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

Intra-Cellular Therapies, Inc. (NASDAQ:ITCI) Q4 2023 Earnings Call Transcript February 22, 2024

Intra-Cellular Therapies, Inc. beats earnings expectations. Reported EPS is $-0.3, expectations were $-0.44. Intra-Cellular Therapies, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen, and welcome to Intra-Cellular Therapies’ Fourth Quarter and Year-End Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today’s conference is being recorded. I would now like to turn the conference over to Dr. Juan Sanchez, Vice President, Corporate Communication and Investor Relations. Please go ahead.

Juan Sanchez: Good morning, and thank you all for joining us on our fourth quarter and full-year 2023 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. These are subject to change and involve 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 are 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’re excited to share our results for the fourth quarter and the full-year 2023. This past year was defined by strong and consistent growth throughout our company. We achieved major milestones as we established CAPLYTA as a key treatment option for broad patient populations with bipolar depression and schizophrenia. We also advanced our pipeline programs, and look forward to announcing top line results in our major depressive disorder study, Study 501 and Study 502. Our full-year 2023 total revenues were $464 million. CAPLYTA net sales in 2023 were $462 million, compared to $249 million in 2022, representing an 86% increase. Similarly, total scripts grew by 85% in 2023, compared to 2022.

Demand for CAPLYTA remains strong. Our well-executed commercial efforts continue to drive prescription growth from both new and existing prescribers. We anticipate continuing strong demand for CAPLYTA. Based on this positive momentum, I am pleased to report that we expect full-year 2024 CAPLYTA net product sales to be in the range of $645 million to $675 million. Mark will elaborate on our commercial performance and plans for this year in a moment, and then Larry will share additional details regarding our financials. We continue to strategically invest in our pipeline, and we anticipate further advancements in several of our late, mid, and early-stage clinical programs in 2024. I’d like to share more specifics regarding our plan for expanding CAPLYTA beyond its current indication.

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Q&A Session

We have two upcoming Phase 3 top line readouts for the use of lumateperone as an adjunctive treatment in major depressive disorder, or MDD. Our 501 study is fully enrolled, and most patients have completed treatment. We allowed the small number of patients who were in screening when we reached our previously determined enrollment targets to continue and be randomized to the double-blind treatment phase of the study. The rationale for allowing these patients to continue to participate in the double-blind treatment is that we believe that, ethically, if a patient had to participate in the screening process and qualified for enrollment, they should be allowed the possibility of receiving treatment. As a result, we expect to report top line results from Study 501 in April of this year, rather than late March.

We remain on track to report top line results from Study 502 late in the second quarter this year. Subject to those results, we continue to anticipate filing a supplemental New Drug Application with the FDA in the second-half of this year. We have a high degree of confidence in our MDD program. As we have previously shared, multiple lines of evidence support this confidence, starting with lumateperone’s mechanism of action, simultaneously modulating serotonin, dopamine, and glutamate systems. Importantly, we have significant clinical evidence in several patient populations, including patients with schizophrenia with comorbid depression, patients with bipolar depression, and patients with MDD exhibiting mixed features. Of note, CAPLYTA is the only anti-psychotic approved for both bipolar I and bipolar II depression, both as monotherapy and as adjunctive therapy.

We remain very excited by the possibility of helping millions of patients with MDD. The significant uptake of the last two anti-psychotics approved for adjunctive treatment in MDD underscores the continued unmet need and the large opportunity in this market. Given the efficacy and safety profile to date, we are confident in CAPLYTA’s future potential in this patient population. As we mentioned to you previously, we were expecting to have a meeting with the FDA to discuss the results of Study 403, particularly with respect to the MDD patient population with mixed features. I am pleased to report that we recently had a constructive meeting. And as you know, we wait for minutes prior to making any statements regarding our interactions with the FDA.

We expect to receive the minutes from the meeting later this quarter, and plan to update you regarding the outcome and next steps at that time. Beyond our MDD program, we continue to invest in our lumateperone R&D program. Accordingly, we have initiated our lumateperone pediatric program, which includes an open-label safety study in schizophrenia and bipolar disorder, and double-blind placebo-controlled study in bipolar depression, and two double-blind placebo-controlled studies in irritability associated with autism spectrum disorder. Approximately 2.8% of children in the United States have autism spectrum disorder. Irritability is a common symptom that impairs their daily activities with prevalence estimates ranging from about 25% to 45% of those patients.

There are only two anti-psychotics approved for the treatment of irritability associated with autism spectrum disorder, and two anti-psychotics approved for the treatment of bipolar depression in the pediatric population. We believe lumateperone, with its efficacy and favorable safety profile, if approved, can address the important medical need for these younger patients and their families, especially given the heightened concern regarding metabolic and motor issues these patient populations. Additionally, in the first-half of 2024, we will continue to advance our long acting injectable lumateperone program studying four different formulations. In summary, we continue the very successful launch of CAPLYTA, and are confident in the continued robust growth throughout 2024.

CAPLYTA is an important treatment option for patients with bipolar disorder and schizophrenia. These conditions account for about 50% of the U.S. anti-psychotic market’s nearly 68 million scripts each year. With the potential addition of MDD, our total addressable market would expand to cover nearly 80% of the market’s prescriptions. In addition, we expect our development programs among younger patient populations and our work with long acting injectables to further maximize the value of our lumateperone portfolio. Outside of lumateperone, our pipeline continues to move forward with several clinical trials underway, and others commencing soon. ITI-1284 is an important product candidate in our neuropsychiatry portfolio. In the first-half of 2024, we plan to initiate patient enrollment in Phase 2 clinical trial.

Starting with our generalized anxiety disorder program, our first study will evaluate 1284 as adjunctive treatment to SSRIs and SNRIs. Also in the first-half of 2024, we will begin clinical conduct to evaluate ITI-1284 for the treatment of psychosis in Alzheimer’s disease and agitation in Alzheimer’s disease. In our phosphodiesterase I inhibitor program, our Lenrispodun Phase 2 clinical trial in Parkinson’s disease is ongoing, and we expect to complete enrollment in late 2024, with top line results expected in the first-half of 2025. With respect to our ITI-1020 oncology program, our Phase 1 single ascending dose study in healthy volunteers is progressing. Our earlier-stage development programs include ITI-333 for opioid use disorder and pain, for which a multiple ascending dose study and a positron emission tomography study are both ongoing.

Also in development is our non-hallucinogenic psychedelic program. This past December, at the American College of Neuropsychopharmacology, we presented the preclinical data from our lead compound, ITI-1549. We are very encouraged by the positive reception our presentation received from the scientific and medical community. And we look forward to advancing ITI-1549 into human testing in late 2024 or early 2025. In 2023, we presented new CAPLYTA data regarding our development programs at several medical and scientific meetings. We also published results in various medical journals, demonstrating our progress throughout the course of the year. Looking ahead to 2024, we are starting off operationally and financially strong. As of December 31, 2023, we had approximately $500 million in cash, cash equivalents, and investment securities, and we have no debt.

I’m incredibly proud of our team and our accomplishments, and I’m excited to embark on our next phase of growth in 2024. I will now turn the call over to Mark to further discuss CAPLYTA’s performance and our plans for 2024. Mark?

Mark Neumann: Thanks, Sharon. Good morning, everyone. It’s great to be with you today. 2023 was a year of tremendous progress in establishing CAPLYTA as the leading treatment option for patients with bipolar depression and schizophrenia, setting the stage for continued robust growth in 2024, and beyond. We continue to work our way up the physician adoption curve, adding more than 15,000 new first-time prescribers of CAPLYTA during the year, and growing the breadth of our cumulative physician prescriber base since launch to over 36,000 by the end of the year. We also saw consistent quarter-over-quarter increases in the depth of prescribing as existing prescribers identified more and more patients who were appropriate for CAPLYTA treatment.

This progress was driven by our comprehensive promotional activities, including the expansion of our sales force executed in Q2 of 2023, extensive peer-to-peer medical education programming, and robust digital advertising. Complementing our professional promotion was a comprehensive consumer and patient campaign featuring broad national advertising through television and social media to enhance awareness among the 11 million adults with bipolar disorder and to communicate the potential benefits of CAPLYTA for these patients. For the year, CAPLYTA posted strong growth, increasing total prescriptions by 85% in 2023 versus 2022, and finishing the year with significant momentum, accelerating growth in total prescriptions to 10% sequentially in Q4 versus Q3.

We are well-positioned to drive continued robust growth throughout 2024. CAPLYTA has a very compelling product profile that features strong efficacy and a favorable safety and tolerability profile. In our clinical studies, CAPLYTA’s metabolic parameters, which include changes in weight, cholesterol, and glucose, are all similar to placebo. Equally important, movement disorders, like EPS and akathisia, are also similar to placebo. CAPLYTA’s favorable profile is very important, as these side effects can often lead to poor patient compliance and drug discontinuation. Another real benefit we hear from physicians is that they can start their patients at the effective dose without having to titrate. Instead of waiting days or weeks to complete that process, physicians also appreciate the convenience of CAPLYTA’s once daily dosing.

In 2024, we will continue to invest in optimizing the growth of CAPLYTA with several enhancements to our comprehensive promotional plan. As I mentioned previously, we added approximately 50 additional sales representatives late in Q1 of 2023, and those representatives are now firmly established and contributing significantly to our growth. We’ve also had consistently favorable results from our comprehensive direct-to-consumer platform, and we will continue these efforts throughout 2024 with a new creative campaign being introduced in Q2. Finally, we continue to enjoy a strong market access position with over 99% of Medicare and Medicaid lives covered and about 90% covered commercial lives. As I mentioned in our last call, from the end of Q3 2023 and the beginning of the fourth quarter, we negotiated an improvement in the utilization criteria for CAPLYTA with two of the largest Medicare Part D payers.

We were able to move CAPLYTA from a prior authorization and two generic steps to unrestricted status with these plans. We’ve already seen some initial benefits from this in the fourth quarter, and we expect to see the full impact of these changes this year. In summary, we made tremendous progress with CAPLYTA in 2023, and we are confident that CAPLYTA’s favorable product profile, and our incremental promotional investment behind the brand will result in a robust year of CAPLYTA growth in 2024. I’ll now turn the call to Larry to discuss our financial performance. Larry?

Larry Hineline: Thank you, Mark. I will provide highlights of our financial results for the fourth quarter and year ending December 31, 2023, and our outlook for 2024. In the fourth quarter, net product sales of CAPLYTA were $131.5 million compared to $87.4 million for the same period in 2022, representing a year-over-year increase of 50.4%. Our increase in net product sales was primarily driven by strong underlying prescription growth, a 55% increase versus the same quarter in 2022, and a 10% sequential increase over the third quarter of 2023. This increase was partially offset by a higher gross-to-net percentage in the fourth quarter that was at the high end of the low 30s, still in line with our prior guidance. For 2024, we expect CAPLYTA’s gross to net percentage to be in the mid-30s throughout the year.

Q4 inventory levels in the trade, measured by days on hand of CAPLYTA at the wholesale level, remain consistent relative to the prior quarter. For the full-year 2023, total revenues were $464.4 million, compared to $250.3 million in 2022. Net product sales of CAPLYTA were $462.2 million for the full-year 2023, in line with our guidance. This represents an increase of 85.5% compared to 2022. SG&A expenses were $409.9 million for the year ended December 31, 2023, compared to $358.8 million for the year ended December 31, 2022. R&D expenses were $180.1 million for the year ended December 31, 2023, compared to $134.7 million for the year ended December 31, 2022. Turning to our outlook for 2024, as Sharon mentioned, we expect CAPLYTA net product sales to be between $645 million and $675 million, reflecting continued strong demand.

For 2024, we estimate SG&A expenses to range between $450 million and $480 million, which include approximately $38.6 million of non-cash share-based compensation expense. This reflects our commitment to continue to effectively and efficiently support CAPLYTA commercialization through investments in our sales organization and marketing activities. For 2024, we estimate R&D expenses to range between $215 million and $240 million, which includes approximately $22.5 million of non-cash share-based compensation expenses. Our R&D guidance reflects investments to support our broad pipeline. In 2024, we anticipate that a large portion of our total R&D expenditures will be related to our lumateperone development programs as we continue to explore the use of lumateperone in additional patient populations.

Our financial position remains strong. Cash, cash equivalents, investment securities and restricted cash totaled $499.7 million at December 31, 2023. This concludes our prepared remarks. Operator, please open the line for questions.

Operator: Thank you. [Operator Instructions] One moment while I announce our first analyst, and it comes from the line of Andrew Tsai with Jefferies. Please proceed.

Andrew Tsai: Hey, thanks. Good morning, and congrats on the strong execution and the continued progress. So, for me, wanted to ask on MDD today, what is your guys’ latest thinking in terms of what we can expect to see in the top line release, in April? And then our understanding is that two-point placebo-adjusted change should be a good efficacy result. But is there anything else you would encourage the Street to also look for as we think about CAPLYTA’s potential differentiation in adjunctive MD such as response rates, remission rates, safety profile, anything else? Thank you.

Sharon Mates: Thanks so much for the question, Andrew, and for the kind words. This is Sharon, and I’ll start off, and then I’ll ask if Suresh has anything he wants to add. So, typically, in our top line data what we do put out is all of the information that we have at that point. As you know, these are large studies that we do, and so we don’t get all of the top line data — all of the data at one moment in time. And since we know how anxious both we and the Street are, we put the data out when we get it. So, we certainly expect the primary endpoint, which is change from baseline on MADRS. And we’ll also put out any other data that we have at that point. And you’re right that typically in these studies you expect to see a two to four-point change on the MADRS, but on an adjunctive study you expect to be at the lower end, whereas in monotherapy studies you expect to be at the higher end.

So, that’s what we’re expecting. We power our studies to approximately 90%. And so, — and we obviously, as I said in our prepared remarks, we have confidence, both in our program, in these studies, and on lumateperone’s performance in these studies. So, with that, I don’t know, Suresh, do you have anything you want to add?

Suresh Durgam: Not at this time. You have covered —

Sharon Mates: Okay.

Andrew Tsai: Thank you.

Sharon Mates: Thank you.

Operator: Thank you. And one moment for our next question, please, comes from the line of Brian Abrahams with RBC Capital Markets. Please proceed.

Brian Abrahams: Hey, and congrats as well from my end on all the continued progress. Maybe continuing on MDD, can you talk — maybe give us a little bit more of a sense of the degree of over-enrollment you may have in the study, how that might impact powering. And then, how are you thinking about, as these results come out during the second quarter, where the most differentiation potential could be here in terms of positioning relative to some of the other adjunctive atypicals in the space? Thanks.

Sharon Mates: Okay, thanks. So, this is Sharon again, and I’ll start with regards to, yes, as we’ve said, patients come into screening, and we did believe that patients who are in screening who pass through successfully through the screening process should be allowed to enter. Typically, you plan your studies so that you will have at least the number of patients. Whenever you put a protocol in place you say approximately, like we had approximately 470 patients. We screen appropriately for that. And we had patients come through. So, it’s a small number of patients. It’s typically under 5% that you over-enroll, and that is what fit the bill here, that we allowed to come in that you over-screen, and if they pass you allow to go in.

So, that is what we have. But, of course, you do need to wait for them to complete. So, it’s just a couple of weeks later that they are coming through finishing up the study. And that’s why the study will read out in April, rather than in March. So, I think, I don’t know, Suresh, did you want to add anything to that?

Suresh Durgam: Yes, I think they were asking about the [powering] (ph). For this —

Sharon Mates: Okay —

Suresh Durgam: There is not going to be any powering implications because the number is so small, so I would not expect any powering implications.

Sharon Mates: Right. And on differentiation, you also asked about that. And I think that CAPLYTA has demonstrated its efficacy and favorable safety and tolerability profile. And with that, we think that there is a real need in the marketplace for additional agents, and that CAPLYTA can perform well in this marketplace.

Brian Abrahams: Thanks, Sharon. Thanks, Suresh.

Operator: Thanks. One moment for our next question, please, it comes from the line of Jessica Fye wit J.P. Morgan. Please proceed.

Na Sun: Hey, guys, this is Na Sun on for Jess. Congratulations on the strong guidance for CAPLYTA in 2024. Can you walk us through some of the assumptions that’s underlying the guidance? What does it mean in terms of patient penetration? And then how do we think about the gross to net dynamics in 2024? Thanks.

Sharon Mates: So, maybe I’ll ask Mark if you want to talk to the first part. And then, Larry, if you want to talk to the gross to net?

Mark Neumann: Yes, sure, Sharon. So, the guidance that we put out, the main driver of that guidance is the underlying strong demand trend that we see in the business, and the continued demand for CAPLYTA. So, any variation around that trend is really where you get the range in the guidance. We expect to continue to penetrate both the schizophrenia and the bipolar depression market, where we focus both on increasing the breadth of prescribing, our prescriber base, as I mentioned in my prepared remarks. Last year, we added over 15,000 new first-time prescribers of CAPLYTA. We expect to see that continue in 2024. As well as, at the same time, across the entire prescriber base, of what is now over 36,000, we expect to continue to see increased depth of writing as these existing prescribers get more experience and they find more and more patients that are appropriate for CAPLYTA.