ACADIA Pharmaceuticals Inc (ACAD) 2020 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to ACADIA Pharmaceuticals' Fourth Quarter and Full Year 2020 Financial Results Conference Call. My name is Gigi, and I'll be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to Mark Johnson, Vice President of Investor Relations at ACADIA. Please proceed.

Thank you so much. Good afternoon, and thank you for joining us on today's call to discuss ACADIA's fourth quarter and full year 2020 financial results. Joining me on the call today from ACADIA are Steve Davis, our Chief Executive Officer, who'll provide an overview of our 2020 financial performance, a review of our business and our outlook for 2021. Following Steve, Elena Ridloff, our Chief Financial Officer, will then discuss our financial results and guidance. Also joining us today is Amanda Morgan, our Chief Revenue and Customer Officer; and Charmaine Lykins, Global Product Planning and Chief Marketing Officer, who will provide updates on our commercial initiatives. Dr. Serge Stankovic, our President, will then discuss our pipeline progress before turning it back to Steve for final remarks and opening the call up for your questions. I would also like to point out that we are using supplement slides, which are available on the Events and Presentations section of our website.

Before we proceed, I would first like to remind you that during our call today, we'll be making a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events or future results, are based on current information, assumptions and expectations that are inherently subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place 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.

Thank you, Mark. Good afternoon, everyone, and thank you for joining us today. Please turn to Slide 5. We had a great year in 2020 with significant progress across our 3 strategic pillars, our strong financial performance positions us well for a pivotal year in 2021 as we prepare for the transformative impact of our potential DRP launch, while advancing our pipeline of innovative programs.

For the full year 2020, we achieved net sales for NUPLAZID of $441.8 million. This represents a 30% year-over-year increase. These results are due to the focused execution of our commercial team, which continues to perform at a high level despite the challenges of the ongoing pandemic. Since launching in 2016, we've achieved consistent linear growth year-over-year in net sales of NUPLAZID for patients with Parkinson's disease psychosis, or PDP.

Additional highlights from 2020 include our submission of an sNDA for DRP. The FDA review is progressing as expected, and we look forward to the potential of NUPLAZID becoming the first and only approved treatment for this indication and the first new treatment in the dementia space in over 15 years. We've progressed our Phase III program for trofinetide in Rett syndrome and initiated ADVANCE-2, our Phase III study for pimavanserin in the negative symptoms of schizophrenia. These are 2 indications with high unmet need and no approved therapies.

We also further expanded our pipeline with strategic business development. We acquired CerSci Therapeutics, bringing us the first-in-class non-opioid pain program. And through our collaboration with Vanderbilt University, we brought in a novel muscarinic receptor program. Both represent high science approaches within CNS and large potential market opportunities.

Please turn to Slide 6. In 2021 to deliver on our mission, we're focused on 3 strategic pillars: first is driving the growth of NUPLAZID for patients with Parkinson's disease psychosis; second, delivering on the dementia-related psychosis opportunity; and third, developing the next wave of breakthrough therapies by advancing our development pipeline and acquiring new assets.

Let's review these further on Slide 7. The significant potential of pimavanserin, combined with our clinical pipeline, will drive meaningful long-term growth. We continue to grow NUPLAZID sales and based on our 2020 performance and current outlook, we are providing net sales guidance for PDP in fiscal year 2021 of $510 million to $550 million. We're on the cusp of the potential approval in DRP, a significantly larger market opportunity, for which our teams have been preparing for approximately 2 years. We will be ready to execute on day 1.

In addition, we're advancing our pipeline with clinical trials across 5 separate indications. Today, we have 2 late-stage and 2 early-stage programs focused on the treatment of neurological and psychiatric indications in areas of significant unmet need. As we look to expand our pipeline, we will leverage our CNS expertise and have ongoing efforts dedicated to evaluating new business development opportunities.

And with that, I will now turn it over to Elena to discuss our financial performance and guidance.

Thank you, Steve. Today, I'll discuss our fourth quarter and full year 2020 results and our 2021 financial outlook. Please turn to Slide 9. In the quarter, we recorded $121 million in net sales, an increase of approximately 23% compared to $98.3 million of net sales in Q4 of 2019. This was driven by strong performance of NUPLAZID in the office-based prescription channel and continued stabilization in the long-term care channel. Overall, year-over-year volume growth in Q4 was approximately 12%. The gross to net adjustment for Q4 was 18.3%. Recent inventory in the channel at the end of the fourth quarter were slightly higher than the previous quarter, but consistent with historical ranges.

Moving down the P&L. GAAP R&D expenses increased to $62.1 million in the quarter compared to $57.5 million in Q4 of 2019. GAAP SG&A expenses increased to $120.8 million in the fourth quarter from $91.9 million in the fourth quarter of last year. Noncash stock-based compensation expense during the quarter was $21.2 million compared to $19.8 million for the same period in 2019.

Please turn to Slide 10. For the full year 2020, we recorded $441.8 million of net sales, an increase of 30% compared to $339.1 million in net sales in 2019. This was driven by 18% year-over-year volume growth. The gross to net adjustment for the full year was 17%.

GAAP R&D expenses increased to $319.1 million in 2020 from $240.4 million in 2019. This is primarily due to the upfront expenses related to the CerSci acquisition and the license and research collaboration with Vanderbilt University. GAAP SG&A expenses increased to $388.7 million in 2020 from $325.6 million in 2019. This was largely due to increased advertising and promotional costs, DRP launch preparation expenses as well as an increase in personnel and related costs. Noncash stock-based compensation expense for 2020 was $84.4 million compared to $82.3 million for 2019.

We ended the year with $632 million in cash and investments on our balance sheet compared to $697.4 million at year-end 2019.

Please turn to our 2021 financial guidance on Slide 11. For the full year 2021, we expect continued growth for NUPLAZID in Parkinson's disease psychosis, and we are providing net sales guidance for PDP of $510 million to $550 million. As this is a potential launch year for DRP, we are not including revenue expectations for DRP in our guidance. The midpoint of the guidance range represents 20% growth in PDP revenue year-over-year.

As you model 2021, we expect similar quarterly dynamics in gross to net as prior years. We expect gross to net to be highest in the first quarter due to the annual reset of the donut hole manufacturer obligation for Medicare Part D patients. As a result of a meaningful increase in gross to net in the first quarter, we expect first quarter net sales to be down sequentially. However, we expect growth in PDP net sales to resume in the second quarter and continue throughout the year.

On the expense side for 2021, we expect GAAP R&D expenses to be between $300 million and $320 million. This is driven by progressing clinical candidates in 5 indications and includes approximately $30 million in stock-based compensation expense.

We expect GAAP SG&A to be between $560 million and $590 million for the full year. This represents similar investments in PDP as compared to 2020 and new investments related to the DRP launch. This also includes approximately $60 million in stock-based compensation expense.

I'll now turn it over to Amanda, who will discuss our PDP commercial performance and outlook for 2021.

Thank you, Elena. Today, I would like to review our full year 2020 commercial performance, which reflects the solid foundation of our business and positions us for long-term growth. Please turn to Slide 13. Over the past several years, we have built and developed a best-in-class commercial field organization through a high-performance culture that is focused on results. In 2020, we achieved $441.8 million in net sales, representing 30% year-over-year growth.

I'd like to point out 2 key drivers of our success: first, despite the pandemic, we've broadened our prescriber base at double-digit growth rates, leading to double-digit volume growth year-over-year; second, we increased our market share and meaningfully expanded the size of the overall PDP market by approximately 4% to 5%. This is a direct result of our PDP disease education and NUPLAZID promotional efforts.

In 2020, we grew across all segments of our business. This was led by office-based prescriptions, which grew as a result of new patient starts performing at or exceeding pre covid levels. And we continue to observe high fulfillment rates for continuing patients on NUPLAZID.

As we have discussed previously, the long-term care channel has been impacted by the ongoing pandemic. In Q4, our LTC business remained stable, and this is continuing as we enter this year. According to the latest IQVIA data, NUPLAZID has continued to outperform a market basket of branded LTC products. While census numbers remain below pre-pandemic levels, they have stabilized, and we believe this will be a temporary situation. As we work through the pandemic, we remain confident in our growth potential for 2021 as we are well positioned to reach patients wherever they are located, whether in the community or long-term care setting.

Now let's discuss our NUPLAZID 2021 growth initiatives and priorities in PDP. Please turn to Slide 14. Our successful commercial execution in 2020 positions us well as we carry this momentum into 2021. This year, we will continue to focus on growing our base of new prescribers, driving growth in the size of the overall PDP market and increasing NUPLAZID's market share. We will accomplish this through a number of commercial initiatives, including stimulating conversations to bridge the communication gap between patients, caregivers and health care professionals, continuing to engage with our customers, both virtually and in person, and amplifying our health care professional and consumer campaigns. Throughout the year, we will leverage the strong foundation we have built in PDP to lead a successful launch in DRP.

To discuss our DRP initiatives further, I'll now turn it over to Charmaine.

Thanks, Amanda. Please turn to Slide 15. Having led several successful product launches in CNS over the years, I'd like to emphasize how excited I am about this launch in particular and how experienced and well prepared our team is. Our marketing and broader commercial teams have been working hard to deliver on the mission ahead of us. Patients are waiting.

An FDA approval of pimavanserin for the treatment of hallucinations and delusions associated with DRP will represent a significant breakthrough for patients and caregivers. In the pivotal HARMONY study in DRP, pimavanserin demonstrated robust efficacy, and importantly, we see this efficacy without any negative impact on cognition or movement. The physicians we have spoken to are eager for a treatment option with clinically established efficacy and a differentiated safety profile. We have an important mission ahead of us and we look forward to delivering these compelling messages upon approval.

A key focus of our DRP launch will be building disease awareness with both health care professionals and caregivers. For health care professionals, or HCPs, disease state education is a top priority, and these efforts are foundational to helping HCPs recognize and discuss the early signs and symptoms of DRP with their patients. Our disease state education website created by and for HCPs, morethancognition.com, continues to see increasing engagement with approximately 450,000 views since launch in October 2019. Our virtual disease state education events targeted for the HCP audience have been very successful with impressive online attendance. Our team has engaged nearly every dementia center of excellence in the United States, and all national long-term care associations have participated in DRP Disease Day Awareness programs.

When it comes to caregivers and the patients they care for, prioritizing the caregiver and our consumer outreach is an important area of focus. When we compare the demographics of DRP caregivers to where we have focused in PDP, DRP caregivers tend to be younger and more multigenerational. To that end, we recently launched MoreThanMemoryLoss.com. A disease education website that speaks directly to the caregiver and provides educational resources and stories to help them know they are not alone in caring for someone with delusions and hallucinations associated with dementia. Similar to our success with NUPLAZID in PDP, bringing awareness and education to health care providers and caregivers will be critical to our success.

Please turn to Slide 16. DRP launch preparations, including talent recruitment, are on track. While the DRP indication is a much larger opportunity than PDP, this indication will be a line extension of our product already on the market. For NUPLAZID, this means we'll be leveraging and building upon our current commercial foundation and established infrastructure. For example, since its launch, NUPLAZID has generated significant brand awareness in PDP. With Acadia Connect, we already have an established patient support service to help patients and caregivers start and stay on NUPLAZID.

Furthermore, NUPLAZID has broad formulary access in PDP with a well-recognized value proposition among payers. And finally, we have a strong and experienced long-term care sales force, leveraging key partnerships with patient advocacy organizations, national electronic health record systems and pharmacies.

Our field organizations are eager and ready to go upon approval. The promise of helping many more patients and their families has never been closer to being realized.

I would now like to turn it over to Serge to provide an update on our pipeline.

Thank you, Charmaine, and good afternoon, everybody. Please turn to Slide 18. First, I'm pleased to report that we are on track for the April 3 PDUFA date with our supplemental NDA for the dementia-related psychosis. Beyond DRP, we are focused on developing innovative new treatments with high unmet need, and that is reflected in our growing and advancing pipeline.

In 2021, we will have ongoing clinical programs across 5 indications. I would like to discuss now our pipeline progress in more detail, starting with our trofinetide program on Slide 19.

As we've discussed, Rett syndrome is a highly debilitating, rare neurological disorder with currently no FDA-approved therapies. Our Phase III program with trofinetide is progressing well, with top line results from our LAVENDER study expected in the fourth quarter of this year. With LAVENDER, we are seeking to confirm the positive results of the Phase II study using the same validated endpoints to show improvement on the core symptoms of Rett syndrome. As a result, based on the end of Phase II meeting with the FDA, if LAVENDER is positive, we plan to submit an NDA.

The negative symptoms of schizophrenia remains a very significant unmet need. Please see an overview of our program on Slide 20. There are over 700,000 patients in the United States who are currently treated for schizophrenia, but still have persistent and potentially debilitating negative symptoms such as social withdrawal, lack of emotion and blunted effect, among others. Approved antipsychotics primarily address the positive symptoms, namely hallucinations, delusions, agitation, but importantly, do not control negative symptoms.

As part of our Phase III program, we have one positive pivotal study already, ADVANCE-1 and are enrolling our second pivotal study now, ADVANCE-2. If positive, pimavanserin could be the first and only FDA-approved therapy indicated for the treatment of the negative symptoms of schizophrenia.

Turning now to Slide 21. With a novel scientific approach, ACP-044 is a first-in-class orally administered, non-opioid analgesic. ACP-044 accelerates decomposition of peroxynitrite. This nitro oxidative agent, peroxynitrite, is elevated following tissue injury. With acceleration of peroxynitrite decomposition, ACP-044 interrupts multiple downstream pain pathways and consequently, may prevent and/or treat a variety of acute and chronic pain conditions. In the first quarter, we will be initiating a Phase II study in acute postoperative pain for patients undergoing bunionectomy surgery. And in the second quarter, we will initiate a Phase II study for patients suffering from chronic osteoarthritis pain.

Finally, please turn to Slide 22 for a brief summary of our ACP-319 program. Treatments targeting muscarinic receptors have shown great promise and potential utility for cognitive impairment in dementia and psychotic symptoms in schizophrenia. We believe, due to its receptor selectivity and allosteric modulation approach, that ACP-319 has the potential to achieve this efficacy without unwanted cholinergic side effects. We are continuing Phase I development and look forward to provide updates on this program as we progress.

Slide 23 highlights our ongoing programs and upcoming milestones.

To recap, near term, we look forward to a potential approval in DRP with PDUFA date of April 3. Also in the first half of this year, we will initiate 2 Phase II studies for the ACP-044 program. And before the end of this year, we expect top line results from the trofinetide Phase III study in Rett syndrome.

And with that, I'll turn the call back over to Steve.

Thank you, Serge. Please turn to Slide 25. Today, we are executing on our promise to deliver NUPLAZID to patients with PDP while preparing for a potential second indication in DRP, that allows us to help a greater number of patients and their caregivers. Our long-term growth strategy reflects the continued momentum of our NUPLAZID franchise and progression of our broad pipeline, which addresses disorders of high unmet need. Additionally, business development remains a critical pillar of our strategy, and we will continue to execute high science deals that expand our pipeline.

In closing, I would like to thank our employees for their accomplishments in 2020 and their continued commitment and passion as we continue our mission to elevate life.

I'll now open up the call for questions. Operator?

(Operator Instructions) Our first question comes from the line of Cory Kasimov from JPMorgan.

I wanted to ask you more about your market research around DRP and kind of what you see as the initial intent to prescribe? And maybe what you would expect to be the biggest impediments to initial uptake?

Yes. Thanks much for the question, Cory. Charmaine, do you want to take that?

Sure. Overall, I'd say we've had very good feedback from KOLs up until now, be it the advisory boards we've had or market research. Physicians are excited to be able to prescribe NUPLAZID for dementia-related psychosis once it's approved. Ideally, because of the dural efficacy that seen through the HARMONY study with 3 times less chance of relapse compared to patients on placebo when it comes to symptoms of psychosis.

The safety profile as well is one that differentiates from the off-label agents that are used out there in the market. So overall, I would say, very positive feedback with regards to physicians that we've spoken to in market research.

Our next question comes from the line of Ritu Baral from Cowen.

I wanted to ask about sort of the first steps that you would take on the DRP launch, especially as it relates to long-term care centers and what is potentially a COVID-off environment. What are you seeing in those dynamics? Are patients moving back into the long-term care center for retail? Could it be disruptive? And how will that fit into your first launch activities?

Yes. Thanks much for the question, Ritu. Amanda, do you want to take that?

Yes. Thanks, Ritu, for the question. What I'll share is, is that the situation in LTC is temporary and linked to the pandemic. We believe that the availability of the vaccine and the distribution of the vaccine will be a key element to returning to pre-pandemic conditions.

What I'd like to share with you is and remind you of is that really, NUPLAZID has done very well throughout 2020 and outperformed the market regardless of the pandemic. And so when you look at it compared to the market basket, 13 of 15 products experienced declines. So just looking at that situation, looking at how we performed in 2020 and looking into 2021, we'll continue to leverage that foundation.

Ritu, it might just also -- just to remind everyone, we ship drug directly to patients. So that's always been our distribution model, so they get it directly at their homes. So we can access patients, whether they're in a long-term care facility or at their home. And I think what we've seen through the pandemic is our ability to do that, our ability to reach out to patients, work through the challenges of the pandemic, and we expect that the learnings that we've garnered there to carry through as we've launched into DRP as well.

Our next question comes from the line of Tazeen Ahmad from Bank of America.

So you guys are not going to be providing guidance for DRP, understandable. But assuming that you do get approved and you do start detailing right away, could we expect to see some detail at least in the early parts of the launch about scripts being written specifically for that indication, so that we have a sense of sort of the cadence of pickup at least in the early days, just so that we have some expectations on how we should think about modeling?

Yes. Thanks much. Elena, do you want to take that?

Sure. So Tazeen, it's a little premature at this point to comment on what we'll provide as far as early launch metrics, but we will do our best to provide dynamics and insights into the launch and we're eager and excited to launch on approval.

Our next question comes from the line of Charles Duncan from Cantor Fitzgerald.

Steve and team, congrats on a good year of progress despite the challenging market. I had a question for Serge relative to DRP. Regulatory progress, and I know you're probably not going to provide a lot of color, but you said that you were on track for the April 3 PDUFA date. And I'm kind of wondering how you know that is the case? Are you in label discussions?

And then can you provide any color on how you imagine the label, if it's an approved label, to accommodate use in a demented patient population.

Serge, 2 questions there. You want to take them?

Serge, I think you may be on mute.

Yes. I'm sorry. I was on mute. Charles, thanks for the question. As it is customary, we are not really providing the details or commenting on the ongoing review, unless, obviously, there is something material. So to that extent, we are not going into details on the day-to-day interactions with the FDA. But we are -- based on all -- everything, we are on track for the April 3 PDUFA date.

In regard to the label, as we have been commenting earlier, we are not only anticipating the broad label, broad indication to all subtypes of the dementia-related psychosis. But we -- across the dementia subtypes, but we are also had basing that on the interactions and agreements that we had with FDA from the beginning, starting with our end-of-Phase II meeting and the pre-sNDA meeting. So from that perspective, we are reliably anticipating that we will receive the broad label with -- based on the study that we submitted was a part of the supplemental NDA.

Our next question comes from the line of Neena Bitritto-Garg from Citi.

So I just had a question about the gross to net. And thanks, Elena, for giving us some good detail around how to think about it for the first quarter and the rest of the year. But I guess I'm just curious about how we should think about where the gross to net could kind of settle out in like the second through fourth quarters this year, just given the DRP launch and the dynamics of kind of new Medicare patients coming on drug in potentially large quantities?

Sure, Neena.

Yes, Elena, do you want to take that?

Sure. Thanks. So maybe I'll break it out just to give you a little more context for PDP versus the dynamics for DRP. So for PDP, we expect a very similar gross to net dynamics as well as rate as 2020. So high teens for PDP. When you look at DRP, since the patient mix will be different as we'll have more new patients and this is heavily a Medicare population, there will be a higher proportion of donut hole obligation for us. So the DRP proportion of revenues will have a higher gross to net, and that will likely be in the mid-20s, again, because of the patient mix. So over time, that would change.

Our next question comes from the line of Jason Butler from JMP Securities.

Just outside of the long-term care setting, can you just give us an idea of what the level of overlap between PDP and DRP prescribers is? And essentially, is there a subset of prescribers here that already has a relatively high level of awareness of DRP and the pimavanserin data?

And then just a quick follow-up. Does your guidance assume for PDP, any return to growth in the long-term care setting in 2021?

Sure. Amanda, do you want to take the first question. And Elena, do you want to answer the question on guidance?

Sure. Thanks for the question. So as we prepare for DRP, we're going to leverage our current call points, and then we'll expand further into psychiatry, LTC and then our CNS-focused primary care physicians.

Elena, you want to take the second point?

Sure. So we've incorporated a range of scenarios within our guidance. And as Steve and Amanda mentioned before, importantly, we can reach patients wherever they are, whether they're at home or in a long-term care setting. So there's a range of scenarios incorporated in our guidance with regards to long-term care returning to growth, and we're confident in the range and the dynamics of the lower end versus the upper end will partially be determined based on what we see as far as long-term care census and the rates which that have accrued throughout the year.

Our next question comes from the line of Jeff Hung from Morgan Stanley.

Can you just provide an update on the level of in-person activity in the last couple of months? And what kinds of differences you're seeing by region or channel? Just curious if that's changed over time.

I'm sorry, you were breaking up on mine. Could you ask the question again?

Yes, sure. So I was just wondering if you could provide an update on the level of in-person activity in the last couple of months? And I'm curious if that's changed over time. And what kind of differences you're seeing by region or channel?

Got it. Yes. Thanks much. Amanda, do you want to take the question on in-person activity?

Yes. Thanks for the question. So the market's dynamic, as we navigate this pandemic, we're seeing some return of face-to-face or in-person interactions, but we'll continue, just like we have throughout 2020 and 2021, to adjust to the market and maneuver from virtual to in-person to hybrid.

Just to echo Amanda's thoughts there. On the in-office side, we are seeing things shift more and more toward in-person visits. On the long-term care side, things are pretty much unchanged on that front, where it's very restricted, getting -- for understandable reason of getting the long-term care facilities.

Having said that, I think as we all see in the press, vaccines being distributed more and more broadly, particularly focusing on elder care and patients in long-term care facilities. This temporal situation will clear and we'll have the ability to do more in-person visits in the long-term care facilities.

And just one additional thing that we mentioned before, I just want to remind you of. Long-term care is a little bit of a different call point than calling on a physician's office. It's more of a -- there's several constituents that need to be engaged in long-term care, the long-term care pharmacy medical directors or nursing staff at the facility and of course, the prescribing physician. We have relationships with all of them, and many of those relationships do not require us to be in a facility. So as we'd indicated before, we feel very well positioned to continue to drive the business in long-term care, and as census numbers come back there, we expect to return the same kind of growth levels that we had there before the pandemic.

Our next question comes from the line of Salveen Richter from Goldman Sachs.

Could you provide your view on how you see the DRP launch trajectory playing out versus what you saw with the PDP launch, recognizing differential factors, including COVID and existing commercial footprint? But any color you can give us here would be helpful.

Sure. Elena, you want to take that?

Sure. So we expect very similar dynamics to what we observed with PDP, but of course, on a much larger scale. If you recall, when we launched in PDP, we said with these kinds of drugs, particularly when you're entering a new space, where there's been nothing approved before, you should expect the progressive linear type of sales growth, and that's exactly what we've seen with PDP. And this is really just because of 2 primary factors, one we're educating both on the disease state as well as getting physicians familiar with prescribing a new drug. And as we start to get more of that familiarity then the prescriber base grows and your depth of prescribing growth. So we expect the same thing to be true for DRP, and we're very much looking forward to launching in -- following the PDUFA.

Our next question comes from the line of Marc Goodman from SVB Leerink.

Yes, Elena, can you talk about the SG&A increase from 2020 to 2021, just some push and pulls? I mean I'm curious number of reps that we're adding, are we adding roughly 250 reps? Are they coming in around the middle of the year? Are they coming in at the beginning of the year?

With respect to the advertising, promotional event dollars that you're doing, I mean, is the PDP dollars going up year-to-year in addition to, obviously, we're layering in DRP? I'm just kind of curious, or as DRP coming in with PDP kind of moving down. I'm just kind of curious how you guys are thinking about this and how it plays out throughout the year as well?

Sure. So you've hit on 2 of the primary drivers. So let me just -- so first, the primary driver for sure is the DRP launch. Our PDP spend year-over-year is very similar, and the key drivers to that increase are the field expansion. You have the numbers right, we're going from 200 to 450. Our marketing launch investments, which include our DRP DTC plan, which we think will be important, and we've had a lot of success with PDP on both unbranded and branded campaigns and we plan to implement a similar strategy for DRP. And then lastly, our medical affairs investments, Phase IV studies for DRP and MSL expansion. So those are the primary drivers.

And as far as the cadence for the year, you should expect SG&A to grow through the quarters throughout the year.

Our next question comes from the line of Vamil Divan from Mizuho.

Thanks for all the thoughts on the DRP because like I guess over the next 6 weeks or so. So maybe I could just shift gears. You also have the trofinetide data coming out, so at the end of the year here. Can you maybe just sort of frame your thoughts on what would be a clinically meaningful result from that trial? And then there are several companies working on products for Rett syndrome. Now obviously, there's a huge unmet need. Can you just maybe talk about where you see this product being differentiated from the others?

Sure. Thanks much. Serge, do you want to take that?

Yes. Thanks, Vamil. I'll start by the first part of your question in terms of what are our expectations in terms of meaningfulness of the results. Just to remind you, in the agreement with the FDA, the primary outcome of our Phase III trial is actually a measurement of the symptoms via 2 separate outcome measures, one being Rett syndrome behavioral questionnaire, which is a validated caregiver assessment for symptoms of Rett syndrome; and the other is clinical global impression of improvement, which is a clinician assessment of the overall improvement of symptoms.

So by virtue of actually not only passing the core symptoms of the Rett syndrome via a Rett rating scale, but also this clinical assessment of the improvement gives the meaningfulness to the outcome of the measure, obviously, providing that we observe a significant difference between placebo and drug in this regard following treatment. So that's as far as the first point goes.

In regard to the second question, one of the distinctive characteristic of the benefit that we are anticipating to replicate it in our Phase III trial from the initial data that we have in Phase II is that trofinetide addresses multiple areas of the core symptoms of Rett syndrome. As you know, Rett syndrome, in its nature, affects the multiple system. Motor, respiratory, seizures are important symptoms, the ability to ambulate as well as other neurological symptoms that occur.

So from that perspective, we are really distinctive characteristic of trofinetide is that addresses these multiple symptoms which is somewhat different from what we have seen with some of the other development programs that are specifically targeted to one specific area like either addressing seizures or respiratory symptoms or things of that nature.

So this ability to address the core symptom and thus improve overall functioning of the patient is important feature that we are anticipated to be able to demonstrate through with the data from our Phase III trial.

Our next question comes from the line of Paul Matteis from Stifel.

Since pimavanserin is on the market and insurers know it well, how much can you formalize reimbursement agreements or at least semi-formalize them ahead of approval? And I guess in April, May, June, what do you think access will look like? Do you think that a physician pretty soon will be able to write this and get a patient on it within a reasonable period of time? Or could we be months away from that after that PDUFA?

Sure. Thanks for the question, Paul. I'm going to answer part of the question, and then I'm going to ask Charmaine to answer the second part regarding just access in the early going.

So as we've indicated before, although DRP is a dramatically larger population than PDP, I wouldn't expect -- I wouldn't assume that we will have any change in price there. Today, we enjoy very good access with payers. We're already on formularies with PDP. And with DRP, we expect very similar dynamics with payers and a very similar payer mix.

When I say we expect very similar dynamics, payers get it. With PDP, there was no drug approved; DRP, there is no drug approved. Use, in both cases, off-label use of the atypical antipsychotics is very problematic in use in those populations. And we've always priced NUPLAZID based on the value it provides for patients and their caregivers and as you know, we enjoy very, very good access today.

So I'll let Charmaine talk a little bit about the mechanics of just what will happen as we move past an approval and payers make adjustments to their access. Charmaine?

Sure. Yes. Sure. Thanks, Steve. So first of all, we have to recognize that DRP will be a line extension for a product that's already approved and on the market, and NUPLAZID is part of a protected class as well. So both of those pieces of information are important here.

Payers will simply add an additional usage criteria for dementia-related psychosis to NUPLAZID's existing formulary status because of the situation.

Now for Medicare, the largest payer, of course, considering the demographics, that is expected to happen within 90 days or so of approval. On the commercial side with commercial payers, it may take up a year, but we don't anticipate it happening -- taking it that long with the commercial payers.

In the interim, we've got patient services programs set up through ACADIA Connect, and we're well equipped to support patients no matter where they may be, as mentioned before, be they in long-term care setting, community or whatnot and also with different types of payers.

Our next question comes from the line of Gregory Renza from RBC Capital Markets.

Congrats on the progress. I just wanted to follow-up a bit on trofinetide, Steve. And just perhaps from -- taking a step back and just from a higher level, just wondering if you could just characterize how perhaps important you see the LAVENDER readout as it perhaps reads through to your efforts and thesis around finding those next waves of breakthroughs and your external business development model, using that as essentially the initial case study for growth beyond pimavanserin, how it suggests, and how you're looking at assets going forward and beyond to build the pipeline?

Yes. Thanks much for the question, Greg. So I would say, as is the case with any clinical development program, we operate in an environment where nothing is 100% certain. Having said that, so with any program, we recognize that there's a certain risk profile and cost benefit profile with any program that we pursue. In the case of trofinetide, we really liked the profile, and we really liked that opportunity. And we would make a dozen more of those investments, so we find those particular types of opportunities.

And by that, I mean, when we brought in that program, the -- it had very intriguing Phase II data, and we're in a situation where if we can replicate those same results in Phase III, then we should have a drug, and we should have the first drug for the treatment of Rett syndrome. So given the investment that we made and have made since doing that deal and the opportunity, we like those kinds of investments.

When we -- so in response to your question, what impact would that have on our business development activities positive or negative. It wouldn't have any quite frankly, if it's positive, we'll be very thrilled, and we'll move forward to try to get this medication to a population that desperately needs a treatment. If it turns out that, unfortunately, we're negative, which is just a risk to our -- that's endemic to our business, right, if that were the case, it wouldn't change our strategy. It wouldn't change anything that we're doing on the BD front.

BD, as we've described as one of the -- or 3 pillars of our business strategy, it's extremely important to us. We're putting a lot of effort into it. You will see more deals from us. And as we've indicated before, we have a foothold both in neurology and psychiatry. We have a foothold, both in broad indications as well as rare disease. We're fairly modality agnostic and have a lot of internal expertise across the broad array of CNS opportunities, and there are a lot of things in the CNS space we wouldn't want to own. There are a lot of things -- there are other things that we think are really interesting and some really, really interesting signs going on right now. So we're very optimistic about the growth plan that we have fueled by business development.

Our next question comes from the line of Sumant Kulkarni from Canaccord.

Thanks again for all the detail you provided on the gross to net and potential payer dynamics. But could you talk about your philosophy on the actual magnitude and frequency of price increases of NUPLAZID? And whether that might have changed in any way, given that DRP approval is around the corner and that indication is much larger relative to PDP?

Yes. Thanks much for the question. As I indicated earlier, I wouldn't -- it's a little premature to comment on pricing, but I wouldn't assume that we'll change price or, in other words, make pricing concessions in DRP, given that the dynamics are very similar and the payer interactions we've had so far indicate that they get it, that they understand there's nothing approved in use of the antipsychotic soft label is very, very problematic in this population.

And so as we go forward, I would expect that the kind of price increases that you might see from us as we go forward, and we're in even larger populations, would probably be consistent with what you'll see across the pharmaceutical industry in general.

And of course, as we move into DRP, we're very eager to get this medication to the very large population that has nothing to treat this disorder today. And as I indicated, we're -- based on the payer work we've done so far, and it's been extensive, we feel like there's a very strong alignment and understanding of the value proposition that we're bringing.

Our next question comes from the line of Chris Howerton from Jefferies.

I guess this is for Serge. If we could just have maybe a little more color on the Phase II trial designs for 044, the pain program? And in particular, I'm interested to know if you're going to evaluate multiple dose strengths? And what the treatment duration and frequency would be?

Yes. Thanks, Chris. Just to remind everybody, our Phase II program based on the preclinical data that we have and potential of benefit of ACP-044, both in the models of acute pain as well as chronic pain, in the Phase II, we are planning to conduct clinical studies both in the acute pain model in the chronic pain model. For the acute pain study, we are planning to conduct post-surgical study following bunionectomy. This will be -- placebo-controlled study that will evaluate different dose levels and treatment regimens. At this point, I wouldn't go into much detail on that, but beyond this.

And in the -- for the chronic pain study, we will be evaluating the osteoarthritis pain. Both studies will have approximately in the range of a couple of hundreds of patients involved. And there, we will be as well evaluating different dose levels and dose regimens. So that's -- we anticipate that top line results for the -- from the acute pain study being shorter, obviously, and we will have the top line results by the end of this year 2021.

And for the chronic pain study, that will be initiated in the second quarter of this year, towards the middle of the year, we will be starting that a little later. So we'll -- we are anticipating the results sometimes in 2022, and we'll obviously update better once we initiate the study and start recruitment.

Okay. All right. Well, I appreciate it, and we'll look out for more details as those studies start.

Yes.

Our next question comes from the line of Yatin Suneja from Guggenheim.

This is Eddie on for Yatin. Just as a quick follow-up to a previous question on the label. Can you talk about what your ideal wording would be for an updated label with respect to the black box warning for increased mortality in elderly patients? And sort of how that wording may affect any uptake? Is there additional education that needs to be done? Or is there any negotiation that can be done on what the wording in that black box maybe looks like?

Yes. Thanks for the question. Serge, do you want to take the first part, and I'll take the second part of that question?

Yes, absolutely. Related to the box warning, I will start by saying that we have a high level of confidence in the safety data that we have submitted with our supplemental NDA. First of all, this particular application, we have a much larger data set, both in terms of safety, as compared to our initial NDA. And in addition to that, we have now years of post-marketing experience with the safety of pimavanserin in this frail and elderly population. So however, with that confidence in the safety data that we submitted, we also have a level of realism that it's very difficult to remove the box warning, particularly when we're talking about class box warning, as it is case here.

So I cannot really comment what FDA ultimately will decide in this regard, but I will share that we anticipate that at the minimum, there will be some modification in the wording of box warning. Just to remind you, currently class box warning consists of 2 statements: one, stating that the risk of mortality that in this population is increased in elderly patients with dementia-related psychosis; and the second sentence clearly states that such a so and so drug is not approved in patients for -- with dementia-related psychosis. So obviously, when we received approval for hallucination treatment of the hallucinations and delusions in Parkinson's disease psychosis, that second sentence had to be modified in some sense, and we had a carve-out for the patients with Parkinson's disease dementia.

So if you look at the specific box wording, in the case of pimavanserin, that second sentence contains that carve-out. We do anticipate, obviously, with the approval of pimavanserin for treatment of hallucinations and delusions in patients associated with dementia-related psychosis, that, that second sentence will have to be clearly removed and some modifications to the overall box warning wording will have to be included.

So I know we're getting -- running -- yes, I'm sorry. I know we're running a little short time, so I'll try to make this as quick. So as Serge mentioned 2 sentences, second sentence would need to be removed because we would be approved for DRP. The first sentence, if that remains, it's unclear at this point whether -- just where we and the FDA would come out on that. But if that sentence were to remain, it would be very similar to the situation we have in depression today, where every antidepressant has a box warning indicating that young people who take antidepressants are at higher rates of suicide and suicidality. And so physicians are very well positioned to make that kind of risk-benefit assessment when they're looking -- when they're evaluating individual patients. Same thing is true in PDP today where we have the class box warning and physicians make the determination and are very well positioned to do that.

In DRP today, there are about 800,000 DRP patients that are taking off-label atypical antipsychotics that, in addition, not being approved for DRP, also have the very class warning that we're talking about, indicating a higher risk of mortality, and that that drug is actually not approved for that indication.

So I think if we're approved and that it's clear in the label that we're approved to treat DRP patients, even if we have some box warning that relates to mortality, we think we'd be very well positioned to -- and HCPs would be very well positioned to make that same value judgment.

We have time for one more question. Our next question comes from the line of Joseph Stringer from Needham & Company.

For DRP, would you expect the long-term care channel to comprise a similar percentage of overall scripts and as seen in PDP? And also, do you expect a similar persistence in compliance rates for DRP relative to PDP?

Yes. Thanks much for the question. In terms of long-term care, long-term care revenue is about 25% of our PDP business today. And we believe in DRP, it will be in the 40% to 50% range of the DRP business.

And I'm sorry, the second question was?

It was on the persistence and compliance rates and DRP versus -- yes.

Got it. Okay. Perfect. Elena, do you want to take that?

Yes, sure. It's a little premature to comment. We'll be able to have greater clarity once we're in the market. But based on what we see in the use of off-label antipsychotics in the DRP market we would expect largely similar dynamics to what we see in PDP as far as persistency and compliance. And we'll be able to provide more color as we get into the DRP launch.

Yes. And just as a reminder, in PDP, this is a really sticky drug. So once you get past the first couple of months of therapy, we have a meaningful drop off with all drugs of this type. Our fulfillment rates are very high in PDP. And as Elena mentioned, once we get through a launch in DRP, we would anticipate we'll have a similar type of adherence.

Thank you. Mr. Davis, please proceed to closing remarks.

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

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.