Greetings and welcome to the Alkermes Fourth Quarter 2022 Financial Results Conference Call. My name is Rob, and I will 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 of Investor Relations and Corporate Affairs. Sandy, you may now begin.

Thank you. 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, 2022. With me today are Richard Pops, our CEO; Iain Brown, our CFO; and Todd Nichols, our Chief Commercial Officer. Before we begin, I encourage everyone to go to the Investors section of alkermes.com to find our press release, related financial tables, and reconciliations of the GAAP to non-GAAP financial measures that we'll discuss today. 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. Now, I'll turn the call over to Todd.

Great. Thank you and good morning everyone. 2022 was a breakthrough year for our commercial organization. We achieved record sales and double-digit growth, compared to the prior year for our portfolio of proprietary products driven by execution of our focused commercial strategy. The year was highlighted by the ongoing launch of LYBALVI. In its first full-year of commercial launch, we exceeded expectations and delivered strong results that began to establish LYBALVI’s important place in the treatment paradigm. LYBALVI’s early launch success underscores the leverage we can realize across our commercial platform, which gives us a distinctive position in the neuroscience space. We launched LYBALVI just over a year ago with a broad differentiated label that includes both schizophrenia and bipolar I disorder. In its first full year, LYBALVI generated net sales of $96 million, which we believe provides a strong foundation for future growth. In the fourth quarter, LYBALVI sales were $34.9 million, up 29% sequentially driven by robust demand. Total prescriptions in the fourth quarter were approximately 28,400, representing growth of approximately 23% quarter-over-quarter, driven by LYBALVI’s differentiated product profile and our commercial execution. The strong demand was due in large part to increase prescriber breadth and use across a broad range of patients. At the end of the fourth quarter, approximately 7,600 prescribers had written a prescription for LYBALVI since its launch, which represents an increase of approximately 27% since the end of Q3. As we have mentioned before, driving prescriber breadth continues to be a key priority for us and provides the foundation for establishing a significant brand presence and awareness in this market. More than 20,000 patients have been treated with LYBALVI through December, Prescriptions in the quarter continue to be evenly split between schizophrenia and bipolar 1 patients. Approximately 45% of the prescriptions in the…

Great. Thank you, Todd, and hello, everyone. So, we finished 2022 strong and are pleased to report financial results ahead of our expectations for the year, driven by the solid performance of our proprietary products and disciplined management of our cost structure. The launch of LYBALVI was a highlight for the year and represents a significant growth opportunity for the company in the large oral antipsychotic market, leveraging our established commercial capabilities. The strength of oral LYBALVI launch was an important factor in our decision to explore the separation of the oncology business, which we believe will help reveal the underlying growth and profitability of the neuroscience business. In the next few minutes, I'll take you through the details of our 2022 results, then turn to our 2023 financial expectations and underlying assumptions for both the neuroscience and oncology businesses and then finish with our updated long-term profitability targets. Starting with our 2022 financial performance, we generated total revenues of $1.11 billion, driven primarily by our proprietary product portfolio, which grew 24% year-over-year and now represents approximately 70% of total revenue. This growth reflects strong results from the first full-year of the commercial launch of LYBALVI, as well as double-digit growth for each of VIVITROL and ARISTADA. From a bottom line perspective, we recorded GAAP net loss of $158.3 million, compared to $48.2 million in the prior year and non-GAAP net income of $57.9 million for the year, compared to $129.1 million in 2021. Recall that the 2021 results included 12 months of U.S. J&J royalties, while 2022 results only included one-month. A full-year of these U.S. royalties would have yielded approximately $200 million of incremental revenue. Now, turning to VIVITROL, in 2022, we recorded net sales of $379.5 million, up 10% year-over-year driven primarily by growth in the alcohol…

Ladies and gentlemen, please standby, we are experiencing technical difficulties. Our conference will resume momentarily. Once again, thank you for joining us. Please standby, your conference will resume momentarily. Thank you. [Operator Instructions] Ladies and gentlemen, thank you for standing by. Sandy, please continue.

Okay. Sorry about that. I think we had a couple of technical issues, but we're back now. So, I'll pick up again where I was talking about the manufacturing and royalty business. So, for the year, we recorded manufacturing and royalty revenues of $332 million, compared to $541.8 million in the prior year. We saw solid growth at VUMERITY, which was up 32% year-over-year, contributing $115.5 million of royalty and manufacturing revenues, compared to $87.4 million in the prior year. Royalties from sales of the long acting INVEGA products were $115.7 million, compared to $303.1 million in 2021. The decrease was driven primarily by Janssen's partial termination of the agreement related to royalties on sales of the long acting INVEGA products in the United States. Arbitration proceedings related to this matter are ongoing, and last month we announced that the tribunal had issued an interim award, finding that Janssen may not continue to sell the products developed under the agreement without paying royalties pursuant to the agreement. We'll continue to engage with Janssen and the tribunal in additional proceedings prior to the tribunal’s issuance of a final award. Turning now to expenses. Total operating expenses were $1.25 billion for the year. Cost of goods sold for 2022 increased approximately $20.7 million year-over-year to $218.1 million, primarily driven by higher volumes of key manufactured products. R&D expenses for 2022 were $393.8 million, reflecting focused investments in the nemvaleukin clinical program and our earlier stage neuroscience and oncology development programs, including the initiation of a first in human study of our orexin 2 receptor agonist program. This compared to R&D expenses of $406.5 million in the prior year. SG&A expenses for 2022 of $605.7 million increased $44.8 million as compared to the prior year, primarily related to investments in the launch of…

That's great, Iain. Thank you. So, before talking about what lies ahead in 2023, I want to note the significance of 2022 as a turning point for the execution of our strategy at Alkermes. With the strong launch of LYBALVI on top of double-digit revenue growth for VIVITROL and ARISTADA our neuroscience business is evolving as we planned. Our R&D investments are also showing promise with nemvaleukin enrolling in registration enabling studies in oncology and our orexin 2 receptor agonist entering and progressing in the clinic. And from a financial standpoint, we continued our sharp focus on operational efficiency, disciplined expense management, and driving profitability. We managed the business with these elements in mind, commercial execution, R&D productivity, financial discipline, all were evident in 2022. 2023 is going to be an important year, one in which we build on the accomplishments of last year and establish a new trajectory for the company. We're focused on three key operational areas. They are driving the ongoing launch of LYBALVI, advancing our orexin program in narcolepsy and other sleep disorders, and executing on the planned separation of our oncology businesses. We believe each of these priorities can drive significant value for our shareholders. So, I'll spend a little time on each of them starting with LYBALVI. The strong traction of the LYBALVI launch in 2022 gives us confidence in its potential. As the first year of launch progressed, healthcare providers have noted LYBALVI’s differentiated weight profile in comparison to [olanzapine] [ph] in their own practices. Looking ahead, we believe LYBALVI long-term potential in this market will be grounded in its proven clinical efficacy, which is rooted in the established efficacy of olanzapine and demonstrated in our pivotal clinical trials, along with real world patient and healthcare provider experiences. So, as you heard from…

Ladies and gentlemen, please standby. We are experiencing technical difficulties. Your conference will resume momentarily. Once again, thank you for joining us today. Your teleconference will resume momentarily. Thank you. [Operator Instructions] Ladies and gentlemen, thank you for standing by. Our teleconference will now resume.

Okay. Apologies. We're having some telecom issues today. So, I'll pick up where I left off. I was talking about the study that's underway in our narcolepsy program. And I was making the point that as we launched the Phase 1b proof of concept study, that'll actually begin looking at the traditional clinical efficacy endpoints. And the most important was one is probably maintenance of wakefulness, which we're going to test in patients with narcolepsy type 1, narcolepsy type 2, and idiopathic hypersomnia, as well as in sleep deprived healthy volunteers. So, taken together, these studies are designed to generate preliminary proof of concept data by the end of the year. So with a strong biological rationale, and significant medical and economic potential, we believe that this program offers an opportunity to create considerable shareholder value. So, we'll continue to focus on careful execution, while carefully and expeditiously advancing the program and we look forward to sharing our progress with you throughout the year. Finally, our third priority for the year is to complete the separation of the oncology business. We believe the separation if we completed will unlock value and position both the oncology business and the remaining neuroscience business for growth and success as we simplify the investment thesis and capital allocation decision making for each business. The oncology side of the business has a compelling standalone investment thesis. Anchored by the potential of nemvaleukin, our novel investigational engineered IL-2 variant that's a potential first-in-class cancer immunotherapy. The IL-2 pathway offers significant potential in oncology. Nemvaleukin is the most advanced IL-2 variant in development and is distinguished by the data generated in the clinic showing anti-tumor activity as single agent monotherapy and in combination with checkpoint inhibitors. Our current development efforts are focused on potential registration enabling studies…

All right. Thanks Rich. Rob will open the call for Q&A now.

Thank you, Sandy. [Operator Instructions] Thank you. Our first question today comes from the line of David Amsellem with Piper Sandler. Please proceed with your question.

Hey, thanks. So, I just wanted to drill down on the longer-term margin targets. Can you talk about the balance between SG&A and R&D spend on the neuropsych business? And I guess what I'm trying to better understand is, how are you thinking about R&D in the context of what seems like a pretty lean infrastructure with just the orexin in the clinic? And should we assume that there's going to be considerable – considerably more promotional investment in LYBALVI, not just this year, but continued further investment and growth in SG&A as a result in the product. Just help us frame those puts and takes, if you will? Thank you.

So the long-term margin targets, it's really a combination of two things. One, you've obviously got revenue growth on the top line. And then we're looking to have as much of that incremental revenue slowdown to the bottom line in order for us to be able to hit the targets. That said, LYBALVI is going to be a big driver on the top line. And to make sure we maximize the opportunity for LYBALVI, we'll be continuing to invest in the DTC campaign over the next couple of years. I think we've [learned] [ph] a lot in this first year as we launched the digital campaign. We have launched the digital campaign and then we launched the TV campaign. So, we'll be able to fine tune, maximize the effectiveness of that investment. And then from an R&D perspective, the model going forward is to have a leaner R&D organization absent the oncology assets. But we also realize we need to invest for the longer-term, so we'll be doing some work from our early discovery engine and then also looking at potentially insourcing some programs into the pipeline as well. But that overall focus on profitability is a key tenant for us. It has been for the last few years and it will continue to be so into the future.

Okay. Thank you.

Our next question is from the line of Akash Tiwari with Jeffries. Please proceed with your question.

Hey, thanks so much. Maybe just a few if I can. On your long-term guide, even with the spin, I wasn't getting to your guided net income targets in 2025 unless I put a LYBALVI number that's close to 500 million, am I missing something here or is it fair to say your internal expectations on this product have grown since last year? And then on your orexin program, the liver toxicity on [Takeda's OX2] [ph] seem to show up after a month of dosing. With that in mind, are you planning in your [MAD healthy trial] [ph] or in any of the trials that you're going to have this year to dose patients for an extended period of time and how do you feel about de-risking safety, particularly around liver toxicity as you enter into a Phase 2b trial? Thanks.

So, on the long-term profitability targets, what I will say is, we haven't provided our long-term expectation or our peak sales expectation and we will not do so today. As I mentioned that the achievement of the profitability targets is really going to get to be driven by growth of all three of our proprietary products and the growth of VUMERITY as well, which will be a key flow through to the bottom line for us. And then obviously, as I mentioned previously, that growth in revenue flowing down to the bottom line in order to be able to achieve the targets that we set out today.

And it's Rich, maybe I'll take the orexin question. Our view is that the toxicity seen from other compounds are largely idiosyncratic those particular structures rather than orexin 2 agonism per se. But to the question, the objective in this year is to establish that proof of concept target engagement affecting the architecture of the sleep wake cycle and establishing dose because the best way to interrogate longer-term toxicity potential is by interrogating at the appropriate dose. Now, know that the design feature going into the program was to maximize or optimize around potency. Potency in and of itself being a really clear design objective to minimize the potential for off-target drug induced liver injury. But you'll never fully answer to that question until you get longer exposures as you indicate at the relevant doses in the patient population of interest.

Thank you. The next question is from the line of Umer Raffat with Evercore ISI. Please proceed with your question.

Hi, guys. Thanks for taking my question. First, maybe perhaps on LYBALVI. I appreciate all the color on the launch metrics. Something I've been thinking about is the number of prescriptions per prescriber appears to be fairly stable. And I would have thought that over time, there's more prescriptions per prescriber just given the refills and new ads. Just trying to understand if the TRx growth really is being driven more by the new prescribers signing on, would appreciate any color on that? And secondly, Rich, could you clarify on the orexin trial, is it the [SAD] [ph] cohorts that you've seen data on or are you also seeing the Part 2 MAD? And also if you could speak to how many formulations are in the trial and if there's a notable difference between these formulations for the orexin? Thank you.

Yes, I'll start off with, kind of the dynamics we're seeing with the prescriber base. We're really encouraged by what we're seeing overall. It's consistent breadth of prescribing on a month-over-month and quarter-over-quarter basis. Your question is right. Overall, the breadth of prescribing right now is – the depth of prescribing is relatively stable, but that's actually an encouraging sign because our prescriber breadth continues to grow. So, we actually see a lot of the expansion right now coming from new prescribers as we bring new prescribers on board. [Launch today] [ph], we're encouraged that approximately 7,400 prescribers have written the product. And our aspiration is that's going to continue to grow consecutively over the next couple of quarters as we continue to advance the launch. And as Iain said earlier, as we light off the DTC component of our campaign at mid-year this year.

Umer, it's Rich. Just to echo what Todd was saying. Our experience is when physicians try LYBALVI, they like it. So, driving breadth is – in our view, operationally in the [indiscernible] prerequisite driving depth. So, I think we're excited about the way the breadth is maturing. I had a hunch you’d ask a question about the orexin. So, what I'd say is that the data we're seeing right now is from the SAD cohorts, so the single-ascending dose, and this is an incredibly informative first phase of the development program because we're learning about tolerability, obviously, an ascending doses. We're seeing PK and how that PK tracks back to our modeling, which appears to be quite high fidelity at this point. We're also from a purely translational medicine point of view, looking at quantitative EEG in healthy volunteers, non-sleep deprived following a single dose. And that's where we're just beginning now to see evidence that is consistent with the idea of target engagements. We're excited about that. The MAD cohorts will light off very soon now with ethics approval and operational go on the MAD. So, that should start-up in the next few weeks, followed by the 1B, which we'll be looking at in patients.

Thank you.

Next question is comes from the line of Chris Shibutani with Goldman Sachs. Please proceed with your question.

Great. Thank you very much. Two questions. One, you talked about perhaps enhancing the access profile for mid-year and how that might impact the gross to net trajectory. Could you just elaborate a little bit further about what you'll base that thinking on? And then in terms of the orexin agonist there, can you, at this point, I know we're still very early in clinical development, talk about what you see as potentially the opportunity from a competitive positioning standpoint of how to differentiate? I've heard a lot of potency in your vocabulary. Is that really the emphasis? Ultimately, what kind of profile do you, sort of aspire it?

Yes. I'll start off with the market access question. As we said in the prepared remarks, our expectation is that gross to net is going to be relatively stable over the first half of the year, and it could evolve in the second half of the year. We're in constant contact with commercial payers right now and discussions with them. And I think really the way to think about this is that market access coverage in the category is not stagnant. It will continue to evolve over time. And this is really – this is a market that is really categorized by navigating step-throughs, PAs, medical exceptions and all the work that we've done with HCPs and this category tells us that they are well versed in this area, and they can actually manage the dynamic. So, we talked a lot about just providing a pathway to access. That's going to be a combination and a mixture of contracting plus all the programs we have to support patient access. For LYBALVI right now, we believe we're really well positioned. The vast majority of patients have a pathway to access. We're seeing good utilization across all of our market access programs, our PA programs, our co-pay programs, and we are having these ongoing discussions with payers. So, right now, if we determine that we need to enhance the position, we'll do so, and we'll look at that in the second half of the year, but that wouldn't happen without really a strategic investment or strategically looking to see if we do need to enhance that position.

And then Chris, on the orexin stuff, I'm glad you asked the question because potency is a feature, but it's not necessarily a benefit. So, what is the benefit of potency? So, the way we see these different compounds evolving in the clinic is that there's a number of different optimization parameters in this design of this molecule. And my long-standing belief has been that these molecules are all going to be quite different. I don't think they're all going to be the same. Even if it's stipulated if they engage the receptor, they might have the same effect on the sleep wake cycle, they could be very, very different along several parameters. Number one is safety. We've already seen drug-induced liver injury from one construct that may or may not be in [indiscernible] others. Number two is the on-target toxicity or AE that you'd be focused on our cardiovascular stages, blood pressure, and heart rate. And we think these may be different, not just because of potency, but also because of PK. And PK is also entirely relevant with respect to another point that these could differentiate, which is on the presence or absence of insomnia. If your waveform is too extended and you don't allow people to return back to baseline before it’s time to go to bed or if it's too brief and they don't have an extended period of wakefulness. So, there's a number of different – and I must say, from the very beginning of this program, we've been seeking – using the animal work and other modeling work to try to optimize 2680 to be sensitive to each of these different parameters.

Thank you.

Our next question is from the line of Paul Matteis with Stifel. Please proceed with your question.

Hey, thanks so much for taking my question. I wanted to ask another just question about the profitability targets. Congrats on pulling those in. More specifically, how much is that pull-in driven by the oncology spin? And are there any other, kind of factors, either additional cost discipline or, again, change in revenue expectations that are embedded in that? And then just on the orexin POC data later this year, could you just share a little bit more granularity on what we should expect? Like how many patients on drug, placebo, things had duration of treatment, things like that, that I think will help us understand how de-risking these data are? Thank you.

Okay. Paul, I'll take the profitability question. So, the spin of the oncology assets, obviously, that brings down the R&D spend quite significantly round-about – if you look at the little table we provided within the slides, it's about $145 million at the midpoint of ongoing oncology costs that would come out of the P&L. I think at the same time, as you see what we're doing in 2023, investing in the continued launch of LYBALVI with the DTC campaign. This year, we're going to have a full-year of digital and potentially half a year of TV. So, you could see some incremental investments within – for DTC there within the sales and marketing line. But again, the ability to hit these revised targets is really going to be predicated on revenue growth on the top line with flow down to the bottom line. So that's really – that continued focus on cost management is really going to help us in achieving the profitability targets one year earlier than we previously anticipated.

And Paul, it's Rich, the sequencing of the 2023 clinical work with orexin is very deliberate. And I mentioned Umer before, SAD progressing into the MAD as you clear doses, particularly as you start getting into where we modeled to be therapeutically relevant concentrations. MAD provides 10 days of exposure gives us PK on a steady-state basis, as well as tolerability and safety with additional EG information. You move into the 1b. The 1b will be circa 40 or 50 patients, I would say, with representation across NT1, NT2, idiopathic hypersomnia as well as sleep deprived individuals. So, you'll get a sampling across each of those different phenotypes or disease categories, which should be enough to see whether you're having effect on the architecture sleep – against the primary end point that one cares about for registration, which is this maintenance of wakefulness test, which is a fairly reliable marker for the activity of these drugs in the syndication.

Okay. Thanks. But what about at year-end, Rich, just for like how much data – not 150 [patients] [ph]?

Well, the only reason I'm going to be a little bit soft on that is because we clear ethics approval at each different stage. And so depending on the timing of the ethics approval and then the subsequent enrollment, the healthy volunteers, we have a pretty good idea on because they're healthy volunteers in Phase I sites. But as we start moving into NT1, NT2, IH and that – so we'll give you a little bit more – but I expect, I mean, our planning case is to have information in at least the NT1s this year. So, we'll see – we'll update – we'll go as fast as we can, obviously, but we'll see as we move through these various logistical hurdles.

Okay. Understood. Thanks so much.

You’re welcome. I did answer a piece of Umer's question, which is about formulations. And there's one formulation in the clinic. Different doses, one formulation.

The next question is from the line of Uy Ear with Mizuho. Please proceed with your question.

Hi, guys. Thanks for taking my question. I guess my first question is the guidance, it is the start of the year, and it seems wide. Just wondering what would it take to sort of narrow it? And secondly, could you provide us with some color on the gross assumption for VIVITROL and ARISTADA in the guidance? I might have missed it. Thanks.

I'll take the last one first. So, the VIVITROL gross to net, we expect that – so fiscal year 2022 ended with a 50% gross to net. We originally thought it was going to be around 52%, but we did see some favorability on the Medicaid side of the business as we went through the year. So, we don't anticipate necessarily seeing that favorability come through in 2023. So, I'd anticipate that you'd see an increase in the gross to net back-up towards that 52% level. And then the gross to net for ARISTADA has been remarkably stable, I would say, over the last couple of years. So you, would expect that kind of level of gross to net to continue into the future. And then your general question around why guidance, as you say, it's early in the year. So, there's lots of puts and takes as we go through the year that could impact the business. And we've done our best estimated trying to put those together. If you – I mean we could go down line-by-line, I don't think we have time to do that. But looking at VIVITROL, for example, the growth in alcohol dependence and then see what happens on the opioid side of the business. ARISTADA is very much dependent upon market growth, and we have certain assumptions built in there. Market growth could be different to what we're anticipating. LYBALVI is still in the launch phase. We've got a lot going on with regard to LYBALVI and the DTC campaign, for example. So, those are just a few examples of some of the things, certainly on the revenue side. And obviously, as we go through the year, what we typically do is we try and narrow those ranges down as we, sort of experienced things throughout the year.

Thank you.

Our next question is from the line of Jason Gerberry with Bank of America. Please proceed with your question.

Hi guys. Thanks for taking my questions. Just wanted to ask a question about the LYBALVI payer mix and gross to net specifically. It seems like your gross to nets are pretty low, and so, it seems like you're not really contracted much on the commercial side, but yet you're not expecting, sort of the volatility we see typically in like year 1, 2 for drugs that are heavily commercially insured. So, just wondering if you can, kind of speak to the payer mix broadly between the two indications that you have there. And then just a quick follow-up question. Just on the VIVITROL patent case, I think it's one single patent in dispute. So, wondering if you're expecting a pretty quick turnaround time on a ruling from the [judge there] [ph]? Thanks.

Yes, I'll start off with the payer mix as well. It's a good observation. Right now, overall, what we're seeing with what we saw last year, we saw in the fourth quarter is, we didn't see as much exposure with our overall gross to net and the rebates that we had to pay. We launched – when we launched the product, we put a number of programs into place, our PA program our co-pay program, and we're actually seeing really good utilization. For example, north of about 70% of all of our prior authorizations are approved, which is very consistent with the branded category. I think also what we're seeing is, we're seeing the real leverage in the dual indications, schizophrenia and bipolar. Schizophrenia, the mix typically in schizophrenia patients is a higher mix within Medicare and Medicaid. Within bipolar, you actually see a higher mix of commercial and Medicaid. And we're getting a healthy mix of both of those right now. Overall, as time settles out, we believe that LYBALVI will be very consistent with the category, which is basically about a third for commercial, a third for Medicaid and a third for Medicare.

And on the annual litigation, while you're correct, there's a single patent. There's a series of arguments underneath that patent that are fairly nuanced and will be discussed during the trial. So, I won't speculate how fast or slow the judge will work. Our assumption is that there'll be some type of decision in the Q2 time frame.

Got it. Thanks.

Our next question comes from the line of Jessica Fye with J.P. Morgan. Please proceed with your question.

Hey guys. Good morning. Thanks for taking my question. When we think about the guidance for 2023 SG&A up around $100 million at the midpoint year-over-year. I imagine much of this is PTC for LYBALVI, but can you quantify that? And how should we think about the annualized DTC cost for LEVALVI as we think ahead to 2024, for example? And then sticking with LYBALVI, but on gross to net, I want to make sure I understand what's embedded as it relates to your LYBALVI sales guidance for 2023? I think you mentioned high 20s in the first half and that, that may widen depending on if you do additional contracting. So, what's baked into the revenue guide in terms of widening in the back half, if anything or would that be upside to sales guidance if you opt to not go that route?

Okay, Jessica, thanks for the questions. I'll take a go at those. So, for 2023, within SG&A, you'll see there's about $75 million, $80 million of incremental sales and marketing spend and the majority of that is focused on the DTC campaign. So that would be for a full-year of digital and half a year of TV. So, if you think about the further years out to 2024 and 2025, if there was a full-year of both TV and digital, then there would be an increase in SG&A proportionately. Also within the G&A, I think I did mention, and it's illustrated a little bit in the slide that we have in the tables. A lot of the one-time type separation costs associated with separating out the oncology business are included within the SG&A line. There's about $45 million of costs in total between building out the infrastructure for the stand-alone entity and those one-time costs. So that looks like G&A is increasing by more than it will. Obviously, with the neuroscience business on stand-alone basis, those costs will no longer be part of the business. And then from a gross to net perspective for LYBALVI, as Todd mentioned, high 20s for the first half of the year. And then the net sales range we gave today of [180 to 205] [ph] really encapsulates a range of gross to net possibilities that we could see in the second half. So, we're not being specific today. That will become more into [light] [ph] as we enter into any potential negotiations and we'll be able to provide more detail as we go through the year.

Great. Thank you.

Our next question is from the line of Marc Goodman with SVB. Please proceed with your question.

Good morning. Rich, could you talk about what's going on behind the scenes with trying to build a deeper pipeline on the CNS side? Do you think in a year from now, there will be more products there? I guess the question is partly how aggressive you're going to be on the BD side? And then also what's happening in discovery. I know you don't want to disclose anything, but maybe you can just talk about it if something will be disclosed over the next year or so? Thanks.

Morning Marc, it's probably too early to make a call on that other than when you think about the neuroscience company spun it's going to have orexin moving aggressively in the clinic. But the pipeline behind that, we've not given you guys any visibility into, in-part because some of it, as you indicated, is not ready, but also because we'll need to populate it with some additional candidates. So, the R&D and profitability guidance that Iain has mentioned accommodates the idea of expanding the pipeline, but not in a dramatic fashion. I mean, we're not going to go on a spending spree because we're managing business to hit those profitability targets. But as the revenue line grows, if we maintain on a ratio basis, an R&D line that's in-line with what our peer companies would do, it accommodates the expansion of R&D. And of course, the major toggle is what happens with the orexin program. If that continues to roll that's going to become a really important feature of the pipeline.

Well, I guess what I'm getting at is that the BD side is really up to you, right? I suppose, how aggressive you want to be. So, I guess I'm just curious how aggressive – what does it look like out there? We know that's happened to the biotech sector over the past couple of years. It just seems like a good time for you to be building up the pipeline, taking advantage of those opportunities.

Yes, I think that you're right. I think that there's – we went through a period of time there really wasn't much out there that we were attracted in now. I think the group is active now, but that happens on such an episodic basis when the stars align and you find something that meets the criteria from a scientific market, as well as intellectual property for perspective. So, it's hard to give you guys any guidance on the timing and sequencing of that other than to know that it's a priority.

Okay. Thanks.

Our next question is from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your question.

Sorry about that. Thanks for taking the questions. Just as a follow-up on LYBALVI and the comments in terms of the gross to net. Just curious if you can just walk through how you're thinking about the decision whether to contract more in the second half of the year that would lead to an expansion on the gross to net and what you would nearly get for that from an access standpoint?

Yes, absolutely. So, we're watching this very closely overall. We look at it a couple of different ways. We're actually looking at the TRx’s and the contribution from each of the channels. And we actually see a healthy portion of prescriptions. As I said earlier in my prepared remarks on bipolar and schizophrenia, but we also see a healthy amount of prescriptions that are flowing through with commercial, with Medicaid and Medicare. So, we're watching that really closely. And those are discussions that we also then have with commercial payers. And one of the decision points that we're thinking about is our access profile right now support the aspiration that we have. And if we need to enhance it in any way. And those are discussions that we had last year, and we'll continue to have those this year. We think that LYBALVI is very well-positioned right now within market access, because we are seeing the prescriptions flow through. We do a fair amount of market research with providers as well. And overall in this category, they think in general that most of the branded agents have a similar profile. There's always step at its prior authorizations, medical exceptions. So that goes into our decision point as well, too. But overall, right now, we think we're really well-positioned.

Okay. Great. Thank you very much.

Thank you. Our final question is from the line of Brandon Folkes with Cantor Fitzgerald. Please proceed with your question.

Hi, thanks for taking my question. I just want to come back to the neuroscience SG&A spend. On LYBALVI, just given the breadth of prescribing is driving growth currently, how do you think about your headcount, infrastructure, and the commercial operation in 2023 and maybe embedded in those 2024 and 2025 profitability targets? Thank you.

Yes. I think we've built the infrastructure. Initially, we built it for VIVITROL, and we were able to start leveraging it with ARISTADA. We now have three products that are supported by the commercial infrastructure. And I think the infrastructure that we have today is going to support growth for all three products into the future without us needing to spend additional money. I think the incremental investments on the SG&A side or certainly on the sales and marketing side are really going to be around this DTC campaign, both in this year and in the next couple of years. But as I said, the idea between the DTC campaign is to grow or move that revenue line up. So, assuming we see that, we will continue to invest in DTC, but we're going to learn a lot as we get into the program, and we'll be able to adjust that investment as we deem appropriate.

Great. Thank you very much.

Please go ahead, Sandy.

All right. Thanks, everyone, for joining us on the call today. Apologies for the technical difficulties and bearing with us. We'll be available all day if you need us. Thank you.

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