Acadia Pharmaceuticals' (ACAD 3.06%) Nuplazid is already helping thousands of Parkinson's disease patients who are suffering from hallucinations and delusions, and soon it may also win use in Alzheimer's disease and other indications associated with dementia. In this episode of The Motley Fool's Industry Focus: Healthcare, host Shannon Jones and Motley Fool contributor Todd Campbell discuss Acadia's latest trial results and why an eventual approval could cause sales to soar. The duo also discusses remarkable results for a precision cancer drug being developed by Eli Lilly (LLY +0.80%) for non-small cell lung cancer.
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This video was recorded on Sept. 11, 2019.
Shannon Jones: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every single day. Today is Wednesday, September the 11th, and we're talking Healthcare. Todd Campbell, healthcare guru, joining us via Skype. Todd, how are you doing over there?
Todd Campbell: It's good this is a healthcare show because I think I need some healthcare. I'm battling a cold, listeners. I apologize! I'll do my best here to get us through some interesting subject matter. Just bear with me a little bit.
Jones: Actually, Todd, I know you're under the weather today, but I'm hoping you'll feel better because we've got lots of good news for you to digest this week. In the biotech space, often, we're talking about pipeline blowups, bad study results, all kinds of craziness in the Healthcare sector. It's always nice to have a show where we've got some really good positive data coming out of this space. With that, let's kick it off. I want to start with Acadia Pharmaceuticals, ticker ACAD. It's a commercial-stage biotech that specializes in CNS, central nervous system disorders. Currently supports a market cap of about $5.9 billion. Stock is up 156% year to date this year, Todd. Pretty amazing. That's really thanks to strong sales related to its bread-and-butter product, Nuplazid.
Campbell: Is that all, Shannon? Is that all? It's only up 156%?
Jones: [laughs] That's it. Just slightly. There's been a lot of focus on Acadia Pharmaceuticals. The question has been, can they expand beyond the one approval that they have for this drug, which is psychosis related to Parkinson's disease? It's really been a roller coaster ride. Even though the stock is up quite a bit this year, it's been a roller coaster. This week, the market opportunity ahead for Acadia Pharmaceuticals really started to clear, a little bit at least, thanks to some positive interim study results. The stock jumped 63% on the news surrounding what could be the next approval for Nuplazid.
Todd, before we get into those study results, though, let's just start about what this drug means for Acadia Pharmaceuticals and what we saw with that strong second quarter.
Campbell: We did $83 million roughly in revenue in the second quarter. That was up 46% year over year. The company is now guiding for $320 million to $330 million in sales this year. That would be up 45% at the midpoint. I think it's important to realize that following that second quarter performance, that upped guidance, the prior guidance was $280 million to $300 million. That's a substantial increase in guidance. I think the reason that you saw so many investors embrace the stock following this latest data is that you're talking about a massive expansion of the total addressable market. You mentioned the Parkinson's disease psychosis indication that it's already approved for. That represents 400,000 to 500,000 patients, roughly. 40% to 50% of patients with Parkinson's disease. Data they just reported, that caused shares to soar, that total addressable market for dementia related psychosis -- that would include things like Alzheimer's disease -- that is 1.2 million. So right there, you're going from an addressable market of 400,000 patients to 1.6 million, 1.7 million.
Jones: Yeah. Pretty large market opportunity ahead. I think what's really interesting about these study results is that they had a fail, I believe it was in adult schizophrenia, back in July. I think for a lot of investors, a lot of people who've been watching this company, there wasn't a tremendous amount of hope in them being able to pull off any positive news with this particular study. So, for the most part, this was pretty much a surprise. This was the HARMONY trial. It actually sounds like they stopped it early because of the positive results. One of the things that they were looking at was defining what is called relapse in patients that have this psychosis. It's really looking at hospitalization due to dementia related psychosis. Did their symptoms deteriorate? Withdrawing from the study due to lack of efficacy? And did they have to use any sort of anti-psychotic medications? For this larger market opportunity that they do have ahead, just one thing to note -- granted, it's a larger market opportunity, but you do have a lot of these anti-psychotics, many of which are generic. So, even though it's a bigger market opportunity, it's also still somewhat of a competitive, crowded market space, too.
Campbell: Yeah. $36,000 to $40,000 a year is roughly what Nuplazid's list price is. Obviously, with discounts and stuff, it's probably not costing that much. Some of these anti-psychotics are more of a value, I suppose. And if they're working for a patient, sure, keep them on that. But for many patients, it doesn't work well. And sometimes it can increase the cognitive decline of these dementia patients. My assumption would be, we're going to get more data later in the year at a conference. Once we look through all that data, my assumption would be, if it looks good, and they get approval, that, yes, you're going to see sales of this drug take off from 2020 through 2021 just from having the label expand to include this indication.
You mentioned the schizophrenia headwind, the trial that failed earlier this year. It didn't improve the good symptoms, if you will, but they still have some hope that maybe it would improve bad symptoms, make them less worse, I suppose. There's a phase 2 trial that'll read out later this year in that indication. Investors should realize there's some more data coming later in the year that could also move the stock up or down.
Jones: Exactly. That particular trial, I think that's set to read out potentially in December. They're looking at specifically negative symptoms, as you were alluding to, Todd. Things like loss of interest, emotional withdrawal, cognitive impairment, things like that. Studies do show that about 40% to 50% of schizophrenia patients do experience these negative symptoms. This is an opportunity to watch.
Another one that I'm watching. They're not trying to be a one-trick pony with Nuplazid. There's another late-stage study of a drug called Trofinetide in treating Rett syndrome. Rett syndrome is basically a rare disease, neurodevelopmental disorder that occurs predominantly in females. Right now there are no approved treatments in this particular patient class. But that's another market opportunity of another 6,000 to 9,000 patients. They've also got late-stage testing as a supplemental treatment for Nuplazid in patients with major depressive disorder as well.
All in all, you've got a lot to look forward to. There's some estimates now that Acadia could hit a billion dollars in sales by 2023. I think a lot of the people that have either been on the sidelines or have turned a blind eye, all of a sudden, there's this renewed focus in a company that could have some really, really interesting market opportunities ahead.
Campbell: I think there was a lot of short covering that drove a lot of that big jump. A lot of people were betting against the ability to expand this into other indications, and they were proven wrong. I think that one of the things, as investors, we have to think about is, you mentioned the $6 billion market cap. And then, you also said 2023, sales estimates of about $1 billion. So, you're already trading at roughly six times 2023 sales. This is not a cheap stock. I think investors might want to sit back, see how these other trials play out, especially in the depressive disorder. That's a 2.5 million patient population.
Jones: Yeah, totally agree, Todd. I think another thing in the near term to be watching out for, Acadia did and the most recent quarter with $382 million in cash, but they burned through about $140 million just in the first half of this year. So I do anticipate they'll be tapping secondary markets here pretty soon. But I think, all in all, this is one that I'll be watching, especially for some of these late-stage trials heading into the latter part of this year.
Let's talk about the other big pharma player making news, and that is Eli Lilly, ticker LLY, which recently acquired Loxo Oncology for about $8 billion earlier this year, the largest deal the biopharma player has made to date. The most recent study reported out of the World Conference on Lung Cancer in Barcelona seems to be pointing toward Lilly making the right call on Loxo, although that price tag is still to be debated. The drug that's turning heads, mine included, is oral drug LOXO-292, now referred to as Selpercatinib -- we'll just call it LOXO-292.
Campbell: [laughs] Yeah, please!
Jones: [laughs] Todd, this is a drug and a company we've talked about on the show before. I was impressed the last time we were diving into their study results, and honestly continue to be more and more impressed with this company, especially as we're headed into this age of precision medicine and gene-targeted cancer drugs. Can you give us just a quick brief overview? What exactly is LOXO-292, and what did we see?
Campbell: Lilly wants to expand into oncology. Oncology is obviously a very big market, and it's growing because of an aging, larger population. Loxo is very intriguing because it's one of the first to have come out with precision medicines that specifically go after genetic mutations and those kinds of targets. So, not really thinking about cancer as far as "where did it originate," such as in the lung, but thinking more, "What is the genetic mutation that is actually driving that cancer to form?" And what's interesting about Loxo, and probably why Lilly paid so much money for it, is that it already got its first drug across the finish line. Last November, the FDA approved Vitrakvi, which is a TRK fusion gene drug that targets 12 different cancers. Sales aren't big yet. They only collect royalties because Bayer licensed the rights to that drug. But, it obviously proved that their platform was strong, and would be able to generate other, theoretically, of these precision medicines. Now, we're starting to see that bear fruit with LOXO-292, which targets the RET gene mutation. RET gene mutations aren't very common. They do occur in about 2% of non-small cell lung cancer cases, and in a slightly higher proportion of thyroid cancer patients. I broke out the math on that. It's about, I want to say, 4,000 to 5,000 patients per year in lung cancer, and 1,000 to 2,000 per year in thyroid cancer.
Jones: Yeah. This particular study, it's named LIBRETTO-001. It's the largest trial ever reported in RET altered cancer patients thus far. Just from a high level, basically, RET fusion drives what's called oncogenesis, where basically healthy cells become transformed into cancer cells. So, just taking a look at the results, pretty impressive. To start, 68% of 105 patients, all of whom had actually failed previous treatments, including chemo, saw a response after taking the drug. That basically meant that their tumors decreased in size by at least 30%. That was certainly a check. But then it got better, Todd. In the 34 patients who had not been previously treated, the response rate was actually 85%. But it didn't stop there. In those patients whose cancer had actually spread to their brains or their central nervous system, the response rate was 91%. On top of all of that, the responses were actually durable. They lasted for a median of 20.3 months, with progression-free survival of 18.4 months. And that is something we should see continue to improve because the majority of the patients continued to respond to treatment or are progression-free as of the cut-off, which I believe was in June. Across the board, we saw some really impressive response rates for this drug.
Campbell: Absolutely. This is theoretically game-changing and life-saving for patients with this particular mutation. The data supports the idea that Lilly can go out and file for FDA approval of this. The big question in my mind that I'm wondering is whether or not it'll get approved for later line therapy, so you'll have to go through the platinum containing chemotherapy first; or, if you'll be able to get an approval based on this trial in the treatment-naive. I don't know whether or not there were enough patients in treatment-naive to be able to justify an approval in that. We didn't have progression-free survival as a primary endpoint. We don't have overall survival as a primary endpoint. But, yeah, overall response rates that high? Very, very encouraging. And also encouraging is the fact that on the safety profile, this drug looks very good. I think that they said the discontinuation rate was only 1.7%.
Jones: Yeah, very small. And even when it came to side effects, you're talking about dry mouth, diarrhea, constipation. Very much at the lower end of the severity range when it comes to side effects. Another notch for them. Right now Lilly plans to file for approval by the end of the year. This certainly gives Eli Lilly a chance to offset some of the revenue due to patent expirations and competition. Needless to say, all eyes will be on this drug. They are also, of course, looking at this drug in thyroid cancer. We should get results in that indication, updates at the end of the year. Basically 10% to 20% of papillary and other thyroid cancers have this same type of mutation as well.
As impressive as that is, though, they are not the only players in this space. You've also got Blueprint Medicines, ticker BPMC. Todd, you and I have talked about this on the show. Their drug, BLU-667, had a 60% response rate in the same indication. They're going to be reading out soon. Granted, I think for Lilly and Loxo, first to market, first with this type of mechanism of action. But, Blueprint is going to be right on their heels.
Campbell: Yeah. Obviously, investors are going to have to bear that in mind, especially when you're looking at Blueprint. This isn't going to move the needle for Lilly. Lilly's a huge company. I don't know if this is necessarily a blockbuster drug. I mean, it'll be a high priced drug, but I don't know if it'll be a blockbuster. The data on the surface does appear to give Loxo/Lilly an advantage over Blueprint. But when you're talking about this size of patient population, I'm not going to quibble too much between a 60% overall response rate and a 68% overall response rate. We'll have to see how the safety comes out. It looked like maybe more patients discontinued treatment in the Blueprint trial as of the last update, but too early to call on that one.
Jones: Exactly, too early to call. They do plan to do a randomized study comparing the drug to standard chemo as a first treatment in lung cancer. I can tell you, all eyes will be on that.
Another thing that I think is worth watching, we did get some updates recently -- because this occurs in such a small percentage of the population, I think you said 1% to 2%, Todd, the challenge then becomes for Eli Lilly being able to identify these patients that will be able to respond. Thermo Fisher did recently announce that it's going to have a companion diagnostic tool to go along with this. I think that will certainly help, but that's another area that I'll be keeping a close eye on as well.
Campbell: Absolutely agree with you!
Jones: That will close us out, but I do want to let you know, a company that we've talked about before, one that I know many of you are watching, Aimmune Therapeutics, they just had FDA briefing talks for their peanut allergy drug just drop today. They're going to have an FDA advisory committee meeting on Friday the 13th. Dun-dun-dun! We'll see how that goes. Overall, briefing talks look very benign. Nothing too outrageous. But as we know as biotech investors, anything can happen in those FDA advisory committee meetings. Todd, I don't know about you, I plan to watch this only because it's the first of what will hopefully be many.
Campbell: Absolutely going to watch this, pay attention to it, and hopefully talk about it soon on the show, right, Shannon?
Jones: That's right, you got it! So, be sure to check us out next week because we will keep you up to date on all the latest happenings with that particular company and more. As for us, that'll do it for Industry Focus: Healthcare. We want to thank you for tuning in! As always, people on the program may have interest in the companies discussed on the show, and The Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. Thanks to Dan Boyd for his work behind the glass today! For Todd Campbell, I'm Shannon Jones. Thanks for listening and Fool on!
