Neurocrine Biosciences, Inc. (NBIX) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to the Bank of America Health Care Conference. My name is Tazeen Ahmad. I am one of the Senior Biotech Analysts at the firm. It is my pleasure to have our next presenting company, Neurocrine. For the next 30 minutes, I'll be spending time with CEO, Kevin Gorman. Talking about the company and some upcoming catalysts. Kevin, good afternoon, thanks for joining us.

Good afternoon, Tazeen, and thank you very much for having us here today.

Our pleasure. So I like to open up every conversation with a 2-minute summary of the company and some of your key accomplishments. And if you don't mind giving us a 2-minute pitch, we can go straight into questions from there.

Certainly, Tazeen. I will be making forward-looking statements. There is no safe harbor for me to put up, but I would please direct everyone to our recent SEC filings, our Q that is up there for all the risks associated with the industry and the company itself. And also Tazeen, thank you again for having us and then thank you, Bank of America Merrill Lynch for this opportunity. Neurocrine, we're very fortunate to be in the position that we're in. We've realized the hardships that millions are undergoing right now. And companies that are having a very, very tough time. Neurocrine didn't prepare for a pandemic. We happen to be in a situation where our business is not nearly as affected as many are. And like I said, we feel very -- we feel very fortunate about that. And Tazeen, I imagine many of your questions are going to touch upon the position of the company and our performance that we've been able to have to date. One thing I would like to say before we get started is that we're not a virology company. We're not an anti-infective company. So we're not directly involved in developing therapeutics or vaccines that are so desperately needed in this COVID situation. But what everyone is aware of is the toll this has been taking on mental health, the existing mental health community and now what is becoming obviously growing mental health community. That is exactly the community that we touch. And both on a national level and on local levels down into the community levels, we have been very active and assisting in every way that we can through this. So Tazeen, rather than go through individual aspects of the company right now, I think that I would just like to turn it over to you so we can have a conversation, and I can answer the questions that you're going to ask that I know are top of mind on the investment community.

Sure. Yes, that would be great. Yes. So while we're on the topic of the performance of the company, you recently reported 1Q results and sales for INGREZZA were once again quite spectacular. Can you just remind us about the dynamics that you saw in 1Q? 1Q historically can be a little bit tricky because of the donut-hole reset, but so far, you've managed to overcome that drag for the last couple of Q1s that you've been selling products. Talk about that quarter, and we can go into some kind of feedback that you're seeing about the second quarter so far once COVID hit?

Absolutely. As you pointed out, Q1 is historically a difficult quarter, not just for us but for any specialty medicine that is out there. There are 2 factors at play in Q1. One has to do with what the patient and the physicians and the pharmacies, our closed door network of specialty pharmacies deal with. And that is after the beginning of the year is when there's a necessity for prior authorizations for the patients all coming at the same time. There are reauthorizations that come in for patients. And it leads to a huge pile up of paperwork and activities at the clinical sites and then flowing into the pharmacies. This is something that is every Q1, and it will not change for the foreseeable future. What makes it more challenging each year is the fact that we have doubled the patients that we serve here, virtually every year. So while that's a very good thing, it does lead to a much, much higher buildup of these patients that need the prior option reauthorizations done. The good thing is that over the years, we have been adapting to this. We have been understanding it better. We've been able to prepare weeks and months in advance and help prepare the physicians' offices and their staff and also our pharmacies for this onslaught. And so it is, as always, a tale of 2 quarters, that first 6 to 7-weeks of the quarter, it is a real slog in making sure that there's no interruptions in patients care and getting in INGREZZA and getting through all that paperwork. And then in the last 6 weeks of the quarter, that second half, then you're through much of that and you're getting on your regular cadence that you have in here. We've been, as I say, getting better, I think that we performed exceptionally well, and I'm very proud of our team that got us through this first quarter with minimal to no patient interruptions taking place. And the second aspect of the quarter is also because of the reset on the donut hole, it's also the greatest gross-to-net fit that we take in this quarter. And so again, that just fundamentally will always be the same. But we -- as you point out, we performed extremely well this quarter. We came through it. We're real fortunate that patients and their physicians realize the importance of tardive dyskinesia and treating it. And so even in these unusual and extreme times, we see that our refill rate remains exceptionally high. There is not a drop-off here. And then what is also very gratifying that even in these times, we saw that NRx is while, of course, you would expect the fall in NRxs, perhaps, but it was not nearly what we expected. And further, we held off our earnings call, so we had the month of April because that's really where COVID hit was in that month of April. And we wanted to be able to give you a little more color on April. And again, you're seeing TRxs that have -- the refills that continued to work out well -- very well. And again, the new prescriptions, even with officers that are now functioning completely electronically. You're not seeing the drop-off that we had feared, not nearly in the NRxs. Now I'm not saying that we're seeing the growth in NRxs that you would normally see in normal times. That's not what I'm saying. But what I am saying is that we're very encouraged by the NRxs that we're seeing even in these unusual circumstances.

Okay. And as it relates to those on NRxs, are they being written by docs who are at this point, quite familiar with the drug? Or are you still seeing new docs being added on?

Yes. By and large, the vast majority of our NRxs, prior to COVID, have been written by physicians that we know well and that we've -- that have been writing. There is always the normal prospecting and uncovering by our sales team of new practices that they come on and they're introducing Neurocrine and INGREZZA to those. But at this point, 3 years into the launch, that's actually a very small percentage compared to our entire universe of doctors that we call on.

Okay. At the beginning of the year, despite what's been really strong sales growth since launch. You talked about still being in what you felt were the early innings of the INGREZZA launch. You didn't want to define it as mature at all. So I guess, how are you thinking about where the incremental opportunity is going forward for picking up patients?

Yes. So when we started on this nearly 3 years ago, and again, these numbers are imprecise. It's really difficult with the market that never had a drug for it before. And that had been left basically at the wayside in diagnosis. But our best work that we could do suggested that maybe 2% to 3% of our addressable population had been diagnosed, received the diagnosis of tardive dyskinesia. Through our efforts over these 3 years, we think that's in the high teens right now. So that's a lot of progress to have the high teens of our addressable population being diagnosed. Still a long way to go, still a lot of patients who need to be diagnosed with tardive dyskinesia and treated with it -- treated effectively. And that brings me back to even where we are today. In the high teens, that doesn't mean that those patients are receiving a VMAT2 inhibitor right now. Almost half of those patients who've received the diagnosis for tardive dyskinesia are being treated in kind of an old-fashioned way, one that does not have any good scientific basis to it at all. And that is, as we called it, treating the disease by trying to work with the offending agent, which is the antipsychotics. The 3 Rs, the physician either reduces the dose of the antipsychotic or they replace it with another antipsychotic or in those situations where they can remove the antipsychotic, they do. But none of those 3 things have ever been shown to have any meaningful effect on tardive dyskinesia. So even when the physicians have been trained up enough that they feel confident in recognizing and diagnosing TD, they're still not at the point where we still have a lot of education to do so that they're treating the most appropriate way these patients with TD.

Okay. Maybe you can talk to us about the logistics of how patients are getting drugs. What percent of your patients are actually receiving drugs through mail order as opposed to having to physically go pick up INGREZZA?

Yes. Virtually all of them get it through the mail. Most of the time, it is sent to their home. There are patients who prefer to pick it up at the doctor's office. But with many of those offices having been closed up throughout the entire country, then that mailing has been changed, which I think that is really helpful all the time, but especially now where most everyone is in a shelter-in-place situation. The patient is still being called by the pharmacies. They're able to talk to someone at the pharmacy who calls them. Ask how they're doing, gives them the ability to speak to a nurse if they're having any problems that they want to talk about. It doesn't have to have anything to do with INGREZZA. And they don't have to keep -- the patient doesn't have to keep track of where they are in their pills, how much they have left. The pharmacies are on a regular cycle with them. So this is -- this also helps with what we call the stickiness of this and not leading to minimizing any treatment disruptions.

Okay. Before I leave the topic of INGREZZA, I did want to ask you about any change if you're seeing such with payer discussions and formulary access?

Yes. And no, we're not. We're -- we -- as we said, we've entered into very discrete and very strategic contracting. We started talking about that towards the middle of last year or even earlier, that we were doing that. But in only very select situations, and nothing has changed to date along those lines. So no -- certainly no substantial changes that we see in our gross to net going forward this year.

Okay. Great. So let's maybe talk about some of the other products that you've got upcoming, there is opicapone brand name ONGENTYS. That is something that is ready to go to market. You haven't yet launched it. There's been a couple of reasons why. I'm just wondering if you could remind everyone where that is and when you expect that to potentially be commercial?

Absolutely. We think that ONGENTYS, and thank you for using the brand name as that's where we'll be going to. But for those on the phone, once again, this is what you've been listening to as opicapone the license that we -- when we licensed it in from the inventor, BIAL, in Europe. Nearly 2.5 years ago, I should say, 2.5 years ago that we completed that license. This is our third drug approved in 3 years. And again, going to how fortunate we are during this time to be able to keep moving forward in our pipeline like this. And before I talk about ONGENTYS, in particular, I do have to say that, as you know, there's a flurry of activities that take place in the weeks leading up to an approval. The -- let's say, the 7-to 8-weeks that lead up to an approval, there's quite a bit that goes on, not the least of which is label negotiations. And the FDA never missed a beat throughout all that with everything that they were doing. And the pressures on them and their primary focus as it certainly should be on COVID. There was never a meeting they missed. There was never a deadline for turning drafts to one another that was ever missed. So I do have to say that the FDA was outstanding in this process. So ONGENTYS is going to be a very important drug in the treatment of Parkinson's patients. The gold standard for treating the Parkinson's space -- community in the United States and everywhere in the world is levodopa. But levodopa on its own is not an adequate treatment for Parkinson's disease. There are 2 main enzymes circulating enzymes that break down levodopa and would never even let it reach the brain. That's why levodopa is always given in combination with carbidopa. And carbidopa inhibits one of the main enzymes that breaks down levodopa. But the enzyme that is left still to break down levodopa prior in getting access to the brain is COMT. And that's what ONGENTYS is there for, is to break down -- is to inhibit the COMT enzyme, such that more levodopa can make it to the brain. And so COMT has been around for a long time. It's been known. There's even a generic -- couple of generic drugs out there that were launched many years ago that are COMT inhibitors. But for a variety of reasons, none of them could fulfill the promise of really being able to make an impact. The impact that physicians were so excited about more than a dozen years ago in being able to substantially change the ability of COMT inhibition to make life much more bearable for Parkinson's patients. ONGENTYS is the first one to be able to do that. It is a once-a-day pill. You give it at night with their last dose of levodopa/carbidopa. And that allows the patient to not have to wake up during the night, set an alarm in the middle of the night to take yet another dose of levodopa. It allows them to then wake up and still be functioning and to not have any of the off times or frozen or slow times that they have then. And that one dose at night will last them all through the next day. And so really, this is a way for patients to dramatically reduce their off time and as is included in the label for ONGENTYS that it significantly increases the good on time that they have. And that means on time without any troublesome dyskinesia. And so that's very important for these patients. And it's the first -- it is the first COMT inhibitor that really can fulfill this promise.

Okay. So in terms of where you think you are, how far are you from starting sales of this products?

So there are 2 things. One is the environment that we're in with COVID-19, that's not an environment that with many of the neurology offices closed, that one would want to launch into. However, more importantly than that, as I had discussed very early in this -- in the year publicly, is that we have no control over the supply chain. The supply chain is completely the responsibility of our partner, BIAL. And BIAL had an incident at one of its manufacturing sites in Europe, nothing to do with COVID, well before that hit. And while we have our launch supplies, we don't have good visibility or at least sufficient visibility for us that we would feel comfortable into our resupplies in 2021 and beyond, such that we would have high, high degree of confidence that there would be no treatment disruptions for our patients once we launch. BIAL has been working on this tirelessly. We're in constant communication with them. And we're going to -- there's some very significant milestones in rectifying the situation that will be coming late this quarter and early in the summer. And as I get that information, I will then be able to share more definitively exactly when we would be launching.

Okay. I'll look forward to that. Maybe moving on to CAH. You are going to have a presentation at the now virtual ENDO Meeting, what should we expect to see there? And what are the next steps for that program?

Yes. So CAH is one of the programs that we're most excited about here. This is a -- for a variety of reasons, a devastating disease that babies are born with, where they -- where they have a genetic lesion. And we fundamentally treat this disease with our CRF receptor antagonist that we have. And we completed a Phase IIb study, first in the adults population. And we actually, for competitive reasons, we didn't give a whole lot of information about the output of that and the results of that study. We went into it and told you that our goal is to have at least a 50% reduction in the important steroids ACTH and 17-OHP in at least 50% of the patients. When we completed that study, and it was a study that had 4 cohorts in it. We told you that we did meet our goals of at least that 50% reduction in 17-OHP and ACTH in at least 50% of the patients. So not very much information at all. We wanted to be able to preserve our publication rights, and that is done now through our -- the presentation that Dr. Auchus will be giving. An oral presentation that's on June 8 at the virtual ENDO Meeting. And here, you're going to get quite a bit, if not all, of the information. You're going to see the safety and tolerability of the drug. You will also see all 4 cohorts. You will see the data in aggregate, and you will see individual patient data here. You will see it not only for the 2 hormones that I mentioned, but you're going to see it for other important hormones here. So this is going to be, I think, a very good download of information that you and all of our investors have been waiting for. And you will see that, that formed the basis of our very fruitful discussions with the FDA that we've been having over the last several months. And with EMA. And again, I do have to say the regulators, EMA and FDA, once again, throughout these difficult times were highly engaged throughout this process. And we came out with a trial design that we all agreed on. And for only a single Phase III clinical study to lead to a positive, to a registration, both in Europe and in the United States. We'll be kicking that Phase III study up in adult patients with CAH in the second half of this year.

Okay. I was going to ask about how you're thinking about the systems of the pandemic for an extended length of time. But I'll just ask you a more of a broad question. What do you think the potential long-term impact could be of COVID to your business? Is there anything -- you've touched upon this already, but is there anything that you're changing in the way that you're doing your business or the way that people are accessing Neurocrine that you think will be permanent even after we go to some level of normal?

Yes. If you look at the 3 arms of -- the 3 main arms of our business: our research, our clinical development and our commercial efforts. COVID's going to -- has touched all 3 of those. And I do believe that it will have an impact for the foreseeable future in all 3. This business, our business, all of our colleagues in biopharma. If there's one thing we do, we adapt. And I think we have always had to adapt. We've always had to adapt to the science to new breakthroughs and discoveries to new challenges. To different regulatory environments to definite economic challenges that are put in front of us. So I'm really confident that we and the industry as a whole is going to adapt well as we go forward. In research, yes. We have to -- we have redesigned our labs to a certain extent. We have put in new protocols in order to safeguard our employees that are in the labs. And that will continue for quite some time. In clinical development, there, to date, we have been able to -- everything that our clinical and regulatory teams have had to do with all of our programs, those that are in the clinic and those that are about to go into the clinic, they have been able to do everything that's within their control and do it on time. And we haven't missed, we haven't lagged. But now we're going to be in the second half of this year, relying them on our partners on the outside. So those are going to be our clinical trial sites, their IRBs, other contractors that we utilize. So it remains to be seen, are they going to open and open as efficiently and at the same pace as we envision that we're going to be able to open out there. And so I think that's something that all of us are going to deal with. We are seeing a reopening of the country. It's going to be discontinuous in nature. It's going to be state-by-state on how they reopen. It's going to be site-by-site on how it reopens. So we'll adapt to that. And definitely work with all of our external partners in order to continue the clinical development of all of our drugs as the pipeline has become quite deep. The third is the commercial operations. And they are spending just a little bit more time. What we went to was a situation where we were completely interfacing with clinicians and their staff face-to-face to almost overnight or maybe literally overnight, where it was all electronic. We were able to adapt to that rapidly. But in addition to just adapting to the way you interact, and it has been very successful. As evidenced by the performance that we've had. It's also the quality of the interaction. And by that, I mean, that our field salespeople, they know their physicians and their staffs exceptionally well. They know which and what each one of them is going through. They know when to give them space. They know how to respect what they are going through. And they know those, and they know when they're available. And ready to have more training, more education on tardive dyskinesia. And our field representatives have done an outstanding job of working respectfully and diligently and productively with their accounts. Part of that comes through -- and that those accounts have been -- psychiatry has been -- as everybody has been going to is more of a telemedicine. But psychiatry has traditionally been the leader in telemedicine. And that's something that we have been working on for over 2 years now. So I think that if you're looking for one long-lasting thing that's going to be here, I think, what you're going to see is a greater utilization of telemedicine, particularly in psychiatry. And I think that we have a good understanding of how to work within the telemedicine space.

Okay. Before we run out of time and before you have to go back to your dog, I did want ask about your recent option for Idorsia epilepsy asset. Can you just give us a quick summary of the deal? And what's giving you confidence that this is the right thing to be pursuing at this juncture for Neurocrine?

Yes. I think the Idorsia collaboration is evidence of us doing 2 things simultaneously here, a greater commitment into epilepsy. And a greater commitment and recognition of being able to go into an area within neuroscience that is burgeoning, which we wanted -- we've always wanted to be in, and CAH is one of those, which is precision medicine, where you're looking at a genotype so you know what genes are absolutely involved and not involved, causative of disease and then being able to have a drug to do that. Two collaborations. Xenon in the sodium channels, Idorsia in the calcium T-type channels. 2 areas where excellent companies with just outstanding research have identified, discovered and developed in Phase I, really important and exciting medicines. They've entrusted them to us, and now we're going to take those forward into the Phase II setting later this year. And we're first into rare pediatric and tractable pediatric epilepsies. And we're looking very forward to doing that. And again, I feel quite fortunate that these 2 outstanding companies entrusted us with these medicines.

And when could we potentially see data from either?

Next year.

Okay. Perfect. Well, with that, I think we are about out of time. So Kevin, thanks so much for spending a little bit of your afternoon with us. We appreciate it. Good luck with the upcoming catalysts, and we're looking to catching up with you soon.

Tazeen, thank you very much for the opportunity and looking forward to hopefully in not-too-distant future to be able to get together in person. Take care.

We look forward to that as well. Take care. Bye-bye.

Bye-bye.