Dive Brief:

• The Food and Drug Administration has approved a new treatment for schizophrenia and bipolar disorder, bringing to a close what’s been a turbulent year for both the treatment and its developer, Alkermes.

• The treatment, which will be sold as Lybalvi, takes the active ingredient in Eli Lilly’s Zyprexa and combines it with a newer chemical agent called samidorphan. Lybalvi is supported by a couple large clinical trials that showed it to be effective and without the same weight gain issues seen with Zyprexa. Alkermes intends to launch the product this fall, sometime between October and November.

• Tuesday’s approval announcement comes six and a half months after the FDA rejected Lybalvi because of manufacturing issues. That decision proved surprising, especially since a group of FDA advisors had just recently voted in favor of the drug. While the agency isn’t required to follow its advisors’ recommendations, it typically does.

Dive Insight:

Though several months later than Alkermes had hoped, Lybalvi is now cleared for launch.

But approval isn’t the last obstacle standing in the drug’s path. The market for antipsychotics is crowded, with a host of lower-cost generic options as well as roughly a dozen “atypical antipsychotics,” including Alkermes’ own Aristada.

Still, Alkermes argues there’s room for more treatments. Speaking to investors Tuesday, Todd Nichols, the company’s chief financial officer, noted how patients living with schizophrenia or bipolar 1 disorder often “cycle through multiple therapeutic options in pursuit of better outcomes.” The market for oral, atypical antipsychotics alone includes about 70,000 patients who switch therapy each month, according to Nichols.

“Each patient switch is an opportunity for Lybalvi to be considered by a healthcare provider,” he said.

To Alkermes, Lybalvi also represents an attractive option for patients dealing with the weight gain and metabolic side effects known to occur from drugs like Zyprexa. Lybalvi works, in part, by regulating the part of the brain that signals pleasure when a person eats, and late-stage clinical testing found that people who took it as opposed to Zyprexa experienced lower average percent weight gain.

Alkermes finished 2020 with a little over $1 billion in total revenue, of which $552 million were from net sales on products. While those net product sales were up 5% compared to the year prior, the company still recorded an operating loss of $112 million.

Analysts expect Lybalvi to provide a helpful lift for Alkermes. In a note to clients last month, Vamil Divan from Mizuho Securities wrote that his team anticipates a slow launch while Alkermes locks down access deals with payers. But later on, they foresee Lybalvi fetching around $700 million a year.

Blair Jackson, Alkermes’ chief commercial officer, said the company expects Lybalvi net sales of up to $10 million this year.

“We’ve been very active with payers over the last year,” Nichols told investors. “The payer reaction is similar to our assumptions, and that is that Lybalvi will be treated like a branded agent.”

“Within this marketplace, generics are always considered first-line options,” Nichols added. So patients are “most likely going to have to step through one, maybe two generic treatment options before they get access. And we are prepared for that.”

Alkermes leaders said they’ll disclose the drug’s list price closer to its launch.