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Alkermes PLC (NASDAQ:ALKS)
Q3 2020 Earnings Call
Oct 30, 2020, 8:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Alkermes third quarter 2020 earnings call. My name is Jim and I will be your operator for today's session. [Operator Instructions]

I'll now turn the floor over to Sandy Coombs, Vice President of Investor Relations. Welcome, Sandy.

Sandy Coombs -- Vice President of Investor Relations

Thank you. Welcome to the Alkermes PLC conference call to discuss our financial results and business update for the quarter ended September 30 2020. Thank you so much for joining us on on short notice. We apologize for the technical difficulties with our earlier scheduled call. But appreciate you all taking the time to join us at this time. With me today are Richard F. Pops, our CEO. James M. Frates, our CFO and Todd Nichols, our chief Commercial Officer. During the q&a section we'll also be joined by Iain Brown, our SVP of Finance.

Before we begin, I encourage everyone to go to the investor section and alchemy comm to find our press release and related financial table, including a reconciliation of the gap to non gap financial measures that we'll discuss today. We believe the non gap financial results in conjunction with the gap results are useful in understanding the ongoing economics of our business. Our discussions during the conference will include forward looking statements. Actual results could differ materially from these close looking statements. Please, please fi to have the accompanying presentation. Our press release issued this morning and our most recent annual and quarterly reports filed with the SEC. For important risk factors that could cause actual results to differ materially from those expressed or implied in the forward looking statements. we undertake no obligation to update or revise the information provided on this call or in the accompanying presentation as a result of new information or future results or developments. After our prepared remarks, we'll open the call for q&a.

And I'll turn the call over to Richard.

Richard F. Pops -- Chairman and Chief Executive Officer

That's great. Thank you, Sandy. And Hello everybody. We've got a lot of important updates to get to today's. So I'd just like to start by noting our progress. And some of the significant accomplishments we've achieved over the last several months, we are positioning the company for what we expect will be our next major phase of growth. The foundational pillars of that growth are our distinctive commercial capabilities, R&D engine, and are focused on the efficient management of our business. Our third quarter results reflect strong Commercial performance in a complex and dynamic environment and demonstrate the resilience of our business and execution of our commercial strategy. We also achieved critical milestones in our ALCS, 3831, and ALCS 4230 clinical development programs, and I'll talk about that more later in the call. While advancing these key priorities, we continue to efficiently manage expenses and drive non gap profitability. As result today, we've improved our financial expectations for the year, and now expect to end the year with non GAAP profitability. Back in line with our original expectations from February prior the impact of COVID-19. Jim and Todd will provide additional detail on the performance and the outlook for the remainder of the year. I'll end with an update on our clinical development activities. What that is a brief introduction.

I'll hand the call over to Jim.

James M. Frates -- Senior Vice President and Chief Financial Officer

Thank you, Richard. And good morning, everyone. Our third quarter financial results reflect strong commercial execution and a continued focus on expense management as we advance our key business objectives. While the results reflect the continued impact of Covid-19 related disruptions on digital demand, growth trends were stronger than anticipated during the quarter. Accordingly, we're raising our financial expectations for 2020. primarily driven by the strength of detrol. net sales. We now expect our bottom line non GAAP net income for 2020 to be in the range of $50 to $70 million back in line with our expectations we provided in February, prior to the impact of COVID-19 reflecting our commitment to driving continued non gap profitability.

I'll provide additional detail on our expectations for the remainder of the year in a moment. But first I'll start with an overview of our financial highlights for the quarter. In the third quarter of 2020, we generated $265 million in total revenues. reflecting a year over year increase of approximately 4%. We recorded a gap net loss of point $1 million compared to a gap net loss of $52.9 million in the third quarter of 2019. Non GAAP net income was $41.5 million for the quarter improved from a non GAAP net loss of $7 million in the same period last year, driven by higher revenues and lower operating expenses in the third quarter of 2020. Starting with Dimitroff net sales in the third quarter were $80.3 million, reflecting a 6% year over year decrease primarily related to the impact of COVID-19 disruptions. Importantly, on a sequential basis, the trawl net sales increased 12% driven by underlying unit growth of 22% this was partially offset by an increase in gross and net adjustments from 46% in q2 to 53% in q3, which reflects a higher mix of Medicaid patients.

At the beginning of the third quarter, wholesale inventory levels were at their lowest point in several years. During the quarter, those inventory levels rebounded to normal levels. were raising our full year expectations for Vivitrol net sales to be in the range of $305 to $350 million from a previous range of $270 to $300 million. This new expectation assumes continued normalization to patient flows and access to healthcare providers. We expect expect gross net adjustments to continue to increase in the fourth quarter to approximately 54%, driven by increased Medicaid utilization, resulting from current elevated unemployment rates. Turning the air Stata products handling that sales in the third quarter increased 6% sequentially in 16% year over year to $62.4 million, driven primarily by unit growth. Underlying total prescription data for Aristotle demonstrated solid growth of 22% year over year in terms of months of therapy. During the third quarter gross and net adjustments for Aristotle were 54% as compared to 48% in q3 2019. Reflecting increased Medicaid utilization. inventory levels increased slightly during the quarter, but we're within normal levels at the end of September.

Based on our solid performance through the first three quarters and expectations for continued execution through year end. Today, we're raising our expectation for Aristotle net sales for the full year to a range of 230 to $240 million, which is higher than the range we set out at the beginning of the year of 220 to $235 million. Moving on to our manufacturing and royalty business. We recorded revenues of $120.4 million dollars in the third quarter, compared to $103.8 million in the same period last year. This increase was driven primarily by higher revenues from a bigger system and Risperdal constant. Our results for the quarter were also positively impacted by a gain of $8.3 million dollars. That we are done our investment in found healthcare partners, which was recorded as other income. Turning now to expenses. We continue to diligently prioritize the investments that support our business objectives to grow the top line, advance our pipeline of development candidates and manufacture commercial supply of our proprietary and partner product. As a result, our total operating expenses were $275.7 million for the third quarter, down from $308.9 million in the same period in the prior year. r&d expenses for the third quarter where $95 million compared to $107.7 million for the same period in the prior year. The decrease was primarily driven by the restructuring that we implemented in late 2019 and the completion of the grumeti Development Program late last year, somewhat offset by increased activity and patient enrollment in the ALEKS 40 to 30 clinical program.

As CNA expenses for the third quarter were $127.7 million, compared to $148.7 million in q3 2019, reflecting lower expenses due to the 2019 restructuring, as well as expense management measures in 2020. Looking ahead, we expect an incremental increase in excess TNA that's in the fourth quarter as we invest in pre launch activities for Alex 3831. Turning to our balance sheet, we ended the third quarter with approximately $597 million in cash and total events investment compared to approximately 500 and $40 million at the end of the second quarter, primarily reflecting our positive financial performance in the quarter, and changes in working capital. The company's total debt outstanding was approximately $276 million at the end of the third quarter. I'll shift now to our updated financial expectations for 2020, which are fully outlined in the press release issued earlier this morning. recent trends reflect both the changes that healthcare providers have implemented to provide continuity of care for patients and the productivity of our vaults commercial strategy.

Our expectation for the remainder of 2020 assumes continuation of these trends. However, do COVID related restrictions may impact our ability to meet these expectations. With that for the top line, we now expect total revenues to be in the range of $1.01 billion to $1.035 billion. We're also narrowing the ranges of our upper Expensive are the expenses are now expected to be in the range of 375 to $390 million. As GMA expenses are now expected to be in the range of 530 to $545 million and reflect an anticipated sequential increase in the fourth quarter of 2020. related to the pre launch activities for office three, a three one. We expect the strength of our top line in our expense management efforts to improve bottom line non gap results by approximately $45 million for 2020. Compared to the financial expectations we set forth in July, demonstrating the operating leverage of our business and our continuing commitment to non GAAP profitability. We now expect 2020 gap net loss to be in the range of 95 to 100 and $50 million and we expect non GAAP net income be in the range of 50 to $70 million. These non GAAP expectations are now back in line with our original expectation from February 2020. Reflecting the reduction in operating expenses, implemented in response to the impact of COVID-19 on our top line.

Looking ahead, we're focused on driving the continued growth of our proprietary commercial portfolio by advancing our development programs and capturing operating leverage data presentation for our 4238 edmo highlighted the potential of this pipeline candidate and the positive outcome of the advisory committee meeting for Ls 381 was another step toward the expansion of our commercial psychiatry portfolio. We have important milestones ahead and believe we're financially well positioned to execute on our business strategy, drive profitability and support shareholder value creation in the years to come.

With that i'll hand the call over to Todd to review our Q3 commercial result.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Thanks, Jim. And good morning, everyone. We are pleased with our strong Commercial performance in the third quarter, which reflects a sequential increase in demand for Vivitrol and continued resilience in the air stock product family. As we adapted our commercial strategy in response to the challenges that patients and healthcare providers are facing as a result of a pandemic. We have developed new and effective ways of engaging with healthcare providers, including investments in digital capabilities that we believe will provide an important foundation for the growth of our products and a potential launch of ALEKS 331. I'll now provide a review of our q3 results as well as our outlook for both products for the remainder of the year. Starting with the trawl net sales in the third quarter we're at point $3 million reflecting sequential unit growth 22%. The rapid response, adaptability and strong execution of our commercial team in the face of the COVID-19 environment was essential to this growth. And I want to acknowledge their commitment and resilience. The growth and pivotal net sales reflects an increase in new patient starts as well as the return of certain patients previously using bevatron, whose treatment had been interrupted earlier in the year.

While many treatment providers have adapted their practices and patient access to injections has increased. Overall Vivitrol volume was still below last year's pre COVID q3 levels with a 3% decline in units every year. We continue to see a healthy balance and indication extra bevatron with the contribution from alcohol dependence increasing over the last couple of years and growing at a faster pace than opioid dependence. with alcohol consumption on the rise across the country is a secondary consequence of COVID-19. There may be increased need for treatment for alcohol dependence in the future. Due to the strong performance of inventory in the third quarter, we are raising our full year 2020 expectations for visual net sales by approximately $25 million to a range of 305 million to $315 million. By the challenges presented by COVID-19 and addiction treatment landscape are not behind us. We are encouraged by the recovery trends that emerged during the third quarter. We will continue to adapt our commercial activities to help meet the evolving needs of healthcare providers and support patient access to our medicines in this dynamic environment. Turning to their static product family. net sales in the third quarter increased approximately 16% year over year, and 6% sequentially to $62.4 million reflecting underlying demand growth.

Total prescription data for aerostatic demonstrated solid growth of 22% year over year in terms of months of therapy and outpace the broader long acting a typical anti psychotic market, which grew at 5% in the same period. The two months does remain at its highest share of brand at 37% in terms of months of therapy. As a result of the pandemic, we have seen some impact of prescribing patterns and a long acting anti psychotic space. year every year of your growth rate of the overall long acting injectable market began to moderate from 13% to one to 5% year over year in q3. As market research show that psychiatry healthcare providers make fewer treatments changes in the COVID environment. Our commercial organization is continuing to adapt to support providers and patients as we drive growth of Aristotle in this environment. Today, we are raising our full year 2020 expectations for airstar net sales to a range of 230 to $240 million, and believe we are well positioned to exit the year with momentum. The commercial organization that we have built to support Aristotle, including capabilities tailor to the immediate commercial environment provides an important operational leverage as we prepare for the potential upcoming launch of Alex 331. The positive outcome of the Alex 331 advisory committee meeting a few weeks ago was a critical milestone. The open public hearing highlighted the significant unmet need that still exists for patients living with schizophrenia and bipolar one disorder, many of whom commonly cycle through multiple therapeutic options in pursuit of better outcomes, switching therapy on average five to seven times throughout their treatment journey. prescribers of anti psychotics are often faced with a difficult trade off between efficacy and tolerability for their patients.

We believe our 331 has the potential to be an important new treatment option for patients and providers. As we approach our November 15 udupa date, pre launch activities are ramping up. Our current expectation is that subject to approval and D ad scheduling, we will be positioned to launch x three and three one toward the end of the first quarter of 2021. Our deep psychiatry market expertise and established commercial capabilities provide a strong platform for the planned commercialization of ALEKS 331. We have a good understanding of the access environment and expect that at launch there will be a range of access barriers in place, with some pairs imposing more restrictive measures and other plans allowing more unencumbered access. Now it's 331. For example, there are 11 states that have some form of mental health exemption policy to reduce or eliminate formulary restrictions on anti psychotic medications for Medicaid patients. We will engage with payers on a state by state and plan by plan basis and expect that access will improve throughout the first year of launch. As formulary decisions are made. Well, that is happening, we plan to implement programs to help mitigate the impact of initial restrictions that may be in place in year one. We have also extensively mapped the prescriber landscape and how they have well defined target universe for launch.

Our Salesforce planning is now complete, and our strategy reflects the shifting competitive landscape in a COVID environment. We believe that a new hybrid promotional model that permanently incorporates both in person and virtual engagements will allow us to officially target our broader footprint prescribers for oil anti-psychotics with a smaller commercial field infrastructure than we initially planned for. For competitive reasons, I won't provide specific numbers around the size of our commercial field organization, or details on our deployment strategy at this time. I will share that at launch we plan to target healthcare providers that represent approximately 70% of the oral anti psychotic market and about 80% of the branded oral anti psychotic market. Our existing Aristotle team will serve as the core the commercial Fx 331. In already calls upon roughly 60% of the providers included in our anticipated prescriber call universe for 331. We are focused on leveraging our existing commercial organization, we'll make additional investments to maximize the launch of the raid three one, a portion of that investment will occur prior to launch. post launch we expect to add incremental headcount to our field organization as pair access for Alex 331 is established and is pandemic related restriction to ease.

Overall, the plan build and our commercial team to expand our reach and support Alex 331 is less extensive than what we anticipated prior to the adoption of our hybrid promotional model. leveraging our existing commercial infrastructure with this flexible approach will provide an important foundation for the potential launch of ALEKS 331 and to continue commercialization.

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

Richard F. Pops -- Chairman and Chief Executive Officer

That's great, Tom, thank you very much. Um, we have achieved a number of critical milestones in our development programs. Against this backdrop of strong commercial execution and discipline management of our expensive, positive outcome of the output, a 31 FDA advisory committee meeting, and the presentation of accumulating anti tumor activity and safety data for ALCS 40 to 30, including in the monotherapy setting for important achievements that underscored the potential value of these investigational medicines. I want to spend a minute on each of these two developments. First off 3031. This is our novel oral a typical antipsychotic candidate designed to provide the established efficacy of olanzapine while mitigating its associated weight gain. We submitted the 3831 NDA treatment of schizophrenia and bipolar one disorder last November, and the advisory committee meeting was held three weeks ago. This was a joint meeting of the psychopharmacologic drugs Advisory Committee, and the drug safety and risk management advisory committee to discuss the clinical meaningfulness of our security 30, one's weight mitigation, and the safety profile, about 3033 votes were taken, and all three outcomes were positive.

More specifically, the nearly unanimous vote 16 to one, supporting the clinical meaningfulness of our 31 weight mitigation was an important reflection of its intended clinical profile. The panel also voted that the safety profile 3031 had been adequately characterized, and that labeling would be sufficient to mitigate the risks related to the opioid antagonist action and family Dorfman. While not binding, the committee's recommendations will be considered by the FDA. And we're looking forward to working with the agency to complete its review of 3831 NDA in vain in advance of the producer date on November 15. I'd like to thank the thought leaders, the patient advocates, and people living with schizophrenia or bipolar disease who participated in the open public hearing to share their clinical perspectives and lived experience. A guiding principle of our company has always been to make medicines to address real life concerns patients suffering from chronic diseases. We believe it's critical to incorporate patient perspectives into the drug development process.

I'm also extremely proud of the alpha release team that represented 3831 at the meeting, I'd like to thank them for the month of preparation helped produce this positive outcome. Approved output 831 will be an important offering for patients struggling with schizophrenia and bipolar one disorder and will underscore our leadership position in the field of serious mental illness. As Todd commented, our current presence in the anti psychotic market with their Stata provides a valuable foundation for the anticipated commercialization. That's 31. You've heard us say for some time, the commercial infrastructure required to bring these medicines to patients is substantial. Approval 3031 will provide an opportunity to add a new revenue stream and drive top line growth while leveraging this infrastructure.

Turning to 40 to 30, in oncology 40 to 30 was designed to retain the therapeutic benefits of recombinant female to by selectively activating anti tumor effect or still, while mitigating the associated expansion of immunosuppressive regulatory T cells. From the outset, we've been rigorous in staging the advancement of this program predicated on the accumulation step by step on data supporting and validating our design hypothesis. The 4230 data presentation in September at esmo was a defining moment in the development program. We present data from artistree one, which is our multi part study of intravenous 4330 as monotherapy and in combination with PD one inhibitor, Pember lism AB, the data showed evidence anti tumor activity for outs 40 to 30, durable and deepening responses as monotherapy and in combination with tempo in a diverse set of difficult to treat tumor texts. I'm going to briefly summarize some of the most important features in the data here. But for those of you wanting a deeper dive, I encourage you to view the esmo presentation archived on the investor section of our website and follow up with our fear at the company.

So let's start with the monotherapy arm of the study. We view the emerging signs of monotherapy efficacy as foundational to the program, the potential to distinguish 40 to 30 from other aisles to various programs in development. The partial response is a verb with 40 to 30 monotherapy that were described as mo we're in patients with refractory mucosal melanoma with perceived received prior PD one therapy. You post them melanomas are a rare, highly lethal variants of melanoma that carry a poor prognosis and treatment options are very limited. With this early evidence of monotherapy efficacy in this tumor type, we're currently in the process of evaluating potential clinical development and regulatory strategies that may support expedited development. The data presented desmo also provided new insights into the potential clinical value of 40 to 30 using combination in this case with Pember lism ab durable and deepening responses have been observed with 40 to 30. In combination with 10, bro, the number of tumor types where there are a limited treatment option. These include ovarian, triple negative breast estafa, jheel, and pancreatic cancer.

The complete and partial responses we've seen with 40 to 30 in combination with Pember in Platinum resistant ovarian cancer are particularly encouraging. This indication represents another potential registration pathway. Given the high unmet need and limited treatment options for patients with Platinum resistant ovarian cancer. We plan to meet with FDA to discuss clinical study and data requirements that could support potential registration and syndication. Across the artistry one study 40 to 30 demonstrate the safety profile, generally consistent with the anticipated effects of cytokine therapy to transient fever and chills as the most frequently observed adverse events in both monotherapy and combination cohorts. Importantly, there were no reports of vascular leak syndrome, which is the hallmark toxicity of hydrocotyle few treatments. Another distinctive feature of the 4230 clinical development program is the potential for subcutaneous dosing. Artistry to our subcutaneous study is ongoing in a dose escalation phase, for both once weekly and once every three week dosing regimen. We're narrowing in on the recommended phase two dose and we'll share pharmacokinetic pharmacodynamic safety and tolerability data from the initial dose escalation cohorts at 50.

In November, we believe that we'll be positioned to declare the recommended phase two dose around the year end. Well then plan to begin dose expansion cohorts in dedicated tumor types in both monotherapy and in combination with tempo. accumulating data from the artistry development program provide a clear picture of 40 to 30 potential clinical value. Our focus is on maximizing the medical and economic value of 40 to 30. For the benefit of patients and our shareholders. Strategic collaboration remains an important opportunity to fully elaborate potential of 40 to 30 across a variety of tumor types. And in a combination with a variety of immunotherapy and other cancer treatments.

Looking ahead, will continue to focus on the three strategic imperatives that currently drive our management of the business, strong commercial execution, effective advancement of our development programs, and efficient management of our operating structure. We have a significant amount to accomplish. And I look forward to updating you on our progress in days ahead.

So with that, I'll finish it and I'll turn the call back to Sandy for the Q&A.

Sandy Coombs -- Vice President of Investor Relations

Great, thanks, Rich. Operator take the call for q&a now please.

Questions and Answers:

Operator

[Operator Instructions] We'll hear first from Vamil Divan with Mizuho Securities.

Vamil Divan -- Mizuho Securities -- Analyst

Great, thanks so much for taking the question. So it's just a couple could one I guess, come into made around the coast to net impact this quarter have gone a little bit. I'm just trying to understand how much of that tuning is to do the pandemic, and maybe more one time sort of adjustment? Or how much of this is more of a steady state? I guess I'm sort of wondering about what what you think goes to that might be for next year. And I'll be ready to comment on that. But for what I'm hoping to get from Colorado or for looking gross to net thought. And then 4234, I guess for Richard, appreciate the comments you just made. And we'll get some more data on this visual acuity. I'm just trying to get a sense maybe around some of the discussions you are having or plan to have with potential partners they're doing after 60 days, maybe a reasonable time for a sec defect, more communication to pick up on that asset, or do you think you still need to do some additional work and maybe for a little next year or something along those lines? Thank you so much for that.

Richard F. Pops -- Chairman and Chief Executive Officer

Yeah, of course. Thanks, Mom. Yes, I think we do see the grocery net changes this year as related to COVID. You know, I think we singled out a little bit earlier in the year when when the COVID crisis started to hit the unemployment rates. As we know, across the country have gone up dramatically from where they were before the crisis, and those funneled through as Medicaid patients into the Vivitrol. Channel. You know, one of the benefits in this quarter was gross Xs came in a little bit lighter than we had anticipated in q3 of 53%. And I think we see them more in the 54% range in q4. And at this stage, I think that's probably the best thing to do is model that out consistently in 21, until we get a sense of how the unemployment rates change in the country going forward. And when they start to change, I think being conservative in that regard around the 54% range, makes sense. Rich 42, on the 40 to 30. Our view of this, and I think we've been consistent on this third year bomb was then we wanted in 20, to lay out and establish the data in three major areas in the program one was monotherapy efficacy. Second is, is combo efficacy with embro, particularly in temporal unapprove tumor type, and the third is sub Q, because we look backwards, this point, the only sub to presentation in development of Nile to vary.

So I think we're checking the boxes, the first two, I think we're well along our way in terms of monotherapy efficacy signal as well as combo combos. Now the sub two, we'd like to get to that recommended phase two dose and regimen. And which we expect toward the end of the year. With that will expand in the sub two way the same way we did an artistry, one, which is into the indicated tumor types with monotherapy and combo. And then I think the program is really, really on on solid foundation. That's the time that I think that we will be leading into a collaboration discussion. There is interested in the program already. I mean, obviously, people in the field are watching new developments in the field. And I think 40 to 30 is beginning to distinguish itself. But we're in we're in No, we're in no rush at this moment, until we really check all the boxes necessary to really be sure that we have the profile that we intuitively design.

Vamil Divan -- Mizuho Securities -- Analyst

Thank you.

Operator

Our next question comes from Brandon Folkes Cantor Fitzgerald.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Thank you for taking my quick reservation on the road this quarter, maybe just continuing along the visible line quickly. He spoke about alcohol being a stronger growth private quarter, maybe just elaborate on how much of that growth has been driven by patients not wanting to enter an inpatient Alcohol Treatment Center during private versus engineering shift to using medically assisted treatment for alcohol, discriminate net remains a very independent, penetrated market. And then secondly, very unhealthy. Very, very one. You talked about reimbursement over the first year. Can you just set some expectations in terms of how we should think about the pace of those reimbursements when in gain coverage and gaining a critical mass of coverage in their first year? Do you expect some relatively quick wins? Or how should we think about that pay? Thank you.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Hi, Brandon, This is Todd, I'll I'll take take the questions. In terms of vitriol for alcohol. To your point. It's a very large market and in a growing area of opportunity. For the brand. 14 point 4 million patients suffer from alcohol use disorder about 400,000 on treatment. Our qualitative research and our discussions with hcps tell us right now that a lot of the growth over off of Vivitrol is coming in the outpatient setting. We have seen some relaxed restrictions on the inpatient setting but still a little too early to call in to see what the what the impact of covid is on those restrictions. So right now we are seeing a little bit more of stronger growth in the outpatient setting. To my earlier comment, we are seeing a little stronger growth for the alcohol indication versus the opioid indication. And it's something that we plan to maximize moving forward as well. In terms of reimbursement for three one. I think the important point to really think about what 331 in this category is there, there really is no uniformed approach to market access.

There are three very distinct channels and Medicare Part D commercial Medicaid formulary decisions will be variable based upon the timelines at the local level. And we're very in tune to that. Today we've had over 40 interactions with payers across the US market that control over 50% of the lives and we're talking with them very closely about timelines. We do expect that launch there's always going to be a percentage of lives that will have open access and is variable at this point. And so we expect that the actual Access profile will become more clear throughout the first year. To support the launch, we have various programs and tactics that we will be putting in place, such as patient reimbursement programs, patient access programs, and so forth that will help mitigate any types of formulary restrictions at launch. But the key message is that it will evolve over the first year of launch.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Right, thank you very much.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Thanks, Brendan.

Operator

Our next question will come from Cory JPMorgan.

Turner Kufe -- JPMorgan -- Analyst

Thank you for taking my question. This is Turner on for Corey, just coming away from the Add Column for 3831. Has your view on the price potential changed at all? Because the commentary from the general physician community is different from that of the panel and economic therapy helpful.

Richard F. Pops -- Chairman and Chief Executive Officer

Thanks. Turner, this is Rich, perhaps I'll start. Yeah. And I'll hand it over to Todd. He's on the front lines of it. But no, in fact, we were really pleased with the with the clarity of the vote with respect to the clinical significance of the weight mitigation that endorphin provides. That that's a really important box to check, because that allows them the efficacy of olanzapine to come through and what we find in our mark researches is the the acceptance and the belief in the efficacy of the lens of pain is quite pervasive and quite strong. But I'll let I'll let Todd elaborate from there.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Yeah, that's right. Turner, is I, I would say that our you know, our main takeaway is that it supports all of our research, and our our position on the value proposition of Alex 331. And really, the unmet need, just for context, I think it's important remember that there's over 2.1 million patients who suffer from schizophrenia, over 2.4 billion million patients who suffer from bipolar one disorder. It's a it's a very large market that is growing, it's a large branded market, over 3.5 billion in branded sales. We believe that, you know, the critical milestone of, of getting through the the ad come actually supports the value proposition of the brand, it actually supports the trusted power of lands attain without the potential long term weight gain. So, so we're very excited about that. We'll move forward to Paul Mathias with people.

Turner Kufe -- JPMorgan -- Analyst

Good. Paul, the quick follow up question on on your views on the ad copy. I'm curious if you could comment on the discussion surrounding bipolar and if you still remain confident in, you know, having that bipolar indication on the label upon approval, and then another follow up on 3831. It talked a lot about discipline extension management, he talked a little bit about where you expect sgma going forward with the three and three one launch day. Thank you.

Richard F. Pops -- Chairman and Chief Executive Officer

So I'll take the bipolar seven. Yeah, we didn't, we didn't really hear anything. He hadn't come there when he was under mine our belief and the approval for both schizophrenia and bipolar one disorder. That's an agreement we've had with reviewing division for for quite some time, it was based on a PK bridging study and some drug drug interaction studies that we ran with about valproic acid and lithium. So we'll, we'll stay the course on that and then expect the approval for both on the expense side. And we're not going to we're not going to guy for 2021 at this point. But I'll let Jim and Tom give you some qualitative sense of that.

James M. Frates -- Senior Vice President and Chief Financial Officer

Sure, thanks, Alex. So you know, to be guided for the remainder of 2020, we do see a roughly a 10% increase at the midpoint for SGA. As we move into, you know, beginning our educational programs. you know, post Purdue for work in the fourth quarter, as we prepare for three, a three one, I would expect that increase to continue, you know, moderately in 2021. As you know, we haven't prepared guidance yet, obviously. But as we hire the compliment of the Salesforce, as Todd mentioned, and begin education activities post launch that'll be a normal bolus for a launch here for a product like 381. You know, importantly though, we're committed to non GAAP net income profitability here. And we think we have the ability to invest strategically in the launch, but also maintain that discipline on profitability as we move into 21. And we'll get more guidance in February as we typically do around the specific data dad, Alex Jones comment, we are committed to a very successful launch here for x 331.

We believe that the brand has a unique value proposition in a very large market was with a significant unmet need. A couple of the areas that that we are focused on right now is Jim made commented early in his prepared remarks, we do have some investments. And in the fourth quarter, we have a very active very productive disease state education program. We we have learned a lot through the pandemic with our commercialization with air, Stata, and we have some proven success channels, and our digital marketing capabilities that we plan to leverage as we launch 331. So we're going to be ramping up those activities in 2021. And we're also going to have the build of our Salesforce again, not as extensive as we had originally anticipated, but we will be adding on sales professionals to support the launch throughout next year.

Turner Kufe -- JPMorgan -- Analyst

Thank you so much.

Operator

Next, we'll hear from Marc Goodman SVB Leerink.

Marc Goodman -- SVB Leerink -- Analyst

Yes, I first, just on 3831. Are you expecting any type of rent and all related to the conversation? Second of all, manufacturing and royalty revenues? Can you give us a sense of as we look into 2021? What are some of the pushing poles that you're expecting? You know, are there any new products that we should be expecting that will come in that'll add any major changes? And then just lastly, on the trials, we look at revenue that you're expecting the fourth quarter, not as much of about this, I guess we would have expected did you get? You know, about some third quarter? You think taking away a little bit from the fourth quarter? I guess. I don't know. It just seems a little more flattish than we would expect.

Richard F. Pops -- Chairman and Chief Executive Officer

Thank you, Marcus. Richard, I'll take the 3031. And then Jim, and Ian and Todd, on the other two, we just be clear. We've actually proposed in the labeling for 3831. Probably the most restrictive aspect as it relates to the risk that was raised by the panel, which is the risk of the opioid antagonists present in the in the formulation by indication that we want this drug excluded or not indicated for patients who are currently using opioids. So we don't expect the Rams but we have proposed an education program is tantamount to an educational room. And we're very comfortable with that, because it's in our best interest to make sure that physicians and patients are aware that 3831 contains endorphins. So we've been this is something we've been prepared for for the entire life of the development program. And we're looking forward to doing we do that with Vivitrol as well. We educate extensively about the role of the antagonists, for patients and physicians.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Yeah, sure, to the other two on the manufacturing revenues, and then on digital expectations for the remainder of the year. Mark. So next year, really, for the manufacturing revenues, you know, obviously humeri, you know, given a dynamic year in that market this year, and particularly COVID, I think we see potential upside there and do that as a real call option. On the manufacturing and royalty side. That's probably the major the product with the most major impact in terms of a difference from this year into next year. I think we see continued growth on Stannah and, you know, constant remaining sort of a net flat to slightly down, but overall, the LA market with our j&j products, you know, continuing the growth that we've seen historically. So I think we feel very solid about that manufacturing and royalty revenue, you know, as a whole with that upside from proverde potential in 2021.

Um, you know, on the Vivitrol side, I, you know, we give a range of guidance, because it's, it's certainly hard to predict. Certainly with COVID, you know, we saw, as I said, in this past quarter, now, roughly two thirds of the growth really came from volume. And then a third came from, you know, adjustments in gross to net on the positive side from previous quarters, as well as an increase in inventory. So as we move into the fourth quarter, we're not really anticipating or planning for a large change in inventory. You know, sometimes that happens in the fourth quarter, but we don't want to bank on that. And then the cautious around the rebound, is a very strong rebound in q3. And it's really just hard to predict. But that's why we give ranges for Vivitrol. And, as we've done in the past, we try and take the previous growth rates, and look at those Moving forward from a demand perspective. And we certainly think that the patrols building back to where we were last year in terms of growth rates in overall market and we continue to see that moving forward.

Operator

Our next question comes from Jason Gerberry Bank of America.

Jason Gerberry -- Bank of America -- Analyst

Hey, thank you for taking my questions. So on out 331, there was some statistics in the Icahn briefing book about 20 to 25% of olanzapine patient getting concomitant opioid prescription. So curious, is that ratio applicable more broadly across the entirety of the atypical antipsychotic world? Just Just wondering, you know, how you think about the potential addressable or eligible patient population, if this country indication is in the labeling? And then if you get a rems? Is that commercially a major headwind in your view? Or can you survive that they'll have a commercially successful product. And then lastly, just he talked about what's going on at the ground level within the trial in terms of the patient flow to the clinics versus the alternative distribution at places like Albertsons, which is talked about last quarter, just just kind of trying to get a sense, you know, thinking about fourth quarter next year, depending upon how the pandemic evolves, how how you're evolving to be able to make sure that patients are guaranteed the therapy. Thanks.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Yeah, I Jason, This is Todd, I'll provide a couple comments start off with that the first question on on patients consistent, you know, the percentage of patients that received a an opioid prescription as well to it, our viewpoint is yet that's that's consistent across the market place at approximately 25%. I think it's important to to remember, when you look at this across patients that have serious mental illness, and bipolar one disorder, you're talking about a total of patients anywhere from about five to 8%. So it's a it's actually a relatively small number of patients. And, and you'll see as well, too, that our belief, what we propose is that those patients are contraindicated. So we think that's very manageable and the right thing to do. In terms of the rems program, we've thought long and hard about that we have proposed an educational program as well. As a company that has experienced with a rems program, we actually have a rental program for Vivitrol, we're very comfortable with that. We know how to execute a rems program, and with a very small country indicated patient population, we think that's going to be very manageable for us from a commercial standpoint.

And then in terms of patient flow. You know, the thing that we're watching very closely with Avatar right now is that the addiction market is starting to recover, which is a very encouraging sign on many different fronts right now. The the substantial majority of the of the recovery of what we're seeing is actually in the outpatient setting. We've had a very large commercial effort on expanding access to injections to alternative sites, such as pharmacies, such as Albertsons, we're very encouraged by that. In general, we've added about 2000 additional locations to our provider locator for injections for Aristotle, and also for Vivitrol. And in all of our discussions with our pharmacy partners, including optasense, they are starting to see an increase in utilization. It's still a little bit early to give specific numbers for Albertsons, but but I can tell you that the the amount of injections that they're providing now, and the growth they're seeing is starting to pick up what we're very encouraged by that kind of follow up. Can you explain a little bit the why it's five to 8% of patients who get concomitant opioid versus the 25% of carex. Just Just understanding the difference of those two numbers. Now, you said would you repeat the question?

Richard F. Pops -- Chairman and Chief Executive Officer

Yeah, I believe it was only five to 8% of patients that concomitant opioid, but it's 25% of PR x, I think there's concomitant opioid. So just trying to understand the discrepancy between those two numbers is five to 8%. Jason is really a meta analysis that's done talking about the population that would have an opioid use disorder and also serious mental illness. So those are the patients that would be contra indicated in the in the Alex 331 label.

Operator

Our next question will come from Akash Tewari with Wolf Research.

Akash Tewari -- Wolf Research -- Analyst

Thanks so much for taking my questions. I just wanted to confirm on 3831 do you currently plan for there to be a rems program or do not? And can you give some comment on what the trajectory will look like both in bipolar and schizophrenia, given some of the comments you've made on reimbursement and your revised sales strategy? additionally, on air Stata, how will the growth trajectory change after Abilify main math goes off, tighten in the mid 2020s. any concerns on revenue growth being affected when you start getting generic competition from the j&j product? Thank you.

Richard F. Pops -- Chairman and Chief Executive Officer

Akash. It's rich. Let me let me give a couple points and then have Todd fill in the details. We don't currently plan around right now. But we'll see how how we end up through the review. And the reason we don't believe is because we're actually proposing educational program that is tantamount to an educational rems when we think that that'll be more than sufficient to meet the needs in the market. Along with it. Todd has mentioned multiple times, the fact of design will not be indicated be contraindicated for patients who are actively using opioids. So we think that'll be sufficient. But if they're within educational realms, we can we can deal with that as as well. I think one of the most interesting things about air Stata, right now is it's a product family. And this space between Aristotle and others, along that thing injectibles grows as we introduce new features and new data, namely the range of doses, the range of durations, the presence of initio as well as the two month dose coupled with data, like from our Alpine study that shows real world use in new associate regimens.So we expect other entrants into the field, although you have noted it's, it's a very small number of competitors in such a important market. So we think the Aristotle product family will continue to stand on its own based on data and the features and benefits of the family for a long time.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Yeah, What I would add is I think the question too, was around uptake. 331 for pair schizophrenia and bipolar. Again, I think the important point to remember with this is that the payers don't look at these as as distinctive products. They don't manage the indication separately. So our expectation, again, is that out 331 from a payer standpoint, is going to compete in the branded space. And we're not expecting to see any difference in uptake from a pairs standpoint for schizophrenia versus bipolar. In terms of the impact to for Aristotle, with a potential another product coming onto the market to Richard's point, I think the good thing to remember about Aristotle is really our source of business. Aristotle's source of business is not predicated on one or two products, it's very broad, we have a large source of business that comes from orals and also a source of business that comes from Le eyes. So one additional product coming onto the market, you know, will not drive a major difference in how we look at outlook for airside as a family.

Akash Tewari -- Wolf Research -- Analyst

Thanks so much.

Operator

Our next question comes from and I hope I'm saying your name correctly Jeet Mukherjee from Jefferies.

Jeet Mukherjee -- Jefferies -- Analyst

Yeah, Hey, everyone. This is G's on for Baron today. Maybe just one quick question for me. I think back in September, you had updated us on an ongoing litigation with Tebow regarding the 499 times for vitriol, just wanted to know where things perhaps currently stand with that. And if you foresee ultimately settling with tether, as you did in the previous annual lawsuit, and I guess theoretically, does ultimately when would it be fair to assume amul could launch after tableaus genomic exclusivity period. Thanks.

Richard F. Pops -- Chairman and Chief Executive Officer

Hi, jeet. Thanks for the question. Yeah, as we disclosed earlier in the quarter, we did file suit against tether. Related to that, to that end up filing, at this point, will not comment on ongoing patent litigation. But we'll certainly keep everyone in the loop as things unfold on that front.

Jeet Mukherjee -- Jefferies -- Analyst

Great, thank you.

Operator

Our next question comes from Douglas Tsao with H.C. Wainwright.

Douglas Tsao -- H.C. Wainwright -- Analyst

Good morning. Thanks for taking the questions. I'm just gonna make the initial one. And maybe I missed it. Can you just quantify in dollars, the inventory adjustments that we saw for Vivitrol and aristata in the quarter? And then another question on the different fall franchises given the adoption with alcohol dependence or sort of increased use there is that concentrated still in the Top five states. And as that seems to be solidifying as a growth opportunity, are you thinking about sort of reshaping the commercial organization to capitalize on that? Or is that something that can basically be done with the Salesforce as its presently considered? Thank you.

Richard F. Pops -- Chairman and Chief Executive Officer

Good morning. Maybe I'll start and then turn it over to Todd, on the Salesforce side. So yeah, you know, in the inventory. Inventory fluctuates in both products, you know, as you know, quarter to quarter. In terms of debit crawl, it was at the lowest level in many years when we started the quarter. And that was a bit of a you know, I guess, a headwind that we saw in q2, it bounced back to normal levels. During the quarter, it was about $4 million of the net sales that we saw, it could be associated with, you know, less than a week of inventory that that we think moved into the channel. And it's back now the inventory level at about two and a half weeks, which is where we would expect it to be. So I think we're back to normal on data trawl, really, as opposed to, you know, in a state where there's too much inventory. Now to get the natural decision, I'm sure by by the channel, as we saw COVID, hitting in, you know, q2 particularly hard. On the aristata. side, same thing, we're back to really normal levels, a little bit higher to about in the four week range. But that's been typical for Aristotle over the last few years. And the impact in the quarter was roughly around a million dollars in Q three. So again, back to normal levels there and normal quarterly quarterly fluctuations, I would say.

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Yeah, Doug, it's time in regards to Vivitrol and alcohol. Right now are the performance and the concentration of the Vivitrol business is somewhat consistent quarter over quarter in our top 10 states represent approximately 58% of the volume for Vivitrol. Through q3, we've seen the substantial majority of our states actually show recovery, that now they're not back to their pre COVID levels, but we're seeing really solid growth through q3. The concentration for alcohol right now is an evolving landscape at this point, we see a little bit heavier, of utilization out west in California, for example, we've been doing a lot of extensive work over the last four months, looking at our deployment for our commercial organization.

We are in the process of updating our deployment, as well to to make sure that we're capturing the targets, the HTTP targets, that actually, you know, have the substantial majority of alcohol patients.That's that's an action that we took, and we put in place in q3, and we're going to continue to evolve that going into next year. In Is there any thought to expanding the list of targets? just you know, or how broad much awareness is there on its availability to treatment for alcohol dependence? Yeah, so that's the right question. Absolutely. awareness level for ma t in general, with alcohol was low. It's in the in the servies. For Vivitrol, it's less than 10%. So we think there is an opportunity to actually expand awareness levels with patients and providers as well to we're going to be very thoughtful, very strategic about where we play, it's a very important decision that we have to make what we think our Salesforce is, is the appropriate size, but we do think there's an opportunity to to reevaluate the targeting, and that's what we've been doing over the last three months.

Douglas Tsao -- H.C. Wainwright -- Analyst

Okay, great. Thank you.

Operator

And that does conclude our question and answer session for today. I'll turn it back to the management team and to Sandy coombs for any additional closing remarks.

Sandy Coombs -- Vice President of Investor Relations

Great, thank you, everyone, for joining us on the call today. We appreciate the patience with our difficulties this morning. But please do reach out to us at the company if you have any follow up questions that we can be helpful with. Thanks so much.

Operator

[Operator Closing Remarks]

Duration: 59 minutes

Call participants:

Sandy Coombs -- Vice President of Investor Relations

Richard F. Pops -- Chairman and Chief Executive Officer

James M. Frates -- Senior Vice President and Chief Financial Officer

Todd Nichols -- Senior Vice President and Chief Commercial Officer

Vamil Divan -- Mizuho Securities -- Analyst

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Turner Kufe -- JPMorgan -- Analyst

Marc Goodman -- SVB Leerink -- Analyst

Jason Gerberry -- Bank of America -- Analyst

Akash Tewari -- Wolf Research -- Analyst

Jeet Mukherjee -- Jefferies -- Analyst

Douglas Tsao -- H.C. Wainwright -- Analyst

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