Axsome Therapeutics Inc

NASDAQ:AXSM

Earnings Call Analysis

Axsome's Q3 Revenue Soars with Pipeline Progress

In Q3 2023, Axsome Therapeutics reported a remarkable 244% year-over-year revenue growth to $57.8 million, propelled by the commercial success of Auvelity and Sunosi, which exhibited 36% and 20% respective quarterly growth. The company's development pipeline progresses steadily, with several Phase III clinical trials expected to complete in 2024. Despite higher R&D and commercialization costs leading to a net loss, Axsome's $416.6 million cash reserve is projected to cover operations until profitability.

Expansion in Prescribers of Auvelity and its Market Reach

The company has successfully broadened the prescriber base for Auvelity by adding approximately 3,200 new first-time prescribers in the third quarter, which prompted an increase in the cumulative total to 13,000 prescribers since launch. Recognizing the growing demand, the company is expanding its sales force to approximately 260 representatives, which will enable it to target around 44,000 healthcare professionals (HCPs), covering nearly 90% of new-to-brand prescriptions.

Rising Demand for Sunosi and its Market Performance

Sunosi prescriptions have witnessed a 16% year-over-year growth in the US, coupled with a 5% sequential increase. The prescription growth is a result of strategic promotional efforts and Sunosi's distinctive clinical profile. Sunosi's patient base expanded by 40% over the year, and payer coverage remains broad, offering a foundation for further growth in its current and potential new indications such as ADHD, binge eating, and shift work disorders.

Auvelity's Potential for Patient Retention

Despite the absence of long-term data due to just having reached the one-year mark since launch, anecdotal reports and prescription refills indicate that Auvelity is not just a rapid-acting, but also a durable antidepressant, suggesting a strong potential for sustained patient adherence.

Uncertainty in Providing Guidance

The management has acknowledged the difficulty in offering precise guidance due to numerous variables at play, although they are hopeful about the enrollment of a patient sample for the ADVANCE-1 trial, which is expected to be consistent with previous trials.

Enrollment Progress for Clinical Trials

The expectation for the announcement of top-line results from ongoing trials hinges on completing enrollment by the year-end. Segment-wise, most patients introduced to the company's products have experienced failed therapies before, signaling a significant opening for new treatment options like those provided by the company.

Fibromyalgia Market and Sales Force Strategy

With a considerable underserved fibromyalgia market of 5 million patients in the US, and with no recent major promotional investments, the company is focusing on disease state education to prime the market for an effective product introduction.

Preparation for New Drug Application Filing

The company revealed that the dataset for the New Drug Application (NDA) will consist of the SYMPHONY Phase III trial and the Concert Phase-II trial, as well as an ongoing open label safety extension trial.

Intellectual Property Position and Competitive Market Analysis

While the company did not comment on ongoing legal matters, they expressed confidence in their extensive intellectual property portfolio. Additionally, they highlighted that their products, such as Sunosi, can address multiple symptoms of narcolepsy, offering a robust market position against potential competitors like orexin.

Addressing High Unmet Need in Binge Eating Disorder

Recognizing binge eating disorder as the most common and highly prevalent eating disorder with limited treatment options, the company anticipates addressing this high unmet need through its product offerings.

Comparative Safety Profile in Clinical Trials and Operational Efficiency

The company discussed mild and transient dizziness noticed in the ACCORD trial, emphasizing no discontinuations due to this side effect. Addressing financial operational aspects, Auvelity has seen improvements in its gross-to-net percentage, now at approximately 50%, indicating a better financial outcome from the previous quarter.

Sales Dynamics in Narcolepsy and Obstructive Sleep Apnea

A significant split is observed in Sunosi prescriptions between narcolepsy and obstructive sleep apnea (OSA), with OSA commanding the larger share. This distinction is expected to continue given the higher prevalence of OSA compared to narcolepsy, contributing to different market strategies for these conditions.

Anticipated Differentiation of AXS-05 from Rexulti

Management voiced confidence in the ongoing clinical development and the emerging clinical profile of AXS-05 for Alzheimer’s disease agitation. They foresee a distinct position for AXS-05 in comparison to other products like Rexulti in the market.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, and welcome to Axsome Therapeutics Third Quarter 2023 Financial Results Conference Call. [Operator Instructions]. As a reminder, today's conference is being recorded.I would now like to turn the conference over to your host, Mark Jacobson, Chief Operating Officer, Axsome Therapeutics. Thank you. Please go ahead.

[Mark Jacobson, executive]

Good morning, and thank you all for joining us on today's conference call. This morning, we issued our earnings press release providing a corporate update and details of the company's financial results for the third quarter of 2023. The release crossed the wire a short time ago and is available on our website at axsome.com. During today's call, we will be making certain forward-looking statements. These statements may include statements regarding, among other things, the efficacy, safety and intended utilization of our investigational agents, our clinical and nonclinical plans, our plans to present or report additional data, the anticipated conduct and the source of future clinical trials, regulatory plans, future research and development plans, our commercial plans regarding Sunosi, Auvelity and our pipeline costs, revenue projections and possible intended use of cash and investments. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, which are only made as of today's date, and the company disclaims any obligation to update such statements. Joining me on the call today are Dr. Herriot Tabuteau Chief Executive Officer; Nick Pizzie, Chief Financial Officer; and Lori Englebert, Executive Vice President of Product Strategy. Herriot will provide an overview of the company and progress made in the third quarter of 2023 as well as key upcoming milestones. Following Herriot, Nick will review our financial results, then Lori will provide a commercial update. We will then open the line for questions. Questions will be taken in the order they are received. And with that, I will turn the call over to Herriot.

[Herriot Tabuteau, executive]

Thank you, Mark. Good morning, everyone, and thank you for joining Axsome Therapeutics' Third Quarter 2023 Financial Results and Business Update Conference Call. In the third quarter, we advanced our differentiated commercial products as well as our broad late-stage neuroscience pipeline. The strong progress in the quarter positions us well to continue delivering potentially life-changing new medicines to patients with serious brain disorders and to the health care providers. Total net product revenue in the quarter was $57.8 million, representing a significant year-over-year and quarter-over-quarter sequential growth. The quarter's strong showing reflects contributions from both Auvelity and Sunosi. Auvelity, our first-in-class oral NMDA receptor antagonist and Sigma-1 receptor agonist has now been on the market for 1 year. Its commercial performance to date reflects its fast onset and lasting efficacy as demonstrated in clinical trials. Later in the call, Nick will provide additional details on our quarterly financials and Lori will go into more detail on our commercial performance. While we are proud of the positive market reception for Auvelity to date and the progress we have made with Sunosi, we believe that we have barely scratched the surface of these opportunities. We look forward to continued commercial execution to realize the tremendous potential for these 2 differentiated medicines.Our commercial success to date has been enabled by strong clinical profiles for Auvelity and Sunosi and by our efficient, effective and innovative digital-centric commercialization or DCC approach. We will continue to deploy this platform with our expanded Auvelity sales force to further drive business performance. In addition, we intend to fully leverage the DCC platform for the potential commercialization of our broad late-stage pipeline. I will provide a brief update on the pipeline progress, including some anticipated upcoming clinical and regulatory milestones. Starting with our 2 in the A stage products. For AXS-07 for the acute treatment of migraine, we are on track to resubmit the NDA for this product candidate in the first half of 2024. In parallel, we are also working on the NDA submission for AXS-14 for the management of fibromyalgia, which is on track for submission in the first quarter of 2024. Moving on to our Phase III clinical programs. The Phase III Symphony trial of AXS-12 for the treatment of narcolepsy is on track to complete enrollment this year with announcement of top line results expected in the first quarter of 2024. The Phase III ADVANCE II trial of AXS-05 for the treatment of Alzheimer's disease agitation is on track for completion in the first half of 2024. In July, we initiated a focused Phase III trial of solriamfetol in ADHD, and we anticipate completion of this trial in the second half of 2024. We previously announced that we intend to develop solriamfetol for the treatment of binge eating disorder and for the treatment of excessive sleepiness associated with shift work disorder. These are 2 new potential indications with significant patient populations and limited treatment options. We are on track to initiate Phase III trials of solriamfetol in binge eating disorder by the end of this year and in shift work disorder in the first quarter of 2024. Further details about these clinical programs will be provided at a solriamfetol Investor Day planned to be held before year's end. Overall, the third quarter saw us make significant progress with our commercial performance and development pipeline. We expect to close out this year with continued strong execution, setting the stage for productive 2024. I will now turn the call to Nick, who will provide details of our financial performance.

[Nick Pizzie, executive]

Thank you, Herriot and good morning. Today, I will discuss our third quarter results and provide some financial guidance. Total revenue in the third quarter of 2023 was $57.8 million, representing year-over-year growth of 244%. Revenue consisted of net sales of our 2 commercialized products, Auvelity and Sunosi and royalty revenue from Sunosi sales in out-licensed territories. Revenue for the comparable period was $16.8 million, comprised only of U.S. Sunosi sales since Auvelity was not launched until October of 2022. Auvelity net sales in the quarter were $37.7 million, representing 36% sequential growth with no net sales in the comparable 2022 period due to the timing of launch. Sunosi net revenue for the quarter was $20.1 million, representing 20% year-over-year growth. Sunosi net revenue consisted of net sales of $19.4 million and $0.7 million in royalty revenue from sales in the out-licensed territories. Sunosi net revenue for the comparable period was $16.8 million. Cost of revenue was $6.5 million in the quarter compared to $1.9 million in the prior year period. The increase reflects the higher product volumes for both Auvelity and Sunosi in the current year. Research and development expenses were $28.8 million for the third quarter versus $14.9 million for the comparable period in 2022.The increase was primarily related to the focused trial of solriamfetol in ADHD, the advancement of ongoing trials of AXS-05 and AXS-12, the MC costs associated with the NDA for AXS-07 and AXS-14, post marketing commitments for Auvelity and Sunosi and higher personnel costs, including noncash stock-based compensation. Selling, general and administrative expenses were $83.2 million for the third quarter versus $40.9 million for the comparable period in 2022. The increase was primarily related to commercial activities for Auvelity and Sunosi and higher noncash stock-based compensation expense due to the build-out of both commercial teams. Net loss for the third quarter was $62.2 million or $1.32 per share versus a net loss of $44.8 million or $1.07 per share for the comparable period in 2022. We ended the quarter with $416.6 million in cash and cash equivalents compared to $200.8 million as of December 31, 2022. We believe that our current cash balance is sufficient to fund anticipated operations into cash flow positivity based on the current operating plan.I'll now turn the call over to Lori, who will provide a commercial update.

[Lori Englebert, executive]

Thank you, Nick, and good morning, everyone. In the third quarter, both Auvelity and Sunosi delivered strong growth results despite typical market seasonality. For Auvelity, we recently reached an important milestone of being on the market for 1 full year. Market reception has been very positive, reflecting the clinical profile of this new treatment. Auvelity works fast and lasts with rapid improvement in depression symptoms starting at 1 week and durable treatment effects that are sustained up to 12 months, all with a favorable tolerability profile. We remain focused on accelerating demand growth. For Sunosi, our relaunch efforts are resulting in solid growth year-over-year and quarter-over-quarter. Both brands are meaningfully impacting the lives of patients, and we expect continued growth in quarter 4 and beyond. Q3 represents only the third full quarter post launch for Auvelity. In the quarter, approximately 69,000 prescriptions were written for Auvelity, representing 30% quarter-over-quarter growth. This performance is in contrast to a decline of 1% for the overall antidepressant market during the same period due to market seasonality. In the third quarter, HCPs wrote prescriptions for more than 16,000 new patients, bringing the total number of unique patients to start Auvelity since launch to approximately 55,000 at the end of Q3. Prescription growth came from both an increased depth of subscribing with ACP adopters as well as an increased breadth of new prescribers. In the third quarter, we added approximately 3,200 new first-line prescribers of Auvelity, increasing the cumulative total of prescribers since launch to 13,000. As mentioned during our Q2 earnings call, in response to our early loss success and growing demand, we are expanding the Auvelity sales force by about 100 sales representatives to a total of approximately $260. We are on track to complete the hiring of the expanded team by the end of Q4 with completed training and full deployment in the first quarter. The expansion will increase our reach from 26,000 prescribers to approximately 44,000 prescribers. These 44,000 HCPs write approximately 90% of new-to-brand prescriptions and will substantially increase our potential to reach and help more patients. With regards to payer coverage, we currently have coverage established for 70% of all covered lives. In the commercial channel, which represents the greatest source of volume for Auvelity, coverage is now at 48% of covered lives. In the Medicaid and Medicare channels, approximately 100% of lives are covered. Active discussions with payers continue as coverage expands and evolve. Turning to Sunosi. Total prescriptions for Sunosi in the U.S. grew 16% year-over-year and 5% sequentially. Like Auvelity, Sunosi experienced meaningful demand growth in the third quarter despite the expected overall market decline due to summer seasonality. The steady growth of Sunosi can be attributed to our focused promotional investments and Sunosi's differentiated clinical profile. Since Q3 of last year, Sunosi has added 14,000 unique new patients, which represents an increase of 30% in cumulative unique patients over the past year. The field team continues to work on driving both debt within the current prescriber base and breadth by adding new prescribers. Since Q3 of last year, we have increased unique new riders of Sunosi by 23%. Payer coverage for Sunosi remains broad, with 95% of commercial lives and 83% of total lives covered. We expect our promotional efforts to drive continued growth for the product in the current indication. In addition, Sunosi has significant growth potential in new target indications, including ADHD, binge eating disorder and shift works disorder. Overall, both Auvelity and Sunosi delivered strong performance in the quarter. We remain focused on commercial execution to maximize the potential of these clinically differentiated treatments, which address patient populations with high unmet needs.I will now turn the call back to Mark to lead the Q&A discussion.

[Mark Jacobson, executive]

Thank you, Lori. Operator, may we please have our first question.

[Operator]

[Operator Instructions]. Our first question today is coming from Charles Duncan of Cantor Fitzgerald.

[Charles Duncan, analyst]

Herriot and team, congratulations on a really nice quarter. I had a couple. One is commercial, one is pipeline. Perhaps for Lori or whoever wants to answer it. Regarding Auvelity, I'm wondering about the drivers of demand in terms of -- well, I'm wondering about the drivers of revenue. Are you still seeing more new patient adds versus persistence? Or are you starting to see persistence? Because it would seem to me that the product profile would result in patients being on the drug longer than you might expect for in antidepressant.

[Lori Englebert, executive]

Charles, I'll take that question. It is one that we're still working through. We have just hit our 1-year mark. So it's still a bit hard to comment on the long-term persistence rates for Auvelity. We're not seeing anything particularly different than what you would expect from the therapeutic area. Feedback, though, from an anecdotal feedback as well as what we're seeing in refill prescriptions anecdotal feedback, the product is working per the label. Early on, all we really heard about was the rapid onset of action. But now that we're just tick past the 1-year mark, we are starting to hear about the durability of effect. So the product is fast and it laps, which is consistent anecdotal feedback from both HCPs and patients. And we're starting to see that through just the healthy number of refill prescriptions, that's evidence that clinicians and patients are seeing a response and are continuing treatment. I was just going to answer the driving of new patients. We're still very pleased with the number of new patient acquisition that we're getting on a weekly basis.

[Charles Duncan, analyst]

For Nick, now that you're through a year, are you contemplating giving guidance next year? Or is that not yet? Do you feel like you're not yet there?

[Nick Pizzie, executive]

Yes, I think we're still a bit early on. We'll continue to ponder that as we get closer towards the end of the year and into 2024, but there are so many variables at this point that giving guidance is difficult at this point. So I'll stand by, but I hear the question, Charles.

[Charles Duncan, analyst]

Maybe the area regarding the pipeline, I had a question about '05. I'm really intrigued with ADVANCE 2 in Alzheimer's disease agitation. I'm wondering, you sound pretty bullish about being able to read that out in the first half. And I'm wondering if you could characterize the patient sample that you're enrolling on, obviously, on a blinded basis thus far. How are you confirming Alzheimer's disease diagnosis? Or is a symptom presentation across neurodegenerative disease, not all that different. And so you don't really need to confirm diagnosis of Alzheimer's.

[Herriot Tabuteau, executive]

The patient sample that we're enrolling should match or is matching the patient sample that we enrolled in the ADVANCE-1 trial. And the way that we confirm diagnosis are through validated scales for both Alzheimer's disease as well as for agitation. A well-accepted scales and the same ones that we used in the ADVANCE-1 trial and also that is used in other studies in Alzheimer's disease.

[Charles Duncan, analyst]

But you're not doing imaging, correct? You don't feel that's necessary.

[Herriot Tabuteau, executive]

We are not doing imaging.

[Charles Duncan, analyst]

Nor blood-based biomarkers?

[Herriot Tabuteau, executive]

We are not doing imaging or biomarkers for enrollment into the trial, and that's pretty standard for studies of Alzheimer's disease that look at cognition or behavioral symptoms.

[Operator]

The next question is coming from Marc Goodman of Leerink Partners.

[Marc Goodman, analyst]

This is Rudy on the line for Marc. Just a quick follow-up to on the ones 2 questions. Can you talk about your expectations for that coming readout? And what data do you think will be adequate to support a SNDA filing for this indication?

[Mark Jacobson, executive]

So I assume that, that question has to do with Alzheimer’s disease agitation. And in terms of data from upcoming readouts, we do have the ADVANCE II trial. We expect that to complete and read out in the first half of 2024. And that, along with the results from our prior studies as well as the ongoing open-label safety trial will form the basis for the SNDA filing.

[Marc Goodman, analyst]

But do you still need additional efficacy data from one in order to file for that indication?

[Herriot Tabuteau, executive]

The 3 studies, which are efficacy trials, which will be in the package or the ADVANCE-1 trial, the ACCORD study as well as the ongoing ADVANCE 2 trial.

[Operator]

The next question is coming from Vikram Purohit of Morgan Stanley.

[Vikram Purohit, analyst]

Two from our side. One on narcolepsy, it seems like there was a little bit of a slip-on timing for expected data readout from late this year to 1Q of next year. Just wanted to get some context on what might have driven that? And then secondly, for the Auvelity launch, what is your latest sense on the breakup of patients you're seeing across lines of therapy?

[Herriot Tabuteau, executive]

I'll take the first question, and we'll have Lori take the second question. With regards to narcolepsy in the AXS-12 study the change in terms of when we expect to have top line results is driven purely by enrollment. And we're on track to complete enrollment by the end of the year.

[Lori Englebert, executive]

In terms of the type of patients that we're seeing right now, about 10% to 12% are first-line therapy, but the majority and the overwhelming majority is about 60% of the patients that we're seeing have failed 1 or 2 prior therapies. So some of all up 70% have failed 1 or 2 or brand new to therapy.

[Herriot Tabuteau, executive]

And I would just add that we're really pleased that this early on in the launch, 40% of patients either are brand new or have failed on treatment.

[Operator]

The next question is coming from David Amsellem of Piper Sandler.

[David Amsellem, analyst]

Just a couple. So first, on the esreboxetine filing and opportunity, how are you thinking about the fit of that commercially within the organization? My understanding is it's a large GP-focused indication. So where does that fit exactly in terms of just where you're taking the organization? That's number one. Then number two, for reboxetine, is it your expectation that you'll be filing on this data set? Or are there any other gating items to a filing in the narcolepsy setting for that drug?

[Lori Englebert, executive]

I'll take the first one on fibromyalgia. You're exactly right. Fibromyalgia is an incredibly underserved market, 5 million patients in the U.S. Only 3 products approved to treat right now. They're all generic widespread. There hasn't been any promotional dollars in the area for a very long time. Patients, HCPs are all very, very frustrated with this patient type because they don't have effective products to treat. So in terms of where we're taking the market, it's way too premature for us to speculate on how we will structure our sales force. But what we're focusing on right now is really making sure that we understand the marketplace, make sure that we have really strong disease state educational efforts to make sure that HCPs and patients are educated well on the disease state. And then we'll focus our field force on the highest likelihood to prescribe HCPs.

[Herriot Tabuteau, executive]

And I just add that to what Lori said. I think is one of the things that we've always been mindful of in designing our commercial approach is to make sure that we built the commercial infrastructure and platform. to enable us to leverage the pipeline. So we're ready. We're really happy with the way our DCC or digital centric commercialization platform is performing with regards to Auvelity as well as Sunosi. And so that experience is allowing us to hone it to make it even better, and we will be leveraging that with the fibromyalgia launch. With respect to your question on reboxetine and the data set for the filing, the data set will consist of the SYMPHONY Phase III trial, which is ongoing as well as the CONCERT Phase II trial. In addition, there is an ongoing open-label extension trial that is also required for the filing. And so those 3 studies will form the basis for the NDA filing.

[Operator]

The next question is coming from Jason Gerberry of Bank of America.

[Jason Gerberry, analyst]

Firstly, just on the patent front, a little surprising, we're about a year post launch with only a single Paragraph IV... So curious, any views on your end, what might be going on here? Perhaps most of the generics are going Paragraph III since they can't get first to file. But on the flip side, maybe this trend might be real and maybe there's going to be limited IP challenges given the breadth of your IP? And then my second question is just your thoughts specifically to narcolepsy maybe how the orexins could competitively have an interplay with '05. It looks like a drug that's very potent on MWT but may have a trade-off with insomnia rates as sleep disorder trade-off. So just curious your thoughts on the emerging profile of orexin and how that could competitively interplay with 05’.

[Hunter Murdock, executive]

Jason, this is Hunter Murdock. As a matter of practice, we really can't comment on ongoing legal proceedings. But I can tell you we're very proud of our extensive portfolio on Auvelity, and we don't have any further comments on it.

[Herriot Tabuteau, executive]

And maybe I'll touch on your question around the orexin and how they might impact the market. We like our portfolio, and we do have Sunosi, which is approved to treat active daytime sleepiness in patients with narcolepsy. And then we have AXS-12. And as you know, we're waiting with the readout of that Phase III trial. And the primary endpoint for that study is cataplexy. So when we think about the market and the need, and I'll let Lorie talk about that, one of the aspects of the disease to be cognizant of is that there are multiple symptoms that these patients experience. So no one treatment will address each system. So we like our portfolio, which should be able to address more than one of those sentence, Lori?

[Lori Englebert, executive]

And of those that are on the market and approved right now, patients have to endure really difficult dosing schedules. They trade off efficacy for tolerability or vice versa. So there is still a high unmet need in this orphan indication for patients.

[Operator]

The next question is coming from June Lee of Truist Securities.

[Joon Lee, analyst]

Binge eating for storable sounds like it could be either a niche or a huge opportunity. How are you framing the prevalence and commercial opportunity of binge eating in the U.S. for soriacitol? And I have a follow-up.

[Lori Englebert, executive]

We are also very excited about the potential here for binge eating disorder. It is the most common eating disorder. $7 million is the estimated prevalence right now, only very, very limited treatment options are available for patients. So again, high unmet need in a disease that is incredibly prevalent.

[Joon Lee, analyst]

On the narcolepsy study, would hitting statistical significance on cataplexy, but not on excessive daytime sleepiness is a good outcome? Or is it your goal to hit statistical significance on both cataplexy and EDS?

[Herriot Tabuteau, executive]

The primary intent of the study is cataplexy, and we're not going to speculate in terms of what the results would be or could be, we're close. So you'll know very soon.

[Operator]

The next question is coming from Ram Selvaraju of H.C. Wainwright.

[Raghuram Selvaraju, analyst]

First one is on binge eating disorder. Can you maybe clarify for us what you expect the competitive landscape, if any, to be for your drug candidate as and when it might secure a label for this indication?

[Lori Englebert, executive]

Right now, again, there is, I think, one product available for binge eating disorder, generic. It is highly prevalent SSRIs, SNRIs is being prescribed for the disorder. So we think we have an opportunity to really differentiate ourselves clinically in the marketplace.

[Raghuram Selvaraju, analyst]

And then can you just refresh my memory regarding your time line with regard to smoking cessation. And ultimately, if you could just sketch out for us strategically, assuming a label in that indication, ultimately, how you expect promotion activities, sales and marketing activities for that indication to dovetail with what you already have in the field?

[Herriot Tabuteau, executive]

There is an obvious overlap in terms of therapeutic area for small contestation and the rest of our psychiatry and neurology pipeline. So we like the concentration. And I think a lot will depend upon the clinical profile as it evolves from our Phase III trials.

[Operator]

The next question is coming from Joseph Thome of TD Cowen.

[Joseph Thome, analyst]

Maybe the first one on the additional 100% sales force. Can you go into a little bit more detail on the incremental call points? Are these primary care physicians? Or are they additional specialists that you weren't seeing earlier? And given that the group is going to be higher by the end of the first quarter, should we expect more like a Q2 impact from that? Or how are you thinking about that? And then second, on the core data presented at CTAD, it looked like dizziness popped up as the largest TEAE, but then impressively that went to 0 in the double-blind period. So can you just talk a little bit about dizziness with AXS-05? Does this go away with time? And what is the grade of that AE.

[Lori Englebert, executive]

I'll address the expansion. As we mentioned last quarter and refreshed everyone's memory at this readout, we are expanding our sales force from about 26,000 HCP targets to 44,000 HCP targets. That will take a higher number of PCPs into that number. But what we have remained focused on is the highest likelihood to prescribe HCPs. Of those 44,000 HCPs, they are writing 90% of new branded therapies on a weekly basis. So we feel like we have a great opportunity to optimize the growth of the product.

[Mark Jacobson, executive]

And with regards to the question around dizziness the [indiscernible] trial. Your observations are correct. The dizziness was a mild. It was transient. It decreased over time and it did not result in discontinuations.

[Operator]

The next question is coming from Yatin Suneja of Guggenheim.

[Yatin Suneja, analyst]

This is Eddie on [indiscernible]. Just one from us. In light of the increasing sales force this quarter, how should we think about the quarter-over-quarter script increases for Auvelity? And do you expect the increased sales force to really show increased cadence then? Or do you think we have to wait until later in 2024 before we see an inflection there?

[Lori Englebert, executive]

As we mentioned before, we should have the field hired in trade and promoting by Q1, but it does take a little time for new sales reps to establish themselves and get out there to produce. So we don't expect any meaningful uptick until later in the year.

[Operator]

The next question is coming from Graig Suvannavejh of Mizuho Securities.

[Graig Suvannavejh, analyst]

Congratulations on a good quarter. I was just wondering if you could please comment on gross to net in the third quarter for both Auvelity and Sunosi and whether third quarter reported sales for both products reflected any changes in inventory? And then I have a follow-up, please.

[Nick Pizzie, executive]

The gross to net for Auvelity in the quarter was approximately 50%. That was an improvement from the previous quarter, which had a GTN discount that was in the low to mid-50s. Sunosi as well was in that low 50 very similar to where we saw in the previous quarter. As it relates to inventory, we've always shared that, we maintain roughly 2 weeks of inventory in channel. So there was no inflection as it relates to the sales for inventory for neither Auvelity or Sunosi.

[Graig Suvannavejh, analyst]

And then I see trajectory there. You've done a nice product, but given peak sales that you put out there of $300 million to $500 million, I'm just wondering if maybe you can comment on how we should expect the time to peak sales and what the dynamic might look like between OSA and narcolepsy mix?

[Lori Englebert, executive]

I'll answer and then Nick onto if there's anything else you want to add. So right now, the split between OSA and narcolepsy is about 70% OSA, 30% narcolepsy. That's to be expected. OSA prevalence is about 22 million patients, whereas narcolepsy is 18,000 to 20,000. So we do expect, let's say, to continue to increase. Right now of those 22 million OSA patients, only about 1 million patients are actually drug treated. So our path to peak sales will come with increased efforts in education and understanding of OSA and treating the disease, which we are very heavily doing and have started doing several quarters ago. So we are anticipating that, that promotional effort will continue and peak sales will be follow.

[Nick Pizzie, executive]

And the other thing maybe I'll add is that while we're continuing to grow very nicely in the U.S. market, ex U.S., there's been a refocus with the Pharmanovia transaction that was announced earlier. And Pharmanovia is really ramping up their sales and marketing strategy. And we would expect to start seeing significant international sales and from our perspective, royalty revenue as it relates to the pharmanovia strategy.

[Operator]

The next question is coming from Myles Minter of William Blair.

[Myles Minter, analyst]

You've got Sarah on for Myles. Congrats on another great quarter. 2 quick ones from us. Do you guys have any internal goals about the Auvelity prescribing mix between primary care physicians and specialty referral accounts? And then secondly, is there any read-through or learnings from the Rexulti approval in Alzheimer's disease agitation? And how do you see AXS-05 differentiating from that recently approved options?

[Lori Englebert, executive]

I'll take the first one. In terms of goals, we don't typically look at it that way. As mentioned, we take a look at the prescribers that are most likely to prescribe. Right now, there's about 80% psych, 20% PCP, that's to be expected, especially with a novelty mechanism of action and our new product come to market. Consistent with our expansion and as we expand out to broader PCP sets, we do expect that to level out a little bit.

[Herriot Tabuteau, executive]

And with regards to Rexulti and any learnings from there, we've been happy with our clinical development plan with regards to AXS-05 and Alzheimer's disease agitation. We like the clinical profile thus far from our completed trials, which have been consistent. And we think that it is and will remain differentiated as it relates to Rexulti.

[Operator]

The last question is coming from Matt Kaplan of Ladenburg Thalmann.

[Matthew Kaplan, analyst]

Congrats on the strong quarter. Just wanted to talk a little bit about the ADHD opportunity for Sunosi and what the potential is there? And can you describe the market maybe more, to Lori in terms of the unmet need there?

[Lori Englebert, executive]

Again, we are very excited about ADHD for solriamfetol. Prevalence for ADHD across pediatrics as well as adults and adolescents is about 17 million, so highly prevalent condition. It's a very large market right now, lots of prescriptions on a monthly basis. The way that you can take a look at the market and think about the market now and the way that we're evaluating is really break it up into stimulants and non-stimulants. Stimulants really have rather large effect sizes but they do have safety risks that come along with, while your non-stimulants are safer, but they have less effect sizes. So we are excited again for the opportunity for solriamfetol and ADHD.

[Operator]

At this time, I'd like to turn the call back over to Axsome's CEO, for any concluding remarks.

[Herriot Tabuteau, executive]

Well, thank you all for joining us on today's call. I am proud of the efforts made by our outstanding team at Axsome. We're excited by the opportunity ahead of us, both Sunosi and Auvelity as we continue to progress our industry-leading CNS pipeline. As we close out 2023, we are on track to deliver on multiple potentially value-driving milestones on the clinical and regulatory fronts over the next 12 months. Our team is working hard to deliver on our goal of having potentially at least 5 marketed products by 2025. We look forward to updating you on our progress. Have a great rest of your day.

[Operator]

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines, come back after webcast at this time and enjoy the rest of your day.