Alkermes Plc Stock

Greetings, and welcome to the Alkermes Third Quarter 2026 Financial Results Conference Call. My name is Dylan, and I will be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended September 30, 2026. With me today are Blair Jackson, our Chief Executive Officer; Todd Nichols, our Chief Commercial Officer; and Joshua Reed, our Chief Financial Officer. A slide presentation, along with our press release, related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors section of alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business.

Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this morning and our most recent annual report filed with the SEC for important risk factors that could cause our 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 now I'll turn the call over to Blair for some opening remarks.

Thank you, Sandy. Good morning, everyone. On my first quarterly call as CEO of Alkermes, I'd like to start with a few thoughts on the opportunity ahead and the priorities that will guide us. We have a clear strategy and a strong foundation. Our focus now is on execution. That means advancing our pipeline with rigor and urgency, driving strong commercial and financial performance and allocating capital thoughtfully to our highest value opportunities.

Our commercial business is an important element of our strategy and provides a strong financial foundation to invest in innovation. Our greatest opportunity for growth and value creation lies in our pipeline, particularly our leadership in orexin research and the potential of our orexin development portfolio to yield important new treatment options in neuropsychiatry. I'll discuss the significant momentum across our development pipeline in more detail following the discussion of the quarterly results. The combination of commercial strength, financial performance and a differentiated pipeline positions Alkermes well for its next chapter and the potential for meaningful long-term value creation for shareholders. I'm incredibly proud and honored to lead Alkermes at this important point in its evolution, and I'm confident in our strategy, our people and the opportunities ahead. With that, let's turn to the quarter, Todd.

Thank you, Blair. Good morning, everyone. I'm pleased to report that we delivered strong performance across our commercial portfolio in the third quarter, reflecting contributions across addiction, psychiatry and sleep medicine. Our teams remain focused on driving demand, broadening patient access and building on the opportunities across our 4 proprietary products.

In the third quarter, net sales from our proprietary product portfolio increased 31% year-over-year to $417.3 million, reflecting the addition of LUMRYZ and continued demand growth across our established commercial portfolio. Starting with VIVITROL. Net sales in the third quarter were $127.6 million. VIVITROL continued to see strong demand driven by penetration in the alcohol dependence market.

Net sales also benefited from approximately $8 million in gross to net favorability, primarily driven by favorable patient mix. For the full year, we continue to expect VIVITROL net sales in the range of $460 million to $480 million. We remain confident in the strength and durability of our VIVITROL business and look forward to continuing our impact with this important medicine.

Turning to our psychiatry franchise. Third quarter net sales for ARISTADA product family were $103.9 million. ARISTADA continued to see demand growth driven by expansion in HCP adoption. Net sales also benefited from approximately $7 million of gross to net and inventory favorability. We are encouraged by ARISTADA's continued strong performance within this category.

For the full year, we continue to expect ARISTADA net sales in the range of $365 million to $385 million. LYBALVI net sales were $95.9 million in the third quarter with underlying TRx growth of 18% year-over-year, supported by new patient starts and broader prescriber adoption. Net sales also reflected approximately $2 million of inventory benefit. Last quarter, we implemented a strategic expansion of the LYBALVI market access profile that we believe will position LYBALVI for long-term growth. Access now stands at approximately 80% of covered lives. And as a result, we have already seen positive trends on volume demand and prescription fulfillment. As expected, gross to net adjustments were approximately 42% during the third quarter.

For the full year, we continue to expect LYBALVI net sales in the range of $380 million to $400 million. Looking ahead to next year, we expect gross to net adjustments for LYBALVI to be in the 45% range. We expect the benefits of expanded payer access to be reflected first in prescription volume, which we expect will continue to grow nearly 20% year-over-year with an acceleration in net sales growth expected to follow.

Beyond 2027, we expect volume growth and net sales growth to track more closely together again. Turning to our sleep franchise. LUMRYZ net sales were $89.9 million in the third quarter. We reached approximately 4,100 patients on therapy at quarter end, reflecting strong underlying demand, broader prescriber adoption and increased use among existing prescribers.

Net sales also reflected the drawdown of approximately $7 million of inventory build that we highlighted in our second quarter results. Last month, we presented results from the positive Phase III REVITALYZ study of LUMRYZ in idiopathic hypersomnia at the Sleep Europe meeting.

IH is a fast-growing segment for the oxybate market. The revitalized data will serve as the foundation for the sNDA submission for IH with a potential launch in March 2028, if approved. IH represents an important potential growth opportunity for LUMRYZ, and we look forward to updating you on our progress. For the full year, we continue to expect total LUMRYZ net sales of $350 million to $370 million, of which Alkermes expects to record $315 million to $335 million, reflecting the mid-February close of the Avadel transaction.

Supporting LUMRYZ, we have an established sleep medicine platform that includes an experienced commercial and medical organization with a deep understanding of the market dynamics in HCP and patient journeys. This platform provides a strong foundation to support the potential launch of alixorexton and our broader ambition to become leaders in sleep medicine across multiple treatment modalities.

Across our proprietary portfolio, we expect net sales to be in the range of $400 million to $420 million in the fourth quarter. We are pleased with what we have accomplished so far this year and remain focused on delivering against our 2026 objectives. As we enter the final quarter, our priorities remain clear. Drive demand for our medicines, expand patient access and position our brands for continued growth. With that, I will pass the call to Joshua to review the financial results for the quarter.

Thank you, Todd. We delivered solid financial results in the third quarter, supported by the strength of our commercial portfolio and disciplined management of the business. Through the first 9 months of the year, our financial position has provided the flexibility to advance our strategic priorities and invest in key opportunities that we believe will support our future growth. During the quarter, we generated total revenues of $480.1 million. As Todd outlined, our portfolio of proprietary products generated net sales of $417.3 million. These results reflect contributions from all 4 of our proprietary products and positive underlying demand trends across the commercial business.

Manufacturing and royalty revenues were $62.9 million for the quarter, including $29.5 million from VUMERITY and $26.4 million from the long-acting INVEGA products. Turning to expenses. Cost of goods sold in the third quarter was $94.2 million, which includes the purchase price fair value accounting of LUMRYZ inventory that we described last quarter. This compared to $51.6 million in Q3 of the prior year. R&D expenses in the quarter were $121.1 million compared to $81.7 million in Q3 of the prior year, reflecting continued investment in our orexin development portfolio.

Of note, our development activities during the quarter included the alixorexton Phase III studies initiated earlier this year and clinical development activities to advance ALKS 7290 in ADHD and MDD as well as ALKS 4510 in fatigue associated with Parkinson's disease or multiple sclerosis. SG&A expenses were $208.5 million for the quarter compared to $171.8 million in Q3 of the prior year, with the addition of the Avadel commercial infrastructure as the primary driver of the year-over-year change.

During the quarter, we also recorded amortization of acquired intangible assets of $19.7 million and net interest expense of $21.1 million. In Q3, we recorded GAAP net income of $16.3 million and EBITDA of $63 million. Adjusted EBITDA was $120.1 million, which we believe provides a useful measure of the underlying cash-generating performance of the business during the quarter.

From a balance sheet perspective, we ended the third quarter in a strong position with approximately $787.6 million in cash and total investments. For the year, we are reiterating our 2026 financial expectations provided in July across all line items. Our performance through the first 9 months of the year positions us well to deliver against these expectations.

Our 2026 financial performance and operating expenses reflect a number of Avadel transaction-related costs. As we look ahead to our 2027 operating expense profile, there are a few important dynamics to keep in mind, beginning with cost of goods sold. With the vast majority of the noncash LUMRYZ inventory fair value step-up associated with the Avadel acquisition being recognized in 2026, we expect cost of goods sold to be lower in 2027, reflective of more normalized patterns.

For SG&A, excluding the transaction-related costs recorded in early 2026, we expect a broadly similar expense profile for 2027. For R&D, our 2027 investment will reflect the growing number of programs across the portfolio and the broader level of clinical activity planned.

Importantly, we expect to deliver strong cash generation and adjusted EBITDA performance in 2027 while continuing to invest in the significant opportunities across our pipeline. We believe this balance demonstrates our ability to fund future growth drivers while maintaining financial discipline. We'll provide our full 2027 expectations on our February call. With that, I'll now hand the call to Blair.

As you've heard from Todd and Joshua, our commercial business continues to perform well with the proprietary product portfolio expected to deliver net sales of nearly $1.6 billion in 2026. That foundation allows us to advance an increasingly broad pipeline led by our portfolio of orexin 2 receptor agonists.

We are in the early stages of understanding the full therapeutic potential of orexin biology. Over the past several years, we've been generating a substantial body of clinical evidence across central disorders of hypersomnolence, and we are now generating our first clinical datasets from our orexin portfolio in broader areas of neuroscience.

Starting with alixorexton, our most advanced orexin candidate, we reached several important milestones across the development program during the quarter. Our Phase III Brillance Studies in narcolepsy type 1 and narcolepsy type 2 are underway, and we are pleased with enrollment progress across the program. We continue to expect top line results from these studies beginning in mid-2027.

In idiopathic hypersomnia, we completed enrollment in the Vibrance-3 Phase II study, which enrolled approximately 130 participants and will represent the first multi-week clinical dataset of an oral orexin 2 receptor agonist in IH. The study is evaluating wakefulness and IH symptom severity with the Epworth Sleepiness Scale and idiopathic hypersomnia severity scale as primary and secondary endpoints, respectively.

Beyond evaluating the safety, tolerability and efficacy of alixorexton in patients with IH, we expect the study to provide important insights to inform a potential registration program, including dose selection, dosing regimen and endpoint strategy. The study also includes our first evaluation of split dosing in a hypersomnolence disorder, which we believe could provide additional flexibility to address the diverse needs of patients.

We expect top line results around year-end or in early 2027 and look forward to sharing those data. Hypersomnolence disorders represent a significant market opportunity. And this month, the first orexin 2 receptor agonist is expected to become commercially available for the subset of patients with narcolepsy type 1. As this new therapeutic category enters the commercial landscape, we believe that if approved, alixorexton's wide therapeutic range, dosing optionality and broad anticipated utility across narcolepsy types 1 and 2 and potentially IH will support a differentiated profile with the potential to provide an important new treatment option to providers and patients. While the commercial opportunity begins to take shape in hypersomnolence disorders, we are advancing our strategy to develop orexin 2 receptor agonist for a range of neuropsychiatric and neurodegenerative disorders.

Last month, we reported the first clinical results for ALKS 7290 in adults with ADHD. This was a 50-subject Phase Ib proof-of-concept study designed primarily to evaluate safety and tolerability and to generate initial data characterizing the effects of ALKS 7290 across a range of established clinical scales for ADHD, CNS biomarkers and objective cognitive performance tests.

In the study, ALKS 7290 was generally well tolerated with no serious treatment-emergent adverse events and no treatment discontinuations among participants who received ALKS 7290. Most treatment-emergent adverse events were mild and largely consistent with on-target effects for orexin 2 receptor agonists.

Across the 2 doses evaluated, ALKS 7290 demonstrated dose-dependent clinically meaningful improvements from baseline on exploratory endpoints evaluating established measures of ADHD symptoms and disease severity. We were pleased to observe improvements across both the inattentive and the hyperactivity impulsivity subscales of the adult ADHD Investigator Symptom Rating Scale, or AISRS, with effects emerging as early as the first assessment on day 6.

ALKS 7290 also demonstrated clinically meaningful improvements from baseline in overall ADHD disease severity as measured on the CGI-S scale. In addition, we observed treatment effects across objective measures related to processing speed, information processing, working memory and attention. These findings provide the first clinical evidence of the effects of an orexin 2 receptor agonist in the treatment of adults with ADHD and further support the dose range selected for the ongoing Phase II study. That Phase II study is already enrolling adults with ADHD and is designed to evaluate once-daily and split dose regimens of ALKS 7290 with change from baseline in AISRS total score compared with placebo at week 4 as the primary endpoint.

We expect the ADHD Phase II data in the second half of 2027. Building our momentum in diseases outside of hypersomnolence, last week, we announced the expansion of the ALKS 7290 development program into major depressive disorder, or MDD, with the initiation of a 150-patient Phase II study evaluating ALKS 7290 as an adjunct to antidepressant treatment in adults with MDD who have had a partial response to standard antidepressant therapy. This randomized, double-blind, placebo-controlled study is designed to evaluate the safety and tolerability of ALKS 7290 over 6 weeks while also assessing its effects on depressive symptoms as measured by change from baseline on the MADRS or CGI-S compared to placebo at week 6.

The study will enroll adults with and without excessive daytime sleepiness, which will allow us to evaluate the potential effects of ALKS 7290 in the overall MDD population as well as in this important subgroup. Turning to orexin biology and neurodegenerative disorders. We plan to initiate a randomized, double-blind, placebo-controlled Phase II study evaluating ALKS 4510 in people with fatigue associated with multiple sclerosis or Parkinson's disease.

Fatigue is one of the most common and consequential symptoms across a broad range of neurological and systemic diseases, yet effective treatment options remain limited. Fatigue associated with multiple sclerosis or Parkinson's disease are compelling initial areas for development with clearly defined patient populations, significant unmet need and established clinical scales focused on fatigue.

We believe these disease areas offer a tractable development pathway for establishing clinical proof of concept for orexin 2 receptor agonism in fatigue while also representing meaningful commercial opportunities in these patient populations.

Importantly, this study is intended not only to evaluate the potential of ALKS 4510 in these specific disorders, but also to deepen our understanding of the role of orexin biology in fatigue more broadly. We believe these insights generated could help establish a foundation for evaluating additional disease areas where fatigue remains a significant source of patient burden and unmet need.

Alixorexton in hypersomnolence disorders, ALKS 7290 in broader neuropsychiatric disorders and ALKS 4510 in fatigue are components of our broader orexin portfolio development strategy that allows us to evaluate these distinct molecules across a range of patient populations and disease settings. As we advance and expand these development programs, we're also continuing to advance additional orexin compounds through preclinical development.

We're just beginning to explore the potential clinical utility of orexin compounds, and Alkermes is at the leading edge of research for this emerging therapeutic class. Our focus will remain in neuroscience applications, but with the potential to reach across a broad range of disorders, we believe the opportunity for this class is vast and will be the focus of significant research and development for years to come.

Looking ahead, the next year will be a pivotal and data-rich period for Alkermes with 6 important studies expected to read out across our orexin portfolio. We start with anticipated data from the Vibrance-3 Phase II study of alixorexton in idiopathic hypersomnia in the coming months, followed by top line results from all 3 Brilliance Phase III studies in narcolepsy beginning in mid-2027.

For ALKS 7290, we expect Phase II data in ADHD next fall and for ALKS 4510 Phase II proof-of-concept data in fatigue toward the end of the year. Taken together, these studies have the potential to significantly expand our understanding of where orexin-based therapies can make a meaningful difference for patients.

Our focus remains on executing with urgency and discipline, generating the clinical evidence needed to unlock the potential of this novel class and building what we believe can become a leading franchise, addressing some of the most significant unmet needs across sleep, neuropsychiatric and neurological disorders. We plan to pursue these opportunities while continuing to deliver strong commercial performance and investing thoughtfully to support long-term growth and value creation. With that, I'll turn the call back to Sandy for the Q&A.

Thanks, sir. We'll now open the call for Q&A.

[Operator Instructions] Our first question comes from Leonid Timashev with RBC Capital Markets.

Just wanted to ask one on IH and how you're thinking about what to expect there. Maybe can you talk us through when you see that data, how you'll think about moving forward with the split dose, maybe with the once-daily doses and maybe how you're thinking about what you could see on the relative magnitude between those?

Sure. It's Blair. I think when we look at the IH dataset that's coming out, there's a wealth of information that we're going to be getting from that trial. As you alluded to, first and foremost, we're going to be getting the once-daily dosing for that program. And as we've spoken before, we see the IH population as somewhat similar to the NT2 population in that it's highly variable. These patients have a range of disease and different responses to orexin agonism. So we would expect something similar to that NT2 dataset. The main difference, though, being that with IH population, they do have one separate population, which is the long sleepers. And those long sleepers, we have less experience with.

We expect that we'll have a similar response within them, but this dataset will tell us more on that piece. With regards to the split dosing, the split dosing, as you know, is an important component of our overall program in that it provides both flexibility for patients across NT1, NT2 and IH, but also could provide some additional efficacy for those patients who need it in the later afternoon. And so this will be the first opportunity we'll be able to see that split dataset as part of a patient program. So all this data will be coming out towards the end of the year, and we're pretty excited to see it.

Our next question comes from Paul Matteis with Stifel.

This is [ Emily ] on for Paul. We were just wondering where do you think Takeda may price? And like if there was a chance that they price on the lower end, do you think that you have the possibility to kind of like adjust there with the different doses you plan to have available across the disorders?

This is Blair. I think that Takeda is going to be pricing imminently, and we'll see that in the next few weeks. And obviously, that will set the range for the overall market. As you alluded to in your question, though, we have a lot of flexibility on our pricing moving forward. So we'll see where they price and we'll adjust accordingly.

Our next question comes from Graig Suvannavejh with Mizuho Securities.

Congrats on the progress in the quarter. Just on the pipeline and obviously, on the orexin franchise, I was intrigued by the movement into major depressive disorder and psychiatry. Could you give us perhaps a little bit more of the rationale there? And can you give us maybe a sense of if there are other psychiatric indications beyond MDD that you think an orexin might make sense?

Yes, we looked extensively at other areas outside of hypersomnolence where you could apply orexin agonism. And we did some comprehensive preclinical work, really looking at the basic biology behind orexin agonism and identified a number of different domains where you could apply this, some of them being cognition, fatigue, mood, wakefulness, all these different areas. And so as part of that, we did some translational work in many of these areas. And within mood, some of the things we noticed is that we saw a really strong synergistic increase in serotonin in the prefrontal cortex when orexin agonism was given with SSRIs or SNRIs and so synergistically. And I think that's really telling that there's a benefit you could have here by having adjunctive therapy with orexin agonism.

We also did use the highly translational model as part of that early research, which is the chronic social defeat test, which is really a way of establishing rodents who have really a depressive phenotype and then providing them with therapy and seeing how they respond to treatment. And what we found is we found similar effects to what you'd see if those animals were dosed with ketamine or with fluoxetine.

So we feel -- we felt pretty strongly that there's a potential signal here. And so the desire to move into a patient population is something we've had for some time. And so part of this study that we're looking at is exploratory in that we'll be looking at not only the full MDD population, but we'll also be looking at a subgroup of the population who also have some excessive daytime sleepiness. So that gives us an opportunity to really learn a lot as part of this program and really design our program going forward.

To the first part of your question regarding other things, yes, we have a number of other areas that we're looking at within neuroscience, both neurodegenerative and neuropsychiatry. And we'll talk about those as we get closer to additional activity.

Our next question comes from Akash Tewari with Jefferies.

This is [ Albert ] on for Akash. Given that your ADHD program will likely need to demonstrate efficacy comparable to existing stimulants to be competitive, can you discuss the rationale for not modifying the trial design to target a specific patient type? And what gives you confidence that the current trial design can demonstrate a clinical meaningful treatment benefit?

So first, I would like to correct a little bit of what you said there. I think there's a wide range of efficacy outcomes that are commercially attractive for a new entrant in the ADHD space, especially an entrant like an orexin agonist, which could bring broader response profiles over and above what you see with existing therapies that are there. So I think for us, the goal moving forward is to establish that efficacy level, flush out some of those broader domains that we started to see in the Phase Ib study and show and demonstrate that this is a safe profile within this patient area.

And I think the early data that we saw in our Phase Ib program support all of those goals. One of the key things that we looked at through that Phase Ib study was our dosage range, making sure we were at the right region of targeting those receptors and engaging that circuitry. And what we found was exactly that, that yes, we're right in the range. We don't need to lower or raise our dose. We can use the doses that we have. We also found that we were seeing a really robust response early within treatment. And so I think there is no requirement for us to modify the study in any way nor would it benefit from us based on what we've seen to look at individual subtypes.

Our next question comes from Rudy Li with Wolfe Research.

Just a quick follow-up question on 7290's MDD study. So J&J showed good efficacy data in MDD for its orexin antagonist, but in patients with insomnia. Can you maybe talk about the rationale for orexin agonist for MDD? I mean, what will be the key difference in the study population, the trial design versus J&J and what will be the key differentiator versus current standard of care?

And I think it's important to recognize that using orexin agonism is a fundamentally different approach than using orexin antagonism. And orexin antagonism, what J&J was trying to do there was sort of address the sleep disorder and hoping it would have a knock-on effect on potential mood.

This is very different what we're doing. We believe that we directly impact centers of mood within the brain, and we're actually looking at treating the depressive symptoms directly. Now because we are using a subgroup who has excessive daytime sleepiness because we think we might be able to drive additional signal through that group. But this is a fundamentally different view than what J&J did with their orexin antagonist.

Our next question comes from David Amsellem with Piper Sandler.

Got a couple of LUMRYZ questions. So regarding the launch of Takeda's oveporexton, do you perceive any potential impact to LUMRYZ in terms of new starts next year in NT1. So that's number one. And then looking longer term with the IH launch for LUMRYZ in '28, how are you envisioning uptake? Do you think there's going to be a sizable switch market from XYWAV to LUMRYZ? Do you think you'll be able to expand the overall oxybate footprint in IH? Or is it a little bit of both?

Yes. David, this is Todd. I appreciate the questions on LUMRYZ. Yes, we're really, really excited and pleased with the performance of LUMRYZ this year and specifically in Q2, strong net sales, really strong patient demand up to 4,100 patients. We are watching very closely and thinking very deeply about the impact of orexin. As you know, we're big believers in the mechanisms. We actually believe they're complementary, and we hear that pretty consistently from HCPs around the belief and the desire to use both mechanisms. So we think there's a long-term durability in the oxybate market and a lot of excitement with orexins.

Initially, we're going to have to see how this plays out with Takeda's product entering the market. We think initially, that will be a switch population for earlier lines of therapy, patients looking to switch. But we hear pretty consistently from HCPs that patients that are on oxybate, specifically LUMRYZ and that are stable, like to stay on the product overall. So we do believe that there will be an impact on oxybate, but we think it will be somewhat marginal at the beginning, and we think the category overall will be durable.

In terms of IH, yes, this is something we're really excited about. We did present the data recently at Sleep Europe. There's a lot of anticipation on the IH launch. If it's approved, we will be commercializing no sooner than March 1, 2028. And there's a lot of anticipation there. This will be the second product potentially approved in the market. We think it's underpenetrated at this point right now. We think that LUMRYZ actually will compete for new starts in IH, but also there will be a switch market and that LUMRYZ will compete in that switch market.

Our next question comes from Jessica Fye with JPMorgan.

[indiscernible] Jess. Any feedback from physicians regarding the ADHD dataset? I wonder if you could tell us when -- how the placebo group did in the recent study or when we could see more detailed data, including placebo response rates.

Yes. So we've had a lot of discussions with physicians with regards to the ADHD data. And I think there's a lot of excitement about the fact that we're able to move a number of these different tools using orexin agonism. And I think, in particular, folks were interested in the fact that you were seeing consistent response across these measures. And so not only the internal consistency between patient-reported outcomes, but also physician-reported outcomes as well as objective measures.

And just as a reminder, the study itself was a safety study that was designed to look at the wide therapeutic potential that we could have and the therapeutic window we would have with an orexin agonist. And I think that read out really, really well. As such, it's not really appropriate to have a placebo comparison. So what we rely on for that is the objective measures and the subjective measures that we included in that study that we shared in our press release.

Our next question comes from David Hoang with Deutsche Bank.

I wanted to ask, once you are post Vibrance-3 data in IH, either year-end or early '27, once that data is in hand, how quickly would you look to move into a Phase III program for IH? And what would that study design potentially look like?

I think we're going to want to move as quick as we can. Obviously, our goal is to get into the Phase III following that dataset. What we would like to do, though, is meet with the agency first. And so that actually will probably be a rate-limiting step as making sure we get that meeting. And we'll obviously hope that they'll be very responsive because this is an important patient population. As for the size, our expectation is it's probably going to be a similar size to the NT2 study, but that will obviously depend on the signal that we see in the Phase II program. And so that will help set that. But ballpark-wise, think of the Phase IIs for planning purposes -- sorry, think of NT2 for planning purposes.

Our next question comes from Marc Goodman with Leerink Partners.

Just back on oxybate. Could you just give us a little sense behind the scenes what you thought happened in the quarter as far as was it a normal quarter of just new patient starts, discontinuations, the pricing, just how the market dynamics have just shaping up since you've owned the asset? Is it generally kind of consistent with what you thought, any major changes in the quarter?

Yes, absolutely, Marc. This is Todd. I'll take that. Yes, again, we were pleased with the quarter. We were assuming some seasonality, which you typically would during Q3. And I think we saw a little bit of seasonal dynamics. But overall, the growth in LUMRYZ was really driven by patient demand.

We saw nice increases in overall patients for narcolepsy, 4,100 patients. That was driven by some of the submetrics that we watch very closely, which are new enrollments, conversions and actually patient persistency. So all 3 of those dynamics, we believe, really contributed to the nice patient growth, which -- and then also contributed to the net sales growth, which was 16% year-over-year.

And then pricing?

Yes. We didn't see any significant pressures on pricing overall. The pricing was within our range of expectations. And as we've said before, historically, LUMRYZ has a really strong market access profile. We didn't see any changing dynamics there as well, and we're not anticipating any strong changing dynamics as we head into the last part of the year.

Our next question comes from Joseph Thome with TD Cowen.

This is [ Jacob ] on the line for Joe. On the MDD study for 7290, I was actually just curious if we might expect any kind of prespecified subgroup analysis by excessive daytime sleepiness or like stratification by excessive daytime sleepiness and whether we might expect powering to be sufficient to determine any differences between those patient populations or whether we could have an endpoint like ESS where we could see if the effects on move were being mediated by sleepiness?

Yes, as I said in the prepared remarks, actually, we do have a prespecified subgroup, which is a group that has excessive daytime sleepiness. And our goal here is to look at the 2 populations, both the all-comers MDD versus the group that has the excessive daytime sleepiness. And one of the goals there is to see do we see an enriched signal within that group.

And you may expect to see that because as you look at the MADRS scale, for example, there's some questions there that specify or are highly related to sleep or the anhedonia associated or lack of urgency and things like that, that people get. So we want to see that and we want to test that in the study. And then that will allow us to then determine our development path moving forward.

Our next question comes from Alex Nackenoff with Truist Securities.

Another one on ADHD. For the Phase Ib portion, could you explain your rationale why you utilized an inpatient setting and possibly how that may have impacted, if at all, baseline characteristics? And if those baseline factors or the inpatient setting may have led to an outsized or suppressed treatment response. I'm just curious if you think you had a representative ADHD population where you believe the results will translate in future clinical studies.

So as we look at the ADHD program, we had 2 programs that are studies that we're running at the same time. We have, first and foremost, our large Phase II outpatient study that we're running that is placebo-controlled, multiple doses, et cetera. What we wanted to do in the Phase Ib study was to ensure that we had some information that we would inform on, one, what are some of the types of signals that we would see and two, whether we were in the right dosage range overall. In order to do that, what we needed to do is learn a lot about how patients respond to orexin agonism. Because remember, this is actually the first asset of this mechanism that's ever been tested outside of hypersomnia indications.

And so we needed to learn what we're doing, and that meant we had to put a lot of different tools within the Phase I program. And in order to do that, if you try to do that in an outpatient type setting, that would be exhaustive for the patients. It would be very hard for you to operationalize that. So that's why we chose an inpatient setting. What it allows us to do is put those patients in a clinic, look at those different outcomes in a more staggered pace that's appropriate for the patients.

And we don't think that has any change on the overall baseline characteristics. I think overall, when we looked at the incoming baseline characteristics, that's consistent with what we see with other ADHD studies. I think where it would where inpatient settings tend to have an impact on some things is on your safety outcomes because sometimes what you tend to see in inpatient settings is those patients talking about their side effects, and that can sometimes amplify side effects here and there.

Again, we saw a very good AE profile from this program. So I think all in all, we got exactly what we wanted from this study. I think it validates the approach. And as we've always said, the Phase II study that's ongoing is going to be the one that's going to determine what's the characteristics or what's the signal size related to this drug treatment in this population.

Our next question comes from Umer Raffat with Evercore ISI.

I wanted to touch upon 7290 as well and a couple of points. First, I saw you guys used split dosing when conducting the inpatient ADHD trial. Do you think split dosing could be driving placebo response? And are you intending to continue using split dosing only in your ongoing outpatient ADHD as well as the MDD trial? And then secondly, the fact that you used up to 50-milligram dose of 7290, what does that tell us about the potency relative to your narcolepsy program?

I think on the first question on the split dosing. So as we went into the ADHD study, one of the things we wanted to do as we're trying to learn on the signals is we didn't want to confound some of the PK differences of single-day dosing versus split dosing. We wanted to take that out of the equation.

So we use split dosing just because it's a more -- it just allowed us to standardize. I think as you look at our ongoing Phase II study, we're actually using both once daily and split dosing. And I think that's important because, as you know, in the ADHD population, it is a bit of a lifestyle drug in some respects in that it -- patients have different needs according to what -- whether they're working, whether they're student, what's happening in the evening, what happens in the morning, et cetera.

And so I would envision that we'll probably introduce other dosing types, maybe PRN and other things in the future after original registration. But we're going to do both moving forward, single-day dosing as well as split dosing through the development program. With regards to the upper dose of 7290, it's actually -- you can't really use that to relate to narcolepsy. This is fundamentally a different drug. It has a different potency, has different pharmacological characteristics.

And then also keep in mind that the pharmacologic dose level that you need to activate the ADHD circuit may be different than what you need to activate, say, a wakefulness circuit. And so there's a lot of dynamics that are going on there that don't really allow you to make that comparison.

Our next question comes from Ash Verma with UBS.

This is So Youn on for Ash. For the IH study, is it fair to assume that the baseline ESS scores are similar to what you had in the NT2 study? Or so is it fair to assume that the placebo arm in this IH study could closely resemble how the placebo did in the NT2 study?

Yes. I mean, look, we've established very similar entrance criteria as in IH versus NT2. Now who ends up enrolling in the study depends on the study and which patients show up. So we'll know that as we look at the data moving forward. I think as we look at this area overall, I think we feel pretty good that we're controlling placebo. Obviously, with wakefulness, one of the things to keep in mind is you don't tend to see such a big placebo response that you see in neuropsychiatric indications.

So you tend to actually -- it really depends more on the treatment arm than it depends on the placebo arm. But again, we do what we can to control that. And we've done that in this program by really trying to standardize how we do the tests, really making sure we have high-quality control on our clinical sites.

Got it. And if I may have a follow-up. I think you alluded to the long-form IH patients earlier. Can you talk about roughly what percentage of your IH patients would be the long-form IH?

So in our study, we haven't disclosed what that is. I think as we look at the general population, though, within IH, typically, you see something in the order of around 25% of patients can be deemed long sleepers.

Our next question comes from Amy Fabia with Needham & Company.

With regards to the upcoming IH study readout, I'm trying to understand what -- how you're sort of thinking about the outcome of the results, especially in the split dosing arm. As we think about the trade-off between efficacy of having split dose and then maybe potentially implications on safety, are there any guardrails in terms of those trade-offs beyond which you may decide not to pursue a split dosing? And then secondly, is there some process within the study of determining which patients may be best suited for a split dosing versus not that could inform your next clinical trial?

I think with the split dosing, there's -- we have a wide therapeutic range with this drug. So you remember, when we went into our programs before, we studied in the NT2 trial up to 18 milligrams. And we have an ability to go higher if we want to. So split dosing, we don't see sort of a safety question as to what's going to determine whether we move to split dosing.

Now obviously, the data will tell us that. When we look at the NT2 data, if we see something unexpected, we'll adapt accordingly. But a priori, we don't anticipate that being a gating factor. What we're really looking for with the split dosing is really a comparison to the once-daily dosing. And in the subset of patients who require additional efficacy in the afternoon, do we see a difference. And if we do see that difference, that's going to add additional flexibility for physicians to provide that dosage option to the patients.

And remember, in our NT2 study, we normalized, I would say, about 70% of the patients on the ESS scale using the once-daily dosing. So we anticipate even in IH that we're going to see a good response on both dosage forms. But we want to have that added flexibility and that added efficacy for patients and that added flexibility that split dosing would provide.

What the second question was what again, sorry?

What I was trying to ask is, is there a way to learn from the study as to a priori, which patients may be best suited for a split dosing?

Yes. No... So it's interesting. It's a priori. What we don't know when patients come into the study is would you be better on a split dose? Or would you be better on a single dose? And patients, obviously, in our study are going to be randomized randomly into that -- into those categories.

We'll see if we learn anything from this study of whether or not there are any patient characteristics that drive that. I think it would be surprising. I think one of the challenges when you get into NT2 and IH populations is the science underlying the etiology of the disease is a little unclear. And so in many ways, it's hard to -- you can't just use a standard biomarker to say a patient is going to be responsive or nonresponsive or need an afternoon split dose.

So again, we'll learn in the NT2 study. And it may just be that after this study, doctors are going to have to empirically decide to see how their patients respond to the once-daily dose and then move them on to split dose if it's required. But the data will tell us, and we'll adapt from there.

Our next question comes from Andrea Newkirk with Goldman Sachs.

This is [ Morgan ] on for Andrea Newkirk. For ALKS 7290 in MDD, given antidepressants typically fail to address residual fatigue and anhedonia, what magnitude of difference on MADRS do you consider clinically meaningful for this novel mechanism?

Yes. It's interesting that as you look at the MADRS scores and you look at things that are out there, I mean, I think typically, people see a change versus placebo of somewhere between 2 and 5 as being a meaningful difference on MADRS. And in fact, the drug that's out now, AUVELITY, which only had a 3-point change, 3.5 point change or so relative to placebo has strong uptake because it has unique characteristics. And so it has, A, a different mechanism; and B, it has a rapid onset.

And I think as you look at the MDD space, there's a number of areas where you can provide improvement, cognition, anhedonia, fatigue, as you alluded to. And we've seen things like cognition and fatigue benefits in some of our other trials. And so I think you -- I think the goal for us is to be able to show a statistical difference between placebo as part of MADRS, understand the domains of where we see response -- and if we can show something that's different that provides a different -- a broader profile than you see with the SSRIs, SNRIs, I think there's a lot of opportunity there. Because remember, this is adjunctive therapy. About 40% of these patients have an inadequate response. I think there's a lot of room for improvement for these patients.

Our next question comes from Jason Gerberry with Bank of America.

This is [ Chi ] on for Jason. I have a follow-up on the expectation for Vibrance-3. What do you expect to see from the data for advancing the program to Phase III? Is it driven by whether the study meeting the primary endpoint? And what do you want to see as differentiator relative to our market offerings such as oxybate? Do you want to see sort of magnitude of benefit on ESS or IHSS for the IH study? And just quickly as a follow-up, on your earlier commentary around expecting to see a similar response as in the Vibrance-2 study, is that commentary related to QD dosing in ESS scale as we think about the overlapping elements between Vibrance -2 and Vibrance-3?

Yes. I mean there's a lot in your question there. I think as you look at the Vibrance-3 study, as you look at it, obviously, our endpoints are ESS and IHSS. And we want to be able to show a benefit within there. And for us, the Phase II study, remember, is about trying to ensure and understand your signal, just trying to understand your signal relative to your safety profile. And can you design your Phase III trial in order to get over the line, show the statistical significance, show a benefit to those patients.

Obviously, we want to hit statistical significance as part of our Phase II study if we can. If we were to fall a little bit short, does that mean we would stop the program? No. As long as we feel that we have an appropriate signal that trial design would be able to overcome. That being said, when we look at our early treatment within this patient population, remember, we had a once-daily dosing, similar to what we did with the NT2 population. We saw a similar effect size between NT2 and IH.

So our hope is that we see something similar. We hope that we'll provide additional benefit through the split dosing and that we'll be able to then design our Phase III meet with the agency and then move that into our Phase III program. So with regards to my previous comment with regards to Vibrance-2 versus Vibrance-3, what I'm really just trying to say is that there's a lot of heterogeneity in the patient populations, both in NT2 and IH. There's also a lot of overlap between diagnosis.

Patients move between an NT2 diagnosis in an IH diagnosis sometimes frequently. So I would expect that there's an overlap of population there. And that if you have a similar population that the once-daily drug would perform similarly with the caveats that I mentioned earlier that you have this other patient group in there that we're going to be learning about the long sleepers. So again, what I'm hoping is that we've designed the study in a way where we can learn what we need to from this program and move forward quickly into Phase III.

Our next question comes from Luke Herrmann with Baird.

So just a follow-up on the orexin and oxybate dynamic. Given the view that orexin and oxybates can be complementary by HCPs and that's intuitively sound that they can be complementary. But I guess what is your early thinking on payer dynamics if a set of patients could theoretically be in a position to step up from 1 to 2 branded therapeutics?

Yes. Luke, this is Todd. I'll take that. Yes, we're spending a lot of time right now talking to payers overall. As you know, the access profile for oxybates and for LUMRYZ is quite strong at north of 80%. And we don't see that changing over time. There's a significant value to HCPs and to patients. I think a lot will be determined pretty quickly here when we see what the pricing dynamic looks like for the Takeda product overall. As you know, there's a lot that goes into pricing.

And one of the considerations that we will be thinking through is not only just the overall value of alixorexton with a very broad label and how we plan to differentiate, but also making sure we take into consideration what the reimbursement profile looks like. So our expectation is that we will put forward a profile in a pricing dynamic that will allow broad access to both products.

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

Just on 7290 into MDD, I was just curious, it sounds like you were looking into the drug's effect on sort of some of the specific domains of the MADRS. I'm just curious, are you looking at things like SHAPS -- because I think there is a rationale to think that orexin could have an effect on anhedonia. And obviously, that's sort of a more refined measure of looking at that specific aspect of the disease.

Yes. I mean I think as we move forward in the program, we're going to be looking at a lot of different things. I think for the ongoing study right now, our primary is really on the MADRS. We're really -- yes, are we looking at the individual domains? Of course, we do, but we're designed to look at the overall response overall. So our goal here is to really show whether or not we see an overall effect size, understand the patient population. And then as we move into the next phase of the program, we'll dive deeper into some of the areas that we see.

Our last question comes from Ben Burnett with Wells Fargo.

This is Orfeas on for Ben. Congrats on the progress. I had another question on oxybate plus orexin. It is complementary, and we've also heard similar feedback from KOLs. With that in mind, would you remind us of your plans to generate data of an orexin agonist in combination with an oxybate? And if you do run such a study, would your oxybate of choice be LUMRYZ or valiloxybate?

And actually, we do want to generate a lot of data with oxybates and orexins together because just like you're hearing, we're hearing from our patients that, that would be a desirable to be able to have a nighttime treatment with an oxybate and a daytime treatment with an orexin. And we want to be able to support that. We want to support patients and doctors in how to use it, how to use it safely and also for payers to support it and show those benefits. That being said, what we want to make sure is that we do those studies as we're further along in the registration program. We don't want to put our core registration program at risk. So it will take a little time, and we will move to that. And of course, we will use LUMRYZ as the comparator. We think that's the dominant drug moving forward, and that's what we'll want to show.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Sandra Coombs for closing comments.

All right. Thanks, everyone, for joining us on the call today. If you have any follow-up questions, please don't hesitate to reach out to us at the company. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to Alkermes Second Quarter 2026 Financial Results Conference Call. My name is Sherry, I will be your operator for today's call. Please note, this conference is being recorded. I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Good morning. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended June 30, 2026. With me today are Richard Pops, our CEO; Joshua Reed, our Chief Financial Officer; Todd Nichols, our Chief Commercial Officer; and Blair Jackson, our Chief Operating Officer and incoming CEO.

A slide presentation, along with our press release, related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors section of alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements.

Please see Slide 2 of the accompanying presentation, our press release issued this morning and our most recent annual report filed with the SEC for important risk factors that could cause our 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.

Now I'll turn the call over to Richard for some opening remarks.

That's great. Thank you, and good morning, everyone. So, a few months ago, we announced that I will be handing the CEO reins to Blair while continuing to serve as Chairman. That transition becomes official next week, making this my final earnings call as CEO.

When we made that announcement in February, it reflected my confidence in the strength of Alkermes' leadership team and how effective we've been in positioning the company for its next major phase of growth. At the time, we had a strong sense of what the coming months could bring, and I'm pleased to say that many of our most optimistic expectations have become reality. So, what does that mean in practical terms?

I think most notably, Alkermes' leadership position in orexin development is now quite clear. While our initial focus is on disorders of hypersomnolence, such as narcolepsy and idiopathic hypersomnia, we increasingly see orexin as a platform with the potential to address a broad range of serious conditions, where this neurocircuitry plays an important role, such as ADHD, fatigue and other potential psychiatric, neurodevelopmental and neurodegenerative diseases.

Alixorexton is at the leading edge of that opportunity. It remains the only orexin 2 receptor agonist to have demonstrated efficacy and tolerability across both narcolepsy type 1 and narcolepsy type 2 in large Phase 2 studies. Importantly, its clinical profile has shown benefit beyond improvements in excessive daytime sleepiness with evidence of meaningful effects on cognition and fatigue as well. We've continued to share these findings, presenting the first Phase 2 data set in narcolepsy type 2 at the SLEEP meeting in June, and most recently, the topline results of an interim analysis of our alixorexton long-term extension study in NT1 and NT2, which demonstrated sustained improvement in wakefulness and other measures for up to nine months of treatment.

Today, we're actively enrolling patients in our Phase 3 narcolepsy program, which remains on track for expected completion next year. At the same time, we're advancing alixorexton in idiopathic hypersomnia in our Vibrance-3 Phase 2 study. Vibrance-3 adds a new element to the program with a split dose arm. The split dose regimen is designed to extend the pharmacodynamic effects of alixorexton later into the day and expand our competitive profile as we seek to meet the spectrum of needs of individual patients.

We have now introduced two additional orexin compounds into clinical development, each exploring a new avenue of potentially significant commercial and medical opportunity. ALKS 7290 is currently enrolling adults with ADHD with initial Phase 1b clinical data expected by the end of the third quarter. ADHD represents one of the largest and most compelling potential applications of orexin biology, and we look forward to gaining our first insights into its activity in this population.

In addition, ALKS 4510 is planned to enter Phase 2 in fatigue later this year, initially focused on patients with multiple sclerosis or Parkinson's disease. Fatigue remains one of the most debilitating and poorly treated symptoms across a number of neurological disorders, and we expect initial data from this program next year.

Our advantageous competitive position has become increasingly evident. Today, Alkermes is setting the pace in orexin biology with a robust and expanding foundation of clinical evidence in narcolepsy and now generating new data sets across a number of development candidates and disease states. The result is an R&D pipeline with both depth and momentum, and we entered the second half of the year with a series of meaningful clinical readouts ahead of us.

But there's more to Alkermes in the pipeline. We've built a significant commercial business that serves hundreds of thousands of patients, generates substantial cash flow and provided the foundation that allows us to invest for the future. And here, too, a number of important developments have unfolded largely as we anticipated they could.

The first relates to LYBALVI, our oral antipsychotic medicine. For several years, we've been pursuing a deliberate strategy of steadily expanding access while carefully balancing the economics of our gross to net profile. This past quarter marked an important milestone in that effort. Through new contracting arrangements that we believe will help drive increased uptake of LYBALVI, we expanded access strategically with three of the largest Part D plans where LYBALVI is now on formulary.

With this expansion, LYBALVI is now covered for more than 80% of insured lives. That level of access means that patients who may benefit from LYBALVI have a better chance of getting it and importantly, provides a strong platform for continued prescription growth in the years ahead.

The second relates to VIVITROL, our long-standing medicine for the treatment of alcohol and opioid dependence. Given its unique clinical profile and the distinct treatment settings in which it's used, we have always believed that VIVITROL would have a long commercial life.

Today, more than two decades after its launch, VIVITROL continues to grow. Earlier this month, we announced the termination of our agreement with Amneal for an authorized generic of VIVITROL. So, we can say now conclusively that there will be no AG for VIVITROL in 2027. As we've discussed many times before, VIVITROL's manufacturing requires specialized sterile facilities and formulation expertise. This has created meaningful barriers to entry as evidenced by the fact that today, there remains only one approved ANDA. And as we look ahead to 2027, the actual timing of that generic market entry remains uncertain. So, we see VIVITROL continuing to be a strong contributor to our commercial business in the years ahead.

The third major development has been the acquisition and integration of Avadel and the LUMRYZ brand. As reflected in today's results, the integration of the Avadel team and the LUMRYZ business has proceeded exceptionally well. In fact, as we've gained experience with the medicine and the impact it can have on patients, our enthusiasm for its long-term potential has only increased. Importantly, last quarter, we reported positive Phase 3 results for LUMRYZ in idiopathic hypersomnia, positioning us to pursue an sNDA submission and if approved, a launch in that indication in March 2028.

Taken together, these developments underscore how substantially Alkermes has evolved. From a standing start in sleep only a few years ago, we have become one of the leading companies in hypersomnolence disorders with both a growing commercial presence in narcolepsy and a differentiated research and development platform.

More broadly, we believe the biology underlying sleep and wakefulness represents one of the most compelling frontiers in neuroscience, with opportunities that may extend well beyond today's approved therapies and well beyond narcolepsy. We expect this to remain a fertile area for innovation and drug development for many years to come.

So as I reflect on where the company stands today, I would say that much of what we had hoped to accomplish has begun to take shape. Our commercial business is strong. Our pipeline is advancing. Our scientific leadership has never been more apparent. It's exciting. So I'll end my prepared remarks from my last earnings call on a note of great optimism and appreciation for the remarkable opportunity this company has provided me.

And with that, I'll turn the call over to Todd for a review of the commercial results.

Thank you, Rich, and good morning, everyone. I'm pleased to report another quarter of strong commercial execution. During the second quarter, our teams remained focused on supporting patient access, driving demand for our commercial products and delivering strong performance across addiction, psychiatry and sleep medicine.

In the second quarter, net sales from our proprietary product portfolio increased 34% year-over-year to $411.7 million, reflecting solid demand across our psychiatry and addiction portfolios and our first full quarter of commercial contribution from LUMRYZ.

Starting with VIVITROL. Net sales in the second quarter were $124.5 million, reflecting solid year-over-year performance. Results were driven by growth in underlying demand in the alcohol dependence market as well as approximately $4 million of gross-to-net favorability, primarily related to favorable patient mix. For the full year, we continue to expect VIVITROL net sales for 2026 in the range of $460 million to $480 million. We remain confident in the strength and the durability of our VIVITROL business and look forward to expanding our impact with this important medicine.

For our psychiatry franchise, in the second quarter, net sales for the ARISTADA product family were $96.7 million. Results reflected solid underlying demand as well as approximately $4 million of gross to net favorability, primarily related to favorable patient mix. We are encouraged by recent growth trends in the long-acting injectable antipsychotic space and ARISTADA's performance in that market. For the full year 2026, we continue to expect ARISTADA net sales in the range of $365 million to $385 million.

LYBALVI net sales grew 12% year-over-year to $94 million. Underlying TRx growth was 18% year-over-year, driven by sustained momentum in new patient starts and continued expansion in prescriber breadth. Gross-to-net adjustments were approximately 36% during the second quarter.

This quarter marked a meaningful step forward in the evolution of our long-term access strategy for LYBALVI. We significantly expanded LYBALVI's access position during the quarter with coverage now exceeding 80% of all insured lives with notable access enhancements, particularly in the Part D channel. These access gains improve our competitive position and represent a strategic investment in the brand's long-term growth potential. We expect gross-to-nets to expand in the second half of the year. And for the full year, we now expect GTN adjustments in the high 30s. Underlying demand has remained strong, and we are maintaining our full-year guidance of LYBALVI net sales in the range of $380 million to $400 million.

Turning to our sleep franchise. Q2 marked the first full quarter following our acquisition of Avadel and the LUMRYZ brand. During the quarter, the team delivered strong performance and generated LUMRYZ net sales of $96.6 million. We exited the quarter with approximately 3,900 patients on therapy. Our strategic focus is on providing a strong access profile and driving adoption among prescribers while providing extensive patient support services. In addition to strong underlying demand, our Q2 results included approximately $7 million of benefit related to timing of wholesaler inventory shipments at quarter end. I'll discuss how we expect that to impact Q3 in a moment.

For the full year, we continue to expect LUMRYZ to generate total net sales in the range of $350 million to $370 million. Of this, we expect Alkermes to record $315 million to $335 million, reflecting the mid-February close of the transaction.

In sleep medicine, we have the unique opportunity to both grow the LUMRYZ brand while preparing for the potential future launch of alixorexton. We believe the combination of our commercial capabilities, deep expertise in central disorders of hypersomnolence and a differentiated portfolio encompassing both oxybate and orexin mechanisms uniquely positions Alkermes as a leader in sleep medicine.

Looking ahead to the third quarter, excluding the GTN benefits for ARISTADA and VIVITROL and the $7 million inventory fluctuation for LUMRYZ mentioned earlier, we expect net sales from the four proprietary products to be generally similar to Q2 levels in the range of $390 million to $410 million.

As we enter the second half of the year, we remain focused on disciplined execution, supporting patient access to our medicines and delivering sustained commercial performance across the portfolio. With a seasoned commercial organization, a growing presence in sleep medicine and significant opportunities ahead, we believe we are well positioned to drive growth and to create long-term value.

With that, I will pass the call to Joshua to review the financial results for the quarter.

Thank you, Todd. In the second quarter, we delivered strong financial results driven by continued growth across our proprietary product portfolio, a full quarter of contribution from LUMRYZ and disciplined execution across the business. Our diversified commercial portfolio and strong operating performance continued to generate meaningful cash flow and to provide flexibility to invest in our expanding development pipeline.

Turning to our financial results. During the quarter, we generated total revenues of $496 million. These results reflect solid performance for our portfolio of commercial products and the first full quarter of financial contribution from LUMRYZ following the acquisition of Avadel. As Todd outlined, our portfolio of proprietary products generated net sales of $411.7 million.

Manufacturing and royalty revenues were $84.3 million for the quarter, including $30.6 million from VUMERITY, $27.5 million from the long-acting INVEGA products and manufacturing revenue of $20.9 million related to RISPERDAL CONSTA. This represents the majority of our expected manufacturing revenues for CONSTA for 2026. And as such, we do not expect meaningful revenues from CONSTA for the remainder of the year.

As we move into the third quarter, we expect Q3 total revenues in the range of $450 million to $470 million.

Turning to expenses. Cost of goods sold in the second quarter were $98.1 million, which includes the purchase price fair value accounting of LUMRYZ inventory that we described last quarter. This compared to $49.5 million in Q2 of the prior year prior to the acquisition of Avadel. In the third quarter, we expect COGS to be in the range of $85 million to $95 million.

R&D expenses in the quarter were $112.9 million compared to $77.4 million in Q2 of the prior year, reflecting continued advancement of our orexin portfolio. That program has expanded to include a number of ongoing studies, including the Phase 3 alixorexton Brilliance studies in narcolepsy, the Vibrance-3 Phase 2 study in idiopathic hypersomnia and the ALKS 7290 Phase 1b study in ADHD, and preparations for the Phase 2 study in ADHD as well as clinical development activities supporting ALKS 4510 as we prepare to enter into Phase 2 in fatigue later this year. In the third quarter, we expect R&D expenses to be in the range of $120 million to $130 million.

SG&A expenses were $217.6 million for the quarter compared to $170.8 million in Q2 of the prior year. The year-over-year increase primarily reflects the addition of the Avadel commercial infrastructure. As we look ahead to the third quarter, we expect SG&A expense to be fairly flat in the range of $215 million to $225 million.

During the quarter, we also recorded amortization of intangibles of $22.6 million and net interest expense of $20.6 million.

In addition, we recorded a change in the fair value of contingent consideration of $26.4 million related to the CVR milestone associated with our acquisition of Avadel, which we deemed more likely to be achieved following the recently announced positive Phase 3 results for LUMRYZ in IH.

In Q2, we recorded GAAP net income of $0.5 million and EBITDA of $49 million. Adjusted EBITDA was $139.2 million, which we believe is more representative of cash generated by the business during the quarter. Looking ahead to the third quarter, we expect Adjusted EBITDA to be in the range of $80 million to $100 million.

For the year, we are reiterating our financial expectations across all line items with the exception of GAAP net loss and EBITDA, which are impacted by the change in fair value of the contingent consideration that I mentioned earlier. We now expect GAAP net loss in the range of $95 million to $115 million and positive EBITDA in the range of $75 million to $95 million.

Turning to our balance sheet. We ended the second quarter in a strong position with approximately $690 million in cash and total investments.

Overall, we are pleased with our performance in the first half of the year. Our diversified commercial portfolio, strong balance sheet and ability to generate meaningful cash flow provide flexibility to invest in our growing development pipeline while maintaining disciplined financial management. We remain focused on executing against our strategic priorities and believe we are well positioned to deliver on our objectives for the remainder of 2026.

With that, I'll now hand the call to Blair.

Thank you, Joshua. As you've heard, we entered the second half of 2026 with strong commercial and financial momentum and continued execution across our development portfolio. During the first half of the year, we delivered important clinical and operational milestones that further strengthen our long-term growth profile.

Starting with LUMRYZ. As Richard mentioned, in May, we announced positive topline results from the Phase 3 REVITALYZ study in idiopathic hypersomnia. Based on these results, we plan to submit an sNDA for LUMRYZ in IH by year-end. If approved, this would expand LUMRYZ's growth opportunity into an additional area of significant unmet need with a potential launch as early as March 2028.

Turning to alixorexton, in June, we presented detailed results from the Vibrance-2 study at the annual SLEEP meeting. This marked the first positive Phase 2 data set for an orexin 2 receptor agonist in narcolepsy type 2 and one of the few studies conducted exclusively in this patient population. Importantly, it also provided the first look at the impact of orexin signaling on fatigue and cognition in patients with normal physiological levels of orexin.

We were encouraged, not only by the treatment effects observed across wakefulness, fatigue, cognition and other patient-reported outcomes, but also by the response from the sleep medicine community to these findings. Collectively, the data broaden our understanding of the potential role of orexin biology in patients with normal alixorexton.

Building on these data, earlier this month, we reported interim results from the ongoing alixorexton long-term extension study, or LTE. This is the first long-term study of an orexin 2 receptor agonist to demonstrate sustained clinically meaningful improvements from baseline in wakefulness and excessive daytime sleepiness across both NT1 and NT2. We view these data as highly clinically relevant, and there are a number of important elements to this dataset.

First, we observed durable improvements in wakefulness, cognition and fatigue for up to nine months of treatment with sustained effects over time. Given that narcolepsy is a lifelong disease, durability is a critical attribute for any potential long-term therapy.

Second, the magnitude of benefit remained impressive with up to nine months of treatment. Overall, across measures of wakefulness, cognition and fatigue, most participants were severely symptomatic at baseline. At week 24 of the LTE, most patients across all doses had cognitive functioning scores within the normal or mild range and mean fatigue scores were within the normal range. Across all dose groups in both NT1 and NT2, alixorexton sustained clinically meaningful improvements from baseline in mean wakefulness. We believe this is one of the most compelling aspects of the alixorexton profile.

Finally, data from week 24 of the LTE generally demonstrated further improvement in mean wakefulness on the Maintenance of Wakefulness Test and Epworth Sleepiness Scale relative to the results observed during the randomized Phase 2 studies. During the first four weeks of the LTE, dose adjustment was permitted, providing flexibility to meet individual needs across narcolepsy patients.

This has important potential implications for clinical practice. Narcolepsy is a heterogeneous disorder with a spectrum of disease severity and sensitivity to orexin 2 receptor agonists. In a real-world setting, we believe providing a range of dose options would give physicians flexibility to tailor treatment to individual patients and would be an important element of alixorexton's competitive profile.

Taken together with the generally safe and well-tolerated profile demonstrated in this interim analysis of the extension study, these data strengthen our confidence in alixorexton's potential to become a cornerstone treatment for narcolepsy. As the body of evidence continues to grow, we believe alixorexton is well positioned to help transform the treatment of narcolepsy and address significant unmet needs for patients living with NT1 and NT2.

Operationally, we've continued our strong focus on clinical execution. The Brilliance Phase 3 studies in NT1 and NT2 are active and enrolling, and we are pleased with the progress across the program. In idiopathic hypersomnia, enrollment in the once-daily dosing cohorts of Vibrance-3 has been completed, and the split-dose cohort is actively enrolling. We continue to expect completion of that study in the fourth quarter.

Turning to ALKS 7290 in adult ADHD, we have made substantial progress in our Phase Ib study, and we now expect topline results by the end of the third quarter. This randomized placebo-controlled study is designed to enroll approximately 50 adult patients to establish initial clinical proof-of-concept for ALKS 7290 in ADHD. Participants will receive two weeks of treatment with ALKS 7290 or placebo. This study will assess the safety and tolerability of ALKS 7290, along with the effects of treatment on translational measures, including quantitative EEG and certain neuropsychological performance measures. These assessments are designed to evaluate sustained attention, vigilance and impulse control in a short duration study. While the study is not powered for statistical significance, we will also assess changes from baseline on established clinical ADHD scales, including the adult ADHD Investigator Symptom Rating Scale, or AISRS.

Importantly, we expect these data will represent the first clinical evaluation of an orexin 2 receptor agonist in patients with ADHD. In parallel, we continue preparations for a larger Phase 2 study and expect to begin enrollment in that study this quarter.

Finally, turning to ALKS 4510, fatigue represents another potentially significant opportunity for orexin biology. Our initial strategy is to evaluate fatigue in well-defined patient populations where symptom burden is substantial and meaningful unmet needs remain. Our first Phase 2a study will enroll participants with fatigue associated with multiple sclerosis or Parkinson's disease, providing an important opportunity to evaluate the impact of orexin signaling in these disease states.

In this placebo-controlled, randomized, double-blind study, we plan to enroll approximately 175 participants with multiple sclerosis or Parkinson's for four weeks of treatment. As we look for signal and prepare for later-stage clinical studies, the Phase 2a represents an important opportunity to evaluate a number of established fatigue scales, including the Modified Fatigue Impact Scale, or MFIS, which is commonly used in patients with MS, the Parkinson's Disease Fatigue Scale, or PFS-16, the Fatigue Severity Scale as well as the PROMIS-Fatigue Scale that we implemented in the alixorexton narcolepsy development program.

As we advance into this area of development, we also plan to engage with the FDA regarding study design and the development pathway. More broadly, we believe fatigue represents a large and underserved category where meaningful innovation is needed, and we are excited to begin exploring the potential of this mechanism in that setting.

We have built the industry's most comprehensive portfolio of orexin 2 receptor agonists and are now advancing that science across multiple indications where meaningful unmet need remains. The progress we've made over the past year has increased our confidence not only in alixorexton, but in the broader opportunity to leverage orexin biology beyond narcolepsy.

So, as I prepare to take on the responsibilities of the CEO role next week, my objective is simple: deliver on the tremendous opportunities ahead of us, focusing on what matters most, operating with discipline and executing with excellence. Under Richard's leadership, Alkermes has grown into a company that has profoundly impacted the lives of countless patients, a company of which we are all immensely proud. As the continuing Chairman of our Board of Directors and a trusted advisor, I am grateful for Richard's ongoing contributions to the company and know he will continue to play an important role in supporting our future success.

With that, I'll turn the call back to Sandy for the Q&A.

Thank you. We'll now turn the call over for Q&A.

[Operator Instructions] Our first question is from Umer Raffat with Evercore ISI.

I just wanted to focus on ADHD for today's question. And specifically, here's a couple of things I want to touch up on. One, I think you've mentioned it's 50 adult patients in an ongoing study that's going to be reporting later this year. How are you thinking about the translatability from adults over to pediatrics? My understanding is pediatrics is a must for any ADHD drug development. So that's one.

Secondly, I think you also mentioned it will be like a two-week endpoint. And I'm just trying to think about, I know tachyphylaxis was something that you were definitely able to overcome in the narcolepsy setting. I'm just trying to think about the ADHD endpoints and whether two weeks and translatability is six weeks given the orexin mechanism of action, how you're thinking about that and whether there will be a follow-up. And then finally, is it safe to assume that among the neuropsych performance measures you're evaluating, we will have AISRS for adults in there as well?

Umer, this is Blair. Thanks for the questions. Yes, look, I think as you look at the market as a whole, pediatrics is obviously very important. What we do, though, is start with adults, and we'll do the first part of the program in the adult population. That's highly translatable into adolescents and children. And the way you typically handle that is by doing some bridging PK and then you move into your later-stage programs, including those patient populations. So we have that well in hand and we'll move forward once we have the dose ranging figured out for the adult populations.

And remember, we'll get the dose ranging predominantly from our larger Phase 2 study that will come out for next year. The study that we get this year will be our translational study, our Phase 1b study that we'll have by the end of the third quarter.

With regards to the endpoints, you're exactly right. The two-week endpoint that we have in the Phase 1b study is shorter than you'd typically have in a dose-ranging study. And that just really reflects the fact that this is predominantly a safety and a translation study. And so what we'll be doing is looking at a lot of different markers, both from EEG, behavioral markers as well as some of the typical tools that you see. And we will include AISRS as part of that.

So we'll be able to really get a comprehensive sense of whether or not we're engaging the target, sort of some of the effect size, but we're also looking for dimensionality of the response. Are we seeing things other than what you see with the typical assets that have been tested in this space using this new mechanism. So we're really excited to see what learnings we can bring from this study.

Our next question is from Paul Matteis with Stifel.

Richard, congrats on the transition. And Blair, congrats to you as well. Another one on ADHD. Can you maybe just talk a little bit about how you selected the doses for this study? Obviously, you can't look at like receptor occupancy. So how confident are you that you're in the right sort of range here in the 50-patient POC study? And then as you think about other non-sleep indications like something like MS fatigue, where are we with establishing the regulatory path there? And what are some of the kind of different endpoints you're kicking around that you think the FDA could be receptive to?

Sure. Paul, I think on the selection of doses, so as you mentioned, 7290 is a new asset. So it's a molecule that stands on its own. It's been through a full SAD/MAD program. And we took a similar path to selecting doses that we did with the original work with alixorexton, whereby we used EEG and target engagement as a way of assessing what range we wanted to be in. That gives us a pretty good sense of where we're engaging the system. I think what's unknown still is a little bit of the response and the pharmacology related to attention versus what we see with, say, wakefulness in an alixorexton system.

So part of our strategy here is if we see that we're slightly high or slightly low in the range out of the 1b study, we'll have an opportunity to tuck in additional doses on the higher or lower end. We think we've got it in a good range, but we have that flexibility if need be.

With regards to our other areas, specifically MS fatigue and 4510, as I said in the prepared remarks, I put in some of the endpoints or some of the tools that we're using as part of that study. And that's really getting at what you were asking about, which is establishing a regulatory pathway with the agency. And what we're trying to do here is make sure that we can find a scale that best represents how fatigue is described by patients across multiple areas such as multiple sclerosis or Parkinson's disease and align with the FDA on that tool moving forward for the regulatory path. So this 4510 study is going to be important in establishing that.

Our next question is from Leonid Timashev with RBC Capital Markets.

I just wanted to ask sort of how you're viewing the orexin commercial landscape and specifically maybe what your latest thinking is on pricing and how much of that strategy might be driven by how the competition evolves versus sort of what you're seeing as the intrinsic value of the molecule as sort of you continue to develop it in NT1, NT2 and IH.

Yes. I think as the market evolves, pricing is one of the things that we're going to learn over the next little while. with Takeda coming into the marketplace first, I think they'll be definitely establishing a price corridor for the class. And as you know, this is a mechanism where we've seen really outsized effects relative to the current standard of care. So it's really meaningful impacts to patients and their lives potentially. And so we'll see where Takeda ends up pricing. And then based on that, we'll look to establish our own price strategy as we complete our program.

As we've said before, I think we're going to bring a lot of potential options to the table with the program that we're developing with alixorexton, multiple doses, a range of doses that patients can use according to their own individual needs, but also the split dose option, which will allow for flexibility in dosing commercially as well. And then assuming the data comes through, that will be across all different hypersomnia indications, NT1, NT2 and idiopathic hypersomnia.

So I think all of that will go into our determination of price moving forward. But we think from a patient perspective, we're in a really good place of delivering a lot of value over the next few years.

Our next question is from Akash Tewari with Jefferies.

Congrats, Richard. It's really great working with you. So any lessons from the Tris CRL for their once-nightly low sodium oxybate? Do you feel like you'd be able to file on PK data? And where do you currently stand with your program? And then maybe stepping back, Richard, can you talk a bit about what's going on with GLOBE and GUARD and the impact it could have on mid-cap biotech? Is the perception that there's limited dialogue with these companies in the administration true? And do you think these programs will ultimately get implemented?

Why don't I start with the VOX question, and then I'll turn it to Rich on the second question. I think as we look at our low to no salt option that we're developing, which we call our VOX program, we're taking an approach where we're taking multiple formulations into the clinic and looking at them this year. And the goal here is to establish a bioequivalence pathway if possible. That will be our fastest path to market potentially. If we're able to do that, then that would allow us to do a PK bridging study and move forward with a broad label.

I don't think that the Tris CRL really impacts that in any way. I think Tris has its own idiosyncratic safety and efficacy questions that it needs to answer. I think for us, it's a pretty straightforward path if we're able to achieve bioequivalence. We have a robust package with the LUMRYZ data set that we can leverage. And I think the molecule that we're using on the VOX program looks really good. So we'll see how that data comes out, and we'll give you guys some information on that once that's available.

And Akash, it's Rich. Briefly on GLOBE and GUARD. These are the CMMI demonstration projects that are currently in front of the with an expectation of perhaps a final rule fairly soon. Both of them are ways of essentially building in reference pricing to foreign markets into the Medicare and Medicaid programs. They're probably directly in violation of the existing statute. So I think there's a lot of energy in the Congress and also just direct lobbying with HHS and the administration about modifying these or not proceed to the final rule.

To the extent there's a final rule issued, I think there's still a fair amount of litigation that will go forward. For midsized companies, it's actually quite important because many of the big companies have a large portfolio that they can sort of craft deals around, whereas many of the midsized companies depend on one or two products only. And to the extent they have a foreign reference price, it can be really important for their business. And I think policymakers have been very receptive to that message. Just to be clear, for Alkermes, we don't have foreign reference pricing. We don't sell our drugs at a lower price outside the U.S. So it's not an issue for us. But for the industry writ large, it's actually something people are paying a lot of attention to.

Our next question is from Joseph Thome with TD Cowen.

Adding my best wishes to Rich and Blair on the upcoming transition. Maybe switching to IH for alixorexton. I guess what should we think about as the goal for later this year? Is it getting patients to below 10 on ESS? And maybe how can we extrapolate the results that you saw in the NT2 population over to IH given that there are some similarities in this population, but also you have the incorporation of the BID dosing. And then maybe your competitor, Takeda has indicated some expectations on scheduling for their compound. I guess how are you thinking about the scheduling of alixorexton? And maybe what studies have you done to support that?

Joe, it's Rich. I'll start and then Blair and Todd can jump in. I think our expectations for the IH are informed by the success that we had with NT2 given the fact that two populations overlap to some extent. They're both characterized by a lot of variability. So what we want to see in the Vibrance-3 study is a couple of things.

We want to see evidence of the activity of alixorexton in this diverse patient population as measured primarily by ESS and IHSS. We're using MWT simply as another marker because we used in other studies, recognizing that it's not used as an approvable endpoint in IH, but it also gives us a tool to look at the benefits of the split dose. And so, we're testing the split dose in the IH population to see whether we can see just numerical changes in the IH MWT by splitting the dose, one in the morning and one later in the day.

So what we're hoping to see and our expectation is to see evidence of activity, a sense of dose so we can design and size the Phase 3 program. With respect to Takeda, they've been talking publicly about potential scheduling at Schedule IV, which is within our planning scenario, and that won't be a commercial impediment at all.

Blair, Todd?

Yes. As Rich said, I think IH is a really interesting market overall. And I think to the extent that we can have an effect within that patient population, I think that's going to be really, really important to that group. There's really only one approved product there right now on a branded basis. And I think bringing orexin into that class is going to be very, very attractive.

And as Rich said, our whole focus here is about identifying the signal to design our Phase 3 to get the most robust label possible, and that's what we'll be looking for.

Yes. And in terms of, as Rich said, all of our research points to HCPs don't see this as a barrier to entry for products.

Our next question is from David Amsellem with Piper Sandler.

So a bigger picture question on orexins. When Lilly bought Contessa, they talked very clearly about multi-indication potential. Obviously, you have a lot of irons in the fire. But can you talk about how you're thinking about even more indications for your orexins and when we can get more updates on potential additional clinical programs? So that's number one.

And then number two, on VIVITROL, do you think that any generic competition whatsoever will materialize next year? I noticed on the FDA website that Teva's generic is listed as "discontinued". So just wondering, I know, Richard, you alluded to it being a fluid situation, but are you expecting any generic competition, any entrants on VIVITROL whatsoever next year given that?

David, it's Rich. So interesting, and I referred to it in my opening comments is that things are playing out largely the way that we would have hoped that they would have played out, in both the orexin space and in the VIVITROL space. So I think it's really gratifying to see Lilly and others talking about the potential breadth of applications of orexin. Because remember, when we started this a couple of years ago, that was a gleam in people's eyes. We're still trying to figure out the pharmacology, the tolerability, the overall efficacy levels. And now I think it's almost taken as a matter of proven science that these drugs are quite effective in driving wakefulness in patients with and without alixorexton in their brain.

We are, as you know, active in ADHD and fatigue in multiple domains. And we're not going to describe at this moment some of the other areas that we're going, but we do have a number of other ideas as well as other compounds in development.

With respect to VIVITROL, VIVITROL has always been a bear of a product to manufacture. It requires unit operations that most generic companies just don't have in terms of sterile processing of microspheres and sterile filling of dry powders and so on. We terminated the Amneal deal later earlier this year, so there won't be an authorized generic next year. And at this moment, we don't plan on a generic entering in 2027. We don't have perfect visibility in everything, but in terms of the way we're going to plan our business for 2027, we're not anticipating a generic.

Our next question is from David Hoang with Deutsche Bank.

Congrats on the upcoming transition. So, I just wanted to ask first on, I guess, latest thoughts maybe around the relative market size and opportunity for NT1, NT2 and IH. And I think the thinking is maybe the IH market is perhaps bigger than some of the epidemiology historically has suggested. And would you agree with that? And then in terms of LUMRYZ, if you could just talk about some of the underlying maybe patient demand trends that you're seeing there.

Yes, David, I'll take that one. We would agree with your statement, significant unmet need, NT1, NT2, but also all of our research really points to significant unmet need within IH. As we've said in the past, there's about 40,000 patients right now. We think that's actually likely undersized, and there's only one approved product on the marketplace. So, when we do our research with HCPs and patients, we see a really significant unmet need there, which provides a great opportunity eventually for LUMRYZ and also for alixorexton. So, something that we're excited about.

LUMRYZ had a great quarter. Q2 was really strong, as you saw in the results. Overall, 3,900 patients on therapy, which is a really nice growth trend quarter-over-quarter and year-over-year. In fact, year-over-year, that's a 25% growth in patients, and that's really being driven by HCP TRx breadth. We continue to see expanding breadth. In fact, HCP breadth year-over-year grew by 24%. And it's really driven by strong patient mix. And so it's a really diverse profile. It's new to oxybate patients. It's switched patients coming back into the mix overall. And so we're really encouraged with the underlying demand and the metrics that are supporting that.

Our next question is from Uy Ear with Mizuho Securities.

Rich, congrats on making the transition. And maybe just help us sort of understand potentially the implication from the Takeda readout that we expect this year. Would you be able to, I guess if our understanding is that they, it's twice its BID dosing. And if the readout for NT2 is positive and IH is positive, how should we kind of perhaps interpret what that means with respect to your split dosing program and the IH readout later this year?

It's Rich. I don't know if I completely understand the question, but I'll give you my interpretation of what you're asking. Takeda is going to get approved for only NT1 for a drug, 861 that is dosed at the 2/2 dose is their anchor dose. And that's the extent of the commercial launch that will happen this year. They have other drugs in development. We've not seen any data on those, and they're way behind what we're doing. We're in Phase 3 for NT1 and NT2 and with a range of doses from once daily to split doses to provide the flexibility that we know patients will want as they introduce this, they get introduced to this new pharmacology.

So I think one of the things that's happened over the last year is that our leadership position in the disease of hypersomnolence has become more clear. I think at this time last year, there's still speculation about other players. Are they going to be faster or slower than us, what their data were going to look like now. It's clear Takeda is going to come first, and we're going to come next with a broader offering. So anything that comes behind us is going to have to figure out how to compete with our profile. And our profile, we think, is the best-in-class right now, and it's the most advanced.

Our next question is from Jessica Fye with JPMorgan.

This is Jose on for Jess. I have two on ADHD. I'm curious about how you're applying learnings from narcolepsy and your other programs to design an ADHD titration strategy, particularly given that standard ADHD therapies are used across a wide range of doses and dosing schedules? And second, how do you think class effects such as polyuria would play out in this patient population?

This is Blair. Thanks for the question. Look, I think as you go into ADHD, it has many of the similar characteristics that we see within diseases of hypersomnolence with regards to a need for long-acting dose options, dose options that last throughout the day as well as opportunities for some flexibility for patients. And I think there's a lot of learnings that we take from the work that we've done in NT2 and NT1 that will inform on that. I think from the wide safety profile that we've seen and the wide therapeutic window, we don't anticipate that a titration is going to be required with regards to, for any sort of safety reason.

Remember, we saw in our NT2 study that the drug and this mechanism was tolerated really well with patients who had an intact alixorexton, which is what we see as kind of the platform that we'll be launching into in all of these other indications outside of diseases of hypersomnolence. So, it then comes down to just sort of normal drug development and sort of looking at what other AEs you bring to the table. I think, as you said, polyurea is something that we've seen in our hypersomnolence program, and that comes with a certain engagement of the orexin system.

We're not sure if that will come into play at the levels of dosing that we're going to need for ADHD. We'll assess that as we go forward. What we've seen, though, at least in all of our clinical programs is that polyurea that we see is really an increased frequency of urination that's noticed by the patient. It's usually mild. It can be moderate, but it doesn't tend to lead to discontinuation or dissatisfaction. So I think all in all, if we see a similar profile to what we've seen in our existing programs in ADHD, we'll be quite happy. But the data will speak for itself when we get it.

Our next question is from Rudy Li with Wolfe Research.

Just a quick follow-up for the LUMRYZ growth trajectory. Can you provide additional color on the key growth drivers across different patient segments? And regarding potential impact of orexin entry, maybe talk about recent market research and payer discussions for potential combo use of orexin plus oxybate?

Yes, sure, absolutely. So yes, again, overall, Q2 was really driven by addition of new patients. Total patients on therapy, 3,900, that's a net add of about 300 quarter-over-quarter, which is a strong indicator going into Q2. And it's really based on contribution from returning patients, new to oxybate patients and switch patients. Actually, the strongest growth segment right now is new to oxybate, which we view as very encouraging because that's the highest portion of the dynamic impact of the market overall. So we feel really good about that.

We're going to be watching closely just the impact of the launch of Takeda's program potentially sometime this year going into next year. I think you know we are really big believers in orexin biology. We believe that there's significant unmet need and that alixorexton has the potential to fill a very big gap in the marketplace. All of our research, all of our HCP research continues to support durability of the oxybate class, and there's a lot of interest in oxybate plus orexins.

And so we believe we have the chance to be really the leaders in SLEEP right now. In terms of payer research, that's ongoing. We're watching that very closely the pricing that will happen with Takeda program. We believe we have a competitive advantage based upon the profile of alixorexton and also the breadth of the indications.

And then this is Blair. Just to talk on the combination element for a second. I mean we do get a lot of interest from patients and physicians about the ability to use both orexins and the oxybates together. And a lot of that actually is generated by some of those that use oxybates now. They're getting a tremendous benefit. And what they'd like to do is augment that with the orexin molecules. And so I think, as a company that has both, it's on us to start to generate some data that we can provide both to the treatment community as well as to the payer community. And that's something we'll be looking at doing over the next few years.

Our next question is from Ben Burnett with Wells Fargo.

This is Orpheus on for Ben. Thank you for sharing some color on LYBALVI and the Part D expansion. Would you expect to see the impact from this expansion this year? Or will that be more visible in 2027? And perhaps more broadly, how do you expect LYBALVI's growth dynamics to unfold over the coming quarters?

Yes, absolutely. In terms of LYBALVI, as Rich and I both said in our prepared remarks, it was a really strong quarter overall for LYBALVI performance with demand, but we're really pleased with the strategic move in expanding access. LYBALVI access across all channels is now approximately 80%. We view that as a long-term strategic investment in the durability of the brand. We think that all of the underlying metrics support that right now, which is TRx growth, HCP breadth of prescribing continues to expand in persistency.

And so we believe that improving access will enable stronger volume. That's the reason why we've enhanced the access profile and gone into new agreements. The short-term impact is going to be expanded gross to net, which I said earlier, that will happen later this year, but we believe that's going to support long-term growth over the next several years.

Our next question is from Ami Fadia with Needham & Company.

I wanted to get your latest thoughts on how you're looking to potentially generate any data in patients that are using both an oxybate and an orexin and if there is a way to differentiate in this market with, say, some sort of combination data.

I mean, why don't I start and then I'll turn it over to the others. I think one of the biggest takeaways I had coming from the SLEEP conference in Baltimore was the interest in this combination therapy, given the fact that narcolepsy is a 24-hour disease, and we're going to address the wakefulness side of it incredibly aggressively with the orexins. But in talking to patients, patient advocacy groups and clinicians, the consolidation of nighttime sleep, particularly as it relates to consolidation of slow wave nighttime sleep is a benefit that's not entirely captured in the current labels for oxybate.

So, I think we came away from that as we've gotten more experience with LUMRYZ, the idea that this oxybate biology is under science at this point. So, with alixorexton moving so aggressively in Phase 3, we're not going to disrupt that program. We're going to finish the Brilliance program we're going to file with the safety data set that's consistent with the Brilliance program. Around that time, though, we'll start feathering in the idea of creating some studies to look at both sides of the equation. And we'll do that probably not for registrational purposes, but more for support for clinicians and for payers. But it's an area that's got a lot of energy right now. Blair?

No, nothing.

Our next question is from Ash Verma with UBS.

This is Hoyan on for Ash. I guess our first question is, so as we get closer to the potential launch of Takeda's oveporexton in NT1, what is your base case assumption on where the annualized list and net pricing per patient might shake out? And the second is, what is your assumption around how ORX-750 asset may change in the hands of Lilly. We saw the Phase 2 has expanded materially from 96 patients to 248 patients and now includes more frequent and/or regular follow-ups on the endpoints. How could that change the data generation in your view?

So look, I think as you look at Takeda's launch, as we said earlier, they'll be determining the overall price. And as you know, this class generates a tremendous amount of value for these patients, and they're going to be limited to the NT1 population. So I'd expect them to price kind of in the range of a typical orphan drug. And obviously, they're in the process of working through that now as they prepare for their PDUFA, which we expect to see in kind of the August to December time frame. So we'll learn more then as to where they end up.

As for Lilly, I think, and the Orexin 750 program or ORX-750 program, I think you're exactly right. Lilly's widened their Phase 2 program. And they've done that because they needed to sort of backfill some of the work that was done by Centessa earlier. I think that wasn't a very thorough dose ranging. I think they were being very exploratory in their program to try to show people what they could potentially do.

Lilly is taking a traditional and responsible drug development approach. They're doing a proper dose ranging so they can understand what they really have and how it's going to play. And I think Rich characterized it really well earlier, which is we're well ahead of our competitors as we think of NT2 and IH. And I think across all indications, we think we have a really robust profile that's going to be difficult to differentiate from. And, I think Lilly is going to be looking to see how could they differentiate as they come into the market after us.

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

Just one follow-up. I think you made the comment at the beginning of the call that you had become sort of more optimistic or sort of enthusiastic about the Avadel transaction in LUMRYZ. And I'm just curious what in particular is sort of driving or sort of drove that enthusiasm because obviously, you felt good enough about the asset to do the deal originally.

Todd, why don't you start?

Yes, absolutely. The transaction has gone exceptionally well with the integration. Approximately, we're coming up on six months right now. And so we feel really good about that. Gaining the commercial infrastructure that Avadel had is a really big strategic advantage for us and something that we have in our long-term plan. We believe that it's going to allow us to obviously get into the market much sooner in the sleep community, and that evidence is playing out right now.

We believe that LUMRYZ is the best-in-class oxybate. We're seeing that really strong growth trends across patient segments. It's being supported by HCP research and just the capabilities that the team brings to the market, such as patient services, our established capabilities and market access is also supporting that right now.

So we weren't surprised by the Q2 results, and we believe that there's a really long-term durable opportunity for LUMRYZ and then addition when alixorexton comes to the market.

Let me just add that on the human side, culture in these companies is so critical. And we ask a lot of our teams and the team at Avadel is just a superb team, and they've just integrated into Alkermes culture so seamlessly. And they've taught us a lot about this oxybate class. It's interesting to observe it from the outside. But once you're actually dealing with patients and providers and the whole reimbursement system and understanding the value that these medicines confer to individual patients, it's hard not to get more excited about it. And then you couple with the idea of combining the pharmacology, and we just see a lot of white space here to improve the overall quality of life for patients with diseases of hypersomnolence.

Our last question is from Marc Goodman with Leerink Partners.

Rich, it's been a fun journey working with you all these years. So my question is kind of just on orexin, big picture strategy. You've got three products now. One is obviously focused on fatigue. You've talked about different areas. Is the strategy to take that product, and that's the fatigue product and you'll just continue to work through that. One of them will be ADHD.

And then do you have other plans, other orexin molecules behind that to go into other indications? Or do you feel like three is enough to kind of take it into all the different areas? And I'm just curious, Joshua, as we think about the R&D spend for these programs, specifically, obviously, orexin, which is where most of the spend is, should we be thinking that the R&D numbers go up dramatically here? Or is this going to kind of level out in the $500, $600 spending per year range over the next couple of years as narcolepsy kind of comes down and all these other indications kind of come up and spend?

This is Blair, Mark. Why don't I start and then Joshua can tell you how we're going to pay for it all. I think as you look at the expanding pipeline in orexin, as you said, fatigue is a really interesting drug in that we're starting in multiple sclerosis fatigue and PD-associated fatigue. And then the goal is to expand it outwards from there into broader areas. As you know, fatigue is sort of impacts a number of different diseases around neuroscience, and we think this can be a really interesting opportunity. That being said, we have a number of indications that we're looking at within neuroscience that are both extensions of some of the programs that we already have on the molecules that we already have. And we also have additional molecules in development, which would allow us to go after different things and perhaps with different characteristics as well. So we have a pretty comprehensive strategy.

We'll start to reveal more of that as we move forward and we get closer to the clinic on a couple of things. But our goal is to press our advantage here. We've been talking about these diseases in orexin biology for a number of years now, and it's great to see it now finally getting to the point where we're starting to generate data around that.

And Mark, a few things from my perspective. First off, we'll always exercise disciplined financial management. But as Blair pointed out, I mean, we've got a tremendous opportunity here in orexins, and we'll appropriately invest to capitalize on that opportunity. But with all that said, you're thinking about this appropriately, right? We're in Phase 3 on alixorexton. So as those programs wind down, we'll start to reinvest in our pipeline. And you can imagine that we'll leverage that investment in the orexin space.

And Mark, it's Rich. Just one last thought on this. It looks to the analogy, and hopefully, this plays out to the GLP-1 space, where there's plenty of molecules. You need plenty of molecules because the pharmacology also begins to expand. You start with GLP-1, you add GIP, you add glucagon, you start getting triples and adding this pharmacology into other established pharmacologic pathways in CNS indications is really exciting. So I think we're just at the beginning of this all.

That will conclude our question-and-answer session. I would like to turn the call back over to Sandy for closing remarks.

All right. Thanks, everyone, for joining us on the call this morning. Please don't hesitate to reach out to us at the company. If there are any follow-up questions, we can be helpful with. Thank you.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Good morning, everyone. Thanks for joining us here on the third day of the Goldman Sachs Global Healthcare Conference. And thanks to everyone who joined us here as well as online.

We're thrilled to be joined today by Richard Pops, Chairman and Chief Executive Officer; and Blair Jackson, Executive Vice President and Chief Operating Officer for Alkermes.

Maybe first, just over the last 12 months, you've seen a significant period of change for Alkermes, including validation of the orexin agonist class, an acquisition of Avadel, the announced CEO transition. So thanks for joining us. But before we jump into Q&A, I'd love to just turn it to you for some opening remarks on all that progress.

Well, thanks for having us, first of all. And standing room only in this giant room is great to see.

You don't know how to deal online...

This has been just a fantastically interesting past 12 months for the company. In part, from our perspective, we're smiling because we're doing everything we said we're going to do. And things have evolved in a way that we would have hoped to predict, but it all of a sudden seems surprising to everybody. And that is we've been working on in the orexin agonists now for a number of years.

We've been, along with others in the field, slowly elaborating the biology and the chemistry. And I think it's becoming abundantly clear that this is a really exciting opportunity. And then with Lilly coming to the space and in many ways, validating what we've been saying, now we find ourselves with a drug that we think is really the best-in-class molecule in disease of hypersomnolence now enrolling in Phase III after a very, very strong Phase II program that answered most of the questions that we all had because these weren't underpowered Phase IIs. They were very well-powered Phase IIs asking questions about safety and efficacy and tolerability over extended periods of time at a range of doses.

So the company is evolving really well. I announced that I'm going to move to Chairman. Blair has been shoulder to shoulder with me for the last many years building this company. And we've got ourselves in a position now where I think that if we execute, we can see the valuation of the company really expanding. And it's not notional. It's just at this point, it's about -- it's in our hands to execute. Blair...

Yes. I think if you look over the last year, we've really been looking to widen our portfolio and our pipeline and orexin agonism and really laying down a number of different bets over the next little while and programs that are going to report out over the next 12 months. So we're in a really exciting moment for the company and a moment of really execution and change.

And so I think everybody in the company is really excited, and I know it's going to be a really interesting data set, both in the sleep space as well as in the neuropsych space as we look at our ADHD and our fatigue programs as well.

What's interesting, we have a $1.7 billion top line commercial business that drives tremendous profitability and a lot of cash flow, and most people don't care at all about it. But we care a lot about it because it's the flywheel that powers all this innovation that we've been able to do in a nondilutive way for our shareholders.

We bought Avadel, which brought us into the hypersomnolence business from a commercial perspective with a really good asset with cash. We didn't need to use any stock to do that. So we have amazing strategic flexibility that we've been exploiting slowly, carefully, almost quietly. And I think people are beginning to realize that.

Great. Let's start with the orexin program. And as that competitive landscape continues to evolve, potential approval, the first NT1 asset expected relatively soon, other pharma stepping into the space. What is your current thinking about how alixorexton is most differentiated? And how does that profile then translate to NT2?

Go ahead, Blair.

Yes. I think when you look at the space as a whole, this is a disease area that has a number of therapies that are in it right now, but has less a really gap in what patients are really looking for. And I think with this new class of orexin agonist, it's bringing with it a whole new level of efficacy and opportunity for these patients. And we're going to be coming into the marketplace with a drug that treats -- has multiple doses to treat different heterogeneity and disease.

We have a drug with once-day dosing with split dosing to provide flexibility for patients and their needs as well as a drug that hopefully works across all 3 hypersomnolence indications. If you compare that to Takeda's drug, which is coming in right before us, it is a wonderful drug. It addresses a lot of the efficacy in a subset of patients. It's limited in where it can go. There's not multiple doses, can't go into other indications.

So we're highly differentiated from the first molecule in the space. And we're really looking to deliver on that data set with our Phase III program. And our goal with RTPP is to create a label that's going to be hard for anyone else coming behind us to differentiate from, whether that's Eli Lilly or whether that's anyone else.

Great. Maybe given what we've seen from the data on alixorexton benefits on wakefulness in EDS in the NT2 population, I think 8 to 10 minutes from baseline on the MWT and ESS scores at the upper limit of the normative range. How do your results reinforce confidence in the benefit of orexin in indications such as NT2 and idiopathic hypersomnia, where those orexin levels are not necessarily compromised?

Well, we're going to show a more complete analysis of the NT2 data next week at the Sleep conference in Baltimore. And the feedback we get from opinion leaders in the space is that it's remarkable to see, and this is the first agent to show against the backdrop of this very highly variable patient population, not just changes in MWT that are clinically meaningful, but changes in the Epworth sleepiness scale, which is the patient self-reported assessment of their daytime sleepiness, taking people from highly symptomatic to normal.

And we'll show it at sleep, we'll show some of the longer-term extension data from the open-label phase, showing this is a durable effect that lasts for multiple weeks, coupled with new data on fatigue and cognition, which are part of this holistic benefit that these orexin agonists seem to be bringing patients, which is not just the number of minutes your eyes are open in the MWT test or how you report in ESS, it's what are the components that lead to that feeling of normalcy with respect to cognition and fatigue as well.

So what people have to understand about the NT2 data is that unlike NT1, it's a very, very diverse patient population. And in a Phase II study where you keep people in a particular dosing lane for the duration of the period of time, you get a certain response. And in the real world, the patient won't stay in the dosing lane. They need a higher dose, they'll go to a higher dose. They need a lower dose, they'll go to a lower dose, which is why to your earlier question about differentiation, this program from the outset has been built on differentiation.

And the differentiation we see central is range of doses, range of regimens and range of indications. So the physician and the patient have the ability to flex into whatever duration they want and whatever dose is most suitable to their disease and their lifestyle.

Great. Maybe you could contextualize for us how clinically meaningful the results you've shown on MWT and ESS relative to other options currently available in these indications.

Well, no one has ever shown any data in NT2 alone to my knowledge. When you see the data from the oxybate, for example, it's a pooled NT1, NT2 population. So I think that -- I think it's one of a kind at this level with respect to the various parameters we've measured in the NT2 population.

In the NT1 population, of course, if you compare orexin agonist to previous therapies, I don't think there's any comparison between the MWT changes that you're seeing in the NT1 patient populations compared to the previous drugs.

Yes. And what I'd say is when you look at any of these various indications, there's multiple prisms that we look at with regards to efficacy. One of them is MWT, which we use in NT1 and NT2. I think there's a risk of over interpreting that result when you look at an average across a number of patients. We have -- especially in NT2, where you have this huge heterogeneity of response.

When you kind of lump it all together into an average number, it actually hides what's going on underneath. You may not see certain things that are really there like dose range and things like that. I think also, though, when you look at these indications, you need to look at it from the context of what patients are looking at within their treatment paradigm, things like ESS. So this is your excessive sleepiness scale and really gives a sense of are these patients feel tired -- do they feel tired or don't they feel tired.

What we saw in our NT1 program is that we were able to normalize almost everybody under the ESS scale. We normalize about 70% of them on the ESS scale with the NT2 and so from a different prism, it shows you a different element of the disease response.

The other thing I'd point out, and we're going to talk a lot about this at the Sleep Conference is cognition and fatigue. One of the things that we're seeing is with these orexin agonists, we can drive improvements in cognition, improvements in fatigue, take patients who were severe to start and pretty much normalize them over the course of the study. And it's really all of those things that contribute to that patient, how they feel, how they're going to respond on treatment and how they'll be -- how they'll move forward with their treatment parameters once they're on therapy long term.

To that point, what should we look for in terms of the scope of data you'll present on things like fatigue and cognition?

So we'll show some detailed slides or graphs on both cognition and fatigue over the course of the study as well as over the OLE period. So you'll get a chance to see, one, the response, what happens when you take a placebo patient on the trial, flip them over into active.

And then you'll also get to see the duration of the response in the OLE period as well. So it's -- it will be a fulsome data set similar to what we showed with the NT1 prior.

Great. And to what extent do we understand those symptoms like fatigue, brain fog, et cetera, to be attributable directly to a loss of alixorexton versus seeing kind of secondary effects of sleepiness?

It's interesting. When you look at our programs in NT1 and NT2, that's exactly that experiment. NT1 patients don't have alixorexton and NT2 patients have full alixorexton. And what you're seeing is consistent responses regardless of what the alixorexton is.

I think that one of the things that we look to do as we move forward with our programs is continue to generate evidence to show that cognition and fatigue are actually both independent of sleep. There is some overlap and some correlation.

But if you look, for example, at our fatigue study, patients have fatigue for a number of different reasons. It's independent of orexin. It can be from a neurodegenerative process. It could be from a cancer treatment. It can be from a variety of different things. And that is sort of the future of orexin and where you can take it is to go after some of those really debilitating indications.

Is there any other efficacy data we should anticipate? And for example, could we potentially see any additional MWT analyses across patient subgroups to better understand kind of the efficacy given the heterogeneity of NT2 patients?

Well, I think for the time being, we want to be -- we want to share what's relevant for people to understand the molecules. A lot of the stuff that you're asking for is it really came out of all the Phase II program that we've done to date and really is informed on our dose selection, our development strategy and things like that. So we want to maintain that proprietary for the time being and not reveal that to the rest of the world.

Understood. Maybe turning to idiopathic hypersomnia. You mentioned, I think, on the first quarter earnings call that you've initiated enrollment in the split dose cohort of the ongoing Phase II, and that's on track to complete in the fourth quarter. I guess should we expect -- like what should we expect in terms of nature of disclosures here relative to what you've already shared in NT1 and NT2 patients?

I think with the IH, it's going to be very similar to what we disclosed with NT2 and how we proceeded with that. We'll share with the top line. I think what will be different about the disclosure on IH with Vibrance is that we've introduced split dosing into that program. That was one of the key learnings we had from our Vibrance-2 study, where we showed that some patients would benefit from having enhanced efficacy in the later half of the day and patients were looking for some flexibility, ability to maybe push out their dose later into the evening.

And so this will be the first embodiment of that in the clinical program to show how that impacts their responses, both on ESS and IHSS, which are the endpoints for IH, which that's different from NT2 and NT1.

MWT is not a component of that disease. That being said, we do have MWT as part of that. So we will get to see how the split dosing affects the MWT in that patient population.

Great. And can you share how you're thinking about the target product profile for alixorexton in idiopathic hypersomnia?

So it's interesting you asked that because it's actually -- when you think of how we design this and what we talked about earlier, the idea that we have alixorexton to be able to provide benefit across all 3 indications, I mean they really share a TPP.

So from a physician perspective, the belief is that you could go into that doctor's office, that doctor has a patient who may have one of these diseases. And as you know, the diagnosis is a little bit gray. There's a little bit of back and forth. Sometimes NT1s look like NT2s, a lot of time, IH and NT2 overlap. But the differential diagnosis won't matter if we have all 3 indications.

So the idea here is can you address those 3 indications? What are the appropriate doses for each indication as a starting dose? And then you can move around wherever you need to be, whatever that patient has. And in fact, you might actually use this as diagnostic criteria. You could -- by dosing low patient responds, you know they'll be NT1. If they don't, you could move them up the dosage curve and maybe they're NT2, maybe they're IH, et cetera. So it provides a lot of opportunity downstream to really provide just a more appropriate treatment for this patient group.

Great. You recently initiated the Phase III Brilliance program last quarter. I think the NT1 and NT2 studies are underway. Could you provide an update on enrollment and how that's progressing in the studies? And as well, could you just characterize patient physician receptivity to those trials.

So yes, you're right. We've initiated these programs. We've moved very, very quickly. We met with the FDA after our Phase II talk them through the data and our approach to building this program. And we really have 3 studies that are part of our Brilliance Phase II, NT1 studies and a single NT2 study.

And across the programs, we have once-day dosing and we have split dosing across both indications. And so it provides -- it will provide a lot of flexibility downstream. What we're finding is as we introduce these clinical studies, we're getting a tremendous response from patients and physicians. And I'll contrast that to when we started, no one really knew Alkermes. They didn't -- we were bringing a new molecule into the space. Takeda was the big fish people. Those are the studies people were really interested in.

We're a little bit more now the bell of the ball. I think people are recognizing that we have a molecule that is really, really can help people. And there's a lot of interest in joining these programs. We're actively enrolling in the study. Europe is coming on board and turning on. As you know, that takes a little time on a country-by-country basis. That's going really, really well.

And so I think we're exactly where we hope to be at this stage in the development. And if we enroll strong leading into the summer, I think we're in good shape.

The virtue of running a big Phase II program is that it prepares you for Phase III with the site and data set that you can bring in Phase III now when a physician is sitting with a patient, you say, if you want to enroll in the study, we know the agent works.

And so the only risk for the patient really is in the randomization. Do they end up on placebo? And then they know they can go in the open-label phase later and get access to drug. Whereas in Phase II in the early days, it's an experimental medicine. You don't know whether it's safe or tolerated. And then we have that flywheel that began spinning in Phase II that rolls really well into Phase III.

That's super helpful. Do you -- maybe you could speak to the Takeda approval for I'm going to leave that one for orexin, in terms of how it might impact your kind of enrollment ability, particularly in the NT1 population where it's relevant.

Well, look, I think in any development program, there's a number of things that people do to provide treatment for their patients and to keep them on therapy while you're getting ready to commercialize. So Takeda has done the same thing.

They have a number of people in their extension programs who are likely going to be some of their early customers as they move forward. So if you actually look at the true overlap of where we are in enrolling our studies versus their launch, I think we're in a really good place.

And one of the things to keep in mind, too, we're in a number of different countries around the world. There's U.S., there's a number of countries ex U.S. In fact, some of our best sites come ex U.S. And so I don't see their launch really impacting our enrollment in this program.

The contrary, we're probably the biggest fans of a strong launch from educating patients to the new mechanism, recruiting doctors to understand the mechanism so they feel comfortable prescribing to the patients.

Great. What can you share regarding the powering assumptions across the 3 studies and the magnitude of improvement that would be both statistically, but also clinically or commercially meaningful?

It's actually a really interesting question because I think this disease area is different than what a lot of people are familiar with. I think a lot of times, if you're talking about a depression study or schizophrenia study, that power calculation is so critical and it's so important. I think what we're finding here given the effect size of these molecules and efficacy is that the power is not your real key question.

Your key question is really about your clinical effect size and how that compares competitively to the others in the group. I'll point to the fact when we started our NT1 study, and we did our multi-dose, we had 4 patients that drove statistical significance. So when you have a 90-patient study, 150-patient study, it's not the p-value. You kind of leap over that. And in fact, one of the things we showed in our NT2 program, despite all this patient heterogeneity, despite some patients responding, some not, variability in how the tests were run, the efficacy of the drug just shines through.

So for us, it's about standardization. It's about making sure that we're enrolling the right patients. You don't want an NT2 patient in your NT1 study that will mess up your signal. You want to make sure your cataplexy is standardized. You're counting them the same at any treatment site so that you can actually have as much fidelity in the data as possible and get rid of some of that noise.

And I think one of our key learnings as well in our Phase II program was that the MWT, which I think a lot of people felt was a very standardized objective test, has a lot of art to it. How people do it, how -- whether people determine whether the person is sleep or not, how all that happens requires a lot of attention. And I think doing that and applying that care into the Phase III is going to enhance our signal that much more so that we have a really strong label as we go into the market.

You mentioned measuring cataplexy in the NT1 studies. I think you've recently revised assay that you'll use to measure and report those events in Phase III. And remind us how that new methodology differs from prior ones in terms of standardization.

Sorry, it's cataplexy?

In cataplexy?

Yes, yes. So I think one of the things that was a big -- was a surprise a little bit is that even within treatment specialists, how they recognize cataplexy and how they count it somewhat different and especially as you went across different locations and things like that. And so cataplexy is really a spectrum. And it can be anything from a patient losing full muscle tone to almost a tweak in the cheek or an eye. And it sometimes becomes hard to recognize for both the patient and the physician.

So one of the things that we did is we put very clear criteria on what is considered cataplexy, making sure they were trained to understand it, making sure that was consistent across our study and consistency is key.

And then the other is counting them. You could have -- a patient could be watching a comedy and then all of a sudden have a cataplexic event. Maybe it's their leg twitching and their leg in the course of a short time, twitches 10x. One doctor might call that one cataplexic event, another might call it 10, right? You can't have that. That really messes up your score.

So different.

So it's all of those little things and making sure they're trained, making sure that we're certain they were trained, making sure the patients understand how to do it as well. That's what's going to drive the effect as we move into Phase III.

Great. You kind of alluded to this already, but how confident are you that the effect size is seen in Phase II will translate and hold up into Phase III? And would there be any reason to expect kind of compression in a larger patient population or a longer duration trial? Or is it the reverse?

Yes. I think, again, this area is a little different when you have an asset that actually has an effect size like this, it really mutes a lot of those effects. A lot of times, when you see compression of effects, it has less to do with the active drug and more to do with placebo. And there's not a lot of placebo here.

So what you find is if you look at MWT, you look at ESS placebo slot on the bottom. It doesn't tend to move. And so we feel pretty good as you go to bigger sizes. It's not so different.

The other thing to keep in mind is that your Phase II trials are similar in size to your Phase III trials here. Your rare disease. We were 90 patients in our Phase II trial, and we were like 150 in our Phase III trial. So you're not that much bigger. So this idea of dilution doesn't really come into play.

Okay. What about the decision to evaluate the cognition endpoints, BC-CCI and PVT in the Phase III program? And could you speak to which if either is more kind of clinically meaningful.

So I think what's interesting is -- so we've used BC-CCI consistently through the program. And I think as a tool, it's really good for measuring cognition holistically. So cognition is how does that patient -- how is that patient interpreting things? Are they -- do they have memory? Are they able to engage in tasks, things like that? I think it's a true sense of how the patient feels.

PVT is a little different. That's a vigilance test essentially, and it's actually more a behavioral test. It's akin almost to do you have attention? Do you have -- are you able to respond in a task situation? And so I think they measure very, very different things.

I think we're really expanding in the cognition side with regards to these assets as well. And I think as we go to the vigilance side, you'll be -- we'll be doing more of that with the ADHD program as we think of some of the attention and things like that, that we're doing there.

We decided to measure PVT as part of our program in Phase III. We do know others are doing it. We want to make sure we have a rounded data set to show the benefit of our drug. So we'll have both BC-CCI and PVT to round it out. But I think most of the data that we share with you and you've seen before is really around that cognition piece because we know that's a key driver of patient satisfaction.

When you talk to patients with narcolepsy, they don't talk about MWTs or ESS. They talk about brain fog and they talk about fatigue. And so what we tried to do from the outset was build these instruments into the clinical trial using instruments that are recognized as being having validity despite the fact they haven't been used historically in narcolepsy. Because we know that patients care about those things. And it's also beginning to increase the dimensionality of what an orexin agonist does.

First principles, when you think about what this circuitry does in the brain, it drives wakefulness. And wakefulness is more than just the amount of time your eyes [ woke ] up. Wakefulness is about mood elevation. It's about focus, it's about vigilance. It's about cognition. All these things that turn on in the beginning of the day that allow you to sustain through the day and then wind down at night so you complete.

So it's not surprising that an orexin agonist would have an effect on these various domains. And what we're trying to do is bring light to that through data. Whether or not it ends up the label at the outset, I think ultimately it will. But at the outset, it's important to differentiate these from mechanisms proceed with them.

Can you speak to any new learnings on the safety front in the open-label extension study or as you kind of gather feedback from physicians on what they're willing to tolerate?

And maybe related to that, can you provide an update on whether you'll be conducting ophthalmic exams to assess visual changes in the Phase III?

Yes. I think as we look at the open label, I think what we're going to show, and you'll see it at sleep is a lot of consistency on tolerability of the drug. A lot of the key sort of AEs that you tend to see with this are things like transient insomnia, you'll see pollakiuria. And what's interesting is as you move into your OLE period, longer-term treatment, it doesn't come up that much. Even if patients move to higher doses, you don't tend to see any -- or that many additional AEs. So highly tolerable program to what Rich said earlier in the study.

With regards to ophthalmic exams, that was only done as part of the Phase II. As you know, we had a couple of AEs related to vision. We wanted under abundance of caution to understand that to make sure there wasn't anything going on. That was confirmed as part of our Phase II program. And so there will be nothing in our Phase III.

Great. Beyond alixorexton and hypersomnia, there's also a growing investor interest in your Project Saturn program. Maybe starting with 7290, you have a Phase Ib study in ADHD patients coming in 4Q. How translatable do you think the preclinical mouse data are in this setting?

So that -- we use the 5 choice serial reaction model as our preclinical model. It's quite a robust model that's been used. It allows you to kind of compare assets on a rank basis, but also on an effect [indiscernible].

We went through rigorous testing of these therapeutic class within these models. So we feel really good that we're engaging that circuitry. We also know that we did a number of other things, too. We did EEGs. We did microdialysis where you're looking at neurotransmitter expression in the brain.

So we think that if you look at all of the indications that you could take orexin agonism, anywhere alertness goes, all these different things, ADHD is probably the most proximal next to sleep. So you do your hypersomnia. ADHD has the highest probability of success and then you kind of move out from there as you look at other indications.

So the real question for us, and this is why we're doing our -- part of why we're doing our Ib is that no one's really taken orexin agonism in ADHD patients before, and they may provide additional benefit beyond what the existing therapies do for ADHD patients. So it's not just about your ACR score. It's what about cognition? What about fatigue in those patients? What about other elements that they may feel on this drug? And that's part of what we want to explore in that early study.

Great. I think you're starting a Phase II study later this summer. I guess, can you talk about your conviction to move into that ahead of seeing Phase Ib data and how you might be able to incorporate any learnings out of the Phase Ib into Phase II design?

Well, so again, the Phase Ib is about rounding out, making sure we're hitting the targets, making sure we're rounding out some of our signals, understanding the benefits of the mechanism.

The Phase II is a traditional dose-ranging Phase II study where we set a range of doses that we're going to look at. And we're really trying to put ourselves in a good spot to design our Phase III program for efficacy. It's a much longer study. It's going to use the ACER test as a statistical test, it's 300 patients. We'll have that [indiscernible] things that overlap.

And there is an opportunity to adjust on the edges, but we feel pretty good about where we are in our dose range and our target engagement that we don't need to wait to do Ib and then move into II.

Maybe briefly, we can touch on the Avadel acquisition in LUMRYZ, which you talked about as being complementary. Now that transaction has closed, what are kind of like the key next steps in terms of integration?

So it's interesting. This transaction really addressed a number of different issues for us, not issues, but actually benefits for us. It brings with it just an incredible asset with the LUMRYZ and the oxybate class. It actually bolsters our commercial business as a whole, revenue-wise, profitability-wise. And it prepares us for the launch of alixorexton, really gives us that step into the sleep space with a commercial group that is highly experienced, knows the patients, knows the payers and the physicians.

And what's interesting about it, too, is, in many ways, it was a bolt-on. We brought over more than 90% of the commercial business, which was actually most of Avadel, frankly. And so we brought those -- that group in. They're part of our team. We're having a lot of discussions with them.

Interestingly, this transaction has opened up a lot of discussions with the treatment community on how can you use orexins in the morning and perhaps oxybates at night. There's a lot of discussion now about how can we generate data to show the benefits of doing those things.

So from an integration perspective, to your core question, they're pretty much integrated. We've hit the ground running. We've had -- we're having just a great response having them as part of the team. And they're going to benefit from our scale and some of the things that we have, patient engagement and all these other things.

And we're going to benefit from some of the things where they do really, really well, like some of their market access and pull-through and some of the stuff we're doing on alixorexton. So it's been great for us.

You're sort of alluding to it, but could you expand a little bit on the way that like your work with LUMRYZ could lay the groundwork for potential launches of alixorexton?

Yes. No, it's interesting. When you go to launch one of the drugs in a new space, it's sometimes tough. You have to go into a doctor's office, you're a new company. They don't know who you are. You don't know who there. You don't know if supposed to talk to the doctor, the nurse, who their payers, what systems they're using, all these things. And that takes time, and it takes time to burn that in.

And with this transaction, we bypass all that. We're right now talking to most of the doctors that we're going to want to talk to for alixorexton. We're out there. We know the nurses. We know how to wire that office. And so as we come in with alixorexton, it's going to be a face they know. We're going to have a reputation.

As Rich said earlier, we're going to be at sleep in a pretty profound way this year. Avadel was going to be there in in-force as were we. Together, we're going to -- we have many posters. We're going to talk to all the KOLs, all the physicians. We're known to those offices, and that's going to -- that can only help your launch as you move into a new space.

In our final minutes here, I wanted to just touch on the CEO transition, Rich, I think you're moving away in August after more than 3 decades at the company. What are you most proud of throughout your tenure at Alkermes? And what's the legacy you kind of hope to leave behind?

I think I'm probably most proud of is the fact that over 200,000 patients will get Alkermes medicines this year. And we've been sort of quiet about it, but we've chosen to work often in places where big pharma has not spent as much time, serious mental illness addiction.

And in doing that, we've created a culture at this company that is really -- it's a really lovely company because it's animated by this idea of helping people. And this most recent progress in narcolepsy, you can see that being brought over like when Blair talks about the Avadel team coming in. And what we get with them often is just that connection to the patients and the physicians.

And that's really exciting for a company like ours that sees the translation of what we do in the laboratory into patients' lives, and it isn't theoretical. We've been doing it. And that's a really good feeling. So if you can spend your professional energies doing things like that, at the end of the day, if you're successful and it's hard, translates into people's lives getting better, that's a pretty satisfying experience.

And I'm really proud of handing the baton to Blair, who's obviously been integral in building it to where we are today. So I think we're going to make that transition without a hitch.

I think that's a great place to end. We're officially out of time. So thank you so much.

Welcome.

Thank you guys. Appreciate it, and thanks everyone who joined us here and online.

Thank you.

Greetings, and welcome to the Alkermes First Quarter 2026 Financial Results Conference Call. My name is Carrie, and I will be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Good morning. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended March 31, 2026. With me today are Richard Pops, our CEO; Joshua Reed, our Chief Financial Officer; Todd Nichols, our Chief Commercial Officer; and Blair Jackson, our Chief Operating Officer. A slide presentation, along with our press release, related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors' section of alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. During the quarter, we closed the acquisition of Avadel Pharmaceuticals plc. The financial results announced today reflect the mid-February closing of the transaction and the integration of Avadel into our business, including 6 weeks of contribution from LUMRYZ, Avadel's once-at-bedtime sodium oxybate for the treatment of narcolepsy.

Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 2 of the accompanying presentation, our press release issued this morning and our most recent annual report filed with the SEC for important risk factors that could cause our 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 for some opening remarks.

Thank you, and good morning, everyone. So, we had an excellent financial first quarter with another strong period of commercial execution and business performance. The quarter was consequential in other ways. Perhaps most significantly, we completed the acquisition of Avadel, a key element of our strategy to become a leader in the sleep medicine space. With LUMRYZ, we add a new differentiated medicine to our portfolio, one that's early in its commercial life and has significant potential for growth. LUMRYZ addresses a clearly defined patient need and fits logically into our portfolio, consistent with our focus on medicines delivering meaningful clinical benefit to patients. From a financial standpoint, the acquisition further enhances our financial growth and provides additional resources and flexibility to advance our development portfolio. Beyond the financial consideration, the acquisition allows us to establish a commercial footprint in sleep medicine now, well in advance of the potential approval and launch of Alixorexton. This early presence enables us to engage directly with sleep specialists and other key stakeholders critical to ensuring access to prescribed medications. Building these relationships now provides a strong foundation to accelerate our potential launch trajectory for Alixorexton.

Another consequential event occurred at the very end of the quarter with the announced entry of Eli Lilly into this therapeutic space. This is an important external validation of the breadth of the scientific and commercial potential in developing new medicines targeting the orexin pathway. I think it underscores important aspects of this emerging therapeutic class, namely the limited number of competitive entrants and the scarcity of available intellectual property around the chemistry as well as the broad potential clinical and commercial opportunity. It starts with diseases of hypersomnolence and extends beyond that to a range of potential conditions in neurology, psychiatry and other rare diseases. For Alkermes, we believe Alixorexton and our other development candidates represent substantial opportunities to advance patient care and drive significant value for shareholders. We have a clear strategy, and we're well positioned to advance these programs. Blair and I will provide an update on our development efforts at the end of the call. But first, I'll turn to Todd and Joshua to review our commercial and financial performance for the first quarter. Todd?

Thank you, Rich. Good morning, everyone. I'm pleased to report that we're off to a strong start to the year with first quarter performance ahead of our expectations and solid execution across the commercial organization. It is exciting to note the evolution of our commercial team as our portfolio of commercial products expands. We now have commercial capabilities in 3 distinct categories: in addiction with VIVITROL, in psychiatry with ARISTADA and LYBALVI and now following the closing of the acquisition of Avadel and sleep medicine with LUMRYZ. The integration of Avadel commercial team is progressing well, and we entered the second quarter with the combined team fully in place. Looking ahead with clear strategic priorities, a seasoned commercial team and a portfolio of important medicines in addiction, psychiatry and sleep disorders, we are in a strong position to deliver on our performance goals for 2026.

Turning to our first quarter results. Net sales from our proprietary product portfolio increased 38% year-over-year to $338.1 million, reflecting solid demand across our psychiatry and addiction portfolios and certain favorable gross to net adjustments during the quarter and 6 weeks of commercial contribution from LUMRYZ. Starting with VIVITROL. Net sales in the quarter were $112.4 million. VIVITROL performance continued to be driven by our ability to capitalize on highly localized market dynamics in certain states and payer systems. Looking ahead, we continue to expect VIVITROL net sales for 2026 in the range of $460 million to $480 million. For our psychiatry franchise, in the first quarter, net sales for the ARISTADA product family were $93.8 million, reflecting solid underlying demand. In 2026, we continue to expect ARISTADA net sales in the range of $365 million to $385 million. LYBALVI net sales grew 32% year-over-year to $92.4 million. Underlying TRX growth was 21% year-over-year, driven by sustained momentum in new patient starts and continued expansion of prescriber breadth. Gross to net adjustments were approximately 33%, which we expect will continue to widen into the mid-30s during the course of the year as we continue to build on our market access profile. For the full year, we continue to expect LYBALVI net sales in the range of $380 million to $400 million. The first quarter results for these products benefited from gross to net favorability of approximately $14 million, driven primarily by favorable patient mix. Approximately 2/3 of this favorability related to VIVITROL and the remainder related to ARISTADA and LYBALVI. Across the brands, inventory levels in the channel were relatively stable in the first quarter of 2026. As a result, we expect Q1 to Q2 growth trends to generally track end market demand.

Turning to our sleep franchise. We are now 10 weeks post close of the acquisition of Avadel. As we build on our commercial presence in this space, we are pleased with feedback from the sleep medicine community regarding the LUMRYZ commercial organization, the utility and expected durability of the oxybate class and the differentiation of LUMRYZ within this category. The LUMRYZ team is off to a strong start since joining Alkermes. For the first 6 weeks following the close of the acquisition in mid-February, we recorded LUMRYZ net sales of $39.5 million. For the full quarter, LUMRYZ generated approximately $72 million of net revenue. We exited the quarter with approximately 3,600 patients on therapy and with solid momentum in new patient enrollments, which we expect to build on as we move through the year. For the full year, we expect LUMRYZ to generate total net sales in the range of $350 million to $370 million. Of this, we expect Alkermes to record $315 million to $335 million, reflecting the period since the mid-February close of the transaction.

In sleep medicine, our near-term focus is on driving growth and executing against the LUMRYZ opportunity while advancing our broader strategy in the space, including preparation for the potential launch of Alixorexton. Narcolepsy and idiopathic hypersomnia represent multibillion-dollar market opportunities. And our goal is to establish Alkermes as the leader in sleep medicine based on deep expertise in this disease area and differentiated and competitively positioned product portfolio. With solid performance from our established franchises and the recent addition of LUMRYZ, we are operating from a strong position of increasing scale and diversification. As we move forward, our focus remains on disciplined execution, driving demand across our brands and advancing our strategy in psychiatry, addiction and sleep medicine. The first quarter was a strong start to the year, and we are well positioned as we work toward achieving our 2026 objectives.

With that, I will pass the call to Joshua to review the financial results for the quarter.

Thank you, Todd. In the first quarter, we delivered financial results that reflect continued growth across our proprietary product portfolio and the initial contribution from LUMRYZ following the close of the Avadel acquisition. Post acquisition, our financial profile is further enhanced and diversified. We manage the business to drive significant operating cash flow and maintain a strong balance sheet, and we do so now with increased scale and flexibility. We are in a strong position to invest in the expanding development pipeline that will shape the future of our business.

Turning to our financial results. During the quarter, we generated total revenues of $392.9 million. These results provide a solid foundation for the year. Today, we are updating certain noncash elements of our 2026 financial expectations to reflect refinements to the purchase price accounting for the acquisition of Avadel. These adjustments improve our full year expectations for GAAP net loss and EBITDA. For our portfolio of proprietary products, we generated net sales of $338.1 million, ahead of the expectations we outlined on our fourth quarter call. As we move into the second quarter, we expect Q2 net sales from our proprietary portfolio, including a full quarter of revenues from LUMRYZ in the range of $385 million to $405 million. Manufacturing and royalty revenues were $54.8 million for the quarter, including revenues of $27.3 million from VUMERITY and $18 million from the long-acting INVEGA products.

Turning to expenses. Cost of goods sold were $61.6 million, which includes the purchase price accounting of LUMRYZ inventory. Recall that at closing, LUMRYZ inventory held by Avadel was marked to fair market value. Net of the LUMRYZ inventory step-up charge, cost of goods sold would have been $48.9 million in Q1 of this year compared to $49.2 million in Q1 of the prior year. In the second quarter, we expect COGS to be in the range of $85 million to $95 million, reflecting a full quarter of LUMRYZ sales and associated inventory step-up charge. R&D expenses in the quarter were $103.3 million compared to $71.8 million in Q1 of the prior year, reflecting the initiation of the Alixorexton Brilliance Phase III clinical program in narcolepsy, which began in the first quarter, the ongoing Vibrance-3 Phase II study of Alixorexton in idiopathic hypersomnia and the Phase I studies and development efforts for our next Orexin 2 receptor agonist candidates, ALKS 7290 and ALKS 4510. In the second quarter, we expect R&D expenses to be in the range of $110 million to $120 million.

SG&A expenses were $264.6 million for the quarter, which included approximately $55 million of costs associated with the closing of the acquisition of Avadel, including transaction expenses and share-based compensation. Excluding these onetime expenses, SG&A would have been $209.4 million compared to $171.7 million in Q1 of last year, primarily reflecting the addition of the Avadel commercial infrastructure mid-quarter. As we look ahead to the second quarter, we expect SG&A expense to be in the range of $210 million to $220.

During the quarter, we also recorded amortization of intangibles of $11.7 million and net interest expense of $12.4 million. In Q1, we generated GAAP net loss of $66.5 million and EBITDA of minus $30.1 million. We also generated positive adjusted EBITDA of $80.3 million, well ahead of our prior Q1 expectation of adjusted EBITDA of $30 million to $50 million due to higher-than-expected revenues and the timing of R&D expenses. Looking ahead to the second quarter, we expect adjusted EBITDA to be in the range of $100 million to $120 million.

Turning to our balance sheet. We ended the first quarter with approximately $538 million in cash and total investments. To finance the acquisition of Avadel, we used approximately $775 million of cash from our balance sheet and entered into term loans totaling $1.525 billion due in 2031. We expect to pay down this debt quickly with cash flows from the business. During the quarter, we also deployed $28 million to repurchase approximately 1 million shares at an average price of approximately $28 per share. We continue to have $172 million of remaining share repurchase authorization. As I mentioned, in connection with the purchase price accounting related to the Avadel acquisition, we have refined our expectations for several noncash expense items, including the inventory step-up charge, which flows through cost of goods sold and the amortization of intangible assets associated with LUMRYZ. These changes have a net positive impact on our 2026 expectations for GAAP net loss and EBITDA. We now expect to expense approximately $105 million of LUMRYZ inventory fair value step-up in 2026 compared to a prior estimate of approximately $150 million. As a result, our 2026 cost of goods sold is now expected to be $320 million to $340 million, an improvement from our prior estimate of $365 million to $385.

For amortization of intangible assets, we now expect full year amortization expense in the range of $75 million to $85 million compared to our previous estimate of $95 million to $105 million. For income tax, we now expect no income tax expense or benefit for the year from our prior estimate of an income tax benefit of $20 million. Taken together, these purchase price accounting adjustments improved our expectations for GAAP net loss, which is now projected to be in the range of $70 million to $90 million as well as for EBITDA, which is now expected to be in the range of positive $105 million to $135 million. All other components of our 2026 outlook, including adjusted EBITDA, remain unchanged. Taking a step back, with a strong start to the year, and we look forward to carrying this momentum into the second quarter and beyond.

With that, I'll now hand the call back to Rich.

Thank you, Joshua. So, the commercial and financial elements of the business are strong. With expected revenue of more than $1.7 billion and adjusted EBITDA of more than $370 million, we have the financial resources to invest aggressively in our pipeline and generate significant cash flow. I think it's becoming increasingly clear that our orexin program has brought us to the threshold of substantial value creation. To date, we've developed and shared with you comprehensive clinical data sets across the first area of focus for this therapeutic class, disorders of hypersomnolence. That data set reflects the design and execution of a broad Phase II program, randomized, controlled, multicenter, multiweek across multiple doses and indications using established clinical endpoints as well as additional measures such as fatigue and cognition that relate specifically to the brain circuitry that we're activating. At the same time, we're broadening our development efforts beyond disorders of hypersomnolence, leveraging our portfolio of Orexin 2 receptor agonist candidates. In this area, more than most, we believe that chemistry-based intellectual property represents an important strategic asset. Blair will speak in more detail about our expansion strategy and development plans. But first, I want to update you on where we are with Alixorexton. This year, our focus is on continuing the momentum we built in Phase II to enroll the Phase III Brilliance studies in narcolepsy. Phase III for us is all about execution. We're on the path now to potential registration. The Brilliance Phase III program is now open for enrollment in narcolepsy type 1 and type 2 with site initiation and patient screening underway. Because of the strength of the Phase II results, investigator interest in the studies is strong. We're working to enroll these studies quickly with a sharp focus on quality and execution to support the strongest competitive positioning. From an operational perspective, the duration and scale of the Vibrance Phase II studies generated important and proprietary data that inform the design of our Phase III program. With Alixorexton, we're building a broad and robust clinical data package across narcolepsy and idiopathic hypersomnia. In June, we'll present data from the Vibrance-2 narcolepsy type 2 study at the Annual Sleep Meeting in Baltimore. We reported the positive top line in November, so much of the data set will be familiar to you. Along with the positive outcome of the study, Vibrance-2 is important because it's one of a very small number of clinical studies ever conducted exclusively in patients with NT2. As such, it provides a depth of insight into the characteristics and variability of this population that is largely absent from the existing literature. The Sleep Meeting gives us an opportunity to share the data with a broader sleep community. One-on-one engagements with clinicians and investigators over the last several months have already given us a clear sense of the treatment community's high level of interest and excitement about these data. For idiopathic hypersomnia, or IH, our Vibrance Phase III -- I'm sorry, our Vibrance-3 Phase II study is ongoing and on track to be completed in the fourth quarter of this year. We've initiated enrollment of a split dose cohort of approximately 30 patients across sites in both U.S. and Europe, with patients randomized to Alixorexton or a matching split dose placebo. As a reminder, in IH, the Epworth Sleepiness Scale and the idiopathic hypersomnia severity scale are the established and preferred clinical and regulatory endpoints. In addition to those measures, Vibrance-3 also includes mean sleep latency assessed by the maintenance of wakefulness test, which will help us to characterize the durability of wakefulness over the course of the day.

The clinical development program for Alixorexton has been deliberately designed to support strong competitive positioning, both in the quality of the clinical data generated and the breadth of potential dosing options and regimens being evaluated to address individual patient needs. We believe this approach positions Alixorexton, if approved, to become the orexin of choice across both narcolepsy indications. Importantly, Alixorexton has the potential to be the first-in-class in narcolepsy type 2, and our lead in development in NT2 continues to widen. In the meantime, while the orexin development story in narcolepsy continues to mature, with LUMRYZ, we now have an important new medicine being used in current clinical practice. Later this quarter, we expect to announce top line data from the LUMRYZ Phase III REVITALYZ study in IH. Data from this double-blind, placebo-controlled randomized withdrawal study, which enrolled approximately 150 patients would serve as the basis for an sNDA submission with a potential launch in early 2028, if approved. This represents a potential growth opportunity for LUMRYZ in an underserved patient population, and we look forward to data this quarter.

So now I'll turn the call over to Blair to provide an update on our expanding development work in orexin portfolio. Beyond central disorders of hypersomnolence, there are many adjacent disease areas that may benefit from modulating the orexin pathway. We identified this opportunity early on, and we're moving aggressively with new molecules. Go ahead, Blair.

Thank you, Rich. As we outlined earlier in January, this year, we are expanding our orexin development programs into disease areas outside of sleep medicine. We are doing so with 2 new molecules from our portfolio, ALKS 7290 and ALKS 4510. Each of these Orexin 2 receptor agonists has been advancing through single and multiple ascending dose cohorts in healthy volunteers, and we're pleased with the profiles we have observed to date. This year, our development plans take us into patient populations in ADHD and fatigue. Early on, based on our emerging data and feedback from clinical investigators, we identified attention deficit hyperactivity disorder as one of the most compelling initial opportunities for Orexin 2 receptor agonists outside of sleep medicine. ADHD is a common neurodevelopmental disorder characterized by persistent difficulty in maintaining attention and concentration and is frequently accompanied by hyperactive and impulsive behavior. Despite the availability of some treatment options, many patients continue to experience residual symptoms: functional impairment, tolerability issues and adherence challenges even when receiving current standard of care treatment. Against that backdrop, Alkermes is working to advance the evidence base supporting the potential use of Orexin 2 receptor agonist in ADHD. We have established a foundation of data from validated preclinical behavioral models, assessment of neurotransmitters and human EEG that support our conviction in this program. Based on this foundation, we are initiating our first clinical studies of ALKS 7290 in adults with ADHD this year. The first is a Phase Ib randomized placebo-controlled proof-of-concept study designed to enroll approximately 50 adult patients. Participants will receive 2 weeks of treatment with ALKS 7290 or placebo. In this study, we will assess the safety and tolerability of ALKS 7290, along with the effects of treatment on translational measures where we expect to see more rapid changes, including quantitative EEG and certain neuropsychological performance measures. These assessments are designed to evaluate sustained attention, vigilance and impulse control in a shorter duration study. For exploratory purposes, we'll also assess changes from baseline on established clinical ADHD scales. Results from this Phase Ib study are expected in the fourth quarter of this year, and we will provide the first clinical data generated with the Orexin 2 receptor agonist in patients with ADHD. Enrollment in that study is already underway with the first patients dosed in April. As enrollment in the Phase Ib study progresses, we plan to initiate a well-powered Phase II study in adult patients with ADHD this summer. This randomized double-blind study is expected to enroll approximately 300 patients and will evaluate ALKS 7290 versus placebo over a 4-week treatment period. The primary endpoint will be change from baseline in the adult ADHD investigator rating scale. Data from this study, which we expect to complete in 2027 may serve as the foundation to advance to a potential registrational program in ADHD. We are excited to be the leaders in this exciting area of clinical development, and we look forward to updating you on our progress.

For ALKS 4510, we are advancing in single and multiple ascending dose studies in healthy volunteers and plan to initiate a multi-dose Phase IIa study later this year in patients with fatigue associated with multiple sclerosis and Parkinson's disease. Fatigue is one of the most common and burdensome symptoms in neurodegenerative disorders and remains a significant unmet need in MS and Parkinson's. Our interest in fatigue in these populations is also informed by observations from our Phase II narcolepsy studies, where we saw improvements in patient-reported fatigue that appeared distinct from effects on sleepiness or wakefulness alone. Fatigue represents a novel area of pharmaceutical development, and we'll provide more details regarding the design of the development program as the Phase II study opens later this year. As we advance through the development program, our strategy will be stepwise, data-driven and informed by interactions with regulatory authorities as we seek to make a meaningful contribution to patient care. Taking a step back, the potential utility of Orexin 2 receptor agonist across a broad range of indications is a significant and striking opportunity. This will be the year that we generate a substantial new increment of data to the clinical evidence base supporting these potential opportunities.

With that, I'll turn the call back to Sandy to manage the Q&A.

Thanks, Blaire. We'll now open the call for Q&A.

[Operator Instructions] And our first question will come from David Amsellem with Piper Sandler.

So, on the orexin programs beyond sleep wake, in ADHD, can you talk about your thought process regarding development as monotherapy versus adjunctive therapy in ADHD? And how you -- what preclinical data you can point to that gives you confidence that a monotherapy approach makes sense? And then regarding the fatigue program, it might be a little early to talk to this, but can you talk about endpoints that you're exploring? And I realize this is going to be informed by your discussions with regulators, but what are you going to be looking at in terms of early outcome measures on fatigue?

Sure. David, it's Blair. So, with regards to ADHD, we have a substantive amount of data with regards to orexin agonist in this space. And in fact, it's probably the most tangential of the indications out there for the next place for us to go. We did a lot of preclinical work looking at neurotransmitter release, looking at behavioral models, EEG. We saw increased levels of acetylcholine in the prefrontal cortex, which is a high indication of activity and attentiveness. We also use what's really a highly translatable model within the preclinical testing where it's called the 5-choice serial reaction test. And our initial hypothesis was exactly where you started was what if we did an adjunctive therapy perhaps with a non-stimulant, would that provide a really beneficial outcome. But when we did that model, what we found is across all our studies, we were performing as well as or better than stimulants themselves as a monotherapy. So, we feel that both in the attention and the impulsivity aspects of those programs that we have a really good opportunity here. And our clinical studies that we're kicking off are actually designed to look at just that. So, we'll be looking at monotherapy across a broad population, both intention and impulsivity. And I think the 2 studies that we've set up are going to be really well positioned to give us a full idea of how this could proceed moving forward.

With regards to fatigue and that program, we're moving into the clinic with a drug called ALKS 4510. And that's a really interesting area. And we are looking very carefully at the scales to be used within those studies. So, we're going to be testing this in MS fatigue patients and Parkinson's disease patients. And one scale that we're going to use is the PROMIS Fatigue Scale. This is a scale that we used in our NT1 study, where we showed a really strong benefit within the NT1 patients, taking them really from severe to normal on that scale. And that hasn't been shown very widely within clinical literature. We also saw similar outcomes as we moved into the NT2 patient population. So that bodes well as we go to an intact orexin tone system. But the other thing to keep in mind is a lot of these disease areas, they also have their own scales that have been developed as part of that patient population. So, we're going to be testing those 2 and trying to understand best how the different characteristics of the scales work and also how these drugs perform within different subcategories of fatigue.

Our next question will come from Umer Raffat with Evercore ISI.

I have a 2-part question. And clearly, there's been a ton of interest, strategic interest in the orexin space. And what I'm wondering is twofold. Number one, can you lay out time lines for indications beyond narcolepsy? Because I feel like that aspect of the value has not been captured by much of the valuation numbers that have been thrown around so far. And I ask that in particular because it seems like Lilly's early interest in Centessa was perhaps not even on the lead program. And number two, more importantly, is Alkermes and the Board open to the idea of asset sale rather than a whole company sale if that were to be a possibility at any point? And I'm thinking back to examples like Biohaven.

Maybe I'll start and then I'll hand over to Blair as well. Yes, I think Blair just referred to it in the prepared comments, which is the 2 most immediate adjacencies to the hypersomnolence are fatigue and ADHD. We're enrolling patients right now in the first ADHD study, that translational study in adult patients. So that will be a 50-patient study. We'll get data this year on ADHD. So, give us our first sense. And we won't even wait for those data before we light off a bigger proper Phase II program, which we'll light off this summer in ADHD because we feel like the preclinical evidence in that space is quite compelling. And the enrollment in the fatigue studies in Parkinson's and whatever, that starts this year as well. So, we're right on the threshold of new data sets that expand the understanding of the pharmacology in patients without demonstrable orexin deficits. And as you know, the first hints of that come from our NT2 data and our IH data that we've already developed. So, with regard to the second question, our company and our Board, we are a public company. We react to whatever circumstances present themselves. But we feel like right now, we're right on the threshold of major valuation changes as we mature this program. And I think Lilly coming into the market underscores the fact that there's more than just hypersomnolence here at play. This circuitry is directly associated with human wakefulness defined broadly. And I think that opens up a whole bunch of adjacencies. And we start with hypersomnolence and we go from there.

Blair, any other thoughts?

No, I'd just reiterate what Rich said, which is we're in a process right now. We're going to be turning over a lot of cards with regards to a number of these clinical areas, and we're looking to really execute and drive value over the next couple of years. So, I think it's a little premature to talk about any potential sale process.

And moving next to Paul Matteis with Stifel.

This is Julian on for Paul. And I guess just to piggyback again on the orexin program and the pipeline, it would be great to hear about, for this larger Phase II that you're kicking off this summer, what types of patients are you hoping to enroll? And can you just talk a little bit about the translatability of what you'd expect based on past clinical data literature in terms of success on the primary endpoint and how may that translate to a larger randomized Phase III? And I guess, in comparison, how large are Phase III studies relative to the Phase II that you plan on kicking off?

Yes. Thanks for the question. I think with regards to the ADHD, as we said -- as I said earlier in the call, we saw pretty broad activity in some of our early models with regards to this asset and this mechanism. And so, as we look to enroll our patients in the Phase II study, we think a broad base of patients will be beneficial from this. So, we're not going to look at individual subtypes. Our key primary endpoint for this is the [ ACERs ], which is the adult tool that's been used widely in the industry. And what we're really looking to do is see the relative effect size across the patient population. And just to give an idea of what people have seen in the past, there's typically -- it kind of breaks into 2 main areas. You typically see the nonstimulants and they typically have Cohen effect sizes that are kind of 0.3 to 0.45 or so. And then what you see is a very different result with stimulants. Stimulants typically can be 1 and above with regards to Cohen's d, but it comes with trade-offs. And so, what we're really looking to see is how we perform on that over a 4-week period. That study, as we said in the prepared remarks, is going to be about 300 patients. And that's roughly the size that you see in some of the Phase III programs. And you go a little longer. Usually, you're looking at 6-plus weeks on the primary endpoint. But we'll determine that, and we'll indicate more of that after we see the data in the Phase II.

I just want to add a couple of things on that. Number one, what we did in narcolepsy is what we want to do in ADHD, i.e., have a significant amount of clinical data before we launch the Phase III program and run a Phase II program that almost mimics the Phase III program. That's a major risk mitigator in the program. Second thing is we're going to start using the tools that exist, just like we did in narcolepsy. But what's interesting about this pathway is it is activating the brain in different ways than the stimulant activates the brain. And I think with the benefit of additional clinical data, we'll be able to dial into some of the differential efficacy potential of an orexin agonist compared to just a stimulus, which is revving up the brain in a more general way.

And sorry, just one quick question, if I may as well. I think you said you'd be completing the IH study in 4Q, Rich. Are we expecting data this year? Or could it potentially run into next year?

That's the translational study, the first study where we're looking at more -- I'm sorry. I'm sorry. Yes, the IH Orexin study, we'll complete that in Q4, and we'll get the data as fast as we can thereafter. It could be right at the end of the quarter or right in the beginning of the second quarter according to the current plan.

And moving next to Jessica Fye with JPMorgan.

Just a question on LUMRYZ and your guidance for that product this year. Can you just talk about what's embedded as it relates to your expectation for any potential net price pressure as non-AG generic sodium oxybate gains traction in the marketplace?

Yes. Yes, sure. I'll take that one. So, at this point right now, as I stated, we're guiding to $350 million to $370 million. We had a really solid first quarter, and so we feel really good about that heading into Q2 and for the remainder of the year. At this point, we haven't seen any impact on multisource generics for Xyrem. Again, the most important point is this is a multisource generic for Xyrem, not for LUMRYZ. So, we haven't seen any impact on demand, any impact on physician behavior, any change in payer behavior at this point. A really solid part about the LUMRYZ story is really the diverse patient mix. We get a sizable portion of patients from new to oxybate, from returning oxybate and from the switch market. So, it's a very durable product. So, it's something that we're watching very closely. We're going to have to see how it plays out. But with our full year guide, we do incorporate a range of gross to net scenarios.

And our next question will come from Ben Burnett with Wells Fargo.

I wanted to ask about the Vibrance-3 data that you will provide in the fourth quarter or thereabouts. I guess what dose cohorts will be included in the update? And will this include split dosing at therapeutically relevant doses?

Yes. We expect to have top line results from the entire study when we read out the data from that, which would include the split dose arm.

Okay. Fantastic. And can I ask, the split dosing that's being tested, how is that split? Are they evenly split? And are you testing sort of higher total doses in the split dosing cohorts relative to the single-dose cohorts?

We haven't disclosed the specifics on the split dose strategy either for the IH study or for the other studies as well, partly because we feel like we've learned so much from our clinical program that is proprietary that we're going to keep that close to our vest until we have the data.

We'll go next to Marc Goodman with Leerink Partners.

Yes. On LUMRYZ, can you talk about the net patient starts that got you to the 3,600 patients that ended the quarter? And then now that you own the asset, can you give us an update of how you plan to develop valiloxybate?

Yes. Mark, I'll take the first part of that. So overall, as I said in my prepared remarks, the brand in Q1 realized 3,600 patients on therapy. We actually think that total patients on therapy is the best metric. That's a 28% year-over-year growth overall. That's really the durable part of the brand. That really incorporates any type of demand perspective, access and also persistency. So, our focus is really on total patients. We're always going to be focused moving forward on growing net patient adds, and we feel really good about the enrollment trends we saw coming at the end of the quarter, which is going to set us up very well for Q2 and beyond. And that's really based upon just the overall strength of the mix between new to oxybate switch and also returning. So, we feel good about the patient mix that we're seeing.

Mark, this is Blair. I'll take the valiloxybate question. So that's an asset that came over as part of the Avadel acquisition, and that's an opportunity for us to potentially develop a no-salt once-nightly product for patients. And so, our plan for that is to take multiple formulations into the clinic and really try to assess a rapid development program. And this is really right up our wheelhouse. As you know, we're a formulation company at our roots and especially when it comes to PK/PD relationships. So, we right now have multiple formulations that are in the clinic and being assessed. And as we have more data later in the year, we'll share that.

Blair, do you think you're going to have to do a full -- like a full Phase III study? Or will you be able to do like some type of bridging study that is quicker?

Well, that will really depend on the clinical data that we generate. So, our hope is that we can do some bridging. But again, we'll have to see how this asset performs in the clinic.

And Rudy Li with Wolfe Research has our next question.

Can you talk about your current understanding of the competitive landscape for orexin agonist? And specifically, what key endpoints being measured in your Brilliance Phase III trial that could provide additional label differentiation?

I think the major differentiating feature in the orexin space now is the fact that Alkermes has the only program that has a range of doses that have been credentialed in large randomized Phase II studies. And in so doing, we've been able to explore other domains other than just the classic maintenance of wakefulness test and the cataplexy scale by extending into fatigue and cognition. So, while we don't expect fatigue and cognition data to be in our initial label, what we do expect to have a clinical data set that encompasses all those features of the treatment. So when we come to market, if the drug is approved, we expect to come to market for NT1 and NT2, which differentiates us from the first market entrant as well as a range of doses across NT1 and NT2 both as once a day as well as in split dose formats, which further differentiates us from the first market entrant. And I think following the acquisition of Centessa, I think our lead in NT2 as well as NT1 continues to grow. So, we're really happy with the competitive positioning, and we think this is going to open up the beginning of a brand-new class of pharmaceuticals that will continue to grow from the diseases of hypersomnolence.

And we'll go next to Luke Herrmann with Baird.

One on 7290 in ADHD, you laid out the effect sizes we've seen across different standards of care. So based on the preclinical data, do you think the more likely outcome as a monotherapy is sort of a more tolerable asset that sits in the middle of stimulants and nonstimulants in terms of efficacy? Or do you think efficacy could actually exceed what we've seen with stimulants?

Well, again, what we've seen in our preclinical data is we performed as well or better than stimulants in our early models as monotherapy. So obviously, if we're able to achieve that clinically with the tolerability profile that we see with this class of drugs, that's a great outcome for us. But I think there's a wide range of market opportunities regardless of what we see in the clinic, but our goal will be to get the strongest efficacy possible.

Great. And then just one follow-up on the Alixorexton Phase III studies. I believe you commented on the high level of patient interest. Has this exceeded what you anticipated? And would this maybe lead to more expeditious enrollment?

The difference between Phase III and Phase II for us is that when you go into Phase II, no one's used your drug before. And now we go into Phase III with a major data set that's been presented at major meetings and a buzz about this program. What mitigates against the rate of enrollment, though, is the control and the rigor that we learn from Phase II about which sites to use and how to select patients and how to make sure that you're not just enrolling for the sake of enrollment numbers, but to enroll the finest cohort you can over the period because those data become your label. So, the quality of that study is sacrosanct. So, we expect to enroll the study correctly at the rate that we'll determine as we activate sites, and we'll keep you guys posted as we go on that.

We'll hear next from Joseph Thome with TD Cowen.

This is Jacob on for Joe. I was wondering if you were planning on studying LUMRYZ in combination with an OX2R agonist in the future? And if so, what would a trial for that look like?

Yes. Jacob, it's something we're hearing so frequently from clinicians now that we've completed the acquisition. And we'll go to the sleep meeting in Baltimore, representing both once-nightly oxybate with extended efficacy as well as the Alixorexton program. And so we will be harnessing that energy into a clinical program over time. We won't -- we're not going to start that right away. We need to finish some other things first, namely the registration program for Alixorexton as monotherapy. But I think there's increasing interest in understanding both the nighttime and the daytime aspects of the disease.

We go next to Ami Fadia with Needham & Company.

I've got 2. Just with regards to Vibrance-2 that's going to be presented at the sleep meeting in Baltimore. What additional data on top of what you had announced at the initial data readout that we can expect at the meeting? And with regards to the LUMRYZ study that's expected to read out in the second quarter, maybe talk about your expectations for what that profile is likely to look like, the market opportunity and what you're doing in terms of preparing for a potential launch of that indication?

Ami, it's Rich. I'll start. As I mentioned, we presented most all of the data on the Vibrance-2 study in November, and that's available on the website if people want to look at that again. But we will give a bit more sleep in 2 principal domains. One, we'll try to give a little bit more dimensionality to the efficacy effect that we saw. And the other is we do have data from the extension phase now that we can tack on to the double-blind phase. And that's always instructive to see what happens as patients stay on therapy for a longer period of time. And of course, at the sleep meetings, those data are presented by investigators and you have the ability to talk to people who actually have hands on in the use of the drug.

Your second question was about LUMRYZ in IH and the market opportunity for that. I'll start and then I'll ask Todd to comment on that. What's interesting is that the competitive product is Xywav the principal growth of that drug now is driven by the IH indication. And part of the reason we went into IH for Alixorexton was talking to patients and patient advocacy groups, there's a huge unmet need for new medicines in IH. And we just had a thought leader here at the company yesterday saying that he thought oxybates at this moment are probably the best treatment for idiopathic hypersomnia, which is interesting. I think that's underappreciated. So, we will be able to enter this market with LUMRYZ in 2028. So, we have some time to prepare for that type of launch if it's approvable. But we're quite excited about that as a life cycle growth tool for LUMRYZ. Todd, do you...

Yes. The only thing I would just add a couple of things. We continue to validate all of the research that we've done, listening to the community, listening to HCP. We believe it's a really underdeveloped category right now. There's 40,000 patients that are diagnosed. We think that's underrepresented. And there's only one FDA-approved product on the market. We think that LUMRYZ has an opportunity to be the second product. And we know how well LUMRYZ is received in the community now for narcolepsy. So, our expectations are very high on what the opportunity is for LUMRYZ in IH. As Rich said, as the data is presented, as we go through the approval process, we'll be continuing to build what our launch plan looks like, but it's something that we are very excited about.

And we'll go next to Jason Gerberry with Bank of America.

This is Chi on for Jason. Just on ADHD, can you talk about what's unique about the molecule PK or dosing profile that could help you mitigate insomnia or urinary frequency, the class of adverse -- class adverse events you have observed in narcolepsy patients? And would you expect the ADHD patients to be more or less sensitive to these class AE so far? And just a quick follow-up on Vibrance-2. Would you provide any sort of kinetics on weekly MWT data to better contextualize data comparison relative to a key competitor of yours, which had 2-week data, and you've talked about observation of tachyphylaxis in the past with Vibrance-2.

Chi, it's Blair. I'll start with ADHD, and then I'll get Rich to answer you on the Vibrance-2 stuff. So, with regards to ADHD, I think a couple of things I want to make sure we're clear on. One is the adverse events that we typically see with this class of orexin agonist. It's a very wide therapeutic window. As you saw from our programs in NT1 and NT2, we have a really nice AE profile overall. There's -- the main effects associated with this class are really [ polyuria ] and some transient insomnia that we see at the beginning of the study. As we talk about the ADHD program and the PK dosing profile, I think with regards to any of the new programs that we move outside of narcolepsy, we're developing them with new drugs. So ALKS 7290 is its own unique molecule. It's been designed by itself specifically. It's optimized for the patient populations that we're going after. And so, it will have its own unique PK and dosing profile that will match that patient population. As you know, what we saw in our NT2 program is that patients who have an intact orexin system, so who have natural orexin tone, we tend to see a very mitigated overall AE profile due to that fact. And so again, I think we're well positioned to test a wide range of doses within that patient class.

Rich, do you want to do...

Yes, the Vibrance-2 data at sleep, you will see time course data on a multi-week basis for the ESS score. And I just want to make the point that there is no competitive data that's been presented so far. There's only one company that's shown multi-week successful data in NT2 and that's Alkermes.

And we'll hear next from Akash Tewari with Jefferies.

This is Anastasia on for Akash. So, when you previously talked about NT2, you've kind of segmented the pop into a couple of buckets of patients. You have the ones who would benefit from BID dosing and then the ones with kind of a more modest effect size. So how are you thinking about that dynamic as you consider orexins working in other indications where patients have more normal hypocretin levels at baseline like ADHD or fatigue?

We just think overall, dosing flexibility will be a really important thing because people have different physiologic set points for their base orexin tone and they have different lifestyle expectations, whether they want to stay up until 10:00 at night or they want to go at 7:00 p.m. So, our feeling is that we've established in data so far in NT2 patients as well as IH in early stage that patients with normal orexin tones can benefit from an orexin agonist. So then that degree of that benefit will be determined by each individual set point, as I just described. So, the prerequisite for addressing that commercially is just a range of doses with data supporting those -- that range of doses in the label, which is exactly why we've designed the pivotal study, the Brilliance study to include once-daily dosing, split dosing across that range of doses that we elaborated in Phase II.

Moving next to Ash Verma with UBS.

This is [ Ho ] on for Ash. Our first question is for the pending LUMRYZ IH study. How do you think about the placebo arm here given the patients may have some bias knowing that sodium oxybate works in IH? And our second question is, so it's good to see the decent beat on VIVITROL. Can you help us understand your latest thoughts on how the VIVITROL revenue trajectory could be in 2027 and beyond as Teva Generic enters?

I'll take the first and Blair and Todd talk about the second. The LUMRYZ -- just understanding the LUMRYZ IH Phase III study is a randomized withdrawal study. So, patients would have all been on the oxybate. So, there's no blinding issue. And then it's withdrawn on a blinded basis. So, this is the same design that Jazz used with their Xywav study.

Yes. And I think with regards to VIVITROL, as we move into 2027, there's a number of interesting scenarios in front of us. Obviously, we have the potential entrant of Teva into the space in the beginning of 2027. And we're looking at a lot of scenarios related to that, including some scenarios where Teva actually doesn't -- isn't able to make it into market. What we don't expect, though, is to have a really dramatic impact on VIVITROL as these -- as the new entrant comes into the place. VIVITROL is a unique asset. It requires a lot of manufacturing capability. It requires a lot of commercial infrastructure and handholding with patients and physicians.

And Todd can give you a little more on that.

Yes, absolutely. Just to kind of reiterate, we have really 2 key priorities right now, and that's delivering for 2026 for VIVITROL. We're right on track to be in the range of our full year guidance, really driven by the alcohol dependence indication. And to reinforce what Blair said, we've been working on this for a number of years. We have a range of scenarios that we're playing through, and our research continues to reinforce that we don't see this as a typical erosion if Teva were to make it into the market, it's a durable product. And so, we'll be prepared regardless of what those scenarios are to flex our resources if we need to and also be prepared to compete.

Our next question will come from Uy Ear with Mizuho Securities.

So maybe -- apologies for missing this, I dialled in a little bit late. Could you maybe just help us understand if there's a reason or not on why the patient mix may change going through the year given the nice patient mix that led to better-than-expected gross to net? And the second question is on ADHD, is there anything else in terms of potential differentiation other than efficacy?

Yes. I'll take the first one regarding patient mix. We did see some favorability, some Medicaid favorability in the first quarter of the year. We don't expect -- we don't actually forecast on favorable patient mix. We do expect that for the full year that we would see the access profile for LYBALVI expand. So, we do have better line of sight to what that profile would look like. We're always in active negotiations with payers and our full year range actually assumes that, that could play through. But that's the real logistics of the business right now. We're just not forecasting any additional favorability for the remainder of the year.

And then with regards to ADHD, look, we're looking for differentiation both on efficacy and tolerability. I think if you look at the ADHD market and how it's evolved, it really was started around the stimulants and the amphetamine use within adults and children. And that comes with significant trade-offs. It comes with side effects. It comes with potential abuse. And I think people have been really looking for more tolerable agents that are maybe nonstimulant for a long time. And up until now, really the efficacy of those agents really just hasn't matched what you've seen in the stimulant class. So, I think the really holy grail for this indication in this area is to create an asset that has the efficacy of a Vyvanse or something like that, but also is really well tolerable. And the orexin agonist class has the potential for that. It's a new mechanism of action. It operates on the alertness centers in the brain. We've seen attention and impulsivity benefits in preclinical models. We've seen the right neurotransmitter release and profile as we look at these assets. So we think there's a real opportunity here to really thread that needle and provide a new benefit to this patient population.

And our final question will come from David Hoang with Deutsche Bank.

I just had 2. Maybe first with the Vibrance-3 IH study. When we do get that data for the split dosing arm, I guess, ideally, what would you like to see for that split dose versus a single dose to help validate your hypothesis? And I guess do you just have any sense of in the real-world setting if a split dose or a single dose would be preferred? And then on the LUMRYZ opportunity in IH, if LUMRYZ is approved for IH, how do you think about where your patients may come from? Do you think that would be mostly oxybate naive in IH? Or would you think that there'd be a good proportion of switches from Xywav as well?

David, it's Rich. I'll take the first. The hypothesis for the split dose in IH is driven by the observations that we saw in the NT2 study. And so the simple readout would be to look at the MWT and see whether we're extending the later time points and elevating the latencies in the later time points, recognizing that it's almost a laboratory measure that we're using in the IH population because the MWT is not a preferred endpoint for IH, but it's simply a way for us to demonstrate the pharmacodynamic effect of the split dose and to confirm our dosing assumptions. In the real world, we've talked to a lot of different folks in the course of market research. I think that the once daily will continue to be probably the modal approach that patients use. But over time, as the category continues to mature, I think we analogize it's the ADHD space where there's a whole range of dosing alternatives and people can tailor their dose to their lifestyle. And that's why we think there will be a real virtue to having a suite of once-daily doses as well as accompanying split doses that people can then dial in to the level of wakefulness that matches their lifestyle and their disease.

Yes. And in terms of the IH opportunity for LUMRYZ, we clearly see a high unmet need here, and we think there's a significant opportunity for expansion potential as we think that the market right now is very modest, even with one product approved, there's only a very modest penetration. So, we see market expansion opportunity, which will be a new patient start opportunity that LUMRYZ will have the ability to tap into. That's what we've seen with narcolepsy. But at the same time, it's also going to create another market, which is a switch market. And that's what we've seen with narcolepsy. So, we think that it will mimic kind of the patient patterns that we've seen in narcolepsy, which is new to oxybate patients, switch patients and returning patients.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Sandra Coombs for closing comments.

Great. Thank you, everyone, for joining us on the call today. Please don't hesitate to reach out to us at the company if we can be further helpful. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Alkermes Fourth Quarter 2025 Financial Results Conference Call. My name is Melissa, and I will be your operator for today's call. [Operator Instructions]. I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, please go ahead.

Good morning. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter and year ended December 31, 2025. With me today are Richard Pops, our CEO; and Joshua Reed, our Chief Financial Officer; Todd Nichols, our Chief Commercial Officer; and Blair Jackson, our Chief Operating Officer, who will join us for the Q&A. .

A slide presentation, along with our press release, related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors section of alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements.

Please see Slide 2 of 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 our 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 now I'll turn the call over to Richard for some opening remarks.

Great. Thank you, Sandy, and good morning, everyone. While we clearly had a strong and eventful 2025. As we enter 2026, there are 3 elements of the business to understand and to value. And the first is the commercial business. In 2026, we expect to generate revenues of more than $1.7 billion and adjusted EBITDA of more than $370 million. And we're continuing to build this business with the recently completed acquisition of Avadel. .

Adding Avadel represents an important milestone and strategic step in the company's transformation. The acquisition adds an important new revenue stream and growth opportunity to our portfolio of commercial products. Strategically, it accelerates our entry into the commercial sleep medicine market and provides a highly functional commercial platform for the potential launch of alixorexton, which brings me to the second element of our business, alixorexton, our most advanced orexin candidate.

We plan to enter Phase III in narcolepsy this quarter following the completion of a rigorous Phase II program and with recently granted FDA breakthrough therapy designation. We had our end of Phase II meeting with FDA last week, which solidified our registration plan and reaffirm for us the benefit of consistent interactions with the reviewing division. We believe alixorexton has blockbuster potential and could advance the standard of care in central disorders of hypersomnolence. We're ready for Phase III. We're excited to get going.

And third is the opportunity that extends beyond alixorexton in central disorders of hypersaline. Orexin 2 receptor agonist candidates represent an entirely new potential vertical of growth and expansion in multiple disease areas beyond sleep medicine. We identified this early on, and we're leaders in advancing the frontiers of this pharmacology. Following a review of the financials and the commercial performance and outlook, I'll provide an update on where we are today and our plans to advance these development programs in 2026.

So with that, I'll turn it over to Joshua to review our financial performance and expectations.

Thank you, Richard. Alkermes' economic engine is underpinned by a diverse portfolio of commercial products. These revenue streams provide the resources to advance our exciting pipeline of development programs while generating strong cash flow.

In 2025, we generated total revenues of nearly $1.5 billion, driven primarily by our proprietary product portfolio, which grew 9% year-over-year and generated approximately $1.2 billion in net sales. For the year, we recorded VIVITROL net sales of $467.9 million, ARISTADA net sales of $370 million and LYBALVI net sales of $346.7 million.

For the year, we recorded manufacturing and royalty revenues of $291.3 million, including revenues of $130.5 million from [indiscernible] and $109.6 million from the long-acting INVEGA products.

Turning to expenses. Cost of goods sold were $196.5 million, which compared favorably to $245.3 million for the prior year, primarily reflecting efficiencies following the sale of our Athlone based manufacturing business last year. R&D expenses were $324 million compared to $245.3 million in the prior year reflecting investments in the [indiscernible] Phase II studies of alixorexton across narcolepsy and idiopathic hypersomnia. And first-in-human studies and development efforts for our next Orexin 2 receptor agonist candidates out ALK 4510 50 and ALK 7290.

SG&A expenses were $701.5 million compared to $645.2 million in 2024, reflecting the expansion of our psychiatry field organization last year and promotional activities related to evolve as well as certain legal and transaction-related expenses incurred in 2025. The investments we have made in the expansion of our psychiatry sales force have generated a strong return and we expect to continue to build on that momentum going forward. Our performance generated strong profitability, resulting in GAAP net income of $241.7 million, EBITDA $285.6 million and adjusted EBITDA of $394 million for the year.

Turning to our balance sheet. We ended the year in a strong position with $1.3 billion in cash and total investments. In order to fund the acquisition of Avadel, which closed in February 2026. We used approximately $775 million of cash from our balance sheet and entered into term loans totaling $1.525 billion due in 2031. We expect to pay down this debt quickly with cash flows from the business.

In 2026, we plan to continue to manage the business with disciplined operational execution to deliver strong profitability and cash flow while continuing to invest in the opportunities we believe will drive long-term shareholder value. With the Avadel acquisition now closed, our commercial platform is meaningfully strengthened and we are allocating capital to the highest potential growth drivers across the business, including the advancement of our Orexin portfolio.

Our 2026 financial expectations were outlined in the press release issued this morning and reflect the combined organization, including 10.5 months of contribution from Avadel and certain transaction expenses and related accounting adjustments that were outlined in the press release that we issued earlier this month upon closing of the acquisition.

Starting with the top line. We expect total revenues for 2026 to be in the range of $1.73 billion to $1.84 billion, driven primarily by net sales from our proprietary products in the range of $1.52 billion to $1.6 billion. Todd will provide more specific details on each of our proprietary products, including expected LUMRYZ revenues for the remainder of the year.

For manufacturing and royalty revenues, we anticipate 2026 revenues in the range of $210 million to $240 million. This outlook reflects the scheduled expiration of certain Zeplion royalties, which phase out on a country-by-country basis during the second half of the year. For VUMERITY, we completed our manufacturing obligations in 2025. And going forward, VUMERITY revenues will be solely driven by the royalty on worldwide net sales without any associated costs.

Turning to expenses. Cost of goods sold are expected to be in the range of $365 million to $385 million reflecting the impact of purchase price accounting related to LUMRYZ inventory. In connection with the closing of the acquisition, LUMRYZ inventory held by Avadel was marked to fair market value, resulting in an increase of approximately $180 million over its cost. Approximately $150 million of this amount will be expensed as the inventory is sold in 2026.

R&D expenses are expected to be in the range of $445 million to $485 million. The increased investment reflects activities of the combined organization and development across the Orexin portfolio. Later this quarter, we plan to initiate the Phase III brilliance program for alixorexton in narcolepsy. We expect to complete the recently expanded Phase II study in IH in the fourth quarter.

In addition, we will continue to advance our ongoing Phase I work for ALKS 7290 and ALKS 4510, with Phase II programs expected to begin in the second half. In terms of the Avadel R&D portfolio, we plan to complete the Phase III program in IH in the first half and to continue to advance [ dellooxabate ] in the early clinic.

SG&A expenses are expected to be in the range of $890 million to $930 million. This reflects consistent investments in our proprietary commercial portfolio plus $50 million of transaction costs related to the acquisition of Avadel, which closed earlier in the first quarter and the incorporation of Avadel commercial infrastructure supporting LUMRYZ for the remainder of the year.

In connection with the acquisition, we will also begin to record amortization of intangible assets. In 2026, we expect this will be in the range of $95 million to $105 million. Net interest expense for the year is expected to be in the range of $75 million to $85 million, and we expect a net tax benefit of approximately $20 million.

While GAAP results will be confounded by the accounting for the Avadel acquisition, we expect to maintain a strong cash flow positive profile in 2026. We expect the GAAP net loss in the range of $115 million to $135 million, reflecting accounting related to the transaction, contrasted by positive EBITDA in the range of $60 million to $90 million and adjusted EBITDA in the range of $370 million to $410 million.

As a reminder, adjusted EBITDA excludes share-based compensation and transaction-related expenses of $50 million as well as the noncash inventory step-up charge of $150 million that I previously mentioned. Adjusted EBITDA is useful and that is more reflective of cash flow to the business.

As we look ahead to support your modeling, I'll provide some additional context on our expectations for the first quarter of the year. In the first quarter of we expect net sales from our proprietary commercial product portfolio to be in the range of $310 million to $330 million. This reflects our expectation of less pronounced inventory fluctuations during the first quarter, typical patient co-pay and deductible reset dynamics and historical demand patterns as well as 6 weeks of contributions from LUMRYZ. .

Royalty and manufacturing revenues will reflect the annual reset of the royalty teams on the remaining long-acting INVEGA products and typical Q1 end market demand patterns. We expect these factors will drive a sequential decrease compared to Q4 2025 to a range of $40 million to $45 million.

On the expense side, we expect cost of goods sold in the first quarter of 2026 to increase by approximately $20 million sequentially from the fourth quarter primarily driven by the inventory fair value step-up related to LUMRYZ. For the first quarter of 2026, we expect R&D expenses to increase sequentially from Q4 to a range of $110 million to $125 million, primarily driven by activities related to the initiation of the alixorexton Phase III program in narcolepsy and the integration of Avadel's ongoing R&D activities related to LUMRYZ and [indiscernible].

We expect SG&A expenses in the first quarter to be in the range of $230 million to $250 million reflecting onetime transaction-related costs of approximately $40 million, the incorporation of LUMRYZ commercial activities in the latter half of the quarter, and consistent investment in promotional activities for [indiscernible], ARISTADA and [ GIVITRO ]. Taken all together, we expect Q1 adjusted EBITDA in the range of $30 million to $50 million.

As we close out 2025, we do so from a position of financial strength. Our commercial portfolio delivered another year of solid performance, providing a profitable foundation that enables continued investment in our strategic priorities. With the Avadel transaction now closed, we entered 2026 with expanded commercial capabilities and a broader platform from which to grow. Across the organization, we remain focused on operational discipline, efficient capital allocation and investing in the opportunities we believe will drive long-term value, including the advancement of our Orexin portfolio and the integration of LUMRYZ into our commercial model. We are well positioned for the year and committed to delivering shareholder growth.

With that, I'll now hand the call to Todd for a review of the commercial portfolio.

Thank you, Joshua, and good morning, everyone. 2025 was another strong year of disciplined execution against our commercial strategy. I am pleased that we delivered at the high end of the increased guidance ranges we provided in October for our proprietary products, driven by strong performance across all 3 brands. .

For the full year, proprietary product sales totaled $1.18 billion. The commercial investments we made throughout 2025 have already generated strong returns and strengthen our foundation for growth as we enter 2026. Joshua has taken you through the top line results. So from my remarks, I will focus on the underlying demand trends as well as our strategic priorities and expectations for 2026. Starting with VIVITROL. In 2025, VIVITROL net sales were $467.9 million, reflecting 2% growth year-over-year.

VIVITROL performance continued to be driven by growth in the alcohol dependence market and our ability to capitalize on highly localized market dynamics in certain states and payer systems. As a reminder, VIVITROL results in 2025 included approximately $27 million of gross to net favorability that we do not expect to reoccur. As we look ahead to 2026, we expect VIVITROL net sales in the range of $460 million to $480 million. We continue to expect VIVITROL to contribute meaningfully to our revenue and profitability profile over the coming years.

Turning to our psychiatry franchise. The expansion of our psychiatry sales force in early 2025 was a key strategic initiative designed to enhance our competitive share of voice and has been highly successful. With our expanded footprint in place, we significantly increased call frequency to high-priority prescriber targets across both LYBALVI and ARISTADA throughout the year. This improved reach and frequency combined with strong execution in the field contributed to broader engagement and increased breadth of prescribers for both brands.

To the ARISTADA product family. In 2025, net sales were $370 million, reflecting 7% growth year-over-year. Similar to VIVITROL, during the year, ARISTADA results included approximately $14 million of gross to net favorability, which we do not expect to recur in 2026. Throughout the year, leading indicators of underlying demand remains solid. We continue to see expanding prescriber breadth, healthy persistency, and strong new-to-brand prescriptions, reflecting effective execution by the field team.

For the full year 2026, we expect ARISTADA net sales in the range of $365 million to $385 million. In 2025, net sales of LYBALVI grew 24% year-over-year to $346.7 million. Underlying TRx growth was 24% year-over-year driven by sustained momentum in new patient starts and continued expansion in prescriber breadth. Throughout the year, improvements in payer access supported broader utilization and reinforce the durability of demand. Gross to net adjustments were approximately 29% in 2025.

Looking ahead for 2026, we expect LYBALVI net sales in the range of $380 million to $400 million reflecting expectations of strong continued growth and demand and gross to net adjustments widening into the mid-30s starting in Q1 of this year, reflecting a strategic expansion of payer access to support broader adoption. As we look ahead to 2026, we are excited to build on this strong foundation. This year also marks our entry into the commercial sleep medicine market, accelerated by the recently closed acquisition of Avadel which brings a number of valuable new assets into our business, including Avadel's commercial product LUMRYZ and organization supporting the brand.

First, for a few thoughts on LUMRYZ. Launched in 2023, LUMRYZ is a once a bedtime sodium oxybate for the treatment of narcolepsy. The features of this product are differentiated and address a significant unmet need in the treatment landscape for narcolepsy. Intended to consolidate the fragmented sleep, sodium oxybate are an important option in the treatment paradigm for narcolepsy, and LUMRYZ is the only once at bedtime option available, avoiding the need for patients to wake up in the middle of the night for a second dose. The Avadel team has done exceptional work launching this product, and we intend to build on this momentum.

In 2025, LUMRYZ generated approximately $279 million in net sales. With approximately 3,500 patients on LUMRYZ therapy as of the end of 2025 and a roughly 40% increase in number of patients from the fourth quarter of 2024. With an estimated 50,000 oxybate eligible patients with narcolepsy, we believe there is a significant opportunity to continue to expand the number of patients on LUMRYZ. We are delighted to welcome the talented commercial team joining us from Avadel, and their integration to our organization is already underway. Their expertise and deep relationships in sleep medicine will be critical to our success with LUMRYZ and provide an opportunity for Alkermes to establish a strong presence in this community as we prepare for the potential future launch of orexin 2 receptor agonist, including our own alixorexton, which we believe will be transformative in how narcolepsy is managed.

We expect strong continued growth -- uptake of LUMRYZ as we integrate this commercial team and capabilities. We expect LUMRYZ total revenue in the range of $350 million to $370 million for the full year. For the first 6 weeks of the year, the Avadel team was off to a strong start and generated revenue of approximately $33 million. Following the recent completion of the acquisition, we expect that in 2026, Alkermes will generate an additional $315 million to $335 million in LUMRYZ net sales for the remainder of the year. We are truly excited about the opportunity for LUMRYZ, which we believe will continue to play an important role in the treatment paradigm. With the momentum across our existing brands and the addition of LUMRYZ, we enter 2026 with meaningful opportunities to drive growth and broaden the impact of our commercial business.

With that, I'll pass the call back to Rich.

Good. Thank you, Todd. So as you've heard, the financial foundation of the business is strong with a Brazilian commercial portfolio with important growth potential. 2026 will be a year of execution across the alixorexton development program. As I mentioned in my opening comments, last week, we completed an important milestone in the development program with our end of Phase II meeting with FDA. This meeting followed the completion of a Phase II program developed in consultation with the agency. The interaction was detailed and constructive and helped confirm key design elements of the pivotal program. With breakthrough therapy designation and clarity regarding the necessary elements of our registrational program, we're in a strong position to initiate the Phase III later this quarter.

So here's what it's going to look like. The global [ Brilliance ] Phase III program in narcolepsy will consist of 3 12-week randomized parallel design with controlled studies, 2 in narcolepsy type 1 and 1 in narcolepsy type 2. In NT1, each study will include 3 arms and will enroll approximately 150 patients. The primary endpoint will be change in mean sleep latency on the maintenance of wakefulness test or MWT, with weekly cataplexy rates in the Epworth Sleepiness Scale, or ESS, as key secondary endpoints.

The BRILLIANCE NT2 study will be a 4-arm study and is planned to enroll approximately 180 patients again, with MWT as a primary endpoint and ESS, a key secondary. Each program will have as an anchor, a once-daily dose that demonstrated robust efficacy in Phase II. We expect that the option for once-daily dosing will continue to be a differentiating feature of alixorexton. We'll also include split dosing regimens designed to drive wake forest later into the evening hours. Along with the once-daily option, split dosing may add another strong element to the product profile.

Our first clinical trial from the split dose regimens will be from the ongoing vibrant Phase II study in idiopathic hypersomnia. This study is expected to be completed in the fourth quarter. So for alixorexton, we have a clear path forward, we're capitalizing on our momentum from Phase I and and we're excited to get started with the Phase III program later this quarter.

We also expect to have data from the REVIDALISE Phase III study of LUMRYZ in patients with idiopathic hypersomnia in the second quarter. This 14-week randomized withdrawal study enrolled approximately 150 patients. If positive, we expect these data will serve as the basis for an sNDA with the potential launch in early 2028, if approved.

Now turning to our other Orexin 2 receptor agonist development programs, ALK 7290 and ALKS 4510, targeting the Orexin pathway, with well-tolerated small molecule drugs is a rich area for pharmaceutical development. ALK7290 and 4510 are both currently in Phase I studies in healthy volunteers. We expect to advance these candidates into patients this year. We plan to develop ALK 7290 for ADHD, moving quickly to generate proof-of-concept data in patients this year. ADHD is characterized by persistent difficulty in maintaining attention and concentration and it's frequently accompanied by impulsive behavior.

Despite the availability of stimulant and nonstimulant treatment options, there's a significant unmet need in this space and an orexin agonist targeting the wakefulness and attention circuitry could be a major advance. With approximately 15.5 million adults and 6.5 million children in the U.S. with a current ADHD diagnosis, this represents a significant potential opportunity.

ALK7290 has demonstrated improved measures of attention and task engagement and decreased behavioral impulsivity in validated preclinical models. We've already shared these compelling data with you. Our single and multiple ascending dose cohorts in healthy volunteers are underway. As we progress through the multiple ascending dose cohorts, we plan to initiate a multidose Phase Ib study evaluating safety, tolerability and efficacy in adult patients with ADHD, and we expect data from this translational study in the second half of the year.

In parallel, we're planning for success and expect to initiate a Phase II study in the second half of the year. We plan to develop ALK 4510 for fatigue associated neurodegenerative disorders, starting with fatigue associated with multiple sclerosis and Parkinson's disease. Fatigue is one of the most common and burdensome symptoms affecting these patients. Patient populations here are significant with approximately 1 million patients in the U.S. with MS and another 1 million with Parkinson's.

ALK 4510 went into its healthy volunteer Phase I study last year and has completed several single and multiple ascending dose cohorts. We're planning to initiate a multidose Phase IIa study this year evaluating safety, tolerability and efficacy and fatigue associated with MS and Parkinson's. We see this as the beginning of a much more extensive fatigue in the future.

So we've built a strong foundation for growth and for value creation, both in the near term and for the future. With alixorexton moving to Phase III, ALK7290 and 4510 moving to Phase II and lure in Phase III for IH and [indiscernible], sodium-free once-nightly oxybate candidate early in the clinic. This company has an unusual combination of assets, a profitable neuroscience business a late-stage potential blockbuster product in development and leadership in one of the most exciting new areas of neuroscience.

So lastly, this morning, we announced that I will at long last, passed the CEO torch to Blair Jackson who's our current Chief Operating Officer and my valued colleague for many years. We'll make the transition official this summer, and I will continue as Chairman. The timing is good.

The company is in the strongest position it has ever been in my 35 years for reasons that we've summarized today. Now is not the time for reflection. We've got too much important work to do over the next few months. But I will say what many of you know, which is that I'm extremely proud of this company, its people and all that we've accomplished. Thousands of patients have benefited from our medicines, developed in a culture defined by scientific curiosity, integrity and deep commitment to patients and families. I have great confidence that we'll continue to build on the momentum we have right now.

Alkermes is on a whole new growth path. It took us some time to get here, but we did and the road ahead looks extraordinarily promising.

So with that, I'll turn the call over to Sandy for the Q&A.

Okay. Thank you, Richard. We'll now open the call for Q&A, please. .

[Operator Instructions]

Our first question comes from the line of Joseph Thome with TD Cowen.

Always get toward together, Rich, best of luck to both of you on this next step. Maybe when thinking about the Phase III trial design and start going into the split dosing for some of these candidates, how should we think about the AE profile associated with that, obviously, hoping to boost some efficacy, is that also going to reduce AEs because you're splitting up the dose? Or would you potentially also drive up as? How are you thinking about that? .

It's Rich. First of all, I think the most important at the highest level is that the data so far for these 2 receptor agonist in treatment narcolepsy or they're generally quite well well tolerated and very safe. So the baseline AE profile is quite favorable. The way we model the split doses is in order to drive those later hours of wakefulness for those patients who want an extended duration away from us with a very similar AE profile.

So I think that's the virtue of running such a big Phase II study where we can model the exposure wake from this profile that we can select that split dose in order to maximize the later durations while minimizing side effects.

Our next question comes from the line of Leonid Timashev with RBC Capital Markets.

Congrats, Richard, on a storied career. I guess I wanted to ask on now that the Avadel deal is closed, whether you can speak a little more about the potential synergies across the sales force between the psychiatry sales force and the potential fleet sales force, there's overlap in prescribers that can helpfully both businesses and just generally how the onboarding of the LUMRYZ team has been?

Yes, absolutely. We are really excited about the integration of the Avadel commercial team. As I said in my prepared remarks, the team has done just an exceptional job and they're off to a fast start this year. The beauty of this strategic integration is it's our first step in the sleep medicine market. Right now, we don't see a lot of overlap between our current psychiatry sales force and the sleep medicine sales force. And so there is a beauty in that, that we can keep our psychiatry team excessively focused right now on driving [indiscernible] ARISTADA. .

And so we think there will be some synergies eventually when we get to the place when we're prepared to launch alixorexton. And at that time, we'll be building out that sales force to maximize the opportunity for both LUMRYZ and alixorexton.

Our next question comes from the line of Joon Lee with True Securities.

I think I understand the medical rationale for narcolepsy patients taking both of spaces and orexin acnes, but what sort of evidence would you need to generate to convince the payers to reimburse for both premium priced drugs, especially since the patients from both [indiscernible] seem to be doing well just on orexin agonist in the long-term extension after being washed out of oxybate. Just trying to understand why orexin agonist wouldn't cannibalize the oxybate market. .

Yes, it's a really good question. This is Rich. I think that the way we think about it is that the orexin agonists are working on the wakefulness side of the equation. And that may indeed be sufficient for many, many patients. As you know, most patients aren't on oxybate right now. But the ones who are on oxybate are on them because of what they do on the other half of the day, which is the fragmented sleep piece of it.

So we think there will be a cohort of patients for whom both sides of the equation are going to be important. Their daytime wake from us as well as consolidating the fragmented sleep at night. It remains to be seen at the full range of doses what the complete effect is of an orexin 2 receptor agonist on reconsolidating nighttime sleep. But we know from talking to patients over the last few years, there's a dedicated patients for whom the nighttime benefits of oxybate will continue to be valuable. And we'll be the only company so far that has agents in both camps.

So we will be motivated to actually generate some data for payers explaining for that rarefied cohort of patients why both medicines might be the most effective way of treating their disease.

Our next question comes from the line of Luke Herrmann with Baird.

I just wanted to extend my congratulations to both Richard and Blair. So thinking about the LUMRYZ Phase III and IH, can you help us understand your internal bar for ESS that would give you confidence ahead of a potential launch and maybe the degree of importance of key secondaries in the eyes of prescribers. .

This is Rich. I think that the IH study mirrors very much what was done for the previous oxybate program that was approved by the FDA. So when we acquired Avadel, we picked up this program, essentially at the end of its development phase. And as we did the diligence on it, what we found is that the randomized withdrawal study mimics exactly what was happening with [indiscernible]. So our expectation is that the -- when we see the data in Q2, they will see a very similar profile for the 1 tightly medicine. With respect to key secondaries, I don't think I've answered that question right now because I just don't have that protocol committed to memory yet, but we can get back to you on that.

Yes, I'll just add to that the primary ESS, as Rich said, what the randomized withdrawal study. So our expectation is that it would mirror what we've seen in the market already with [indiscernible]. Key secondaries are PGIC and IHSS and our expectations that would be similar to what we've seen for the current product in the market. I'll just reinforce that it's really a significant opportunity here.

As you kind of heard us in the past, the eligible population is about 40,000 our estimate in the U.S., and it's a very low penetration right now with only one approved product, this penetrated about 10% in the marketplace. So this is something that we are looking forward to.

Our next question comes from the line of [ Rudy Li ] with Wolf Research.

Congrats reaching by for the euro. I had a question regarding the upcoming Phase III. So apparently I try to start the trial for NT1 I'm just curious have you discussed key factor for a Phase III trial in IH with FDA yet. Can you potentially start the trial earlier would you really need to wait for the Vibrant data?

I think for IH, we'll do exactly what we did for narcolepsy, which is you get the Phase II data from the vibrant study have a formal end of Phase II meeting with FDA and map out and agree on the Phase III program. So we'll wait for those data to come later this year before we initiate that meeting with FDA.

Just a quick follow-up. Like what's your current understanding on the dynamic here, like NT1 versus NT2 and NIH?

The dynamic from a market perspective or from a...

Yes.

I think as Todd just said, the IH opportunity is a really interesting 1 because if you simply look at claims data, you would say that there's about 40,000 patients who are being treated for idiopathic hypersomnia today. But we think that, that pretty significantly underestimates the actual clinical need for a medicine that would deal with hypersonics that is not diagnosed as narcolepsy. So while we have a better sense of the narcolepsy numbers, i.e., about 200,000 patients in the U.S. prevalence, about 100,000 being diagnosed, about 80,000 being treated, we have a much more vague understanding of how big the IH market may be.

So as we've talked about before, the narcolepsy market by itself represents a very significant commercial opportunity, given the unmet needs in that space. And IH, I think that that's the next step in the evolution of the alixorexton story. So we'll wait for the Phase II data, conduct the Phase III and then hopefully launch into that as well.

Our next question comes from the line of Ami Fadia with Needham & Company.

With LUMRYZ now in your portfolio, what are your plans to study alixorexton along with an oxybate together to explore the synergistic effect of a patient being treated with both outside of the information that we already have based on anecdotal evidence?

Ami, and I just was saying in the previous question, I think that there's a potential benefit for certain patients of dealing with the excessive daytime sleepiness with a wakefulness promoting agent like alixorexton as well as consolidating fragmented nighttime sleep with an oxybate. That will not be the modal treatment, i.e., I think most patients will not opt for that polypharmacy.

But for those patients that derive benefit from both the side of the equation, I think it could be a very, very powerful treatment approach. I can tell you during the -- even during the pendency of the Phase II studies, we were hearing from investigators and interest in testing both agents together in certain patients. And we'll be the only company that have agents in both camps. And so from our perspective, we see it less as a registrational pathway as more of an evidence building pathway for the purpose of reimbursement. So I think you can expect to see more from us on that front in the weeks ahead.

Our next question comes from the line of David Amsellem with Piper Sandler.

This is Alex on for David. So now that you have LUMRYZ under your control, how are you thinking about the field force for the product? Also bearing in mind that there will be another market entrant by year-end? And if an expansion is on the table, are you thinking about it more from a breadth or depth perspective?

Yes, absolutely. So right now, we feel like the sales force is rightsized to really maximize the opportunity. I think context is important here. We've done a lot of work in this area. Our estimate is there's about 50,000 oxybate eligible patients in the marketplace right now. And there's a dynamic segment of about 9,000 patients that are cycling. And so that's really the target for LUMRYZ. That's what the sales force has really lined up against is really the oxybate prescribers to maximize that dynamic segment. .

We're seeing very encouraging trends, obviously. The team made some investments late last year with expanding the sales force slightly, also some commercial investments within our patient services area, and we're seeing benefits from that. So right now, we believe that we are rightsized. As Rich said, we think this is a durable market, and so that patients will continue on oxybate. We'll have to see what -- how the year plays out with competitive entrants, but we clearly see this as a uniquely positioned product, and we think we're rightsized at this point.

Our next question comes from the line of Jason Gerberry with Bank of America.

My question is just how to think about kind of underlying SG&A spend beyond 2026. And if you can outline in the 2026 guide for the full year, sort of what's the embedded onetime transaction costs. Because as I look ahead beyond 2026, I assume that there's redundant G&A spend between Avadel and Alkermes and then with the VIVITROL LOE in 2027, I imagine there's opportunity to harvest that brand for profit. unless the decision internally is to just reallocate that spend towards other brands with longer tails. So kind of curious if you can just outline some of those puts and takes in the SG&A kind of beyond 2026.

Yes. Let me talk about SG&A. With respect to 2026, what you have impacting SG&A are a couple of things. You've got about $50 million and onetime transaction costs that are impacting the year. So clearly, those won't carry over into future periods. What you also have in 2026 compared to 2025, obviously, is of taking on the commercial investments associated with LUMRYZ and typical increases that you might see in labor and benefits. .

Frankly, if you exclude the impact of the transaction costs and the acquisition of Avadel essentially on our base business, our base company SG&A is flat. And so thinking about future periods of 2026 and beyond, certainly, we'll look to control spending and be disciplined on that front. And we will look to determine whether or not we've got some synergies and opportunities to reallocate some of those costs of our business as it evolves to increasing investment, if necessary, for alixorexton and for our sleep medicine.

Our next question comes from the line of Ash Verma with UBS.

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Congrats to both Richard and Blair. So just on LUMRYZ, there's a bit of a focus on the impact from the first-generation full generic market formation. Some of the initial list prices coming in much above where the expectation was. And I know Jay also talked about this last night, impact [indiscernible] in the second half. Like how are you thinking about that for LUMRYZ just once nightly. Do you think that similar dynamic, what would apply to like an indirect pricing pressure [indiscernible] would also replicate on LUMRYZ or does it have some sort of an advantage that the competitor might not have?

Yes, Ash, I'll take that. We clearly think there's an advantage for LUMRYZ positioning. Again, it's the only once-nightly oxybate which is significant value to patients in HCP. So the positioning is clear. So strategically, we do believe there's a significant advantage. In terms of just the dynamics of the market right now, I think I think just for context, with generic multisource generics coming to the market, that's very specific to XYREM, very specific there. That is not specific to LUMRYZ. These products are not interchangeable.

So our view right now and what we see in the marketplace with our discussions with payers is payer access is strong. Over 90% of commercial payers or commercial patients have access to LUMRYZ. So we're not seeing any material changes at this point. Obviously, we're going to have to see how this plays out. Likely if there's any impact, it would probably be second half of the year or a little bit later. And so we're going to watch that very closely.

What we do know what we hear from our sleep specialist is that they're committed to making sure that patients get access to LUMRYZ. Their sleep centers have the capabilities to support navigating market access hurdles and and they're committed to doing that. So again, we don't see any material changes at the beginning of the year. We'll see how it plays out for the second half of the year.

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

Can you talk about oxybate that you inherited in the acquisition, just the development plan and how excited you are about this product, you view it as a replacement strategy for LUMRYZ eventually? And just give us a sense of when you're thinking -- what do you have to do to get it to market? And how fast can you get to market? .

Marc, it's Blair. It's a good question. So actually, [ veloxybate ] is a really interesting asset that came over as part of the Avadel transaction. it has an opportunity to play in really the low to no sodium space. And I think what we're looking to do there is try to move the program forward as quickly as possible, trying to really look through the PK profile of that and leverage some of our formulation capabilities to advance that rapidly through the clinic.

So it's too early to say whether this would be a future replacement to LUMRYZ or an addition into the portfolio. We'll see how the data plan pays out over the next year or so.

I mean do you think you're going to have to do a full development plan? Or is this bridging studies that you can do to get it to market? .

That totally depends on the data that we get early. If we're able to match bioequivalence and things like that, then there's a much rapid path forward if we need to do some additional studies, we'll do that. This is an area we know really well. As you know, we're formulation expert, and we've navigated these paths before. So we're early stages here, but it's now in our hands, and we're moving forward aggressively.

Our next question comes from the line of Akash Tewari with Jefferies.

This [indiscernible] on for Akash. Just a couple of questions about your ADHD study. Are you able to share any more details about that? And are you considering potentially inverting the population for a specific ADHD phenotypes? .

Yes, it's Rich. We're not going to enrich for any particular phenotype or cronotype. What we're going to do is what we're excited about for ADHD is very similar in many ways to what we did in narcolepsy in that we think in a reasonably short period of time in a reasonably small cohort of patients, we should be able to discern dose response and efficacy signal. So we're going to move quickly into that translational study. .

Our next question comes from the line of Ben Burnett with Wells Fargo.

I wanted to ask about the split dosing program split dosing the alixorexton program. Just color on the protocol, like when is the second dose taken? And I guess, is it -- given that this is a split dose, -- is it possible you could get away from having any sort of food restrictions? .

So this is Rich. I think that we won't give a whole lot of specificity on the split dose strategy other than to say what its objective is, which is to drive additional wakefulness in the later hours of the day for patients who might want to extend that wake from this duration. What we're finding is that people are experiencing a quality wakefulness that they've not had before. And they're very interested in certain situations of having that persist deeper into the hours of the evening.

So because of the modeling we've been able to do through our Phase II program, we have a really good sense of how to administer 2 different doses administered in time to both extend that wakefulness and also minimize associated side effects. So that's proprietary information. And so we're going to keep that under wraps as long as we can. And I think that, that's going to -- at the end of the day, if we can have sort of an anchor once-daily dose available to all patients as well as this option for split doses, I think that will differentiate the product significantly.

Our next question comes from the line of Umer Raffat with Evercore ISI.

First, congratulations, air on Ligand rule. But my question, Richard, for you is I've been tracking this from the days of 8,700 and 3831. And I feel like pipeline finally is in a spot that it's never been in Alkermes history. So I'm just curious about the the timing of your decision to give up the CEO role while saying Chairman? And secondly, on your Phase III design strategy that you laid out, could you remind us if it includes split dosing both in NT1 and in NT2?

Umer. My theory all along has been the time to pass the baton -- recognize I've been doing this forever, is when the company is just in a demonstrably strong position. In the past few years, we've had basically changed the business model from a royalty-based company based on formulation technology into a proprietary products company. And the last step in that transformation was getting our hands on what could be a potential blockbuster drug and it's sequela. And that's where we are right now. .

So Blair has been my partner through this for a long time. He's actually been at the helm for much of the transformation within the company. And so it's a very logical time to do this. And I'll stay as the Chairman, I'm extremely proud of where we are, and I think we're on this really exciting new trajectory, which I'm going to be part of.

On the Phase III, we are going to include split doses in the NT1. And the history of that is through the NT1 study, notwithstanding the fact that we had this really beautiful efficacy once daily we presented at World Sleep, along the way, we heard from clinicians, we have patients who want to extend this duration into the evening. So originally, our thought was that we would do this as a life cycle management post first approval, adding what we were calling at the time of top-up dose. But when we saw the NT2 data, where it was so clear that for most patients or many patients, they would benefit from a second dose to lift those later time points, we decided to incorporate it into the registrational program.

I think that turned out to be a real blessing for the overall program because I think the competitive dynamic is going to swing significantly in our favor if we're successful with both the once daily and the split dose regimens.

Our next question comes from the line of David Hoang with Deutsche Bank.

Congrats to both you, Richard and Blair. So with Takeda potentially having a PDUFA date for ovaporextin in Q3 and then potentially being on the market by the end of the year. What learnings do you think you could take away from their commercial launch, if any? And would their pricing inform how you think about the value proposition of alixorexton?

David, I'll start and then I'll turn it over to Todd. But from my perspective, I think the most interesting unknown is going to be pricing, because I think that's going to set the tone for the market's receptivity to the value that's being created with these NT1 drugs. So note that they're going to come to market in an NT1. And in NT1, this is a true orphan indication where we have a disease-modifying therapy, conferring benefits from a wakefulness perspective that have not been seen before in this patient population. .

So I think that they're entering the market with a premium product with this degree of medical benefit to patients is a great thing for us because I think that we come second, if we're successful, with a much more broad product offering. But Todd, your perspective?

Absolutely. I would say there's the basic things that will be interesting, which is just the positioning of a product like this. whether it's really positioned for market expansion or for switch, that's clearly something that we'll be watching. But I think Rich really put on the really key thing that we're going to be watching, which is really the pricing dynamic in the market. And that's going to be very interesting for us. It will be something for us to pay close attention to, and it will absolutely fit into what our pricing strategy, market access strategy looks like. .

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

And Richard, congrats on your accomplishments of the company will miss you. Just a question on 7290 and ADHD. If I remember from the presentation that you gave at the day in 2024, you showed preclinical data showing a profile of it look better than the non-stimulant ADHD drugs on the market right now. I guess I'm curious, is that the benchmark? Or do you have a sense how ultimately this might compare to the stimulants on the market, which have continued to have very significant disruption on the market and real challenges for availability. So I think that there would be sort of demand for better non-stimulants?

Yes. I think what struck us about that preclinical program was that -- I think our going-in hypothesis was that the Orexin pathway might be a really nice complement to the nonstimula drugs. And then in those model systems, the Orexin system by itself as monotherapy looks incredibly important. There's been some recent publications about the actual effects of stimulants on ADHD, what the mechanistic basis of that is. And if you map that on to what's happened with the Orexin pathway, the Orexin pathway just anatomically and neurobiologically, it's affecting many of these domains that are relevant to the idea of attention and focus and vigilance and things like that.

So I don't think we necessarily have a sense of how to compare it to a stimulant or compared to a nonstimulant. What we think is that the phenomenon that we'll see in the clinic could be very specific to that of an orexin 2 receptor agonist in this disease setting. So we'll be keeping our eyes wide open for the clinical signs that emerge from the study, but we go in with some very strong preclinical expectations that we'll have a benefit.

Blair, I don't know if you have any additional thoughts on.

No. I guess just to add, I think as you look at the preclinical data, 1 of the things we saw in this 5 -- those serial reaction test, which is a highly translatable model to the clinic is that we saw about equivalent efficacy across sort of the stimulants versus the orexin. And so we think, as to Rich's point, I think we're very confident about seeing a signal in the next study, and we'll define that further as we get through the Phase II program.

And if I can, just a quick follow-up. Do you think that you might have sort of a different effect in different domains of the ADHD than stimulants as well as sort of the currently marketed nonstimulants? .

I think it's too early to be -- to tell. I think right now, our best data is that the early test that I mentioned earlier. And we actually had efficacy across all the domains in ADHD, both on on concentration and impulsivity. So we're going to be testing all of those as part of this program.

Our next question comes from the line of Uy Ear with Mizuho Securities.

Congrats Rich to your accomplishment and Blair congrats on your next role. So maybe just help us understand, given that there's potential generic entry for VIVITROL in 2027. How you're thinking about the dynamic? And do you think as far as you know, whether there's whether [indiscernible] has capability to manufacture generics at all at this point?

Todd, do you want to go?

Yes, absolutely. So our plan right now is to continue the growth and expansion of VIVITROL, similar to what we did in '25 into '26. So we see, again, strong demand for '26. We're preparing for multiple different scenarios that cut occur in 2027. The research that we've done continues to validate that this is a difficult product to commercialize, but it's really difficult to manufacture. So we know that as the company that's had this for so many years. And so we'll have to see if there's a capability to do that, what the supply in the market looks like. We're prepared for that. .

And if we do get competition in 2027, what that looks like, we'll be prepared to compete, but we'll also be prepared to execute a range of scenarios, which could include pulsing our spend differently.

Our final question this morning comes from the line of Paul Matteis with Stifel.

This is Julian on for Paul. And let me offer my congratulations on behalf of Paul and the rest of the team at Stifel to you, Rich and Blair. Just a couple of really quick ones. When can we expect more detailed data on NTI? I'm not sure if you disclosed that. The open-label extension is still ongoing, and when can we expect to get that data? And then for when you're talking about the brilliance program, Rich, I think you mentioned that the primary endpoint in the NT2 Phase III study is going to be MWT? I know it was a dual primary for the Phase II. So just curious, thinking behind that or if there was always a plan to go ahead with MWT?

We've submitted the NT2 results for a series of presentations at sleep in Baltimore in June. So we should hear fairly soon. I expect those to be accepted. So you'll see more of the complete data set. You've seen a lot of it, but I think what I'm really interested and we've been talking internally about is trying to even bring some more color to the quality of efficacy that you see in the NT2 population.

Because I think looking at average MWT or average ESS doesn't really tell the whole story of the clinical benefit and the benefit of exit receptor agonist in that more heterogeneous patient population.

I think that in the Phase III NT1, NT2 studies, we're reverting to more the traditional hierarchy now that we have the data from Phase II and we can model, we're comfortable with. And I'm looking around the table to make sure I'm not misspeaking on this, we'll have just a primary analysis on MWT with key secondary, including ESF.

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Sandy for final comments before we close out.

Great. Thank you, everyone, for joining us on the call this morning and for the questions. Please don't hesitate to reach out to the company. If you have any follow-up questions, we can be helpful with. Thank you. .

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Great. Welcome, everyone. My name is Jess Fye. I'm a biotech analyst at JPMorgan, and we're continuing the 44th Annual Healthcare Conference today with Alkermes. We're going to hear a presentation from the management team, and then we're going to go into some Q&A.

Because of JPMorgan's involvement with the pending transaction, we're not going to take any Q&A related to the pending deal, and I'm not going to be discussing that.

So with that out of the way, let me turn it over to Alkermes, CEO, Richard Pops.

Good morning. Thank you, Jess. Hi, everybody. I'm actually really excited to get to this presentation today in the new year, tell you about Alkermes in 2026, where we stand today and how the accomplishments in 2025, set us up for what we can now see clearly as our next potential phase of growth.

So with that said, I'm going to make forward-looking statements today, as I always do. And it's described in this slide and this is a business obviously characterized by risk. And we try to go out of our way to describe them in our SEC filings and ask you to take a look at those for a more complete description of them.

So with that said, let's make forward-looking statements. Let's -- coming into 2026, we've built a very strong foundation for growth and value creation for both the near term and the long term. We are a profitable neuroscience company with a late-stage candidate and leadership in an exciting new therapeutic category. And that didn't happen by accident. It's the result of the careful execution of a plan over the past several years, and it's a plan that's been working beautifully for us.

There are the 3 elements of the business to understand and to value. And the first, of course, is the commercial business. In 2025, our commercial business generating more than $1.4 billion in total revenues and generated strong cash flow and profitability. And we're continuing to build this business with the planned acquisition of Avadel.

Second, of course, is alixorexton. It's our most advanced orexin compound. Alixorexton now is entering Phase III in narcolepsy following the completion of what was a very vigorous and rigorous Phase II program. It has blockbuster potential, and it could advance the standard of care in narcolepsy and idiopathic hypersomnia. We recently announced that alixorexton was granted FDA breakthrough therapy designation at the end of last year in NT1. But the opportunity extends beyond just alixorexton in narcolepsy and IH. Orexin 2 receptor agonist candidates represent an entirely new potential vertical growth and expansion in multiple disease areas beyond sleep medicine. We identified this early on. And we've been leaders in advancing the frontiers of this pharmacology.

So taken together, the commercial presence and profitability, a late-stage development program and a platform for the future. This is the exciting combination that comprises Alkermes today. And it's interesting, like for the last few months, investors focus has almost been exclusively on alixorexton for good reasons. But let's start there and knock that off at the outset. The reason why folks have been so focused on alixorexton is because the orexin 2 receptor agonist class represents a multibillion-dollar opportunity in sleep and beyond.

The story begins with narcolepsy, where the field and our program evolved very quickly over the last couple of years. Orexin in narcolepsy had the key attributes of other major high-value therapeutic categories. First, there's a strong biological rationale for these medicines. Orexin circuitry is the master regulator of wakefulness. We and others have independently demonstrated robust efficacy in multiple studies in patients with narcolepsy.

Next, they have the potential to significantly increment the standard of care in a rare disease by addressing the underlying biology and directly addressing unmet patient needs.

Third, there's limited competition. The orexin chemistry is complex and the novel chemistry needed to compete provides barriers to entry and deep patent protection.

And finally, they address a significant market opportunity in central disorders of hypersonics. We see the market opportunity in narcolepsy and IH alone in excess of $10 billion a year with broad potential utility across multiple disease states beyond that as the pharmacology gets increasingly credentialed. So let's focus on those numbers with a little more precision because they really form the basis for valuing this program. And I don't think that's been done at the same level of rigor that needs to be done as we look forward to launching into this area.

There are approximately 200,000 people in the United States with narcolepsy. It's a rare disease, but a comparatively large one. Interestingly, only about half of these patients are diagnosed. We see this as a large future opportunity as the gap between prevalence and diagnosis is often closed with the advent of new efficacious medicines and the educational efforts that they engender.

But here's the here and now, it's the 80,000 patients currently receiving treatment for narcolepsy. But notwithstanding the fact that they're receiving treatment currently, approximately 80% of these patients report residual symptoms, which are often severe. Idiopathic hypersomnia is less well defined. Claims data suggests about 40,000 patients are diagnosed. But the lightly shaded circle outside of that is there to indicate that we believe that there are many more undiagnosed patients with symptoms of excessive daytime sleepiness that could be candidates for treatment with the drug like alixorexton.

But here's the interesting thing about the branded pharmaceutical market today. The small gray circle represents the oxybates, which is the largest branded category. Oxybates are only used in 16,000 to 18,000 patients each year at an average net price of point of approximately $100,000 a year, driving $1.8 billion of sales in 2024.

So overall, we look at it this way. There's an obvious unmet need in a major medical and commercial opportunity, 120,000 patients, 80,000 with narcolepsy, 40,000 with IH are already diagnosed and being treated with medicines. And we believe there are many tens of thousands of patients beyond that. Market research is clear that patients need and are looking for more alternatives. So the market opportunity is not constrained by the size of the gray circle. The market opportunity expands to address the needs of thousands of patients seeking new alternatives and better outcomes. So this is why we see the opportunity in narcolepsy and IH alone being in excess of $10 billion.

We're moving rapidly to capitalize on this opportunity. We've made incredible progress in just the past few months. Just in the second half of 2025, what happened? We completed our robust Phase II Vibrance studies in narcolepsy type 1 and narcolepsy type 2, and we announced and presented positive data from both Vibrance-1 in September at World Sleep and Vibrance-2 top line data in November. And we were granted breakthrough therapy NT1 in December based on the data from the Vibrance-1 study. We also announced our planned acquisition of Avadel and its commercial narcolepsy drug, LUMRYZ.

With these accomplishments, we're carrying this momentum into 2026. This year, we plan to initiate the alixorexton registrational Phase III narcolepsy program in Q1 and complete our idiopathic hypersomnia Phase II study in Q4. We expect to close the planned acquisition of Avadel this quarter, which accelerates our entry into the sleep medicine market in a transaction that's accretive to our business.

So by establishing immediate commercial presence in the sleep medicine market, we have the opportunity to build critical relationships and deepen our understanding of the patient experience and commercial success factors in this space in advance of the potential launch of alixorexton.

Over the course of 1 year, we've gone from an emerging entrant to a significant presence in the sleep medicine market. The substance of this transformation, the motive force behind it are data from large multi-week multicenter studies, study design with input from regulators and with design features that we plan to replicate in Phase III. The Vibrance program in narcolepsy consists of 2 studies, Vibrance-1 in NT1 and Vibrance-2 in NT2. Each enrolled over 90 patients and included more than 40 clinical trial sites around the world. The data were clear and compelling and summarized here.

In these studies, alixorexton demonstrated statistically significant and clinically meaningful improvements on the traditional endpoints mean sleep latency, excessive daytime sleepiness and in the NT1 patients' cataplexy rates. In addition, alixorexton demonstrated clinically meaningful improvements in patient-reported outcomes related to fatigue and cognition.

And we included these endpoints in the studies based on input from patients regarding the real-world consequences of living with narcolepsy. Alixorexton was generally safe and well tolerated at all doses tested, and there were no safety signals related to either adverse cardiovascular defense or liver toxicity. And as an indicator of patient satisfaction with the treatment in both studies, approximately 95% of the patients rolled over into the safety extension.

A substantial program like this provides a data set that we can use to be informed and sound decisions in Phase III. What did we learn? We now have 6 to 8 weeks of randomized placebo-controlled efficacy data plus durability of effect through 13 weeks of continuous treatment in the open-label setting.

In Vibrance-1, we saw a normalization of wakefulness and excessive daytime sleepiness scores and clinically meaningful improvements in cataplexy rates. Vibrance-2 was the first Phase II study of an orexin-2 receptor agonist to demonstrate efficacy in NT2 in a large study, showing clinically meaningful improvements in wakefulness and excessive daytime sleepiness in this much more variable patient population. So we now have a safety and tolerability database in nearly 200 patients with narcolepsy for 13 weeks or longer, a safety database will continue to build with ongoing long-term open-label extension study.

We also have 2 additional insights that derive from the specific design and conduct of the phase of the Vibrance program. The first is dose ranging and patient preference data, which we're using to inform our Phase III dose selection and key operational insights from the multicenter studies, which will be critical in our conduct of the registrational program.

Vibrance-3 in IH is the third study in the Vibrance Phase II program. It's ongoing and designed similarly to Vibrance-1 and 2. We're currently enrolling patients and testing 3 once daily doses of alixorexton and placebo, the same dose is tested in NT2. We plan to add a split dose arm and split those placebo arm into the IH study. The primary endpoint is the Epworth Sleepiness Scale or ESS, with the IHSS as a key secondary. Our confidence in this study, of course, is bolstered by the results from Vibrance-2, and we look forward to completing this study later this year likely in Q4, which will round out the Vibrance Phase II program.

So now we're moving from Phase II to Phase III from Vibrance to what we're calling Brilliance. Over the years, we've developed a number of drugs, and we've gained a lot of experience in getting drugs approved and launched. We've learned along the way that FDA approval is, of course, essential, but not sufficient for competitive positioning. We're designing our registrational program with the following goals in mind.

We, of course, want to maintain our aggressive pace and accelerate the time to market. But we also want to ensure that we maximize our potential for clinical success and align with regulatory authorities. We're focused on driving the most advantageous accurate label, which derives from data generated in the program.

We want to confirm and build on the generally well-tolerated safety profile and elaborate a differentiated efficacy profile based on careful dose selection and trial conduct, all of this in support of our ultimate commercial positioning. This translates into the architecture of the Brilliance program, which is shown here. We plan to conduct 12-week randomized placebo-controlled parallel design studies using both once-daily and split dose regimens. We'll incorporate the traditional endpoints related to excessive daytime sleepiness such as MWT and ESS and an NT1 cataplexy.

We'll also include a range of additional measures to more completely capture the patient experience on alixorexton. For example, our Phase II data related to fatigue in cognition were compelling and differentiating and we plan to further build that data set in Phase III. We're ready to go. But we won't begin the registrational program without input from FDA, particularly now that orexin has breakthrough designation in NT1.

Our end of Phase II meeting is scheduled next month. So we'll plan to initiate the Phase III program following that meeting later this quarter. Alixorexton has the potential to be a major medicine, and we're developing it that way. So we've built really strong momentum in this program over the past year, and this will carry into 2026. This time line is shown here with key milestones, highlighted by the end of Phase II meeting with FDA next month and the initiation of Phase III. Presentation of data at major sleep conferences and completion of the IH study.

So that's the hypersomnolence program for alixorexton. So let's focus now on the implications of success there. In other words, what the potential might be for agents that can directly affect sleep wake circuitry in the brain beyond narcolepsy and IH. Chronic sleep-wake dysregulation contributes to the disease progression and development of a wide range of diseases, and it's particularly pervasive in psychiatric disease, affecting 70% to 80% of patients, where it's linked to worsening psychiatric symptoms and conditions such as depression, anxiety and bipolar disorder.

In neurology, sleep wake disruption impairs cognition and emotional control and it's increasingly linked to neurodegenerative disease risk. In the cardiometabolic space, sleep wake disruption alters metabolic pathways, reduces physical activity and accelerates cardiometabolic disease risk including obesity, diabetes and cardiovascular disease.

Fatigue cuts across all these disease categories and is the most common symptom reported by patients with chronic disease. We've already begun to demonstrate the utility of an orexin 2 receptor agonist in fatigue with alixorexton, and we expect to build on that evidence. Targeting the orexin pathway with well-tolerated small molecule drugs is a rich area for pharmaceutical development. We're very confident in the pharmacology. We spent time ranking our priorities, and we've identified what we see as the most attractive next indications to pursue.

This lays out our sequencing strategy. We began with alixorexton in narcolepsy NIH. Here, we prove the pharmacology in the most obvious clinical setting and established the first data sets of safety, tolerability and efficacy. From there, we're adding ALKS 7290 and ALKS 4510, both currently in Phase I studies in healthy volunteers. We'll plan to advance these candidates into patients of interest this year. ALKS 7290 in ADHD and 4510 in fatigue associated with neurodegenerative diseases such as MS and Parkinson's disease and other potential conditions. But we don't intend to stop there.

We're working on other molecules and other plans that stem directly from the biology that I've been referring to. We plan to develop 7290 in ADHD, and we plan to move fast this year to generate proof-of-concept data in the clinic. ADHD, it's a very interesting indication. It's characterized, of course, by persistent difficulty in maintaining attention and concentration, and it's frequently accompanied by hyperactive and impulsive behavior.

Despite the availability of stimulant and nonstimulant treatment options, there is a significant unmet need. Stimulants are scheduled drugs that have liabilities related to safety and tolerability and nonstimulant drugs are generally considered to be less effective. An orexin agonist targeting the wakefulness attention circuitry could be a major advance. The patient numbers here are large.

In the U.S., approximately 15.5 million adults have the diagnosis and approximately 6.5 million children have the current ADHD diagnosis. So here's our plan. We're going to -- 7290 in preclinical models improve measures of attention and test engagement and decreased behavioral impulsivity in these validated preclinical models. We've already shared some of those preclinical data with you at our R&D Day last year.

Our single ascending dose cohorts in healthy volunteers are underway, and we plan to begin the multiple ascending dose cohorts in the next few weeks. As we progress through the multiple ascending dose cohorts, we'll plan to initiate a multi-dose Phase Ib study evaluating safety, tolerability and efficacy in adult patients with ADHD. And we'll expect data from this translational study in the second half of this year, so we can move very quickly in this indication. In parallel, we expect to initiate a larger Phase II study in the second half of the year.

We plan to develop 4510 in fatigue, starting with fatigue as with multiple sclerosis and Parkinson's disease. Fatigue represents a broad opportunity across multiple disease states. Approximately 35 million Americans report that they felt very tired or exhausted every or most days in the past 3 months, which is an astonishing number. And I think it's one that's representative of a general cultural phenomenon. But more specifically, fatigue associated with neurodegenerative conditions provides a well-defined set of patients for new drug development.

Fatigue is one of the most common burdensome symptoms affecting patients with MS and Parkinson's. It's estimated that most patients with these conditions experience clinically symptoms of fatigue. And the patient population here also are significant with approximately 1 million patients in the U.S. with MS and another 1 million patients with Parkinson's. 4510 went into its healthy volunteer Phase I study last year, and it's completed several single and multiple ascending dose cohorts.

We're planning to initiate a multidose Phase IIa study this year evaluating safety, tolerability and efficacy in treating fatigue in patients with MS and Parkinson's disease. We see this as the beginning of a much more extensive exploration of fatigue across multiple disease domains in the future.

So turning now and finish up with the financial foundation that supports this innovation platform. One of the most distinctive features of this company is the profitable neuroscience business that we have, and we're adding a new potential growth driver to that commercial portfolio. Our commercial business is based on proprietary products that we developed and market ourselves in 2 therapeutic areas in addiction and psychiatry. VIVITROL in addiction for opioid and alcohol dependence and in psychiatry, LYBALVI, an oral medicine for schizophrenia and bipolar 1 disorder and ARISTADA, a long-acting injectable for schizophrenia. We're adding to this portfolio with the acquisition of Avadel and its commercial product LUMRYZ.

LUMRYZ is an FDA-approved medicine for the treatment of narcolepsy, approved in 2023 and growing now through its launch. It opens a whole new therapeutic lane for us and one where we expect to expand our presence over many years with the launch of alixorexton.

The proposed acquisition of Avadel is an exciting opportunity as it checks several boxes simultaneously transaction. It augments our revenue growth profile and it diversifies our commercial portfolio with a new high-growth product, while at the same time, it accelerates our entry into the sleep medicine market, provides a strong foundation for the potential launch of alixorexton. It's a profitable business. We expect to be accretive and enhance our profitability in 2026.

We expect to finance the transaction in part with cash on hand, supplemented by the issuance of new debt. Importantly, we're not using any Alkermes stock in the transaction. And I'm happy to report that the transaction was approved by Avadel shareholders earlier this week, so we expect to close the acquisition later this quarter.

This is a snapshot of the revenue profile from our key products over the past several years as we've grown and diversified the commercial portfolio with new approvals. With over $1.3 billion of net sales, we've established a significant presence in the complex markets that we operate in. This further strengthens with the acquisition of Avadel. This is the pro forma combined revenue profile.

LUMRYZ has generated $390 million cumulative sales since launch 2 years ago and approximately $250 million in the last rolling 12-month period. This financial strength powers this expanding pipeline. We've never been in a position of such financial and pipeline strength. Alixorexton moving to Phase III, 4510 and 7290 moving to Phase II. And once we close, we'll add in LUMRYZ in Phase III for idiopathic hypersomnia and a sodium-free once-nightly oxybate candidate, which just entered the clinic.

So we'll end where we began. We've built a strong foundation for growth and value create in the near term and for the future. This company has an unusual combination of assets, a significantly profitable neuroscience business, a late-stage commercial potential blockbuster and leadership in one of the most exciting new areas of neuroscience. So we're looking forward to what we think will be an important and exciting year, and I'll thank you for your attention.

Great. Thanks. [Operator Instructions] So maybe to start out, you've now got breakthrough designation for alixorexton in NT1. Do you plan to seek that in NT2?

I don't think we need to. I mean now the molecule has breakthrough designation, that sets up our interactions with FDA, which will begin next month. So we filed on the Vibrance-1 data, because it was the most mature data set, largest, and there was a pathway because Takeda had achieved breakthrough status on NT1. So we're quite confident that we have that designation would come with it in hand, we expect to register alixorexton for narcolepsy 1 and 2 in the same application. So we don't need to do it.

Okay. And the stock, if I remember, was volatile around the NT2 update. What do you think the market misunderstood?

I think that a lot of the analysts present company excluded, didn't really understand the meaningfulness of the MWT measure. And there's some artificial thresholds that were set, like the MWT change on average happened to be greater than X percent or X minutes. But what the clinical finding, the new research finding in that study was really profound, which was that unlike NT1, where most patients if not all patients respond and the average MWT changes represents a central tendency of the data, albeit with a lot of variability around the central tendency was represented by the mean. NT2 is a very heterogeneous group of patients.

So on that particular measure, the MWT, you had patients who didn't respond at all, yet responded normalcy on their ESS score. So the average that was reported in the data was an average of nonresponders and responders. And so the number -- the numeric number of the average of whatever number of minutes was, wasn't the central tendency. There are people who had very high responses and people didn't have any at all.

So I think that what it was exciting for us though, we knew going in that we're going to see a lot of variability in that patient population with a different orexin baseline tones in the brain through all that variability, the signal of the efficacy of the measure powered right through it. So it also gave us that understanding of how to dose for Phase III. So I think people had set up expectations about numbers that were clinically meaningful. And as we've talked to people subsequent to that, I think people are beginning to understand it at a higher level.

Thinking about Phase III. Can you talk about the rationale for evaluating split dose regimens? How many arms might be in Brilliance? And will this be the first look at split dose work for alixorexton?

It will be. I mean we'll introduce the split dose regimen to the IH study that's ongoing. So we'll get some split dose data before the Phase III's readout. But it was really coincidental and fortuitous, I think, because coming out of the once-daily dosing in NT1, where we clearly have a really nice once-daily product. Patients are experiencing quality of wakefulness with these agents that they've never had before, as normalcy.

And so almost irrespective of the PK profile, there are certain patients who wanted to last longer, and they want to go to dinner at night, they want to stay out late, want to go to the theater or something like that. So even after the Phase I -- after the Phase II program in NT1, we had investigators say, you should think about top-up dose, another dose that people they should they want to have a longer duration of the course of a particular day.

Then when we got the NT2 data, it became abundantly clear that the later time points in NT2 could be bolstered by a split dose. And both of those things combined together to say from a commercial perspective, it would be very attractive to have a range of once-daily doses irrespective of the differential diagnosis. The patients can move up and down on the dose. And should they choose a split dose regimen in the label so they can extend their duration or their level of efficacy. So we think from a commercial perspective, it's really attractive. And we think that the data also points you in the direction of doing that for certain patients.

And what does that mean for kind of how many arms you would envision in Brilliance?

Well, we'll settle that with FDA at the end of Phase II and -- end of Phase II meeting later this month. We're going to go in with a proposal of anchor QD dose for both NT1 and NT2. I mean we know from the Vibrance studies, 6 milligrams, 8 milligrams once daily in NT1 is a brilliant dose, 18 milligrams, 14 milligrams, they both are efficacious doses in NT2. So we'll go in with an anchor once-daily and split those, but we won't disclose until we come out of the other side of that meeting or maybe not at all, what our strategy is because we think we have got some real competitive advantages there.

Okay. And how should we think about Phase III enrollment time lines?

I think it's too early to say, but I think that Takeda completed their study in a certain period of time. We'll use that as sort of a benchmark. And what we've learned, and I referred to it obliquely in the earlier remarks is that when you run a multicenter study in 40-plus centers in multiple countries and you look at the data after the study is over, there are sites that you just don't want to include in your Phase III program. They contribute in, but they don't contribute quality in. So that's valuable knowledge.

So for Phase III, we're going to be very fastidious in curating the sites and the types of patients that go because that actually can drive the efficacy signal in a way that is profound. I'll give you a simple example. If you enroll in our Vibrance-1 study, NT1 study, we believe there probably was on NT2 patient in each of our cohorts because we had a nonresponder in each cohort. And that's fine. You still see efficacy, but your actual numerical value is degraded by the nonresponder.

So if you're interested in sort of maximizing your labeled claims for the durability of -- and the extent of your efficacy across any measure, a better curated group of patients will give you a better signal, and we're quite interested in that.

Maybe thinking about the next wave of orexin and 7290, what would represent a win when you get that adult ADHD data in the back half? What are you looking for?

So the wide open lane is a nonstimulant drug that has stimulant-like efficacy. And to the extent it differentiated efficacy would be nice based on the biology. But the nice thing is that it's a well-trod path. And so the scales and the investigators who work with these agents have a really strong sense of what good looks like.

So we'll do what we did in narcolepsy, which is -- we'll finish the SAD/MAD in healthy volunteers. We'll go then into the Phase I study in the patients and then roll right into the Ib in a 2-week exposure where what we understand is that, that should be a sufficient duration to see an efficacy signal and get some idea of dose.

And as I mentioned earlier, we won't wait for those data to design and start initiating the Phase II program. We have a pretty high degree of confidence in ADHD. And then there's risk and everything, so I should state that at the outset, obviously. But the pharmacology maps and the preclinical data are quite strong. So I think that we'll plan on lining off the Phase II before we even complete all the Ib study.

And then, I guess, just in general for the next orexin molecules, given that this class has hit a few safety hiccups -- curious to what degree you feel the alixorexton data and kind of safety experience at all derisks your next products, maybe i.e., like how closely they might be related or not related? Is there any kind of safety derisking that we could extend from alixorexton to your next gens?

So let's take it from the top. I think the class began with a first wave of compounds that weren't optimized. They weren't potent enough and selective enough. And that's where you saw some of the early cardiovascular liability. And then one of the entrants had a liver liability that was more molecule specific, a particular metabolite to that molecule. As the next generation, Takeda's 861 and our drug have moved through the clinic, they generally are quite well tolerated, safe, well tolerated. The primary on-target side effect you see is pollakiuria, the urinary frequency, which is on target and insomnia, which tends to be more transient.

But as a general caloric statement, you'd say that given the degree of efficacy that they're providing, they're quite well-tolerated drugs. 7290 and 4510 both derive from that parent compound structure family that we have. So there are cousins of alixorexton. So in that regard, to your question, we think that the -- any molecule can have idiosyncratic toxicities based on single autonomic changes, obviously.

But we think that where we are now with the preclinical workup and where we are in the clinic, they look like they should be similar to alixorexton in terms of their tolerability. But then you have to map on to that the tolerability in this patient population of interest. So there's always risk and there's always for learning. But generally, we feel like the risk profile has changed favorably over the past couple of years.

So for alixorexton now that you've got it much more characterized than you did even 12 months ago, what's your latest thinking on where you see that product differentiated from Takeda, for example?

That's pretty straightforward because we think Takeda has run a very responsible program of a very good drug. It's going to be the first orexin agonist approved, and it's going to be indicated for the treatment of NT1 only. And there's really one anchor dose. There's 2 milligrams followed by 2 milligrams.

So I think that it's going to introduce to the commercial community a transformational drug that is disease-modifying for patients and confer benefits to them they've not had before. But I think from a commercial perspective, it's also quite vulnerable because if we are successful, we'll come behind with a drug indicated for NT1 and NT2 with a range of doses given once daily and the option for put dosing for extending of duration.

So we -- because we have a broader therapeutic index and we've tested a wider range of doses, that's been our design intention from the outset. We've been designing our clinical program with the competitive positioning in mind from the outset. So I think that the differentiation versus Takeda will be quite straightforward.

And maybe a slightly different competitive question, but kind of thinking about the molecules kind of coming up behind you, what do you see as kind of the key moats that are going to insulate your orexins from subsequent competitors?

Data. The edifice of data we're building through rigorous Phase II clinical trials, the insight those data give us in terms of dose selection for Phase III and then the insights on operational ways of running Phase III to optimize the signal.

So coming behind us to really compete with the precision that you need to, you probably need to run a Phase II program like we ran with a range of doses and understand the durability of effect and the dosing as well as remember, in each of these studies, we had an open-label phase where patients got to choose their dose. It gives us insights into dosing selection by patients.

So I think that we -- our goal is to create not a lot of white space that people can occupy with data that follow behind us. And we don't see the vulnerabilities yet that have revealed themselves in the program so far. So we have really strong once-daily data. I think we're having even stronger data now with once-daily and split dose. We have efficacy in NT1 and NT2 and we have breakthrough designation. So we're moving fast now.

Any other orexin questions? Okay. Maybe -- there one in the back.

Yes. Thank you so much for it. This is so compelling. So many patients everywhere. So many people everywhere need to know how to sleep better. I was just wondering, Richard, like what's it like can you just rip a little bit on -- you did so much for obesity and diabetes way back in the day. And can you talk about what it's like to be back in this a little bit indirectly versus directly, please? Thank you so much and to JPMorgan. We learned so much from this leader every single year.

Kelly, I did not pay Kelly to -- I think we've resonated over the years just because of our interest in patients. And notwithstanding the fact that there are medicines, there are patients who still have huge unmet needs. And narcolepsy is exactly that type of -- people with narcolepsy what you learn is that their lives are completely distorted by this disease.

And even if they get treatment, if you take oxybate or you take stimulants or you take Modafinil and you get some type of palliative relief, there's so much distance to go to bring their lives into a life like the most of us lead. And that's why in the clinical trials, for example, we didn't just look at MWT and ESS and cataplexy rates, we built in fatigue and cognition endpoints because when we talk to patients, we ask them what's it like?

People don't talk about their ESS score or their MWT score. In fact, in the real world, people don't do MWTs. What they talk about is brain fog and they talk about being exhausted. They're getting relief with the stimulant or something. One of the mothers told us that her daughter was forced to step through a stimulant before she could get access to an oxybate.

And on the stimulant, her resting pulse was 142 beats a minute. So that's the kind of stuff you're dealing with as a real human being with a serious condition. That's why I'm such a fan of Takeda's work because it's going to be a huge increment for these patients, hopefully, later this year, and we're going to build on that. But that's the kind of empathy that infuses companies like ours. That's why we do what we do because it can have profound impacts on people's lives.

Maybe shifting to the -- almost the legacy business, but I guess, core business, existing commercial business. What are your key objectives for those franchises this year?

We love the balance in the portfolio, and we love adding the LUMRYZ to that mix. So taking them in turn, LYBALVI growing beautifully. I mean it's a once-daily oral compound for the treatment of schizophrenia. It's based on olanzapine. Its efficacy is superb because it leverages clinical experience. We've talked about this for years. I think the proof now is in the pudding. We have 4-year data. We have just a really strong basis for continuing to build that drug.

There's been increasing focus on schizophrenia and pharmacologic interventions in schizophrenia to improve outcomes. As people are talking about better efficacy in schizophrenia, LYBALVI is in the conversation. That's a great place for us because the efficacy profile of LYBALVI.

ARISTADA is our long-acting injectable aripiprazole. The LAI class was -- its growth slowed after COVID. We've reestablished growth in ARISTADA that's on patent for quite a while. It's a really good drug. So we'll continue that. We have one sales team that promotes both LYBALVI and ARISTADA, our site team.

VIVITROL is the one with more error bars around it because as we move into 2027, there's a single additional entrant to the market, Teva with an ANDA. That's the only ANDA that's been approved for that space. So we see VIVITROL persisting into the 30s with only a single additional player in the growth that we're currently experiencing in that.

But that's one -- I think it's reasonable to say, okay, let's evaluate a range of potential outcomes in 2027, but we'll know that soon enough. And now with LUMRYZ in the mix, that's a launching product, a growing product. It's the only once-nightly oxybate in the marketplace. And for us, it has 2 benefits, the explicit financial benefits, obviously, but then also just the exposure it's going to give us to the key physicians that we're going to be interacting for the next decade. We'll be in the marketplace with these physicians this quarter, and that's exciting to us. And so that adds more than just the revenue to the mix.

Great. Okay. We are out of time, so we'll stop there. Thank you.

Thank you.

Thanks for joining us. Richard, super excited to have you. I'll let you kick things off. There's a lot going on. So I'll let you start, and I can prioritize accordingly.

First of all, good to see you. Thanks for having us back, over. I was just writing the memo to my Board for our last Board meeting in the year, summarizing just a brief highlight of the year. One of the most consequential years in the history of the company, I think. And I think it will turn out to be a transformational year, and companies say that all the time, but we literally transformed the company this year. Last year at this time, we didn't have NT1 data, we didn't have NT2 data. We hadn't made the deal to acquire Avadel. We now have a very strong sense that we're moving aggressively into the hypersomnolence market with the potential to really be a major force in that. That's a completely new commercial domain for us after many years. So this -- where we stand right now is that we're actually really pleased with the key milestones of the year. Our commercial portfolio performed beautifully this year. NT1 data were positive, NT2 data were positive. IH study is underway and enrolling well. The whole landscape of the orexin receptor agonist class, I think, is coming into focus. And I think that we find ourselves really well positioned in that setting. So I'll let you take it from there.

Excellent. But also on the M&A side, if you could just let -- round out the full picture.

On the Avadel, yes, that's what I was referring to, the idea that by -- now that transaction is not closed yet, of course, but we've announced the intention to acquire Avadel. And that fits into this whole thesis that we're moving aggressively into the hypersomnolence business by picking up a company with $275 million of sales this year, profitable already, calling on every physician audience that we're going to be launching alixorexton into -- there's just a beautiful inherent logic to it. And as we valued it, Umer, what we did, we looked at the valuation of that company in 2 ways. One was the discounted cash flows of the business of their product in the context of orexins coming to the market, call that column A. And then column B was the positive lift it would give us on the launch of alixorexton. So essentially, the rotation of that launch curve up to the left over time. And the sum of those 2 comprise the valuation methodology that we use, and we're quite happy with where we ended up in the deal.

Can we break those 2 things down just a little more?

So not quantitatively. I can't but concepting...

Parameters-wise. I'm just -- first one, you said DCF of the revenues that are coming in. So not getting into DCF itself, obviously. But on the revenues, did you guys take into account there could be a gross to net expansion once generic [ Xyrem ] are out in the market?

I think a few companies have a better sense of the gross to net dynamics than we do.

Okay. Fair enough.

We sell drugs where the gross to nets are over 50%. We know these payers. We know all of them. We deal with them all the time. And so I think we have a very good sense of what the gross to net dynamics could be.

Did you speak to your counterparts on the payer side during this due diligence process?

I'm not going to comment on who we talk to or how, but just recognize that understanding net economics is foundational to making any type of valuation assessment for commercial products.

I think this might be the best I've ever felt about the gross to net in the last few seconds than I have ever in the past on this question.

I hope I haven't wavered on that. I think...

You said, let's make history. So the second thing you said was on the launch curve for your orexin itself, being able to accelerate that. I guess my question would be, I would have thought that between a lot of the neuropsych sales team that's in place with Alkermes already, you may not necessarily need additional support. But could you just expand on that? I mean you aren't necessarily -- maybe just expand on the touch points you had versus the touch points you would have needed to add versus the incremental SG&A you've taken on? Because SG&A point on out, I mean every 3 years still comes back up. So...

It's really remarkable because the call points that we have now in addiction, serious mental illness, schizophrenia and bipolar overlap very, very slightly with where we'll be going with alixorexton. Alixorexton is a neurology product sold by sleep specialists or will be sold by sleep specialists and people with specific expertise in the subspecialty of diseases of hypersomnolence in the beginning. And now the whole future of the orexins, we can talk about where they go from here, but in the beginning in narcolepsy, effectively a rare disease. I expect the price point to be high. I expect the medical value added to be extremely high. And I think the nature of the call and the target of the call are very different than selling an antipsychotic, for example, at a much lower price point where there are 19 generics and the payers are in control. Where the leverage comes in is actually in the whole commercial infrastructure, what you have in terms of market access, compliance, national accounts, legal, regulatory, all that stuff. So if we didn't do Avadel, what we would do is we would add another sleeve of commercial team targeted on those specific physicians. It would take some time to burn them in to find their territories, find their accounts, learn the lay of the land. Contrast that with Avadel in hand, we're in that market on a continuous basis right away, starting next quarter if it closes. Building those relationships, knowing the call points, knowing the prescribers, knowing the nurses, knowing the payers, knowing all the elements of the supply of the chain that lead from a diagnosis to a prescription of what I expect will be a fairly high-priced medicine.

Makes sense. So Richard, I remember a couple of years ago, there were certain activist investors involved in Alkermes. And at the time, everything around SG&A was being evaluated very, very -- with a very fine comment back then from your team. I guess my question to you is Avadel with its SG&A run rate of about $200 million right now, how much of it is that you need versus how much it will be called out? Because I think that's going to be very relevant. And I don't know to what extent you can say on it right now.

Yes. We won't comment on the "synergies" other than to say that they're driving -- sometimes you see M&A deals in pharma that are driven by synergies, i.e., you put 2 companies together, you eliminate a lot of expenses, things drop to the bottom line. That wasn't the compelling logic of this deal. This deal was about preparing to launch what we think will be the biggest drug we've ever launched into a very rarefied clinical reimbursement environment and being able to do that in advance with a team of people that have been experienced in that space. A, we don't have to build it; and b, we leverage that experience in the form of something that has a $275 million or top line that's already profitable. So you've heard us say for years, we would like to leverage our commercial infrastructure because we've built it so assiduously over many years. This does that right away, right, with additional revenue on the top line. But also the fact that it's already profitable and it's crossed over that profitability is a bonus feature, I think.

Got it. So is it possible that Alkermes pro forma has SG&A approaching $800 million?

I don't want to comment on the numbers right now, but I think that we will have a profitable business, and we're going to continue to generate significant amounts of cash. And that's why when we look at -- when we went -- thought about doing the deal...

Okay. So you're not worried about SG&A number you're worried about the profitability?

Well, also, I mean, it's such an unusual company because we're generating a significant amount of cash. We are not using a share of stock in this acquisition. It's going to pay itself down through profits and we're going to prepare for the launch of our next big drug. This is a rare thing, Umer. You have to really think about it from a strategic point of view. It's rare that you can find something that ticks all those boxes, grows your top line, grows your profitability, expands your business and prepares for the launch of your next drug.

Great. So let's talk about that, the next drug. We can do any amount of sort of analyses and dissect your data in narcolepsy, et cetera. But I want to start on a topic which probably doesn't get much attention on the Street, the cognition data. The cognition data you generated in type 1 study, is this the only prespecified randomized analysis of alixorexton for an endpoint like that, that ever exists because Takeda was post hoc from my recollection. I don't think that's in Centessa study either.

I believe and you have to have ask Takeda directly, but I believe that they prespecified certain exploratory endpoints in their study. But I will say that we're the -- to my knowledge, we're the only company that's shown in a randomized controlled study, the breadth of the effect and the extent of the effect on both cognition and fatigue on a prespecified basis. And as you know, the effect was not subtle. We saw a normalization of both fatigue and cognition in patients whose baselines were extremely impaired. And what's interesting about that is when you talk to patients and caregivers about narcolepsy, One thing that doesn't come up is MWT because it's not used. What they talk about is excessive daytime sleepiness, fatigue, brain fog and for type 1 patients, cataplexy. These are the clinical presentations that matter so much to patients. So we -- in the Phase II study, because we had enough scale and power, the virtue of running a proper Phase II program is that we could detect these signals even with endpoints that have previously not been used.

Did you hear any patient feedback from the trial [ sites ] on this cognition study?

Absolutely.

And what does that sound like in words?

It's typically expressed in the form of this idea of brain fog and being able to focus. And so...

It's not like I'm remembering more. It's like brain fog \[indiscernible].

It's brain fog. And we chose the scale that we chose, which is called the British Columbia Cognitive Complaints Index because it maps most closely on to the -- we did patient research for a couple of years before we chose this instrument. It's focused on those cognition complaints that patients have and how are they ameliorated or not with the use of the medicine. So as I said before, we didn't have any experience with this. It was just a pretest hypothesis that we might see that -- and that was based on the neurocircuitry, what orexins do because they don't just keep you awake, they actually drive wakefulness a bit large, which includes attention and fatigue and cognition and all these things. So we were -- what we thought was we would do in Phase II is we would test the instrument and then perhaps tune it for Phase III. But the signal came right through with the instrument as currently [ configured ].

I guess what does this mean for you in terms of R&D allocations into the other orexin programs for all the indications beyond narcolepsy? And what does the timing and the scope look like?

So there is one more step on that bridge to get to that point, and that was the NT2 data. Because remember, NT1 patients have no orexin in their brains. So when you introduce orexin, you would expect to see a certain fairly robust biological response. NT2 patients have a whole range of orexin baseline tone. So I think the unanswered question before our data was if you super impose in some cases, what might be a super physiologic dose of an orexin agonist in somebody who's got orexin in the brain, would you still drive wakefulness and cognition and things like that? It looks like the answer is, yes. And with that answer, then you start to move out of narcolepsy. If you take people who have normal...

Sorry -- can I just make sure I get this right? Are you suggesting cognition was tracked in NT2 trials as well?

It was as well. We haven't presented the data yet.

Okay. I was going to ask you a question because I didn't see that.

No, that was not part of our top line report, but we'll show that when we get it [indiscernible].

So that actually validates you don't necessarily need sleep-deprived people for other indications. It's going to be regular people?

We don't think so. There's always risk as you move out into further concentric shelves, but I think each step informs the next step.

So what are the future indications? I can't spell that out.

We haven't told you yet. We haven't told you.

Okay. I'm not smart enough to figure it out but...

Well, you are, but the problem is that there are so many. And so the question is going to be one of triage. It's going to be about choosing them. And it's an interesting calculus that has to do with the clinical need, the mapping on the pharmacology, the patient population size and the price point because if you say that the first introduction of a narcolepsy product was going to be a relatively high-priced product. Disease-modifying in NT1 and NT2, that's a certain value proposition. There are other indications that are denominated in millions of patients where the price point might be much lower. And there are other indications that are denominated in much smaller patient populations where the clinical benefit could be like an ultra orphan or a rare disease price point. That's why you want multiple molecules with different properties. We've put 2 additional in the clinic right now. And I think one of the things that investors haven't quite figured out yet is next year, those 2 are in the clinic right now in volunteers. Next year, we're going to put them into disease studies. So...

And they're in healthy volunteers right now?

Correct. In the SAD and the MAD.

Do we still get some wakefulness type data from them in that setting?

No. We'll be looking -- Well, we'll be looking at quantitative EEG for target engagement. But now that we know some of the on-target side effects, we can actually know when we're engaging target just through the other clinical presentations.

Okay. Great. And I guess, why do you need 2 just because they have different half-lives for different indications or different indication or you want to [indiscernible] it's a market for that.

Yes, different indications.

You need 2 for different indications. Is Alzheimer's a realistic possibility for the indication?

It wouldn't be my first, but it's realistic.

Okay. Excellent. And the path forward then, Richard, what does that look like in terms of you do -- you go right to a Phase II trial randomized presumably 3 to 6 months out to gauge the signal for the new indication?

Do you want to go right into some type of translational study like we did with narcolepsy, where in that first cohort of patients, you can see a signal that you don't have to squint to see.

Right. But in those indications, do you need to go more than 6 weeks to see that signal?

It depends on the indication.

Depends on indication. Okay.

And remember, in narcolepsy, you could see its effect on the first dose.

Right. will you do a master protocol study with multiple indications within the same trial or...

Possibly. We won't really disclose that strategy right now, but there is no shortage. And the more we interact with investigators, the more we're confronted with other clinical ideas that people have for the use of these agents.

Right. So Richard, I guess the one question I have is, as we think about sort of the SG&A plus R&D spend for the company, it's about $1 billion right now. There's Avadel getting put on and new indications. So the company and the Board is ready to invest for success and maximize the opportunity. And there's not like a cap that you want to keep it close enough to $1 billion, not let it go to $1.5 billion to $2 billion, if that's the type investment it takes to pursue all these initiatives.

We think we can solve this simultaneous equation, which is to fund the orexin program as aggressively it needs to be funded while maintaining robust profitability.

So you want to maintain profitability?

Absolutely. Because there's a certain cost discipline that comes from that ethos. So we're not going to say each year, we want...

But wouldn't that enable Takeda or some other company, which is not profitable at all to just leapfrog in terms of R&D and the number of indications to pursue?

[indiscernible] Like I said, we want to -- the first bucket we're going to fill is doing everything we want to do on the R&D side. Remember, these early clinical trials are not expensive. SAD/MAD studies, putting new drugs into the clinic. It's the bigger programs that -- and in the meantime, we're going to be -- let's go back to first principles. What's -- we haven't really talked about the fact that we have a drug now that is going into pivotal studies based on robust Phase II data, where the Phase IIs look a lot like Phase IIIs. Our internal belief in the viability of alixorexton in narcolepsy is extremely high right now. And that by itself is not in our valuation. And as the valuation begins to expand to accommodate that, I think we're going to have all kinds of financial flexibility to do what we want to do.

Got it. Are you implying on the equity side? Or are you implying more so in -- like could you use equity to fund some of these trials or do you need partnerships with people to run the trials?

We generate cash and we have a bunch of cash. No, I think you're focusing too much on the -- like there's a financial constraint. We don't feel a financial constraint.

I guess my sense is for the types of indications possible, you could envision up to $1 billion of R&D spend on -- across indications...

But you've got to go through Phase Ib, the translational studies. And as -- let's say, we start opening up...

They're saying the orexin will be out in the market.

Yes. Well, the business evolves.

Right.

And our investors will say, spend every dollar you have to do that. If this turns into a true vertical where we -- it begins with narcolepsy. But we all can see how it expands, then I think you have to be able to be prepared to compete at the highest level.

Okay. Excellent. I want to get back to some of the narcolepsy data. I intentionally didn't spend too much time on it because I feel like it's been -- everyone's gone through it multiple times. But let me just ask you one question, which I've gotten, and I don't know if I have an answer to this. The Phase II data we saw at World Sleep as well as the Phase II data in narcolepsy type 2 was all reported on week 6 and week 8 basis. You wouldn't have any sense on what that would have looked like on a week 2 basis.

ESS?

I'm not sure that's relevant, but I'm mostly...

It's a good question because it highlights an important distinction that most investors aren't aware of. ESS, which is the patient's assessment of their wakefulness, we monitor that beginning in week 2 consistently through the 8-week or 6-week period and the extension. And you've seen those figures that comes down very quickly. It stays low. So we normalize people on ESS. MWT, because it requires coming into the sleep lab and spending the day there, we measure at baseline and at week 4 and at week 8 in the NT2 study and at week 6 in the NT1 study. So you don't get a continuous MWT profile just because of the invasiveness of the study -- of the test in an outpatient setting.

Got it. IH study, when do we get that readout?

Midyear next year is the original plan, but we're thinking about now of adding a split dose into the IH study just to get some clinical experience with the split dose as the Phase IIIs [ light off ].

And the Phase IIIs will kick off when?

Q1.

Okay. You don't want to see some IH data just before you start the Phase III?

We won't start IH Phase III. We'll start the narcolepsy.

But for the split dose, wouldn't that help or it not?

No, we can model -- we're highly confident in our ability to model the split dose right now.

Phase III, NT1 and NT2 both start in 1Q.

Yes. That's the goal. We're setting our FDA package right now. We expect our end of Phase II meeting in January with the agency.

Got it.

So we'll submit all the protocols and we have some -- we're really excited about that because now we go into Phase III with just a huge data set from Phase II. And I think that -- I think people will begin to figure out -- there's been so much back and forth about this data, that data, ours compared -- the foundational issue now is that we think we have a really important drug, and we've credentialed it through a robust Phase II program.

Do you see all the emerging data sets? I know it's often this versus that. Do you see them all as basically validating a category much more broadly for the patients rather than, my MWT is [indiscernible] and yours...

I think -- I mean the only data sets we've seen have been Takeda and ours. That's -- but those are mutually reinforcing for sure.

Got it. Fantastic. Excellent. Well, I'll leave it right there. We'll come back and discuss. But just in conclusion, if you could just remind us how many active arms do you envision in Phase III trials?

TBD, I think that the most would be 4 and the most -- the modal value will probably be 3.

And the split only applies to NT2, not NT1 or could it be both?

Yes. The NT2 data is what informs it, but we're actually -- we're looking at the overall program now. And what's interesting is the way that the NT1 doses and NT2 doses abut each other. So just think about it in the Phase II program without prespecifying our Phase III. So across the narcolepsy program, we tested 4, 6, 8, 10, 14, 18. It's -- so what we see as a huge competitive advantage is if we get there is -- the drug gets approved with a range of doses. So your differential diagnosis doesn't really matter. There'll be a recommended starting dose for NT1, there'll be a recommended starting dose for NT2 and there'll be -- then you can move up and down because there'll be NT2 patients that have more like an NT1 phenotype and possibly vice versa. So the whole idea of our competitive advantage is based on this dosing flexibility.

Fantastic. Excellent. Thank you so much for making time.

Thank you, Umer.

Greetings and welcome to the Alkermes plc Conference Call. My name is Rob, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Sandra Coombs, Senior Vice President, Investor Relations and Corporate Affairs.

Sandy, you may now begin.

Good morning. Welcome to the Alkermes plc conference call to discuss the top line results of the Vibrance-2 Phase II study of alixorexton in patients with narcolepsy type 2. With me today are Richard Pops, our CEO; and Dr. Craig Hopkinson, our Chief Medical Officer.

A press release, along with the slide presentation that we'll discuss today are available on the Investors section of alkermes.com. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements.

Please see Slide 2 of 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 our 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.

Our prepared remarks today will include data from the randomized double-blind treatment period of our Vibrance-2 Phase II clinical trial for alixorexton, formerly known as ALKS 2680. These data may not be indicative of future data from this trial or results of the other ongoing or future clinical trials. After our prepared remarks, we'll open the call for Q&A.

And now I will turn the call over to Richard for some opening remarks.

Thank you, Sandy. Good morning, everyone. So today, we're very pleased to announce the positive outcome from the Vibrance-2 study in narcolepsy type 2. This is a major milestone for our company and for the broader field of sleep medicine. This is the first large randomized multi-dose Phase II study to demonstrate the potential utility of an orexin 2 receptor agonist in the treatment of patients with NT2. The press release issued this morning summarizes the positive top line results.

On this call, with the accompanying slides, Craig will take you through the top line measures. The open-label extension phase of the study remains ongoing, and there'll be more data to discuss over time. So while we're still in the early stages of the data analysis, today's top line results directly address the study's key objectives, and they were first efficacy. The study successfully met the dual primary endpoints, MWT and ESS, demonstrating clear the statistically significant improvements in weight fullness and excessive daytime sleepiness compared to placebo. The two endpoints capture different information and both are important from a clinical and regulatory perspective. In this study, we gained critical new insights into their time course and correlation in this diverse patient population.

Second, and just as important, our safety and tolerability. We confirmed our hypothesis regarding the shift in dose response in patients with NT2. Consistent with our modeling, alixorexton was generally safe and well tolerated at the doses tested in this study. Interestingly, visual AEs were not among the most commonly reported, and there was no increase in the rate or severity of AEs with increasing doses. This is encouraging information, of course, for our planned NT2, but also as we pursue indications outside of narcolepsy across our orexin portfolio.

And third is our readiness for Phase III, the Vibrance-2 study design particularly its dose range, sample size and longer-term duration, generated new insights into orexin biology in patients with NT2. These are patients with variable degrees of baseline orexin tone. The data provides a strong foundation to advance into Phase III and provide proprietary insights that we believe will support a successful registrational program in NT2. So we now have a new degree of confidence in the potential of alixorexton in the treatment of NT2.

And with that, I'll turn it over to Craig to walk you through the study in much more detail.

Thank you, Richard. Today's positive top line results represent an exciting milestone as we seek to advance a new therapeutic option for patients with narcolepsy type 2. The Vibrance-2 Phase II study met its primary objective all of the domains we focused on: safety, tolerability and efficacy. The data from this study provide a strong foundation to advance into Phase III. But beneath the top line are key insights some of which we'll review today and others that we will retain as proprietary for competitive reasons. In Vibrance-2, we tested a range of therapeutic doses of alixorexton over an 8-week double-blind period patient population, which is a group of patients with a variable degree of underlying orexim front.

This is the first large Phase II study to evaluate multiple doses of an orexin agonist in this patient population and demonstrate a safety, tolerability and efficacy profile in patients with NT2 that supports advancement into Phase III. The study confirmed the dose response shift from the NT1 population that we had anticipated and chose the viability of this range of higher doses. We're very pleased with the safety and tolerability of alixorexton demonstrated in the study and believe it gives us significant flexibility as we move into registrational studies. We observed a key efficacy signal across primary assessments, the maintenance of Wakefulness test or MWT, and on the Epworth Sleep in the Scale or ESS, we achieved statistical and clinical significance. As you will see, we saw greater variability in response compared to NT1 and there are new learnings in the study that we plan to apply in Phase III.

Narcolepsy type 2 is a chronic neurologic sleep disorder. It has many similarities to narcolepsy type 1 in terms of the clinical presentation of excessive daytime sleepiness. However, the underlying disease pathophysiology is much less clear. Unlike narcolepsy type 1, patients with narcolepsy type 2 do not have a known absence or deficiency orexin. The differential diagnosis of NT2 is more challenging and the patient population is considerably more variable in terms of disease severity response to treatment and baseline orexin tone. With that said, it is a population with significant unmet needs and a limited number of currently available efficacious and well-tolerated medicines.

The Vibrance-2 Phase II study was designed to capture the significant patient-to-patient variability and provides a substantial data set evaluating a range of doses of alixorexton in a multi-week study with well-powered cohorts of patients with NT2. The 8-week, double-blind, placebo-controlled parallel design study evaluated 3 doses of alixorexton versus placebo and incorporated feedback from the FDA. After washing out of their current narcolepsy medications for 2 weeks, patients were randomized to 1 of 3 once-daily dose levels of alixorexton, 10, 14 or 18 or placebo. Following the double-blind treatment period, patients had the option to roll into an open-label extension.

The dual primary endpoints of Vibrance-2 are the change from baseline in mean sleep latency on the MWT and the change from baseline on the ESS at the end of the 8-week randomized double-blind period. We enrolled a total of 93 patients across 47 sites in the United States, Europe and Australia. In terms of baseline characteristics, these NT2 patients were highly symptomatic with MWT and ESS scores consistent with severe disease. The mean sleep latency on MWT at baseline was approximately 6 minutes with about half of the study subjects having a mean sleep latency of less than 5 minutes at baseline. The mean ESS scores at baseline was approximately 17.5%, reflecting severe daytime plus. Study retention was strong with approximately 95% of patients completing the double-blind period and rolling into the optional 5-week open-label extension, which is currently ongoing. Those who have completed the open-label period had the option to enroll in a separate long-term extension study. The safety and tolerability results are among the most important findings from the study. Overall, alixorexton was generally well tolerated in the NT2 population.

The data being shared today are as of the data cutoff for the double-blind period. Similar to Vibrance-1, we'll continue to collect safety data during the open-label extension period. Our pretest hypothesis based on our Phase Ib data was that in comparison to NT1, NT2 patients are generally less sensitive to orexin agonist, requiring higher doses to drive improvements in efficacy parameters and correspondingly tolerating higher doses with respect to adverse events, and this is exactly what we observed. Over 8 weeks, alixorexton was generally well tolerated at all doses tested. No treatment emergent serious adverse events were reported, and most TEAEs were mild to moderate in severity. The most commonly reported TEAEs in the randomized double-blind treatment period were polyuria, insomnia, micturation urgency, dizziness and headache. There was no dose response observed in terms of the frequency or severity of these events.

Further and importantly, no safety signals were observed in hepatic or renal parameters, vital science or ECGs, and there were no treatment-related changes on visual exams in patients treated with alixorexton. We have not encountered any dose-limiting AEs in this NT2 patient population and believe these results provide significant flexibility for Phase III. Overall, the safety and tolerability data are encouraging and add to the growing body of evidence supporting the use of alixorexton in the treatment of narcolepsy and begin to establish the safety exposure requirements to support potential registration.

Turning now to the dual primary endpoints as assessed by the Epworth Sleepiness Scale and maintenance of Wakefulness test. Starting with ESS. You'll recall that the ESS is a self-administered questionnaire that measures a person's general level of daytime sleepiness by rating their likelihood of dozing off in each different situations. Scores range from 0 to 24 with higher scores indicating greater sleepiness and scores of over 15 severe sleepiness. We collected ESS data at weeks 2, 4, 6 and 8 with the primary analysis conducted at week 8. Across all doses tested, alixorexton demonstrated clinically meaningful improvements from baseline in excessive daytime sleepiness compared to placebo on ESS at week 8. This can be seen in the graph at the left, which shows the mean scores for each dose arm of the 8-week double-blind period. Reductions in ESS were observed with alixorexton across all doses, starting as early as week 2, the first time point measured. Over the 8-week period at the 14 and 18-milligram doses, mean ESS scores generally remained at or below, which is the recognized threshold for normalization.

Based on the prespecified analysis outlined a table on the right, at week 8, the 18-milligram dose achieved statistical significance with a p-value of less than 0.05 adjusted for multiplicity. At that dose, approximately 70% of subjects reported normalization. The MWT provides a quantitative assessment of daytime sleepiness. For the primary analysis is conducted on the final day of the double-blind period with sleep latencies measured in 4 separate 40-minute tests conducted every 2 hours of an 8-hour period. The result is expressed as the average time of person stays awake over the 4 test periods. The primary analysis compares the change in MWT from baseline to week 8 for each dose versus placebo. The MWT data from Vibrance-2 and NT2 reveal new learnings in comparison to what we observed in NT1 patients. Despite a high degree of variability, both in terms of baseline MWT and the response to treatment, we had a statistically significant outcome.

Overall, on the MWT, alixorexton demonstrated clinically meaningful improvements from baseline in mean sleep latency compared to placebo at week 8 at all doses tested. Based on prespecified analysis, the 14- and 18-milligram doses achieved statistical significance with a p-value of less than 0.05 adjusted for multiplicity. The study employed a hierarchical analysis to control for multiplicity, which precluded the assessment of statistical significance of the MWT endpoints at the 10-milligram dose. And adjusted for multicity, the 10-milligram dose drove numerical and clinically meaningful improvements in mean sleep latency with a p-value of equal to 0.0023. At week 8, observed mean sleep latency ranged from approximately 14 to 16 minutes across the alixorexton treatment arms.

Considering the baseline severity, these observed values are quite meaningful. That said, over the course of the 8-hour test that all doses tested, we observed strong consistent responses at the first 2 time points measured 2 hours and 4 hours post dose, with more variability in mean wakefulness at the 6- and 8-hour time points. This did not correlate with the PK profile, indicating that the effect was not driven by reduced plasma exposure. We have hypothesized that this phenomenon emerges over multiple weeks of dosing in patients with existing baseline orexin tone, reflecting an adaptive response to daily administration of an exogenous orexin agonist. We believe a split dosing regimen could increase mean sleep latencies at the later time points.

Looking at the data holistically across the 2 end points, we saw a clear signal of efficacy with statistically significant and clinically meaningful findings in both patient reported and objective measures of wakefulness and excessive daytime sleepiness. Against the backdrop of a highly variable and heterogeneous patient population, the efficacy of alixorexton was clearly demonstrated, both in terms of statistical and clinical significance, which speaks to the robustness of the underlying pharmacology. We look forward to presenting these data as well as other important findings from the study as we complete the analysis, including data from the open-label extension as well as the patient reported outcomes related to fatigue and concession.

We're still in the early stages of our analysis, but we can already draw some key conclusions. First, and most importantly, the study demonstrated that alixorexton can drive wakefulness in a highly variable population of narcolepsy patients without a known absence of orexin with a generally safe and well-tolerated profile. Second, there are key learnings from the data set that we will apply to our registrational program. We have always believed in the value of providing a range of doses to accommodate disease variability and patient preference. We are even more convinced of that now. The nuances and underlying trends of the data provide an opportunity to amplify the signal in Phase III. In Phase III, we plan to advance a range of doses including once-daily administration as well as split dosing regimens. With these data now in hand, our Phase II narcolepsy program is largely complete. We will initiate end of Phase II interactions with FDA and other health authorities. Alixorexton is in a strong position to provide a potential best-in-class profile and be first to market in NT2.

Well, done, thank you, Craig. We are very confident in the profile of alixorexton narcolepsy. This is based on data. Now with nearly 200 patients having received a range of doses of alixorexton for 13 weeks or longer across narcolepsy type 1 and type 2, we have a substantial data set supporting its efficacy, and we have a strong foundation of patient exposures supporting its generally safe and well-tolerated profile. We have a database now that captures the variability of these distinct patient populations, and we have a refined understanding of dosing regimen as we prepare to launch the Phase III program.

Every patient that has participated in Vibrance-1 and Vibrance-2 advances our understanding of narcolepsy informs our Phase III dose selection and contributes to our understanding of this therapeutic category. I'd like to thank all the investigators and patients along with our families for participating in this study. Over the coming weeks and months, we'll learn even more from the study, and we look forward to sharing those data with you in the future.

So with that, I'm going to turn the call back to Sandy to manage the Q&A.

All right. Thank you, Richard. We'll now open the call for Q&A.

[Operator Instructions] And our first question is from the line of Joon Lee with Truist Securities.

Congrats on the data. For the split dosing strategy, how would you state them out? And how -- and does the doses in consideration include the ones that are higher than the ones tested in Phase II? And any modeling data to show how much of a clinical benefit you may be able to extract from by splitting the dose?

Yes. At this point in time, we're not going to -- for provide the reasons, obviously disclose our dosing strategy. We've got a very clear concept as to what our Phase III design will look like. And we're going to be moving into interface meetings with the regulators and the FDA, and we'll finalize that at that point.

This is Richard. The only thing I'll add is I think this is one of the virtues of running a study of this design and this duration. The learnings that come from a range of doses across a fixed period of time to provide insights that we wouldn't have actually anticipated at the outset.

And I have a quick follow-up. Our base case is that there will be multiple orexin agonists in the market. How do you see the market being segmented the hypersomnia market being segmented by different orexin agonists?

This is Rich, I'll give you just a quick answer. And then I think the most important to realize is that these products are going to segregate based on data. And there are all 2 companies right now that have data of this richness and complexity and that's ticked and ourselves. And I think right now, it's clear that the first entrant is going to have a drug for NT1 and it looks like now that we're going to have a drug for NT2 and NT1, and we'll complete our RH study next year. So our original design intention, which was to go after all 3 of the principal diseases of hypersaline with a range of doses to address both patient variability as well as patient preferences that's very much intact.

The next question comes from the line of Paul Matteis, Stifel.

And congrats on the progress. This is Julian on for Paul. A few questions from us. So I guess, can you just clarify again sort of how you did the stats here are the dual primary and -- the MWT and ESS each have to have a p-value of less than 0.025 is that [indiscernible] if you could just clarify that, that would be helpful. And then also, just on the visual adverse events, it sounds like patients were less sensitive, perhaps than an NT1 sort of confirming your hypothesis as you stated. So I guess given the drug was generally well tolerated, can you just talk about your interest in exploring higher doses and how you're thinking about that initially? And that's it for now.

Yes. So let me start off with your question on the racial analysis. So there was a hierarchical analysis implemented. Obviously, we have dual primary end points in the study. So the alpha at the high dose was split between Epworth and MWT. If we hit both of those end points adjusted for multiplicity, we stepped down then to the mid dose and then from the mid-dose to the lower dose. Then for the question in terms of visual AEs, yes, I think we're excited about the safety profile that's emerged in the study with alixorexton being generally well tolerated. This, we believe, allows us to consider potentially going to higher doses, as I said in the first -- in the answer to the first question. We've got a very clear concept of what our Phase III design looks like, and we're going to be discussing that with regulators at the end of phase meetings.

And just one quick follow-up, if you don't mind. I guess, are you seeing a similar pattern as you saw in NT1 with respect to most of these digital adverse events occurring around the beginning of treatment and then attenuating over time? It would be great if you could just comment on that, too.

Yes, I think it's important to remember that the study is still ongoing. So we've got the open label extension, which is still ongoing. So what we've reported at this time is most common adverse events. And as you saw, we didn't see any visual adverse events in the most common reported AEs.

The next question is from the line of Luke Herrmann with Robert W. Baird.

Big congrats on the readout. Can you talk about whether there were any additional baseline characteristics that would have driven the outsized numerical MWT response at the 10-milligram dose? And then can you talk about the type of dosing adjustments you've seen in the OLE thus far?

I think at this point in time, we've obviously got our top line data in hand. There's a wealth of data that we still need to analyze. So we haven't actually looked at a large number of the subgroup analyses at this point in time. Obviously, that's something we will be looking at. Sorry, and the second...

Dose adjustments in OLE.

Yes. So those adjustments in the OLE were similar to what we saw in Vibrance-1. So all patients start at the mid dose and then have a 2-week period in which they can titrate up or down. So all patients will come on to the OLE on the 14 and then either go up to 18 or down to 10.

Great. And then just one more, if I could. Can you talk about how solidified the Phase III design at this point and beyond the split dosing regimen, other learnings you're looking to gain from the upcoming FDA meetings?

Yes. With the data in hand now, we've got a very clear concept of what our Phase III program will look like. Obviously, the next step is to request an end of phase meeting and to confirm that with the agency.

The next question is from the line of David Amsellem with Piper Sandler.

I just have the commercial dynamics question here. Just looking at the data, both on ESS and also on MWT, how would you think about the competitiveness of that data relative to the oxybate, soriampetol, pitolisant, all of which are fairly widely used in NTI. And understanding that there's a bit more disease heterogeneity in NT2 and also IH, I'm just trying to better get a sense of -- and I know the data is hot off the press. But how are you thinking about differentiation on these end point here relative to the current armamentarium. And then secondly, just coming back to visual AEs, can you confirm that the incidence rates that you saw in Vibrance-2 was lower than the 8-milligram dose tested in NT1 and Vibrance-1?

David, it's Rich. I'll start with the second question. Yes, I can confirm that. So the commercial dynamics are really interesting because when you look at the data set around NT2 population for the drugs that are being used, the data in the label is actually an amalgam of data from NT1 and NT2. So I think that the new mechanism with this safety and tolerability profile, showing such a profound and clear change on MWT on an average basis is really differentiating. And what Craig referred to earlier, based on what we've learned in the Phase II, we believe looking at MWT in particular, that we can tune up those later 2 endpoints and change the absolute PT number that you'll see in Phase III. So we think we're in a really good position to really compete in the NT2 space. Craig, anything want to add?

Yes. The other thing I would add is we've been speaking to some of our investigators in terms of the top line data, and there's a lot of excitement around these data. I think in many respects, I see this study is groundbreaking because it's one of the first well-controlled Phase II studies in the NT2 population. And they're pretty impressed with the clinical outcomes from the study.

The next question is from the line of Umer Raffat with Evercore ISI.

Congratulations. I have a few here, if I may. Perhaps, first, it was very interesting to see Takeda fail with the same dose in type 1 versus type 2. whereas you guys pushed at just a bit higher versus type 1 and you were able to see a signal even at your 10-milligram dose, even though PK and Cmax wasn't dramatically higher. I'm curious how you think about that observation, number one. Number two, on p-value on MWT, which is 0.0485. Obviously, this is not a registrational study, so we don't have to obsess on p-values. But I just wanted to confirm the multiple imputation method for the ANCOVA model, was it using the same interaction effects as you did in your Vibrance-1 study at World Sleep. Third, on multiplicity adjusted p-value, which is technically below 05 on both the mid and high dose on MWT. I would have thought that should not preclude a p-value assessment of 10 mg not unless you are being pegged to a 025 p-value for statistical significance. If you could remind us on that. And then finally, I think I might have missed it on visual disturbances. Did you guys only comment on the ophthalmic exam? Or did you also count on any self-reported visual blur, et cetera?

Okay. So let me take those one by one. In terms of the signal we saw, yes, design hypothesis has always been that you need higher doses in orexin normal population. And I think that's exactly what we've seen in terms of the outcome of the study. Obviously, as I've said, with an acceptable safety profile that gives us a lot of optionality in terms of where we go with this. And we also believe that a split dosing is something that we want to consider for Phase III.

In terms of the statistical methodologies employed that at was the same as Vibrance-1. And then in terms of the multiplicity adjustments, as I said, it was a hierarchical procedure split between Epworth and MWT. And as we step down to the mid dose, while we prevailed in terms of multiplicity adjustment on MWT, we failed to hit for multiplicity at the 14-milligram Epworth. And that's precluded that and the lower dose Epworth precluded us from assessing the 10-milligram dose. But as you've seen clinically meaningful improvements of 10-milligram dose worth with a p-value unadjusted of 0.0023. And then lastly, in terms of ophthalmic. Ophthalmic exams, we saw no treatment emergent changes on ophthalmic exams what we reported in our prepared remarks were the most common adverse events reported in the study and visual AEs were not amongst those.

The next question comes from the line of Jason Gerberry with Bank of America.

Firstly for me, just wondering how you see this data in the competitive interplay with oxybate, I think it's a relevant question given your investment in the space. And then in the Takeda data, it seemed like the effect treatment effect worsened from like the midpoint analysis to the final analysis. I believe that observation was on Epworth. Your -- when I look at your 14-milligram dose, it does look like it gets worse from week 4 to week 8. So just wondering if there's any waning of effect you see on MWP over time? Any kind of time course commentary you can make here?

Jason, it's Rich. Maybe I'll start with the oxybate it. I think as we said around the announcement of the Avadel transaction, we'll -- we see an ongoing role for the oxybate in the treatment in narcolepsy for those patients who are really focused on consolidating their sleep at night. Now we don't have all of the PSG data from Vibrance-1 or Vibrance-2 analyze. But I think it stands to reason that for the patients who really benefit, which are not most patients on with narcolepsy. But for those who are on oxybate, we see a real virtue to being on them. And a once-a-night version in the form of Lumeris is attractive. We think that will continue to be the case. And I think the overall phenomenon as a care and the treatment standards for narcolepsy improve with the advent of the orexin agonist. I think there's going to be a larger pool of patients that are going to be addressable with all these medicines. So we don't see any worsening or emission in the ESS or MWT signal across the time course. Craig, do you want to comment on that?

Yes. I mean I would agree. Over the 8-week period, we see sustained improvements on Epworth all the way through. and from the data that we've seen thus far in the open-label extension that extends through to the open-label extension as well.

Next question from the line of Joseph Thome with TD Cowen.

The KOLs that we talk to often point distillery between the NT2 population and IH. And so just curious, how much are you extrapolating this result today to the IH situation and given the potential for split testing here? Are you anticipating maybe incorporating a split dose either in the ongoing Phase II to kind of see how that might look for IH before that readout next year? Is that a possibility? And then sorry, if I said, but the few patients that did not make it to the 8-week endpoint, why was that?

Okay. So I'll start off with your question. So in terms of split dosing, yes, we do see that there are similarities between the NT2 and IH population. Obviously, different populations, but with a more normal orexin tone. Obviously, split dosing is something that we may want to consider for as well. We think it's premature at this point in time as to our timing of when we actually implement the split dosing strategy, but it's something we're considering. And then the second question was on the discontinuation. So we had 3 discontinuations in the double on period. The one was due to a treatment-related AE of in some year, and there were 2 unrelated discontinuations in the double-blind period.

The next question is from the line of Ash Varma with UBS.

This is [indiscernible] on for Ash. I guess do you think there's any rate across for the ongoing IH Phase II trial with alixorexton from the NT2 trial? And I guess you have said there was no clinically meaningful changes observed on ophthalmic exams. Could you please elaborate further, like define what you think as clinical not clinically meaningful changes? And I guess one more is like did you see how has the MWT curves look like over time, I guess, over weeks, did it get better or worse over time?

Okay. So I think it's not premature for us to reply on what the out of the IH study is going to be. We -- as I've said, we do see that there are similarities between the 2 populations. We have the same dose range in both studies, and we'll wait on the data for that. In terms of the MWT time curve, as we said in our prepared remarks, we did see more variability at the later time points in the day, and we believe that moving to or considering a split dose will help us address that and give us better resolution and potentially further improve the steep latencies towards the end of the day. And the third question was...

The third question was on the ophthalmic exams.

Ophthalmic exams, yes, these were similar to the N1 population. These were performed at baseline as well as the end of the double blind treatment period. We saw no treatment-related changes in the conduct of those studies.

Sorry, when I meant the MWT curve over time. I meant over the weeks, for instance, like was it also a major like you did for ESS like after like 2 weeks, 4 weeks, because it looks like we 8 weeks changed.

Okay, good. Yes, yes. Sorry. So essentially, we looked at MWT at week 4 and at week 8, and we saw similar facts at week 4 and week 8.

The next question is from the line of Uy Ear with Mizuho Securities.

Congrats on the data. Maybe just a couple of questions. First one, I don't know if you've mentioned it, but what's the common? What's your threshold for, I guess, common AEs? Is it like less 10% or higher than 10%, just wanted to get a better sense. And secondly, can you maybe sort of just help us understand a little bit about the waning of the efficacy during the day, I guess, from the start and towards like I don't -- you took, I guess, there are 4 measurements in the day and when -- what measurement did you sort of start seeing significant diminution of efficacy?

So the threshold that we use is a common threshold of 10% across the alixorexton treatment arm. So that's what we use there. In terms of the MWT, as we said in our prepared remarks, we saw strong effects and consistent effect across doses at the 2- and 4-hour time points with more variability at the 6 and 8 hours time points, and this is why we believe that considering a split dose is a prudent thing for us to do in Phase III.

The next question is from the line of Ami Fabia with Needham & Company.

Congrats on the data. Just a follow-up on the split dosing that you mentioned, I think I heard you say that it was not related to the PK. So if you could sort of elaborate on that. And as you consider split dosing how would you think about managing impact on insomnia rate as patients take the second dose at a later time point? And then separately, overall, it seems that you didn't see the rate of AEs that you would have expected to see at these higher doses in NT2. Do you -- does that mean that you'd be able to test higher doses than what you tested here? And could we sort of expect you to see an increase in WTT closer to 20 minutes as you test higher doses?

So let me address your question around split dosing and PK. Yes, in terms of the PK, we don't see any decrease in at the time points at which we're seeing more variability on MWT. So as I said, obviously, more variability at the 6- and 8-hour time points and hence the decision to consider a split dosing.

In terms of insomnia, as you've seen from the safety profile already in the NT2 population in the orexin normal populations, the shift is with higher doses seems to shift in terms of a better tolerated SECI profile as well. We believe that we can model in the split dose so as not to necessarily have an impact on the safety profile and events like insomnia. But obviously, these are things that we're in the process of finalizing, and we'll be discussing with the agency at into phase meetings. Now for the question around the higher dose, as I've said, given the acceptable safety and tolerability profile, we do believe that it gives us maximum optionality as we consider potentially going to higher doses and a split dose for Phase III. But once again, something we'll discuss with the agency.

The next question is from the line of Benjamin Burnett with Wells Fargo.

This is Craig on for Ben. I appreciate the chance to ask a question here. I guess first one from us, based on kind of what you've learned from the study, how are you thinking about MWT or ESS as kind of the primary endpoint for the Phase III you envision a world where maybe you only take 1 of those 2 forward? And kind of what are the pros and cons between both, given kind of like your understanding of the data that we have so far? And I guess one more, just in terms of the heterogeneity and NT2 patients. Did you guys see any kind of changes or anything notable from like responder analysis to patients who might have shown a greater degree of benefit on those later time points?

In terms of the endpoints, we believe both endpoints are important. And obviously, as we move forward with our Phase III designs are something that we'll be discussing with both the regulator in the U.S. and as we move forward. With regard to your question on heterogeneity, at this point in time, we have the top line data in hand. And obviously, a lot more analysis will be ongoing, but we haven't actually performed responder analysis and all of the additional analysis at this point in time.

The next question is from the line of Douglas Tsao with H.C. Wainwright.

Congrats on the data. I guess just in terms of sort of some of the heterogeneity that we've seen responses, it seems like it's in question if I'm wrong, that perhaps different patients in the NT2 population will need different dose levels I guess when you think about the Phase III design, as you move into split dosing as well as different dose levels, do you think that this will be a situation where ultimately sort of one dosing regimen will be approved or do you think they will interest having multiple dosing regimens obviously while doses for the NT1. The confidence or the sort of guidance you'll be able to provide clinicians in terms of starting the patient -- or getting the patients to the right dose.

Yes, I think we've learned -- we've learnt a lot from this well-controlled Phase II study. Obviously, there is a lot more heterogeneity in this patient population and certainly far more so than we saw in the NT1 responses. As such, we've got a very clear perspective on what effective dosing regimens would look like in our Phase III program. And obviously, coming out of a Phase III program, will have a cap perspective on which dosing regimens take forward to filing. But first step is for us to have an interface meeting with the agency.

Doug, this is Rich. I may just add. We've always believed as we move from NT1 into NT2 and IH, that we experienced a much more heterogeneous patient population. So just first principle, it seems to stand a reason that a range of doses and now a range of regimens gives you ability to tune the pharmacology to the patient's particular needs. So a range of doses has always been part of our strategy, and I think we believe that now more than ever. So I think what other striking about the study is notwithstanding all that variability, you still see the efficacy signal power through all that variability with statistically significant results in the heterogeneous population. I think that bodes very well for the Phase III.

The next question is from the line of David Hoang with Deutsche Bank.

So I want to ask on the currently available therapies, which have weight promoting effects. If I think about some of those, pitolisant and stimulants and other things out there, if -- can you remind us if you're aware if we were to look at these products on -- in terms of MWT, how much efficacy what will we see there for MWT for those currently available products? And then in terms of your dosing strategy, just to clarify, you would have some split doses and some single doses in Phase III? Or you're intending to have just every dose would be some variation of a split dose?

Yes. So let me take your first question. The -- it's interesting as you look at the programs that were conducted for the currently approved standard of care, these are invariably just combined NT1, NT2 population of patients. So it's very difficult to actually tease apart a signal for MWT in those populations. What's compelling about this study is it's the first well-controlled Phase II study in a dedicated population of NT2 patients. In terms of the split and single doses, as Richard just said, we see the value in a range of doses. We think we drove clinically meaningful results with once a day dosing. Obviously, we see the value of adding a split dust regimen into the mix as well. Once again, we've had a very clear perspective on what our Phase III design looks like, and we'll be taking that to end of phase meeting with the regulators.

Our last question comes from the line of Akash Tewari with Jefferies.

Akash, you may be muted.

Yes, this is Manoj on for Akash. Just one question. How do you view the lack of clear dose response in MWT? Did you observe any those response at any point of time like at 4 weeks or something? And how does this data inform you for the Phase III dosing? And just lastly, did you see any kind of response plateauing with products in agonist in terms of efficacy on target is? Do you see that as a possibility here? And if so, how is that going to affect the IH trial?

Look, Manoj, we didn't catch the second question. But Craig, do you want to comment on MWT [indiscernible].

Yes. So I mean our belief is as we look at the data holistically, we do actually see a dose response for efficacy, but we don't see a dose response interestingly across the safety profile.

So just to follow up on that. So do you expect like some kind of plateauing both in terms of efficacy and on target as with orexin agonism as a mechanism so that you kind of just see this kind of seeing effect there.

Well, I think in a direction normal population, we always have prophesized that we could go to higher doses and that patients would tolerate those higher doses. I think that's exactly what we're seeing from this well-controlled test study.

And you didn't see any dose response at any point of time for...

So across the incidence or severity of the adverse events in the study.

At this time, we've reached the end of our question-and-answer session. And I'll turn the floor back to management for closing comments.

All right. Thank you, everyone, for joining us on the call this morning. Please don't hesitate to reach out to us if you have any follow-up questions. And we hope you have a wonderful day. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Alkermes Third Quarter 2025 Financial Results Conference Call. My name is Rob, and I'll be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded.

I will now turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Thanks, Rob. Welcome to the Alkermes plc conference call to discuss our financial results and business update for the quarter ended September 30, 2025. With me today are Richard Pops, our CEO; Blair Jackson, our Chief Operating Officer; Todd Nichols, our Chief Commercial Officer; and Joshua Reed, our Chief Financial Officer.

A slide presentation, along with our press release, related financial tables and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today are available on the Investors section of alkermes.com. We believe the non-GAAP financial results in conjunction with the GAAP results are useful in understanding the ongoing economics of our business.

Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 2 of 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 our 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 will open the call for Q&A.

And now I'll turn the call over to Richard for some opening remarks.

That's great, Sandy. Thank you. Good morning, everyone. So Alkermes delivered a strong third quarter. It was marked by solid commercial execution, significant progress in our development pipeline, robust financial performance and continued execution across our strategic priorities. Today, we're raising our financial expectations for 2025, reflecting our confidence in the momentum of the business.

Before we dive into the results for the quarter, our increased expectations for the remainder of 2025. I'd like to take a moment on the announcement we made last week regarding our proposed acquisition of Avadel Pharmaceuticals. This transaction is an important step forward in Alkermes strategic evolution for 3 compelling reasons.

First, we gained an FDA-approved medicine with significant growth potential. LUMRYZ is the first and only FDA-approved once bedtime oxybate for the treatment of cataplexy or excessive daytime sleepiness in patients 7 years or older with narcolepsy. It has already shown strong market uptake since launch.

In 2025, it's expected to generate between $265 million and $275 million in net revenue. Once the transaction is complete, it will immediately diversify our commercial portfolio and strengthen our profitability.

Second, the acquisition will accelerate our commercial entry into the sleep medicine market. It will provide a well-established foundation for the potential launch of alixorexton, our promising orexin 2 receptor agonist in development for narcolepsy and idiopathic hypersomnia. Avadel is a recognized leader in sleep medicine and has successfully built and scaled a high-performing commercial organization. With positive Phase II data for alixorexton in narcolepsy type 1 now in hand, data from Vibrance-2 and NT2 that we expect to report in November. And plans to initiate a global Phase III program early next year, we've reached a new level of conviction in the potential of our Orexin platform.

And third, the financial strength of the combined company will enhance our ability to support a diversified development strategy in sleep disorders. This will include alixorexton as well as our additional alixorexton-2 receptor agonist candidate, ALKS 4510 and ALK 7290, which recently entered the clinic. Avadel's development pipeline also has the potential to broaden our offerings for the sleep community with an ongoing Phase III study of LUMRYZ in idiopathic hypersomnia and valiloxybate, a no self oxybate candidate in early-stage development.

The proposed acquisition reinforces our commitment to neuroscience. It gives us additional scale and builds on our legacy of innovation in complex psychiatric and neurological disorders. The transaction is a compelling opportunity to accelerate our growth trajectory and is squarely aligned with our financial and strategic priorities.

Upon closing, which we currently expect in Q1, we'll be able to provide more color on our expectations for the combined business.

So with that as an intro, I'll turn it over to Josh who will walk through our third quarter financial results.

Thank you, Richard. I'm pleased to join you today for my first earnings call as Chief Financial Officer of Alkermes. I'm excited to be part of a company with a strong financial foundation, a clear strategic vision and a deep commitment to delivering value for shareholders while advancing innovative medicines that have the potential to make a meaningful difference for patients.

Since joining, I spent time getting to know our team, our operations and our financial priorities. I've been impressed by the discipline and focus that drive our performance, and I look forward to building on that momentum.

Now turning to our financial results. Our third quarter results were strong, reflecting continued commercial and operational execution. Financially, the year is tracking ahead of our expectations and based on our performance through the first 9 months, we are raising our full year 2025 guidance today. For the third quarter, we generated total revenues of $394.2 million, driven primarily by our portfolio of proprietary products, which generated net sales of $317.4 million reflecting 16% year-over-year growth. These results were driven by strong underlying demand, which Todd will address in his remarks and gross to net favorability, primarily related to Medicaid utilization rates which drove a onetime gross-to-net benefit of approximately $8 million for VIVITROL and approximately $5 million for ARISTADA.

As we move into the fourth quarter, we expect Q4 net sales from this portfolio in the range of $300 million to $320 million. Manufacturing and royalty revenues were $76.8 million for the third quarter, including revenues of $35.6 million from VUMERITY and $30.2 million from the long-acting INVEGA products.

Turning to expenses. Cost of goods sold were $51.6 million, which compared favorably to $63.1 million for Q3 last year, primarily reflecting efficiencies following the sale of our Athlone based manufacturing business last year. R&D expenses were $81.7 million compared to $59.9 million for Q3 last year, reflecting investments in the Vibrant Phase II studies of alixorexton across narcolepsy and idiopathic hypersomnia and first-in-human studies and development efforts for our next Orexin 2 receptor agonist candidate, ALKS 4510 and ALKS 7290.

SG&A expenses were $171.8 million compared to $150.4 million for Q3 last year, reflecting the expansion of our psychiatry field organization earlier this year and promotional activities related to Lavalve. In Q4, we expect a modest increase in SG&A primarily reflecting activities related to the Avadel transaction. This performance generated strong profitability of GAAP net income of $82.8 million, EBITDA of $96.9 million and adjusted EBITDA of $121.5 million in the third quarter.

As we look ahead, based on our strong commercial performance and momentum through the first 9 months of the year, we are on track to deliver record revenues from our portfolio of proprietary products in 2025. As a result, we are raising our 2025 full year guidance to reflect our current expectations of total revenues of $1.43 billion to $1.49 billion, GAAP net income of $230 million to $250 million. EBITDA of $270 million to $290 million and adjusted EBITDA of $365 million to $385 million. Our full expectations are outlined in the press release issued this morning.

Turning to our balance sheet. We ended the quarter in a strong position with $1.14 billion in cash and total investments. For the acquisition of Avadel, we will use cash from our balance sheet in conjunction with bank debt to finance the transaction. As we close the transaction and finalize the financing, we will be in a position to provide more details. Taking a step back, Alkermes is one of the few biopharmaceutical companies that have successfully transitioned into a fully integrated profitable commercial organization with an exciting development pipeline. I stepped into this role at a time when the company is operating from a position of financial strength with a clear growth trajectory and near-term opportunities with the potential to drive meaningful value for shareholders.

I'm energized by the opportunity to help shape that next phase of our growth, working closely with the rest of the leadership team to support our strategic priorities and drive long-term value creation. I look forward to engaging with many of you in the weeks ahead and to contributing to the continued success of Alkermes.

With that, I will turn the call to Todd for a review of the proprietary portfolio.

Thank you, Joshua, and good morning, everyone. In the first 3 quarters of the year, we executed with discipline against our targeted growth initiatives. The focus drove strong consistent performance across our 3 proprietary brands. underscoring the strength of our commercial strategy and our capabilities. We're encouraged by the momentum we've built and remain confident in our ability to carry it forward.

In the third quarter, we recorded net sales from our proprietary product portfolio of $317.4 million, reflecting 16% year-over-year growth. We drove strong end market demand across VIVITROL, ARISTADA and LYBALVI. Starting with VIVITROL. Net sales in the third quarter were $121.1 million. VIVITROL performance continue to be driven by growth in the alcohol dependence indication market and our ability to capitalize on highly localized market dynamics in certain states and payer systems. For the full year 2025, we now expect VIVITROL net sales in the range of $460 million to $470 million compared to our prior expectation of $440 million to $460 million.

Turning to our psychiatry franchise. The expansion of our psychiatry sales force earlier this year was a key strategic initiative designed to enhance our competitive share of voice. With our expanded footprint, we have been able to significantly increase the frequency of our call volume for high-priority prescriber targets across LYBALVI and ARISTADA. This increased share of voice, along with strong execution has driven increased breadth of prescribers for both brands.

For the ARISTADA product family, in the third quarter, net sales were $98.1 million. Leading indicators related to underlying demand were encouraging with increased prescriber breadth and strong new-to-brand prescriptions during the quarter. For the full year 2025, we now expect ARISTADA net sales in the range of $360 million and to $370 million compared to our prior expectation of $335 million to $355 million.

Turning to LYBALVI. Net sales grew 32% year-over-year to $98.2 million Underlying TRx growth was 25% year-over-year, driven by new patient starts and prescriber breadth. Gross to net adjustments were approximately 28% in the third quarter. For the full year, we now expect LYBALVI net sales in the range of $340 million to $350 million compared to our prior expectation of $320 million to $340 million.

Across the portfolio, we are pleased with our performance through the first 3 quarters of the year and entered the final stretch of the year with strong momentum and a clear focus on delivering against our full year objectives.

With that, I'll pass the call back to Rich.

Thank you, Todd. Well done. I think you can see from the results that the company is performing well across each of the key aspects of our business. During the quarter, our commercial teams delivered strong operational and financial performance, and our R&D teams made major strides in advancing our expanding development pipeline. So I want to make comments about both aspects of the business.

First, commercial. We entered the final quarter of the year ahead of plan and with good momentum into year-end. Over many years, we have developed capabilities necessary to operate in challenging payer and policy environments. By design, we manufacture our proprietary products in the United States, and we do not commercialize these products outside the U.S. We are growing our business by growing demand based on the clear clinical attributes of our medicines and maintaining a disciplined contracting strategy consistent with our view of their significant value.

Now R&D. Our portfolio of Orexin 2 receptor agonist is advancing rapidly, led by alixorexton. The first Phase II data set of alixorexton was presented at World Sleep in September, in the Vibrant-1 study, alixorexton demonstrated compelling therapeutic benefits in patients with narcolepsy type 1 with a profound effect on excessive daytime sleepiness and cataplexy, along with a generally well-tolerated safety profile.

Taken together with the clinically meaningful improvements in fatigue and cognitive function demonstrated in the study, we believe alixorexton has the potential to transform the treatment of NT1.

At World Sleep, the competitive positioning for alixorexton and NT1 also came clearly into focus. In this large, randomized, double-blind, multiweek study, alixorexton administered once daily across a range of doses demonstrated new potential best-in-class features. With data from this rigorous Phase II study now in hand, we're confident in the profile of alixorexton NT1, and we're moving rapidly to initiate the Phase III registrational program in the first quarter of next year. We expect to be first to market in narcolepsy type 2 and idiopathic hypersomnia. We completed enrollment in Vibrance 2 in patients with narcolepsy Type 2 toward the end of the summer, and we expect to report top line data in November.

In idiopathic hypersomnia, Vibrance-3 is enrolling well, and we expect data from that study in mid-2026. like Vibrance-1, these are both large, well-powered Phase II studies designed to provide substantial data sets in forming potential Phase III development. We are building a significant body of clinical data that deepens our understanding of orexin biology and its therapeutic potential in central orders of hypersomnia and beyond.

Equally important, the Phase II studies are yielding key learnings related to study design and implementation that we believe will be invaluable Phase III and help support alixorexton competitive position in narcolepsy.

Beyond alixorexton and sleep disorders, additional candidates from our portfolio of orexin 2 receptor agonists are advancing well. ALKS 4510 is in the clinic and progressing quickly through single and multiple ascending dose studies in healthy volunteers. We expect to complete this Phase I work early next year and move quickly into proof-of-concept studies in the disease areas that we plan to pursue.

For ALKS 7290, we have filed the IND and recently initiated our first-in-human study. Across our Orexin development programs, we have demonstrated in clinical or preclinical models that orexin 2 receptor agonist may have powerful effects not only on wakefulness, but also across domains related to fatigue, cognition, attention and mood. We look forward to sharing more on both of these candidates next year as they complete their Phase I healthy volunteer studies.

So to wrap up, the third quarter was a clear demonstration of Alkermes strong execution, commercial momentum and scientific leadership. We continue to operate from a position of financial strength as we advance our pipeline and generate a growing body of data and insights that inform our strategy and reinforce our conviction in the opportunities ahead. With disciplined focus and a commitment to innovation in the patients we serve, we're well positioned to deliver long-term value for our shareholders. So we look forward to sharing our progress.

With that, I'll turn the call back to Sandy to manage the Q&A.

All right. Thanks, Rich. Bob, we'll open the call now for Q&A please.

[Operator Instructions]. And our first question is from the line of Marc Goodman with Leering Partners.

Yes. Can you talk about LYBALVI just a little bit seemed to be a lot stronger than expected and the gross to net seemed to be a little lower than expected. We were expecting that to kind of creep up some. Just give us a sense of what's happening with the product and just how you're thinking about gross to net into the next year?

Yes, absolutely, Mark. This is Todd. Yes, we're really pleased with performance for Q3. As I said in my prepared remarks in of our psychiatry footprint -- really drove a strong share of voice in the quarter. We were able to significantly increase our call volume, which was our strategic plan. We did that we believe that, that momentum will carry into Q4. And so the result of that is we sold year-over-year TRx growth of about 25%. But what's even more encouraging as we saw new patients start year-over-year, NBRx has increased almost 16%, so the underlying demand is really encouraging, and we believe that's a really direct reflection of the expansion of our sales force.

So for context, breadth of prescribing over the quarter increased 7%. So that's 2 consecutive quarters, Q2 and Q3, we saw a strong breadth of prescribing. To your question on gross to net. Gross to net was a little bit lower in the quarter than from Q2. That's the result of just as deductible resets throughout the year, lower co-pay utilization some small little dynamics like that actually at a lower gross to net for the quarter.

And Mark, it's Rich. I'll just add and Todd can expand on it. But the story about LYBALVI over time in the marketplace, other than just our strong commercial execution, is its efficacy. And that efficacy message is resonating, and I think it's supported now by multiyear data in the real world.

How do we think about gross to net into next year?

So we're not going to provide any guidance today, Mark, for next year. We do expect that going into Q4 that the typical seasonal patterns would show up. So we do expect a little bit of expansion of gross to net in Q4. But we'll give you a full year guide in February.

Next question is from the line of David Hoang with Deutsche Bank.

So I just wanted to ask about I guess, expectations once the NT-2 alixorexton data are in hand, how does that inform the next steps with the FDA and when will we know more about the Phase III program in design? And then maybe just a follow-up on VIVITROL, just kind of the expectations heading into Q4 for that product?

David, this is Rich, I'll take the first and then -- VIVITROL. So we expect that we're on track for data from the NT2 study in November. And as we've said along, when we get those data in hand, that coupled with a Vibrance-1 NT1 data will comprise the package for our end of Phase II meeting with FDA. So we'll request that meeting as soon as we get the NT2 data. we'll have that meeting and then we'll launch the Phase III program is our expectation early next year. Go ahead, Todd.

Yes. In terms of VIVITROL for the fourth quarter, I think the basis of that is what we saw in Q3. We saw strong demand. AD sales continue to drive the substantial majority of the brand. We hear very encouraging feedback from the market from HCPs and patients. So our expectation is that we would continue to see AD growth going to the fourth quarter. I think it's also just important to keep in mind that this is a mature product. So we think it will perform like a mature product, but our focus is really driving AD sales in.

Our next question comes from the line of Umer Raffat with Evercore ISI.

I just wanted to dial in on the NT2 study a little bit. Could you perhaps lay out for us your expectation of how much of an MWT benefit is reasonable to expect knowing there's a bit of tax flexes off of single-dose work in Phase I. But on the flip side, patients are starting off at 10 to 12 minutes at baseline. So how much MWT improvements are you expecting. And then also any broad parameters around what do you know as of right now, on blinded safety for NT2.

March, I won't comment on any of the blinded data. We'll get the full data set here just in a matter of weeks. So we'll look at the data in the aggregate in a large multiweek randomized, placebo-controlled study the blinded information is only -- is not particularly useful to us. So we'll look forward to seeing the whole data set right away. Our expectation is that based on the Phase Ib study, is that we know that orexin-2 receptor -- from that study can drive wakefulness in patients with NT2 and NIH. But we really don't have a numerical threshold at the outset because we also expect a lot more variability in the patient population.

So from a Phase II perspective, what we're looking for is we've identified a range of doses like we did in the NT1 study. What we'd like to see is the safety tolerability profile across that range of doses and clear evidence of efficacy across the various efficacy parameters, all to inform our dose selection for Phase III. So that's the goal. If we can come out of the NT2 study with clear evidence of safety, tolerability and efficacy in a design for Phase III, we think we're going to be the first to market in NT2. And the same thing applies for IH. And this is the virtue, by the way, of running these large Phase II studies. When you're talking about cohorts of 90 patients or so over multiple weeks, and remember, it's not just a 6-week or 5-week double-blind period -- double wind period. It's also the extension period where we have dose variability in selection for patients. So between these 2 phases, we just learned a tremendous amount about patient preference as well as dose response. And that all goes into the calculus for Phase III.

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

Just to piggyback off that, can you confirm what details you'll give us in the top line release? Will we know the actual effect size? Or are you going to be saving some of this for a medical meeting? And then on the safety point, how are you thinking now looking ahead as to whether you might employ some sort of titration to try to attenuate certain side effects, given that in the OLE and the NT1 study, we weren't really seeing much in the way of new onset, visually or things like that.

Paul, so yes, we have a good sense of how we're going to provide the top line data, you'll see that in the next few weeks. But you learn from the Vibrance-1 probably is -- there's a lot of data that comes out of these studies. So what we'll do is as soon as we get the data, we'll start submitting the abstracts for the various medical meetings as they roll into 2026. But you can expect a fair amount of data coming out of the top line, we have a good sense of the structure of it, and you'll see that in relatively short order.

We have made a lot of decisions following Vibrant-1 about the structure of the dosing in Phase III. We're going to keep most of that proprietary right now because we feel like there are some real learnings. Some of them probably you can think through derives from the comment that you made is that we really saw a very, very low incidence of new onset adverse events for patients who had already been exposed to alixorexton in the double-blind period. So all that information from Vibrance-1 has been put into our modeling and I think we've settled on our Phase III design, and you'll see that when the study gets underway.

Next question is from the line of Akash -- with Jefferies.

This is Manoj for Akash. Just 2 questions. When you release the top line Vibrance-2 data, will you be releasing data points over time like 4 weeks and 8 weeks, because both [ 994 and 8619 ] data showed some deterioration of efficacy, primarily in MWT going from 4 weeks to 8 weeks, do you see any biological rationale for this? Or is it just like a noise related to a small number there? And also, do we expect a dose response in Vibrance-2 in terms of -- and also lastly, what kind of PK profile do you look for the next-gen orexin?

So on the point about the techy places that you referred to or Umer referred to as well. We don't see, based on previous data, the significant evidence of tachyphylaxis or degradation in efficacy signal between 4 and 8 weeks or even 8 and 12 weeks in other data sets.

So at the top line, I wouldn't expect all the detailed data of time course. But I just want to let you know at the outset. That's not our pretest hypothesis that we expect to see in degradation. Now to the extent that one did, one way that you could overcome it is with a range of doses. And we've always thought that having a range of doses could be a real competitive advantage in this category. We are hopeful to see dose response across the various efficacy measures, but we won't know until we see the data.

The 3 doses that we modeled for NT2 were designed to give us a spectrum of dose response, but we won't know until we see the final data set. And the PK profile of -- I think you asked about the next orexin agonist, we were really not going to disclose any of the -- any of those particular attributes of the next wave of molecules coming in. I wouldn't necessarily describe it as next generation because I don't feel like they're improving necessarily on deficiencies that alixorexton has. They're just different. And so they're designed for different patient populations in different clinical settings. And as such, they share common features of potency and selectivity. And we think that's essential for interrogating circuitry in the brain, but they will be different.

Our next question is from the line of Joseph Thome with TD Cowen.

Maybe for the NT2 data set, can you talk a little bit about the importance of also showing the benefit on the ESS? Is this important both the FDA? Or is this more of a European measure, if you can kind of put that into context a little bit? And then for the Phase III programs, can you talk a little bit about your expectation for ocular monitoring on one side of it, I could see that it would be helpful if you do see some early visual disturbances to kind of say that this was not impactful. But obviously, on the flip side, it would probably make the Phase III a little bit more complicated. So kind of your latest thoughts on that would be helpful.

Joe, we think in the NT2 study, both MWT and ESS are worth steepness scale are primary endpoints. And they capture different things. The virtue of the MWT is it's sort of a numeric, quantitative assessment of the sleep latency. And ESS captures the patient experience, their self-described degree of sleepiness. And they -- I think they both are quite important. In Phase II, we're interested in looking at where the sensitivity is, where -- what scales move the most reliably across the doses. And that includes -- commission fatigue, narcos severity scale, global impressions, all of the endpoints that we're looking at Phase II because that informs your Phase III structure in design. So we're hoping to see signs of efficacy across all these various parameters.

Phase III, it's too early to say just recounting I think that in Vibrance-1, what we saw was really generally very mild on moderate and one severe ocular in the form of blurred vision. And so it was generally very well tolerated. And that along with the rigorous ophthalmic exams that were conducted in all the patients, I think really answered the question about are there any structural issues that derive from using exit receptive -- and so I don't know the answer yet whether we'll have to do any monitoring in the Phase III study. We're hopefully we don't to the extent that we do, it's quite mild. But I think in some ways, that will be more of a discussion with the regulators.

Our next question is coming from the line of David Amsellem with Piper Sandler.

Just a couple of quick ones. On the additional orexins that are going into the clinic. And I know, Richard, you talked about properties in mood and attention. So is it safe to say that the at least 1 additional disease setting is going to be in a psychiatric setting once you move into proof-of-concept studies next year. Maybe elaborate a little more on how you're thinking about that?

And then secondly, I don't know if this has been asked, but any thoughts on alixorexton outside of the United States? And what kind of discussions, if any, have you had with European regulators there?

David, yes, I think we've said about the next candidates that we're interested in 3 broad domains, psychiatry, neurology, and interestingly, certain rare neurodevelopmental or neurodegenerative settings, where we think a significant part of the clinical precaution is excessive daytime sleepiness and done a fatigue depressed mood, things like that. So we won't be more specific than that right now. But as I mentioned in the earlier remarks, our goal is as we get through the same to move right into those types of patient-focused studies to get signal early on and you'll -- what I'm hopeful is that by the end of 2026, people see how this program has expanded well beyond narcolepsy. And the essential prerequisite of that is getting these 2 candidates through their SAD/MAD credentialing them as bone of feed development candidates for these indications. That's well underway. So we're quite excited about how that's going to mature in 2026.

The second question was alixorexton in XUS. We're developing XUS. We're running clinical trials in Europe and in Asia, and there's a strong demand, I think, for this type of product for patients around the world. So given the state of pharmaceutical pricing discussions across the world, I think it's -- we can say comfortably, we wouldn't expect to bring alixorexton to patients outside the U.S. at significantly lower prices than in the U.S. But our goal is to bring this patient to patients in the U.S., in Europe as well as in Asia.

Our next question is from the line of Ash Rama with UBS.

This is Tian on for Ash. For NT2, how are you thinking about these patients' hypersensitivity to Exagen what's the most concrete evidence that you see why this hypersensitivity could be lower in NT2 patients versus th NT2.

Yes, I wouldn't describe it as hypersensitivity. I think it's the other direction. I think NT2 patients based on the data are less sensitive to orexin agonists. Administered exogenously. So NT1 recall is the disease is a deficiency of orexin. So in NT1 patients, small doses are driving significant efficacy benefits as low as 1 milligram in our hands with alixorexton, we've shown meaningful changes in wakefulness. Whereas in NT2 patients, and we know this from our Phase Ib study, you can drive higher doses in order to elicit more wakefulness. As well as they tolerate higher doses before you see adverse events. So the basic hypothesis going into the NT2 and IH studies is that there's a frame shift, there's a dose response curve shift to the right. so that you need more alixorexton in order to drive wakefulness and patients will tolerate more alixorexton before seeing adverse events.

The next question is from the line of Leonid Timashev with RBC Capital Markets.

I just want to ask how you're thinking about the NT2 versus IH population and sort of the differences in your ability to actually accurately capture them in separate trials, sort of what you're hearing from physicians on how those are diagnosed and bucketed. And then ultimately, whether these are differences that are meaningful in the real world and how that may impact how you're thinking about the relative opportunities of NT2 versus IH?

I think it's an important question. I think we won't really know the answer until we complete the 2 studies. And I think there's differences based on our learnings in multiple discussions with clinicians and patient groups in the U.S. and Europe, there could be regional differences too, in the way that the differential diagnosis is made. What's interesting though, Leonid, is the hypothesis there's no pretest hypothesis that suggest there might be a difference in the response between the IH NT2 diagnosis or the sub categorization within those 2 diagnoses.

As you know, within IH, there are long sleep by age patients, they are shorter sleep IH patients. They have different phenotypes that present. What we know from our Phase Ib study, albeit small, was just taking all comers with NT2 and IH, we were able to show changes in wakefulness well-tolerated profile. So I think this is de novo clinical research. No one's ever tested an orexin-2 receptor agonist at these doses in these patient populations. So I think the whole community is going to be fascinating to see what the distribution looks like, what the variability looks like and what the overall effect of various doses in these patients.

And then I think with that information, we can better design Phase III too. Are there ways of tuning up or focusing that response in the Phase III studies. But our priority we're enrolling patients without any discrimination between the differential diagnosis. And interestingly, in NT2s, you tend to use MWT as an endpoint, whereas that's not used in IH to use idiopathic hypersomnia severity scale and worth. So it's -- it will be interesting to see how the 2 patient populations look when we're finished with the studies.

Our next question comes from the line of Luke Herrmann with Baird.

Just a couple of time line questions on the earlier pipeline. So the next gen orexins are you expecting to share Phase I data from 4510 next year? And do you think there's a possibility of 7290 first in human data reading out next year as well? And then similarly, I know it's sensitive right now before deal close. But in general, do you see a possibility of some new data on the low-salt box debate next year.

Yes. The 4510 and 7290, I think -- I can't say right now whether we'll show you data per se from the SAD/MAD. I think it's more of the gating, the go decision to say, if we're through state doses we think are targeting gauge and therapeutically relevant, then we're going to -- you'll know that we're moving into the patient-focused studies. The timing of the readout of those translational studies remains to be disclosed. I think we're getting a sense of it right now, but it just depends on how fast we move into those translational studies and how quick the readout is. So give us some time to give a little bit of refinement about that as we move into 2026. But our goal is to finish SAD/MAD for 4510 first and move right into some translational studies. Same thing with 7290 get through the SAD/MAD and then go right into a different set of translational studies.

We're obviously quite interested in the no salt once-daily development program within Avadel and as we complete the merger, we will or the acquisition, what we'll do is we'll give you more sense in our hands what we'll be doing with that program. But we think it's a very logical extension to the business that Lumeris has built.

The next question is from the line of Ami Fadia with Needham & Company.

With regards to impact on Nightline sleep, can you talk about the 2 mechanisms, Orexin versus oxybate? And how you're thinking about the 2 mechanisms being complementary and how you intend to study that further going forward? And just separately, with regards to ARISTADA, can you talk about where you expect the gross to net to land for the full year?

It's Rich. Yes, I think your question about nighttime sleep is going to be a very fertile one for additional clinical research. What we've heard from clinicians. You've probably heard the same thing is notwithstanding the powerful daytime wakefulness that orexin agonists are driving, there is still some interest in understanding how that coexists with consolidation of sleep at night for certain patients. Recognizing that most patients don't take oxybate, but the ones who do see real benefit from it. I think there's a real opportunity for some clinical research now to understand how the 2 can coexist, particularly in once nightly and once daily forms that we would control both. So that's an exciting area for further research for patients and I think for the full field because I think that the full effect of an orexin agonist on nighttime sleep architecture is still yet to be learned. We're developing those data in our Phase II program with extensive polysomnography. So we'll be analyzing that data as we complete the virus program. But in the meantime, I think that there's a -- we see that there's a place for the oxybate on a going forward basis for the patients who really benefit from them, and we want to further elaborate that.

Todd, do you want to talk about the GTM.

Yes, absolutely. For ARISTADA, for the full year, we expected to follow the consistent historical patterns, which should be approximately 53%.

Our next question is from the line of Uy Ear with Mizuho.

Congrats on the quarter. So maybe just a quick question on the gross to net favorability. I think you benefit from the last quarter and this quarter for both ARISTADA and VIVITROL. Just wondering, could you maybe just help us understand whether there's more benefit going forward? Like what is being like -- yes, help us understand why these adjustments and secondly, in the quarter, could you also sort of speak about inventory, whether it's -- is there any stocking or is that normal level?

Yes, absolutely. Yes, as we said in our prepared remarks, we did see a benefit for VIVITROL and ARISTADA in relation to Medicaid utilization. Going forward, we're not assuming or planning for any additional gross to net favorability within Medicaid. I think it's important just to note that the Medicaid volume, the absolute volume for Medicaid patients is stable. This is just related to the percentage of Medicaid across our overall channel mix. That was -- that's the favorability. In terms of inventory, there's always seasonal patterns during the fourth quarter, and it can be a little bit difficult to predict, but we are expecting a little bit smoother pattern from Q4 of this year into Q1 of next year.

The next question is from the line of Ben Burnett with Wells Fargo.

I wanted to see if you could just maybe talk about some of the Phase III scenarios for alixorexton. I think we're assuming sort of 2 Phase IIIs would be needed. I guess, number one, I guess, do you agree with that -- and then if so, like would a Phase III NT2 study maybe be sufficient along with an NT1 Phase III to get approval in both of those indications.

It's Richard. That's our assumption right now, but we'll confirm that obviously with FDA. Our expectation is that we'll seek labeling for eluxarexin for the treatment of narcolepsy and the Phase III program will be well-controlled Phase II study for NT1 on a standalone basis and a similar study in NT2.

Next question is from the line of Douglas Tsao with H.C. Wainright.

Congrats on the progress. I guess I know it's early, Richard, and a lot of uncertainty. But just given the fact that you're always so thoughtful on public policy issues I was just curious if you thought much about the potential impact of sort of lapse on ACA subsidies and what it could have for your commercial business in the near term? I have a follow-up.

Yes, it's a good question, Doug. And I think everybody is watching that. I think my sense is that there's a strong political virtue to continuing the ACA subsidies at some level. And recall that a reconciliation in the One Big Beautiful bill, what we were able to make sure is that patients in our population, i.e., patients with serious mental illness and addiction are treated differently. They are the ones who are the explicit target of programs like Medicaid because if these patients are not treated, they end up in the emergency rooms and in the criminal justice system in the community.

So the price points of our medicine stream, these patients are lower and the gross to nets are high. So they're not breaking the bank. So argue from a policy perspective is that there's a reasonable -- there's a political reason to keep ACA subsidies in place, A and B to the extent that we have changes that are focused on Medicaid population in particular, serious methylene and addiction patients, we're going to continue to fight to have them carved out.

And I guess just a follow-up on LYBALVI. I'm just curious, just given the success you had with the sort of additional promotion and detailing the product. Do you have the sense was that physicians just weren't writing and they just needed that consistent reminder? Or was there just sort of some extent, lack of awareness of the product and its attributes.

Yes. In terms of LYBALVI, I think the first thing is, over the last several years, we've had a really strong focus strategically on building awareness around the efficacy profile. And that is -- that's really resonating. It resonates every single quarter. So that's a big driver is just the underlying value of the product. It's also important to remember that LYBALVI is a broad label, right? So we have a broad addressable population. So we're seeing strong growth with schizophrenia and bipolar. The mix is still roughly about 50-50, but new patient starts are definitely growing more towards the bipolar population. And so I think with the strong efficacy along with our commercial execution and then also resourcing that we've put behind the brand. We actually really saw a very positive quarter, and our expectation is that -- and our focus is really growing that demand going into the fourth quarter as well.

I guess just sort of what was driving -- do you think that some clinicians are more familiar that you had the breadth of label for bipolar and the efficacy? Or was it just those are competitive markets and you just constantly need to stay in front of rent?

Yes, it's a good point. The competitive landscape is fierce, as we know. And so we're very practical with this to make sure that we're putting resources in our highest growth driver. So we felt and the data showed us that we needed a stronger share of voice. But number 2 is physician research tells us that HCPs need experience.

So once they get experience with 1 patient type, schizophrenia or bipolar in general, patients are having a good experience, they're more open to expanding their breadth of prescribing. And so we're very pleased, as I said earlier, breadth of prescribing has expanded by approximately 7% for 2 consecutive quarters. and we're seeing encouraging trends with debt. So it's really those 2 things. It's our commercial investment, but it's also the experience of the HCP and the positive experience they're hearing from patients.

Our last question is from the line of Jason Gerberry with Bank of America.

This is Chi on for Jason. I want to follow up on the virtual AE commentary earlier for Vibrant commentary that I heard was that most visual AEs were mild, and there was 1 moderate and 1 SOFIA case. Can you contextualize 1 constitute a SOFIA vision borer? And how long did that last?

And secondarily, is there a dose response relationship with that with the virtual AE and Vibrance-1. When I look back at the Vibrance-1 AE table, there was this SOFIA case of any cause in the 4-milligram dose and SOFIA cases of any cost in 8-milligram dose. Can you clarify which dose level is that 1 moderate case of visual AE and which dose level did the 1 SOFIA virtual AE case occurred in?

Yes, the vast preponderance of the visual AE maybe actually reported as blurred vision were mild cases. There was 1 moderate that became a mild after 4 days, I believe, and there was once that was categorized as severe, but that was part of a constellation of symptoms that led to an early termination of that patient after the third day, I believe, in the study.

So there was dose response. We saw more at the 8-milligram dose than the 4 and the 6. But interestingly, in the extension period after patients have been in the double-blind period and could choose their dose. If patients had been on a previous dose of alixorexton and move to the 8 milligram, we saw no new incidence of visual AE -- so we think that there is dose response. We think the phenomena is largely mild, meaning it's noted by the patient but doesn't affect them. And largely occurred in the first week and are largely transient as well. But we'll see now in the NT2 data set, what that looks like in the IHS as well. But as we build a bigger and bigger data set, the overall conclusion, I think you have to have to draw from this class so far as they're largely generally well tolerated, and the side effects are generally mild to moderate and transient. And the top of the list of the AEs that are on target. You're going to see what these drugs are insomnia and polycaria, which is urinary frequency.

Thank you. That will conclude our question-and-answer session. I'll turn the floor back to management for closing comments.

All right. Thanks, everyone, for joining us on the call today. Please don't hesitate to reach out to the company if there are any follow-up questions.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and have a wonderful day.

Greetings, and welcome to the Alkermes Investor Call. My name is Rob, and I'll be your operator for today's call. [Operator Instructions] Please note that the conference is being recorded.

At this time, I'll turn the call over to Sandra Coombs, Senior Vice President of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Thank you. Good morning. Thank you for joining us on the call to discuss our agreement to acquire Avadel Pharmaceuticals. With me today are Richard Pops, our CEO; Joshua Reed, who recently joined us as Chief Financial Officer; and Blair Jackson, our Chief Operating Officer; who will join us for some Q&A at the conclusion of the call.

In addition to our press release and Rule 2.7 announcement under Irish law, a slide presentation is available on the Investors section of alkermes.com. Our discussions during this conference call will include forward-looking statements. Actual results could differ materially from these forward-looking statements. Please see Slide 5 of 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 our 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.

As you may be aware, in light of our offer for Avadel, interactions with shareholders and others are now governed by the Irish takeover rules. As a result, Alkermes is restricted from what it can disclose beyond what is already disclosed in publicly available documentation relating to its offer. Therefore, we will not be in a position to answer certain questions relating to the proposed transaction, Avadel or our plans for the combined business beyond this. With that, I'll turn the call over to Richard.

Thank you, Sandy. Good morning, everyone. So this morning, we announced that we've entered into a definitive agreement to acquire Avadel Pharmaceuticals, an all-cash transaction, which we expect to be immediately accretive upon closing. This is a very strategic acquisition for Alkermes. It's compelling from multiple perspectives. We gained an attractive new patented FDA-approved product, which will leverage and increase the scale of our profitable commercial business. And we immediately become a key player in the sleep medicine market in anticipation of our progress with alixorexton.

Acquiring a business that's so well aligned with our current and long-term priorities has been one of our strategic objectives for some time. We believe that this combination positions Alkermes for enhanced growth, innovation and value creation.

So before we dive into the specifics of the transaction, I'd like to take a moment for some additional context for today's announcement. Over the last several years, we've been disciplined in our approach to business development, evaluating a wide range of opportunities in search of one that could complement our therapeutic focus, our core capabilities, our advancing pipeline and our focus on profitability. Avadel, a commercial stage company, marketing a proven and differentiated narcolepsy medicine stood out, meeting all of our criteria strategically, operationally and financially.

The timing of the transaction also underscores our confidence in alixorexton. With positive Phase II data for alixorexton in narcolepsy type 1 now in hand, data from Vibrance-2 and NT2 expected in November and plans to initiate a global Phase III program in narcolepsy early next year, we believe alixorexton has the potential to transform the treatment of narcolepsy.

The acquisition of Avadel enables us to enter the sleep medicine market now and establish our presence in this space ahead of the potential launch of alixorexton. Avadel is a recognized innovator in sleep medicine. It's focused on addressing meaningful unmet needs for patients living with narcolepsy. Avadel's commercial product called LUMRYZ, is the first and only FDA-approved once-at-bedtime oxybate for the treatment of cataplexy or excessive daytime sleepiness in patients 7 years or older with narcolepsy. This differentiated profile eliminates the need for middle of the night dosing, which has long been a burden for patients and caregivers.

Since launching LUMRYZ in 2023, we watched the Avadel team build and scale a high-performing commercial organization driving strong demand. New patient starts of LUMRYZ have outpaced the twice-nightly mixed salts competitor by more than 2:1 since launch, with approximately 3,100 patients on LUMRYZ therapy as of June 30 and an estimated 50,000 oxybate eligible patients in the U.S., LUMRYZ has been on a robust growth trajectory and has significant opportunity ahead.

That momentum reflects not only the unmet need in the market, but also the strength of Avadel's commercial strategy, their capabilities and their team, and we look forward to welcoming Avadel employees to our organization and working together to build on their momentum.

Our strong financial foundation, our expertise in CNS drug development and our proven ability to scale proprietary commercial products, including our sophisticated understanding of complex regulatory and market access dynamics position us to further support the growth of LUMRYZ. We believe LUMRYZ is an important therapeutic option and a strong addition to our portfolio in its own right. Against the backdrop of our own development programs in sleep disorders, acquiring Avadel aligns our development pipeline with an approved commercial assets and positions Alkermes to be a leader in the sleep medicine market.

Avadel's established and proven commercial infrastructure and experience in rare diseases provides a strong foundation for the potential launch of alixorexton. As we integrate Avadel, we jump-start our capabilities and avoid the need to build a new disease-focused commercial infrastructure from the ground up. This not only allows for meaningful operating efficiencies. It also provides the opportunity to accelerate market uptake of alixorexton following the successful completion of the development program and FDA approval.

By establishing an immediate commercial presence in the sleep medicine market, we have the opportunity to build critical relationships and deepen our understanding of the patient experience and commercial idiosyncrasies in the space.

We expect the financial strength of the combined company will also support a diversified development strategy in sleep disorders. This includes, obviously, the upcoming Phase III program for alixorexton, but also potential label expansion for LUMRYZ, supported by the Phase III study in patients with idiopathic hypersomnia currently underway and the potential advancement of Valiloxybate, Avadel's in-licensed salt-free once-at-bedtime oxybate clinical development candidate. In addition, we'll continue to pursue a broad development strategy for our orexin 2 receptor agonist portfolio, including ALKS 4510 and ALKS 7290, both of which are now in Phase I and expected to enter human proof-of-concept studies next year.

The acquisition reinforces our commitment to neuroscience, gives us additional scale and builds on our legacy of innovation in complex psychiatric and neurologic disorders.

Now from a financial perspective, the transaction is expected to be immediately accretive upon closing. The LUMRYZ revenues represent an additional growth driver for our commercial portfolio. With expected 2025 net sales in the range of $265 million to $275 million upon closing, LUMRYZ will meaningfully augment our revenue growth profile, and it will further enhance our profitability and cash generation.

So in summary, this transaction aligns with our strategic and therapeutic focus. It complements our commercial infrastructure and it adds new capabilities in rare disease. The timing of the acquisition is strategic and we believe it will position Alkermes to drive meaningful growth and deliver long-term value for our shareholders.

So now I'd like to take a moment to introduce Joshua Reed, Alkermes' new Chief Financial Officer. Joshua brings a wealth of experience in strategic finance and operational leadership, and we're very happy to have him on board as we continue to execute on this growth strategy. With that, I'll turn the call over to Joshua to walk through the financial terms of the transaction.

Thank you, Richard. I'm excited to have joined Alkermes at such a pivotal and transformational moment for the company. Since coming on board, I spent time getting up to speed on the attributes of this proposed acquisition, and I believe it presents a compelling opportunity.

Let me walk you through the key financial highlights. Pursuant to the agreement, Alkermes will acquire all outstanding ordinary shares of Avadel for $18.50 per share, payable in cash at closing. In addition, Alkermes will provide Avadel shareholders a nontransferable contingent value right entitling holders to a potential additional cash payment of $1.50 per share, contingent upon final FDA approval of LUMRYZ for the treatment of idiopathic hypersomnia in adults by the end of 2028. Taken together, this risk-adjusted structure offers a potential per share acquisition price of $20, which represents a premium of 38% to the weighted average trading price of Avadel over the 3 months prior to today's announcement or a premium of 12% to Avadel's closing price yesterday, and a total consideration of approximately $2.1 billion.

The transaction has been approved by the Boards of Directors of both Alkermes and Avadel and is expected to close in the first quarter of 2026, subject to the conditions set out in this morning's Rule 2.7 announcement under Irish rules, including certain regulatory approvals and approval by Avadel's shareholders.

As Richard outlined, upon closing, the transaction will both augment our revenue growth profile and be immediately accretive to our bottom line. Avadel is on a strong growth trajectory and recently transitioned to a net income and cash flow positive profile. Avadel's capabilities and infrastructure are largely complementary to ours, which is one of the attractive features of the deal.

The financial synergies going forward will be largely derived from leveraging a profitable rare disease-focused commercial infrastructure to support the launch of alixorexton and thereby avoiding the costs associated with building those capabilities de novo. Of course, as noted in our Rule 2.7 announcement, we expect there may be certain opportunities for cost efficiencies from leveraging Alkermes' scale, system and processes across various functions.

From a balance sheet perspective, we are entering this transaction from a position of strength. We will announce our full third quarter financial results next week, but are pleased to report that we ended the third quarter with $1.14 billion in cash and total investments and no debt, underscoring the financial strength and flexibility of the business. We expect to finance this acquisition in part with cash on hand, supplemented by the issuance of new debt of approximately $1.2 billion. This would represent a comfortable leverage ratio for us. We expect to delever in a reasonable time frame with cash generated by the business.

This transaction represents a compelling opportunity to accelerate our growth trajectory and is squarely aligned with our financial and strategic priorities, strengthening our core business, expanding our portfolio and driving long-term value creation.

With that, I will turn the call back to Sandy to manage the Q&A.

Thank you, Joshua. Okay. Rob, we'll now open the call for Q&A, please.

[Operator Instructions] The first question today is from the line of Leonid Timashev with RBC Capital Markets.

Maybe only limited things you can say, but can you talk maybe about your confidence in the upcoming data for alixorexton, NT2 and IH and how anything you may be seeing there or feeling about could have impacted the timing of this transaction, your enthusiasm for this transaction, maybe the reasons for this transaction?

It's Rich, I'll take the question. And the IH, NT2 program continues uninterrupted. We've been looking at this Avadel transaction for quite some time. And so as it matured, we moved aggressively. And I think it just underscores our overall confidence in alixorexton in all of its indications right now. Obviously, we have NT1 data in hand now, and we can assess its competitive profile in NT1, which we're quite excited about. We'll get NT2 data in probably in November and the IH next year. But this is all about building the foundation to be able to launch alixorexton as aggressively as possible.

The next question is from the line of Paul Matteis with Stifel.

Can you guys just like help us think about the midterm outlook for Avadel's once-nightly oxybate? How are you guys thinking about the moving parts in the market with increased Xyrem generics pricing pressure. And look, I know it's maybe not a totally fair question, but like how should we think about this asset as -- or this acquisition as like a multiple and what do you think a durable revenue number is going to ultimately look like, say, in the late 2020s as this market continues to change?

Paul, it's Rich. Under Irish takeover, we really can't make forward-looking statements that are outside of what's inside the documentation around the 2.7 announcement, and there's a lot in there. But the general idea from our perspective is that this market is going to continue to grow as new medicines enter. And the -- our view is that the orexins can be transformational in this space, alixorexton in particular.

But also within the oxybate market, you've got a very, very strong competitor with LUMRYZ. And the twice-a-day medicines, generic or otherwise are not substitutable with the once-nightly medication. And we've been watching the growth of the once-nightly category, as I'm sure you have, watching it grow and blossom and addressing unmet needs that patients have. So we think that's going to persist.

The next question is from the line of Joseph Thome with TD Cowen.

I guess a little bit to extend on that point. Do you see a specific type of patient that would be more applicable for an oxybate versus an orexin? And maybe second to that, can you talk about the potential competitive dynamics of LUMRYZ in IH given that Xywav once-nightly is a potential option for some patients on label? How can you, I guess, further differentiate against that?

Joe, it's interesting. As we get deeper into the development of alixorexton and we see that the huge benefits that accrue from driving wakefulness at the levels that we are in the NT1 patients so far. We also recognize that the disruptive nighttime sleep is a feature of the disease. And I think it's still an open scientific question about how much the orexin agonist at various doses are going to affect that disruptive nighttime sleep. And it seems to us that there's going to be a place for oxybate on a going-forward basis, no matter what. The orexins will affect that market, but I think there's always going to be an enduring oxybate market, particularly for the once-nightly version of it.

So I think our view is that there's increasing optionality for patients with this disease, increasing physician focus on treating it, better and better tools, more and more diagnosis. And so the overall general trend in the marketplace is going to be for the use of better medicines for better outcomes for patients.

In IH, we know -- as you mentioned, we've got an approved oxybate in IH already. Avadel study is underway. We'll look and see how those studies complete, and then we'll talk more about the competitive positioning in IH.

Our next question is from the line of Umer Raffat with Evercore ISI.

A couple here, if I may, and not on future forecast, but I just wanted to understand philosophically how you expect genericization and gross to net expansion in this market to affect you guys going forward? And secondly, it looks like the once-nightly version of Avadel technology has taken meaningfully longer than I would have thought. There -- I think there's still some prototypes that were under development. So where exactly are we? And was that a core part of your diligence or not?

And then finally, what's your confidence in the revenues -- historic revenue that I'm talking about because they look like they were fairly flat between 3Q and 1Q and there was a spike into 2Q. I guess I'm almost wondering is that when these conversations started?

Yes, it's interesting. A lot of our diligence in the whole category as we got deeper and deeper into the alixorexton development program was trying to understand the role of oxybates and the future role of oxybates. And as I mentioned to Joe in the previous comment, I think that there's going to be an ongoing role for oxybates for certain patients. Remember, of the 80,000 patients are being treated right now for narcolepsy, only about 16,000 are getting oxybates right now. So it's -- there's a particular patient type that benefits and likes being on oxybate. And the once-nightly is a really nice option for these patients.

In fact, much of the new patient starts for the once-nightly come from patients who've been on the twice-nightly version. So -- but on the generic gross to net expansion question, right now, and we don't expect it to change, the twice-nightlies are not substitutable for the once nightly. Actually, they had separate orphan status designation by FDA. It serves a different purpose. It has different medical and patient benefits. So we think that the once-nightly are going to continue to have their own niche in the marketplace.

I didn't quite understand your second question about the once nightly. That is their product. The first priority [indiscernible] the low sodium. I see, yes. They recently licensed a low-sodium product. And that's not yet in the clinic. We'll be assessing that more carefully through our -- in our scientific diligence, we've done some work on it. We think it's interesting. And we'll be giving a lot more information as we get our hands on that development program.

And also on just the basic hydraulics on the revenue side, as I mentioned in the call, the -- as of June 30, they have 3,100 patients on LUMRYZ out of 50,000 or so addressable market, the growth rate in new patient starts is what we've been focusing on over the last few quarters, and it's quite robust. So you're right, there was a little lull in the early part of the year, but that new patient start data has accelerated, and we're confident in their plan going forward.

Our next question is from the line of David Amsellem with Piper Sandler.

So looking out longer term in a narcolepsy space and IH for that matter, where you have both orexin agonist and oxybate products, do you at all worry that the oxybate category could be a declining category in the context of multiple orexin agonist available. And as you think about not just the strategic fit, but sort of the long-term outlook for the market. What's your view regarding the trajectory of LUMRYZ once you have multiple orexins in the marketplace, both in narcolepsy and in IH?

David. So again, under the 2.7 the Irish rules, we won't make a lot of forward projections. But you should just know that as I've said before, I think that the oxybate, particularly once-nightly oxybate can enjoy a privileged position, an enduring position in the narcolepsy marketplace. For a couple of reasons. One is that -- what they do distinctively versus what the orexins are going to do. But number two, as I mentioned, I think to Umer is that right now, the prevalence in the U.S. is estimated to be something like 200,000 patients with narcolepsy, only about 100,000 of which are diagnosed and only about 80,000 of which are being treated. Why is that? It's because there haven't been really great medicines.

And what you see in other therapeutic categories, as you get more and more innovative medicines in the category, providing different benefits to patients, overall diagnosis rates and treatment rates can increase as well. So right now, the oxybate market, its dollar volume is driven by a relatively small number of patients. And I think that there's an opportunity for the distinctive properties of a drug like LUMRYZ to continue to endure as the market itself gets more mature.

The next question comes from the line of Jessica Fye with JPMorgan.

The next question comes from the line of Marc Goodman with Leerink Partners.

This is Basma on for Marc Goodman. Can you provide more color on what's your take for the value proposition of the low sodium versus high sodium oxybate? And also, we have a question, please, regarding the settlement. Is the fees only applies to LUMRYZ? What about -- we're just confirming, so it doesn't apply to the newly acquired assets from XWPharma? And if that's the case, what is the scenario here?

Yes. On the low sodium, high sodium, I think that, first of all, in the embodiment of LUMRYZ, LUMRYZ's principal clinical attribute is its once-nightly dosing, which obviously has allowed it to carve out a growing presence in the marketplace. If that can be augmented by a low sodium version as well, I think that's all the better. And I think the logic of the license that they took earlier this year for a low-sodium formulation, which we will -- we will develop in the clinic as well.

I can't really comment on the settlement at this point. That's -- we're not a party to that settlement. So I'll refer you to both [indiscernible] for the time being on the settlement details.

The next question is from the line of Akash Tewari with Jefferies.

This is Anastasia on for Akash. So just to kind of continue on the OX2 oxybate combo, would you consider using your, if further developed the low sodium once-nightly oxybate for that? And if you -- if you did not do that, would sodium be a concern for you? And maybe just if you consider offering any kind of price discount on any combo treatment given the patient burden?

Yes. It's far too early to be talking about any pricing in this. But I would say this, in our conversations with experts at World Sleep and other sleep conferences, you do hear discussions about the interest in studying both a drug like alixorexton during the day and oxybate at some dose at nighttime. And I think we'll wait to see the full profile of the sleep architecture through our dosing in NT1, NT2 and IH before we really formalized those plans. But I think that there's an opportunity scientifically for investigation of the concomitant use of the two agents.

The next question is from the line of Jason Gerberry with Bank of America.

Just one, Rich, just conceptually, when you think about the evolution of the market, I mean, by my rough math, it might be like 20,000 patients on oxybate to your point. It's restricted use makes it hard. But do you just generally see the pie being steady and really the growth coming from IH when the orexins start to really penetrate the market? Or do you see that kind of overall pie shrinking and then just LUMRYZ's share of that pie growing?

And then I guess the other point is just what is the competitive advantage in your mind versus the other orexin players having an oxybate as well in the bag in terms of like enhancing your relevance with the various stakeholders in the space?

Yes. It's great question, Jason, because in the conception like you said, I think that our view is that the overall number of patients being treated for narcolepsy with aggressive medicines being with more focused on improved outcomes is going to grow the pie. The overall treated population of patients with narcolepsy as alixorexton comes to market. It's just going to open up new treatment opportunities and new expectations from patients about what their lives can be like. And in so doing, I think there's -- that tide lifts a number of ships, including the once-nightly oxybate market.

Again, for that subset of patients who are willing to go through what you need to go through to be on an oxybate and the doctors who are going to be part of that REMS program. But that's an established part of the market, and I think it will continue to grow.

For us, I think having the 2 products, there's a couple of ways of thinking about the advantage of it. First is temporal. Probably the most important from our perspective is it puts us in the sleep market immediately upon closing. We will have a product that's doing north of $0.25 billion a year in sales, interacting with the key sleep centers, the key sleep physicians, the key sleep nurses, understanding the payment dynamics, the patient access journey, all that stuff is the prosaic working part of launching pharmaceutical company drugs in this world. And we know that intimately through VIVITROL and ARISTADA and LYBALVI, but in a new disease category, it's just going to allow us to burn in all those relationships years in advance of launching alixorexton. And that's super valuable.

Once in the market, though, for a representative from Alkermes to be able to walk into a sleep center and say, "Look, we're not just promoting a single agent. What we're giving you is what outcomes or opportunities for patients to benefit at the physician's choice, what are most advantageous for patients in their practice." And I think that's a real differentiating feature. We experience that right now by having both ARISTADA and LYBALVI, a long-acting injectable of a certain active moiety and oral compound of another active moiety, that allows you to position not just selling your own product for your own benefit, but what's the best potential outcome for your patients, agnostic as to the modality that the physician is preferring.

So long answer to a simple question, but it underscores why we're so excited about the here and now of adding a diversified revenue product growing into our mix, but also anticipating what it's going to mean for the launch of alixorexton.

The next question is from the line of Douglas Tsao with H.C. Wainwright.

Congrats on the transaction. I guess, Richard, conceptually, when we think about the different buckets of patients between NT1, NT2 and IH, I'm just curious if you think there are any that are perhaps would benefit most from a combination of orexin and oxybate?

Doug, it's probably too early for me to make a stratification in that way. I can tell you that what we're learning through our ongoing study in NT1, NT2 and IH is that the patient population is very different. And there's diversity across those patient populations even within that differential diagnosis. So not all NT2 patients are created the same, not all IH patients are created the same. And I have a feeling, when you look at the data, many patients with narcolepsy type 1 or narcolepsy at large have tried an oxybate. And many of them have tried it and stayed with it. Many of them tried it and moved on, whether it was because of the need for twice-nightly dosing or because of the other limitations remains to be seen.

So then the open question is if you can combine the two in a regimen that really provides significant outcomes for patients. Does that open up new opportunities for the use of once-nightly oxybate, that remains to be seen. But I think the core hypothesis is that the oxybates are here to stay. They provide different benefits than the orexins for certain patients and that the once-nightly form is a really attractive option for patients.

The next question is from the line of David Hoang with Deutsche Bank.

So I was just curious, as you did your due diligence on Avadel and LUMRYZ and the commercial strategy that Avadel has been implementing and you think about the LUMRYZ opportunity, do you see a bigger contributor from new to oxybate patient starts versus switch patients? And yes, any thoughts on that dynamic?

Yes. Blair is here who's been focused on this as well, too, and I'll let him answer. But I think what was exciting to me is that a number of new patient starts are coming from the twice-nightly oxybates that are in the market. But Blair, go ahead.

Yes. No, it's a great question. And over the last few weeks to months, we spent a lot of time with the Avadel commercial team. And we were really incredibly impressed with their approach to marketing this product and just finding a way to make sure they can move patients onto the drug that they can make sure that the nurses and the doctors are able to engage with those patients and keep them on the drug. And so I think without getting into specifics on future forecasts, which we can't go into, what we can say is that both of those either switches or new starts are both major contributors to the growth of this product and a key area of focus.

So it kind of gets to an earlier question we had as to how do we see about the robustness of the forecast moving forward? We feel really good about their approach, and we feel strong about the growth of this product moving forward. And as Rich said, for the potential of oxybate in the marketplace.

The next question is from the line of Benjamin Burnett with Wells Fargo.

All right, Rob, why don't we move on and see if we can catch Ben at the end.

Our next question will be from the line of Ami Fadia with Needham & Company.

This is Poorna on for Ami. Just curious to understand how IH has been valued in the deal, given that Xywav has already been approved and has been doing well?

As you saw in the structure of the deal, we've added a continued value right based on the ability to enter the market with LUMRYZ in IH. And that notionally is valued another $1.50 per share. And so we see incremental value for sure in the IH indication, and we'll be moving aggressively to hope to expand the label for LUMRYZ into that indication. Also, we believe that we'll be in that market with alixorexton as well. So once again, just opening a new area of the market for both products.

The next question comes from the line of Uy Ear with Mizuho.

Congrats on the deal. So you guys spoke about being immediately accretive. Just wondering if you can sort of help us understand if there is any potential synergies from the deal? And secondly, when did you guys, if you can disclose, started speaking to Avadel seriously about this potential takeout?

So why don't -- I'll start and then Joshua can chime in. We say it's immediately accretive because even just on a pro forma combined basis. They've just recently become cash flow positive and profitable as are we, and we're not using any stock in this transaction. This is a cash transaction. So we expect the primary synergies come from, as I mentioned before, avoiding the need to build entirely new commercial sleeve to launch into the rare disease space. So we'll leverage a profitable enterprise to do so. So in our models, that's extremely valuable to us going forward.

On a synergies basis, we expect some modest synergies as we combine the 2 overlapping organizations, but they're largely complementary to us. But Joshua, I don't know if you want to add anything to that?

No, that's right, Richard. Of course, as we combine the businesses, there'll be opportunities for efficiencies and cost reduction, certainly by leveraging our scale system and processes across various functions. But as Richard pointed out, Avadel turned cash flow positive. And so even without these synergies, the deal will be accretive to us.

And I won't speak to the history of the deal other than what's in the press release and the 2.7. There will be a proxy filed and you have all the details. But we've been watching Avadel's launch of LUMRYZ since 2023. And two things really wanted -- we wanted to watch mature. A, was seeing the trajectory of their business. And the second was our confidence in alixorexton. Two years ago, we weren't sure whether we would be in this market. Now we have a lot of conviction that we're going to be in -- with a really exciting medicine. So I think it all matured at the same time.

The next question is from the line of Ben Burnett with Wells Fargo.

I just want to ask, how do you view Avadel's sales force? And I guess, do you think that, that sales force is sufficient to commercialize also alixorexton? Or would you, I guess, anticipate needing to build that out further?

Well, we think the sales force is excellent. We think their commercial team is excellent, and it's appropriately sized for the business that they have now. But as it continues to grow, we'll pay attention to that. Particularly as these categories mature and the space between the prevalent population and the treated population narrows, often the sales forces will grow to meet that expanding market.

Right now, the sleep specialist market is pretty tight. You don't need a large commercial team to address the principal writers in the space. But over the next couple of years, we'll be watching that. And I can guarantee when we launch alixorexton, we'll do so with an appropriately sized sales force. But this is just a fantastic way to get ourselves into that market to understand those dynamics intimately.

At this time, we've reached the end of our question-and-answer session. I'll hand the floor back to Sandy Coombs for closing remarks.

All right. Thanks, everyone, for joining us on the call this morning on short notice. Please feel free to reach out to the company if you have any additional questions that we can be helpful with. Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.