Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) Q4 2022 Earnings Call Transcript

Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) Q4 2022 Earnings Call Transcript March 1, 2023

Operator: Thank you for standing by and welcome to the Intra-Cellular Therapies Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. . As a reminder, today’s program is being recorded. And now I would like to introduce your host for today’s program, Dr. Juan Sanchez, Vice President, Corporate Communications and Investor Relations. Please go ahead.

Juan Sanchez: Good morning and thank you all for joining us on our fourth quarter and full year 2022 earnings call. Joining me on the call today are Dr. Sharon Mates, Chairman and Chief Executive Officer; Mark Neumann, Chief Commercial Officer; Dr. Suresh Durgam, Chief Medical Officer; and Larry Hineline, Chief Financial Officer. As a reminder, during today’s call, we will be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and impose a number of risks and uncertainties that might 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’re cautioned not to place undue reliance on these forward-looking statements, and the company disclaims any obligations to update such statements. Sharon.

Sharon Mates: Thanks Juan. Good morning everyone and welcome to today’s call. We are excited to share with you our results for the fourth quarter and the full year 2022. I am pleased to report that we achieved strong sales growth of CAPLYTA and we continue to advance our promising pipeline. 2022 was an exceptional year for the growth of CAPLYTA as we successfully launched our new indication for bipolar depression. CAPLYTA’s prescriptions tripled in 2022 compared to 2021. We have received very positive feedback from physicians and patients on CAPLYTA’s efficacy, tolerability and ease of use. We believe CAPLYTA is having a positive impact on patients. For 2022, our total revenues were $250.3 million. CAPLYTA net sales were $249.1 million versus $83.8 million in 2021, representing a 205% increase.

CAPLYTA’s net sales for the fourth quarter 2022 were $87.4 million representing a year-over-year increase of 243%. Demand for CAPLYTA has been consistently strong and we are confident of continued growth for CAPLYTA. With this in mind, we are pleased to provide revenue guidance for the first time. In 2023, we expect CAPLYTA net sales to be between $430 million and $455 million. In 2023, we continue to invest in our near-term and future growth. In the near-term, our commercial team is focused on maximizing the significant potential for CAPLYTA in our current indications of schizophrenia and bipolar depression. Our future growth will be driven by the continued success of CAPLYTA as well as the execution of our clinical programs. Let me elaborate further on our clinical programs.

We are excited about the potential for label expansion of CAPLYTA in major depressive disorders and other mood disorders, ITI-1284, PDE1 inhibitors, ITI-333, and our long acting injectable program for lumateperone. Beginning with major depressive disorder, which effects about 21 million Americans who experience at least one major depressive episode each year. Many of these patients don’t respond or only respond partially to first line treatment. Our global pivotal program evaluating lumateperone as adjunctive treatment for major depressive disorder in patients who partially respond to antidepressants is ongoing. Patient enrollment continues in studies 501 and 502, two global six week randomized double-blind placebo-controlled Phase 3 trials to assess efficacy and safety.

We expect to file a supplemental new drug application with the FDA for the approval of lumateperone as an adjunctive therapy to antidepressants for the treatment of MDD in 2024. Additionally, we are pleased to announce today we are initiating a third global Phase 3 adjunctive MDD study, Study 505. This study is similarly designed to our ongoing studies and we plan to begin patient enrollment shortly. This approach is consistent with the way we conducted programs for our previous indications and is common strategy in the development of mood disorder programs. Let’s now move on to our mixed features program. Study 403 is our global clinical trial evaluating lumateperone 42 milligrams in patients with MDD and patients with bipolar depression who exhibit mixed features.

This patient population has more severe symptoms, more comorbidities, and a higher risk of suicide attempts than patients without mixed features. This results in higher healthcare utilization and associated costs. We anticipate announcing top line results later this quarter. Now let’s talk about ITI-1284. This year, we are advancing 1284 programs into Phase 2 clinical development in multiple highly prevalent conditions with unmet needs, including education in Alzheimer’s disease, psychosis in Alzheimer’s disease, and generalized anxiety disorder or GAD. Alzheimer’s disease affects 6.5 million Americans over age 65 and will increase further with the aging population. Agitation is experienced by greater than 50% of Alzheimer’s patients and psychosis occurs in 30% to 50% of patients.

These symptoms are difficult to treat and there is an urgent need for medicines to treat these symptoms. Our other Phase 2 program for ITI-1284 is in GAD. GAD effects approximately 7 million adults in the U.S. each year, with three quarters of these patients experiencing moderate or severe functional impairment. Half of patients do not respond to initial therapy. We look forward to updating you on the progress of these studies. We continue to advance the development of our lumateperone long acting injectable program. In 2022, we completed a Phase 1 study with our initial formulation. We plan to initiate Phase 1 studies with several LAI formulations in 2023. The goal of this program is the development of LAI formulations that are effective, safe, and well tolerated with treatment durations of one month and longer.

Moving to our PDE1 inhibitor program. PDE1 is an enzyme highly expressed in certain brain regions, certain cancer cells and immune cells, including macrophages and microglia. In disease states, PDE1 becomes highly active and uncontrolled, preventing cells ability to respond appropriately to its environment. Inhibition of this enzyme in a pathological state restores normal function. For example, in Parkinson’s disease, dopamine pathways are affected, and PDE1 inhibitors restore normal function in these pathways by strengthening dopamine signaling. PDE1 inhibitors can also function as immunomodulators in neurodegenerative diseases and cancer, where important pathways are compromised in immune cells. We are evaluating our PDE1 inhibitor Lenrispodun in a Phase 2 study for the treatment of motor symptoms and cognitive impairment in Parkinson’s disease.

We expect to begin enrollment later this month. Parkinson’s is the second most common neurodegenerative disease after Alzheimer’s disease. For our newest PDE1 inhibitor ITI-1020, we recently received a you may proceed letter from the FDA and now have an active IND to evaluate this compound. As a novel cancer immunotherapy, we plan to start a Phase 1 study in healthy volunteers in the first half of 2023. Finally, ITI-333 has the potential to treat opioid use disorder as well as pain and mood disorders. Opioid use disorder continues to be at epidemic levels. The number of opioid involved overdose deaths in the U.S. continues to increase with more than 80,000 deaths reported in 2021, up from 21,000 in 2010. We have completed a Phase 1 single ascending dose study and recently started a multiple ascending dose study.

We also have an ongoing neuroimaging study looking at receptor occupancy. We are excited about the potential for our development programs as they have the potential to serve patients who currently suffer from serious disorders in areas of unmet needs. Our company is in a strong financial position, ending the year with $593.7 million in cash, cash equivalents, and investment securities and we have no debt. We’re very proud of our performance across the company and look forward to continued growth and sharing our progress with you. I’ll now turn the call over to Mark to further discuss CAPLYTA’s performance and commercial opportunity. Mark.

Mark Neumann: Thanks, Sharon and good morning, everyone. As Sharon noted 2022 was an exceptionally strong year for CAPLYTA as we successfully launched our new bipolar depression indication. Since launch, total prescriptions have tripled and new patient starts are now at levels five times higher than before the bipolar depression label expansion. For the full year 2022, CAPLYTA’s total and new prescriptions increased 193% and 220% respectively over the prior year. This growth is being driven by a compelling product profile, broad market access, and strong commercial execution by our experienced sales and marketing team. CAPLYTA has been well received in the marketplace and we are gratified by the overwhelmingly positive feedback from both prescribers and patients regarding their experience with the product.

We continue to see strong underlying demand and prescriber adoption for CAPLYTA as we consistently increase both the breadth and the depth of our prescriber base, adding significant numbers of unique new prescribers and expanding the average number of prescriptions per prescriber. We delivered another great quarter for CAPLYTA. CAPLYTA’s prescriptions again significantly outperform the antipsychotic market. Total CAPLYTA prescriptions grew 21% sequentially versus Q3, while the overall antipsychotic market was essentially flat during that same time. We’ve carried this positive momentum into 2023 and the strength of our commercial fundamentals and metrics gives us confidence that CAPLYTA will achieve sustained growth throughout the year. We have taken several steps in our prescriber and consumer promotional activities for 2023 to ensure a continuation of the robust growth we have experienced since the launch of bipolar depression.

First, commensurate with the strong demand and positive reception of CAPLYTA to date, we have increased our commercial footprint and recently added 50 highly experienced neuroscience sales representatives to our team. This larger team allows us to connect more frequently with prescribers and continue to expand our reach, increasing our market share and penetration into the market. Secondly, we recently launched the next iteration of our lead in the light direct to consumer campaign and are implementing broad national advertising through television, digital, and social media platforms to continue to raise awareness about the unmet need in bipolar I and bipolar II depression and educate potential patients about the benefits of CAPLYTA. All of these efforts are supported by strong market access coverage across all three payer channels.

CAPLYTA has maintained broad coverage in the Medicare Part D and Medicaid channels, with more than 98% of lives covered. We have further expanded coverage in the commercial channel, which is the primary payer for patients living with bipolar disorder. We expect to achieve commercial coverage for approximately 90% of lives by the end of this quarter. While we are very pleased with the uptake of CAPLYTA at this stage of the launch, we have a strong belief that there remains plenty of room to grow and we are investing behind the brand accordingly. The bipolar depression market is large and has a significant remaining unmet need. Our current label, which includes the use of CAPLYTA as both monotherapy and as adjunctive treatment in bipolar I and bipolar II depression allows us to address large patient populations with tens of thousands of prescribers.

As prescribers continue to acquire positive experience with CAPLYTA, the depth and breadth of utilization increases. This dynamic is building sustained demand for our medicine. This is in line with historical precedents for antipsychotics approved for mood disorders, where branded antipsychotics have long growth trajectories and generate positive volume growth for years. We expect the same dynamic for CAPLYTA. In summary, 2022 was a tremendous year and we look forward to another successful year in 2023. Our team has been executing extremely well and we are building on our growth momentum. I’m confident that we will continue to grow robustly in the coming year as we remain laser focused on executing our commercial plan. We’re excited to continue improving the lives of as many patients as possible.

Now, I’ll hand the call over to Larry to detail our financial performance. Larry.

Lawrence J. Hineline: Thank you, Mark. I will provide highlights of our financial results for the fourth quarter and year ending December 31, 2022 and our outlook for 2023. Starting with our fourth quarter results, net product sales of CAPLYTA were $87.4 million compared to $25.5 million for the same period in 2021, representing a year-over-year increase of 243% and a 22% increase over the third quarter of 2022. Our gross to net percentage remained in the low 30s in the fourth quarter, consistent with our guidance. Inventory levels in the trade measured by days on hand of CAPLYTA at the wholesale level remained consistent throughout the quarter. For the full year 2022, total revenues were $250.3 million compared to $83.8 million in 2021.

Net product sales of CAPLYTA were $249.1 million for the full year 2022 compared to $81.7 million for 2021, representing an increase of 205%. Selling, general, and administrative, SG&A expenses were $94.6 million for the fourth quarter of 2022 compared to $79.7 million for the same period in 2021. For the full year SG&A expenses were $358.8 million compared to $272.6 million in 2021. Research and development, R&D expenses for the fourth quarter of 2022 were $33.9 million, compared to $29.5 million for the fourth quarter of 2021. R&D expenses for the full year 2022 were $134.7 million compared to $88.8 million in 2021. Cash, cash equivalents, and investment securities totaled $593.7 million at December 31, 2022 compared to $412.3 million at December 31, 2021.

Turning to our outlook for 2023, as Sharon mentioned, we expect CAPLYTA net sales to be between $430 million and $455 million reflecting continued strong growth. This sales guidance takes into account our expectation that CAPLYTA’s gross to net percentage will increase to the mid-30s in 2023. For 2023, we estimate SG&A expenses to range between $420 million and $450 million, which includes approximately $29 million of non-cash share based compensation expense. This reflects our commitment to support CAPLYTA commercialization through investments in our sales organization and marketing activities. For 2023, we estimate R&D expenses to range between $195 million and $220 million, which includes approximately $17 million of non-cash share based compensation expense.

Our R&D guidance reflects investments to support our robust pipeline, including multiple studies in our lumateperone clinical programs and our three other developmental platforms. In 2023, we anticipate that a substantial portion of our total R&D expenditures will be related to our lumateperone development programs. This concludes our prepared remarks. Operator, please open the line for questions.

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Q&A Session

Operator: . And our first question comes from the line of Andrew Tsai from Jefferies. Your question please.

Andrew Tsai: Thanks. Good morning and uh big congratulations on the great quarter and a great guidance. So I’ll kick things off and ask about the guidance overall for 2023. Team, what drove your decision to guide on revenue? And secondly is your revenue guidance provided in such a way that we can expect potentially beaten raises throughout the year, so just trying to gauge whether you’re giving a more conservative, more accurate or more aggressive type of guidance here? Thank you.

Sharon Mates: Thanks, Andrew and thanks for the kind words. This is Sharon and I’ll start and then I’ll turn it over to Mark. Obviously, we’re giving guidance now because we’re confident in our trajectory and what we’ve seen with our very strong launch for CAPLYTA. So that’s the overall statement. And then rather than stealing Mark’s thunder, why don’t I ask Mark to comment further and then maybe I’ll come back if there’s anything else to add.

Mark Neumann: Yeah. Sure, Sharon. And thanks for your question, Andrew. Yeah, to pick up where Sharon left off, what we’ve been seeing with CAPLYTA is we’ve been consistently increasing both the breadth and the depth of CAPLYTA prescribing month over month and to provide a little context around that date there have been over 22,000 unique prescribers of CAPLYTA and we’re adding over 1200 new first time prescribers every month. And in addition to that, the depth of their prescribing is increasing as well, so we’re also expanding the average number of prescriptions per prescriber. And while we’re really pleased with this update to date and it supports the trajectory that you’ve seen throughout the course of the year, we strongly believe that there’s still plenty of room to grow for a lot of the reasons that we talked about in our prepared remarks.

These are large patient populations. We have a large prescriber base with tens of thousands of prescribers and a significant remaining unmet need. And so we’ve taken some steps in 2023 that I detailed in the prepared remarks to invest behind the brand to really fuel this growth further. And I’d say that we just — we have a strong belief and a high degree of confidence that we’ll continue to experience this robust growth this year.

Operator: Thank you. And our next question comes from the line of Brian Abrahams from RBC. Your question, please.

Brian Abrahams: Hey, good morning. Thanks for taking my question. And my congrats as well on all the progress. Maybe another question with regards to your CAPLYTA guidance. Can you talk a little bit more about maybe some of the puts and takes within the guidance and the different ends of the ranges, you mentioned gross to net expectations, but also wondering, I guess, what the guidance contemplates with regards to additional demand growth, any changes in the overall dynamics with additional generic entrants, and just I guess, curious the scenarios that would steer you — that would I guess, steer towards the low end versus the high end of the range? Thanks.

Sharon Mates: Mark, do you want to take that?

Mark Neumann: Yeah, I think Brian, it’s simply looking at the trends that we’ve had to date with the bipolar launch, and an expectation that those trends will continue throughout 2023. We’ve said before and we continue to believe that the generic entries of lurasidone from Latuda should not have a significant impact on CAPLYTA. Historically, in this category, when products go generic, the remaining branded products are not significantly impacted. So for example, when Abilify and SEROquel went generic, the growth of VRAYLAR and Latuda was not impacted, and they continued their growth trajectory. So we anticipate a similar dynamic with lurasidone going generic. And then I think just the belief with the increased investment in our sales force, the continued investment in DTC and across our marketing mix, that we feel that the trend should continue throughout 2023 and build especially towards the latter part of the year.

Brian Abrahams: Got it. And in terms of just the variance?

Mark Neumann: Yeah, I think it’s just — we don’t expect a great deal of variance, we expect the trend to continue. And I think, specifically with the incremental investments that we’re making in the sales force as those and we just recently added them, so they literally are just out in the field this month. As they get more and more comfortable in their territories, that will accelerate the growth. Our DTC throughout the year should continue to raise awareness among patients, educate them on the benefits of CAPLYTA, and we’ll see that continue to go. As well as in the market access space, we’ve always had good broad access, particularly in Medicare and Medicaid with over 98%. With commercial, we had been at 85%, through the balance of last year, and more recently now have increased that to 90%, which we expect to be implemented by the end of the month. So I think all of those things should drive real robust growth throughout the year.

Sharon Mates: And I would just like to remind you, this isn’t a variance, it’s just telling you that we expect the momentum to build over the course of the year with growing revenue, as we go from quarter-to-quarter. Obviously first quarter has some first quarter seasonal dynamics built in, and then less so in the second quarter and then building further into the third quarter and fourth quarter.