistency rates that continue to be 10 percentage points above our clinical trial experience, compliance to dose continuing in the range of 75% to 80%.

I'd also like to offer some financial perspective on the seasonal dynamics impacting the first quarter of 2024. Let's start with December. As Brendan discussed, Q4 net sales were positively impacted by a seasonal increase in refill rates as families prepared for the holidays, health care changes and co-pay resets. In January, we saw a reduction in new patient prescriptions due to fewer office visits and Rett clinic days together with reductions in conversion and refill rates as patients went through the payer reenrollment process. And in February, we have seen strong recovery across these metrics. Factoring these seasonal dynamics and expected higher gross to net in the first quarter, we anticipate first quarter net sales to be in the range of $76 million to $82 million. This is reflected in our annual guidance range of $370 million to $420 million. Moving to NUPLAZID.

We are providing net sales guidance between $560 million and $590 million for 2024. The midpoint of the range assumes approximately 1.5% volume growth and 3% net price growth. We are protecting gross to net for NUPLAZID to be between 25% and 29% for the full year and between 33% and 35% for Q1. We expect gross to net to be at similar levels for the remaining quarters of the year as we don't anticipate an increase in gross to net for the fourth quarter of 2024 because of the Medicare Part D redesign that is expected to take place in 2025. We expect R&D expense to be between $305 million and $325 million including approximately $20 million in stock-based compensation. We will be increasing our clinical spend year-over-year as we progress ACP-204, ACP-201 and our early stage programs and reduce our spend on trofinetide. As a reminder, our R&D range does not guide for incremental spend for business development transactions.

We expect SG&A expense to be between $455 million and $480 million for the full year, including approximately $50 million in stock-based compensation. The growth in SG&A year-over-year is primarily due to increased investment in our U.S. DAYBUE franchise as well as the annualization of expenses from being on the market for a full year in 2024, and foundational investments preparing for trofinetide ex-U.S. launches. Our SG&A guidance does not include prelaunch investment for negative symptoms of schizophrenia, which is contingent on positive results of ADVANCE-2. Finally, we expect our 2024 year-end cash balance to be approximately $585 million to $655 million based on our expected range of operational cash flows excluding any expenditures for future business development transactions. With that, I'll turn it over to Steve for closing remarks.

[Stephen Davis, executive]

Thanks much, Mark. Please turn to Slide 25. I'll close by briefly recapping 2023 and highlighting our opportunities in 2024 and beyond. 2023 was a transformational year for us. We launched our second commercial drug DAYBUE. We achieved 40% revenue growth from 2 commercial franchises DAYBUE and NUPLAZID. And we completed enrollment in our ADVANCE-2 study in negative symptoms of schizophrenia. We also acquired worldwide rise to trofenitide. We initiated our Phase III program of ACP-101 in Prader-Willi syndrome, and we initiated our seamless Phase II Phase III study of ACP-204 in Alzheimer's disease psychosis.

Looking to this year and beyond, we continue to capitalize on the successful launch of DAYBUE and strong, project strong revenue streams from DAYBUE and NUPLAZID. We will have the top line results from our ADVANCE-2 study by the end of this quarter. We're pursuing expansion of DAYBUE in Europe, Canada and Japan. We're now well on our way to determining the potential of ACP-101 Prader-Willi syndrome, with the potential new therapy there. Likewise, with ACP-204 for Alzheimer's disease psychosis, and we're now at a point where we have sustainable and growing cash flow from operations to fund future growth. With that, I'll turn it over to the operator for our Q&A. Operator?

[Operator]

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

[Tessa Romero, analyst]

So first one for me is, what drove your decision to provide full year DAYBUE guidance at this time? Rather than just a quarterly guide, which I think was your base case at the time of our conference in January. And second question is just around your guide, are you able to clarify the assumption around where you are estimating real-world persistency is at 12 months? And are you able to give us an update on the number of patients that are currently on DAYBUE?

[Stephen Davis, executive]

Sure. Mark, do you want to take that?

[Mark Schneyer, executive]

Yes. I think as we approach every conversation with Wall Street, we just want to give the most relevant information in context of the business as a whole. As we went through kind of our, through our year-end process and saw the seasonality that we experienced at the beginning of the year, we thought it was important to provide context not only on that kind of a 1 forward quarter guidance, but provide perspective on where we see DAYBUE for the entire year and our confidence in growing the brand over the course of the year and beyond. So that led to our discussion. On different, the 2 periods of guidance range.

On the persistency level, when we continue within our guidance to expect kind of 10 percentage points above the clinical trial experience from the levels that Brendan experienced. Brendan's adjusted. And I think for long term, I think if you think more like 50% plus over a 12-month and beyond period, that's a good early sign. Obviously, I'll point out we don't have patients out that far in the commercial setting. So that's data that we'll evaluate. But I think that's a good reasonable ballpark assumption to take at this time.

[Stephen Davis, executive]

And Actually, I'm going to ask Mark to come back to a number of patients on therapy in a second. But since you pause there, let me just add a little bit more color to that. So of all the patients, who initiated therapy on trofinetide or DAYBUE in clinical trials in LAVENDER together those that rolled over to a drug in LILAC. 40% of them remain on therapy today. And that's 2-plus years since they've been on therapy. As Mark mentioned and as we've described before, we continue to track 10-plus percentage points above our clinical trial experience. So that's the gist of Mark's comment that we expect longer term, and again, when we look at our clinical trial experience, we're looking at 2-plus years on therapy, 40% of them on, we're tracking 10% above that. So that's the basis of our projection that we expect half or more of patients to stay on therapy over the long term.

I would also note that of all those patients that 40% of patients that were on trofenitide or DAYBUE in clinical trials, that have now rolled over, we've had 0 dropouts from those patients since launch. So it's created a very persistent and consistent enduring population. Mark, do you want to address the number of patients?

[Mark Schneyer, executive]

I think as you recall, we had just over 800 patients at the end of the third quarter. When we closed 2023, we had close to 900 patients on therapy. And just to give a little further context, as we described, we had a seasonal decline in January and as a consequence, fewer patients initiated therapy. And then in February, we saw a significant rebound in new patient starts and together with improvements in conversion and refill rates, and today, we have, taking that all together, we have approximately 860 patients on therapy.

[Operator]

Our next question comes from Ash Verma with UBS.

[Ashwani Verma, analyst]

So on DAYBUE, can you quantify what was the seasonality benefit in December? And I'm just trying to wrap my head around, so what, where are you run rating based off 4Q and if this $370 million to $420 million guide, it seems pretty conservative given that we are so early in the launch. Just it would be helpful to understand like in terms of new patient growth, what are your expectations for the remainder of the year?

[Stephen Davis, executive]

Yes. Thanks much, I'm going to ask Mark to answer the first question, Brendan, the second.

[Mark Schneyer, executive]

Yes. So for the seasonality, I would, and maybe onetime benefits in revenue that we experienced in the fourth quarter, it's a total of about $5 million positive to revenue in the fourth quarter. And we quantify that as $3 million due to seasonality and $2 million due to a favorable gross to net in the quarter.

[Brendan Teehan, executive]

Thanks. I'll go from there. So in our prepared remarks, we talked about the seasonality in terms of new patient starts. Following the surge that sort of characterized the first 4 months of the launch of DAYBUE, very interested family that queued up to get started. We then hit a growth trajectory or a launch trajectory that was very much like what we expected linear growth, third quarter and fourth quarter through December. The one place where there was a slowdown in new patient starts was January, significant slowdown driven by lack of COE Rett patient days and Rett patient visits. We saw a snapback or however you want to describe it in February to a similar trajectory for new patients starts moving forward.

So thinking about 2024 and the midpoint of our guidance, we would anticipate the linear curve replicating what we saw in the third and fourth quarter of last year for new patient starts.

[Operator]

Our next question comes from Dave Hoang with Citigroup.

[David Hoang, analyst]

Congrats on the progress. I'm just trying to get a better handle on the higher end of your guidance range for DAYBUE in 2024. What type of elements would you need to see to drive towards the higher end of guidance?

[Stephen Davis, executive]

Sure. Mark, you want to take that?

[Mark Schneyer, executive]

Yes. I think the whole, I mean, the three main assumptions driving our forecast are new patient starts, persistency rates and overall compliance. And obviously, we run many scenarios to get to the informed guidance range that we've shared to you. And it's not necessarily one in particular assumption that you would change that would get you from the middle to the high or to the low. So I think as the midpoint of the range is more towards what Brendan just mentioned on new patient starts, having our persistency continue to be 10 percentage points above our clinical trial experience and compliance to dose to be within the range of 75% to 80%. And as you branch out from the middle, you just flex any or all of those assumptions up will get you towards the high end of the range.

[Operator]

Our next question comes from Charles Duncan with Cantor.

[Charles Duncan, analyst]

Steve and team, congrats on a good year progress and all the information on DAYBUE, that's very helpful. I wanted to ask a question on the pipeline specific to ADVANCE-2 negative symptoms of schizophrenia, I know that you don't have the data in-house yet. But I guess I'm wondering, are you tracking concurrent medications? And if you could provide us a little bit of color on clinically meaningful results versus statistically meaning full results. And then finally, do you anticipate needing a 12-month exposure beyond the 6-month study? Or do you think that the current safety profile of NUPLAZID will handle it?

[Stephen Davis, executive]

Yes. Thanks much for the question, Charles. Doug, three parts to that question, I think.

[Doug Williamson, executive]

And I've already forgotten the first two. But the, in terms of safety, we have an extensive safety database of pimavanserin in schizophrenia as well as other conditions. So we have comfortably more patient exposures than we would need to get an approval. First question was, again?

[Stephen Davis, executive]

Sorry, Charles, Charles, the first two questions?

[Charles Duncan, analyst]

Concurrent medications? Are you tracking that? Do you have good coverage and then clinically meaningful versus statistically significant results. What are you looking for?

[Doug Williamson, executive]

Yes, we're tracking, obviously, we're carefully tracking concurrent medications. Any antipsychotic is allowed, and we haven't analyzed the data yet, obviously, but we expect the results to be similar to ADVANCE-1 where it was the 3 most commonly used antipsychotics, olanzapine, risperidone and aripiprazole that were the main concomitant medications. Clinical and statistically significant, well, obviously, [indiscernible] significant will be defined by the primary for clinically significant, nothing has been approved yet, so there's no kind of benchmark. But in the, in psychiatric studies in general, an effect size of sort of [ 20 to of 0.2 to 0.3 ] is generally regarded as clinically significant. In ADVANCE-1 at the 34-milligram dose, we saw an effect size of [ 0.34. ] So something around the 0.2 to 0.3 level of effect size we would regard as, and the field would regard as highly clinically significant.

[Operator]

Our next question comes from Ritu Baral with TD Cowen.

[Ritu Baral, analyst]

I wanted to ask about Europe. You mentioned that you're going to be filing next year. I wanted to ask in the first half, I wanted to ask what the gating items were for the MAA filing. Are you, do you have to generate any more clinical data? Do you have to generate any sort of data to help with health technology assessments over there? And any potential direction you can give us on what sort of European price that you may, that you think that you can get?

[Stephen Davis, executive]

Yes. Thanks much for the question, Ritu. We don't need to do any, we don't believe we'll need to do any more clinical work. The principal gating item is no PIP was done. Before we acquired rights to the program. So we've got to get alignment on that with the European agencies. And there's some additional work running in parallel sometimes oftentimes, the excipient requirements on formulations differ between the U.S. and the EU, and there's a little bit of work we're doing there just to button that up. We don't anticipate that being a rate-limiting issue, but it's just running in parallel with other work we're doing. And then I'll ask Brendan to address the pricing question.

[Brendan Teehan, executive]

Yes, two points, Ritu. Thanks for the question. One is there will obviously be work already ongoing with our global value dossier and reinforcing the value proposition for trofinetide in Rett syndrome. And then we're still a ways off in terms of determining price for DAYBUE in Europe. I'll simply suggest that, obviously, we would be pricing it for the value in parts on patients, caregivers and the health system. And I know you all would look at other rare disease launches first in the United States and then in the EU, where I think you see an opportunity there tends to be less of a different scene with rare disease products that are seen in broader market assets.

[Operator]

Our next question comes from Jeff Hung with Morgan Stanley.

[Lee Hung, analyst]

For negative symptoms of schizophrenia. Can you just talk about your commercial launch strategy and the timing of key initiatives and about how many additional reps might be needed?

[Stephen Davis, executive]

Yes. Sure, Jeff. Brendan, do you want to take that?

[Brendan Teehan, executive]

Sure. Thanks for the question. Obviously, we're excited and looking forward to turning the card over and hopefully having an opportunity to be the first therapy ever approved to support that patient population. We have a footprint in CNS and we do call on the subset of physicians that would help treat the disease. I think you would expect us to expand from that footprint incrementally and address an opportunity that is more in the psychiatry space than in the neurology space, but we will leverage existing field footprint resources to support that. We also have lots of people that have worked in the broader CNS space that work at ACADIA that have worked on similar assets, and we have lots of internal capabilities that we'll leverage as well. And I would look at us continuing to ramp up post a positive result towards the latter half of this year and into 2025.

[Operator]

Our next question comes from Gregory Renza with RBC Capital Markets.

[Gregory Renza, analyst]

Steve, maybe a question for Brendan as well and just revisiting the seasonal patterns. Just curious Brendan and the team, what learnings are you taking away from this to perhaps address maybe the situation or the seasonality that you look forward with the 2024 to 2025? Especially when you could be encountering certainly greater patient numbers on DAYBUE. Just curious how surprising some of those dynamics from December, January and February were just in the context of how comps to the usual patterns with re-op and visits versus that which could be unique to DAYBUE?

[Stephen Davis, executive]

Yes. Thanks, Greg. Let me answer that at a high level, and I'll turn it over to Brendan. So the seasonality that we saw is something that's just very common in our industry. We see it a lot. Happens to a greater lesser extent with most drugs. Some of it has more of an impact than others. In a rare disease space things do bounce around more than others. And we saw a more pronounced effect of the seasonality than we anticipated. We saw a much more significant impact, particularly in January than we would have anticipated. But the dynamics are very similar across the industry. And one of the learnings we have from this is that a lot of the Rett centers. And this applies to a certain extent also even outside of the COEs. But a lot of the COEs dramatically reduced their Rett clinic days and that just had a significant impact on our prescriptions in that time frame. Brendan, any additional color you like there?

[Brendan Teehan, executive]

Yes, I agree. And Greg, thanks for the question. I think one of the key learnings is just the level of preparation that these families have around the holiday season. Whether you are seeking treatment for the first time, I think we saw a nice trajectory for new patient starts in December. And obviously, not a similar trajectory in January, which I think makes sense. These are, there are fewer Rett clinic days and there are fewer, there's less interest in, I think, Rett clinic visits at the time. But I think more notably is the continuing patient that wants to make sure they have appropriate supply throughout the holiday season, which probably bolsters refill rates in December and may have some impact on January. But I don't think it changes the way we would approach our promotional efforts to this audience. And the return in February to what we're seeing for both patient visits and new patient prescriptions have us on the trajectory we would have expected.

[Operator]

Our next question comes from Ami Fadia with Needham.

[Ami Fadia, analyst]

I've got to, firstly, just with regards to DAYBUE. Just a few more months under the belt. Could you give us a sense of what, where you see the peak market share evolving? And if you can give us some color on penetration in Center of Excellence versus non? And then penetration within different age groups under and over 20? And with regards to the trials that you've initiated in Alzhimer's disease psychosis, and privately syndrome, when can we anticipate to see any data? Could we see some data next year?

[Stephen Davis, executive]

Thanks, Ami. Let me take the last question, and then I'll ask Brendan and Mark to respond to the first two. With respect to data on ADP and PWS. We'd like to get a little bit deeper into these studies before we narrow the aperture on when we expect to complete enrollment and then when we have results. So it's a little bit premature for us to comment on that yet. What I will say in ADP is the studies usually take a couple of years. And in Prader-Willi, it's probably a fairly similar time frame. It's obviously a much smaller study. But in a rare disease population, you just have a smaller patient move you're pulling from. So Brendan, do you want to take the first I'm sorry, Mark, I'm going to say, Mark, you want to take the first question on peak?

[Mark Schneyer, executive]

I think this is a matter of kind of our corporate policy. We don't talk about peak market share in peak sales. But qualitatively, what I would say is we have a significant potential in both from where we stand today as far as penetration. There are a significant number of patients that we believe can benefit from DAYBUE across all market segments. And then as part is peak sales is concerned, we obviously see meaningfully improvement in sales this year as per our guidance. And we expect that sales increase significantly above those levels in the years to come.

[Brendan Teehan, executive]

And maybe I'll address the sort of the market characteristics you were asking about as well. And yes, I think we have ample opportunity to continue to grow our penetration. The question was around COEs and non COEs. In COEs, we're getting about 40% of our prescriptions today from them, 30% from high-volume institutions and COE-like and then 30% in the community. Our penetration, while we don't speak to absolute is the highest in COEs, but we still have ample opportunity to grow new patient share in COEs then followed by the high-volume institutions than the community thereafter. I think you also asked about age groups. What I can say is quarter-over-quarter after the kind of the initial surge, what we see is a very consistent distribution of patients getting started on DAYBUE that is reflective of the Rett Community. I think that can give you a good sense of where we're sourcing business.

[Stephen Davis, executive]

I mean, your line was breaking up a little bit. Did you also have a component of your question related to negative symptoms? Or did I mishear that?

[Ami Fadia, analyst]

No, I think you covered all my questions. Thank you.

[Operator]

Our next question comes from Uy Ear with Mizuno.

[Uy Ear, analyst]

Just first, a clarification question. Did you say that you engage with the EMA? And if you did, did they specifically said that you didn't have to do another study? And second question is based on what Minova put out, is there any learnings from their CRLs that you can apply to your own sNDA for negative symptoms?

[Stephen Davis, executive]

Yes. Doug, two questions. One on DAYBUE or trofenitide in Europe and the other on negative symptoms.

[Doug Williamson, executive]

Yes. So on trofenitide, we've had preliminary communications with EMA, but obviously, they don't confirm that we don't need to do an extra study until we've formally sought scientific advice. But we don't anticipate having to do any further clinical work, on negative symptoms. We don't normally comment on other companies' submissions. But I think since in the press release, they spelled out the reasons for the CRL, it's worth noting that the concerns were that there was only 1 study, and they need 2. So obviously, we are doing a second study, that they didn't have sufficient sized safety database.

We have an extensive database with pimavanserin that they failed to show the clinical significance. We're engaged with the agency actually in questions about the clinical significance of the NSA-16 data that we're providing. And I always forget the fourth thing. But whatever it was, is not an issue for us either.

[Stephen Davis, executive]

So I think, Doug I think that they were also looking at this drug as monotherapy. And of course, we're looking at adjunctive therapy.

[Doug Williamson, executive]

That's right. Yes, the FDA wanted to see concomitant data for their assets because they know that's how it's going to be used in the real world. And obviously, ours is an adjunctive treatment anyway. So that's not an issue.

[Operator]

Our next question comes from Joel Beatty with Baird.

[Unknown Analyst]

What's the exclusivity period look like for NUPLAZID now that the favorable legal rulings have come in December? And then also, is that a long enough period for launch in negative symptoms of schizophrenia to add much.

[Stephen Davis, executive]

Yes. Thanks, much, for the question. Let me kind of sum up where we stand. As you recall, we have 2 patents, 2 families of pattents that protect pimavanserin. One is our composition of matter patent. We won at the Toronto Court Level on that in the fall. We submitted 2 arguments. We only needed to win on 1. We both, we won on both arguments. That is being appealed as we fully expected it would be. The schedule I anticipate there is we'll probably go through a series of briefings in the second quarter of this year, and then we expect oral arguments to be probably in the third quarter of this year, and the decision would likely come probably in the first half of next year. So that's where we stand on that front.

Again, I'll just repeat what we said before. We feel like we're in a very good position there. We wanted the Trial Court Level. This is being appealed and so we'll be continuing to aggressively protect our rights there. On the other family patents dealing with 4 formulation patents around the 34-milligram capsule formulation of pimavanserin. And also, as an aside, have a method of use patent on the 10-milligram tablet. Those are the only 2 marketed forms of the drug. On the formulation patents, we, in the fall, we also won a Markman Ruling in that case, which puts us in a favorable position, advancing to the Trial Court that is scheduled for December of this year, hearing, or excuse me, trial scheduled for December this year.

And we would anticipate a decision from that trial on these formulation patents, in the first half of next year also. So that's kind of where things stand. So when you work through all of that today, we have composition of matter of protection that takes us to April of 2030 with a 6-month pediatric extension, which we anticipate that would get us to October of 2030. That's all on the composition matter patent, which we won at the trial court level now under appeal. On the formulation patents, those run to 2038. We have already settled and yielded a little bit of ground there, which you typically do when you start settling on that. And that we've settled with all the 2 companies, I should say, on the formulation patents. And so that would pull us back to late 2037 on those patents. That family patents, again, being, will come to trial in December, and we expect a decision on that in the first half of next year.

[Operator]

Our next question comes from Marc Goodman with Leerink.

[Marc Goodman, analyst]

Yes. For DAYBUE, just a little bit more color. Can you help us with dosing what's the dosing for most of these patients relative to the target dose? And then also like average age and weight of the patients, if you can help us with that.

[Stephen Davis, executive]

Sure. Before we answer that question. There was a question of profitability that [indiscernible] we didn't answer. So Mark, do you want to take that?

[Mark Schneyer, executive]

Yes, I think just on the previous question, the simple answer is, can we make a launch and investment in negative symptoms of schizophrenia profitable? Simple answer is yes. Obviously, we will be mindful of the potential ranges for exclusivity for remaining for pimavanserin. So our launch will be a little different than if we knew that we would have a much, the longer-dated life. But if we, as we get into 2030 and beyond, we can adjust investment. And also keep in mind there's a significant number of synergies between negative symptoms of schizophrenia and Parkinson's disease psychosis. So we're not starting from scratch and all together we can make this franchise profitable to ACADIA in a variety of ranges ultimate exclusivity for the molecule.

[Stephen Davis, executive]

Thanks, Mark. Okay. Brendan, two questions.

[Brendan Teehan, executive]

Yes, sure. Mark, thanks for the question. The, in terms of dosing, we think in terms of compliance to the label dose, it's a weight-based product. The average compliance to dose is in the 75% to 80% range at this point. You also asked questions about weight and age. The weight has remained in the low 30-kilogram range between 32 to 34 milligram and the ages in the mid-teens, about 16 for an average age.

[Operator]

Last question comes from Yatin Suneja with Guggenheim.

[Yatin Suneja, analyst]

Just two quick ones for me. Could you comment on gross to net, where you are on DAYBUE if you can also characterize the OUS opportunity in dollar perspective? And then are you willing to say anything on NUPLAZID from Q1 sales perspective? How should we think about seasonality there similar to what you have experienced in the past few years or a little bit different?

[Stephen Davis, executive]

Okay. I think it's going to be Mark, Brendan, Mark.

[Mark Schneyer, executive]

Yes. On gross to net, maybe I'll do a go-forward and a look back on DAYBUE. I think going forward, we expect gross to net to be in the 20% range for DAYBUE, and it shouldn't really fluctuate quarter-to-quarter. When we look backwards, it was a little lower over the course of the entire year. So it was 17.7% through fiscal year 2023. And we did have favorability to that in the fourth quarter and the gross to net for DAYBUE was 15.4% in the fourth quarter last year.

[Brendan Teehan, executive]

From just thinking about DAYBUE outside the United States, obviously, we see a tremendous opportunity I would speak to it in terms of the prevalent population, which is slightly larger than the United States and EU, Canada, where we'll be first is on the order of 600 to 900 patients. And then, or Japan is likely between 1,000 and 2,000 patients. So in terms of value, I think I spoke a little bit to what we see which is you can take a look at our U.S. pricing and you can look at other rare disease products that launched in the U.S. to see their proximity to a U.S. price for their EU approach.

And I think there is a narrower band that existed for a broad range or broad education products. It's too early for us to really talk about what a price for per EU nation will be at this point, but that should give some sense of direction.

[Mark Schneyer, executive]

And then on NUPLAZID, I think dynamics should be consistent this year, except for the gross to net dynamic that I mentioned for the fourth quarter. So we gave kind of seasonal dynamics in across the quarter should be the same in terms of volumes. And then I gave the gross to net guidance for the first quarter, just to make sure people can think in the right range as we go through the Medicare Part D dynamics for the first quarter, and there'll just be less of that in the fourth quarter of this year just due to the anticipated Medicare Part D redesign in 2025.

[Operator]

That concludes the question-and-answer session. I would like to turn the call back to Steve Davis for closing remarks.

[Stephen Davis, executive]

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

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.