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

Welcome everyone. I'm Brian Abrahams, one of the senior biotech analysts at RBC Capital Markets. We're very pleased to have our next featured company, Neurocrine, and their CEO, Kevin Gorman. Kevin, thanks so much for joining us.

Hey, Brian, thank you very much for having me, and thank you to RBC for offering us this time.

Our pleasure. So maybe just to kick things off and get started. I would love to hear just a quick several-minute update on the latest developments in Neurocrine and sort of where the company stands today coming out of the last earnings and given some of the developments on the commercial side for INGREZZA as well as the pipeline. And then would love to drill down more on some of those during the Q&A.

Sure. And I'll try to be brief so that we can get enough time in here for the Q&A. Before I start, obviously, I'll be making forward-looking statements. So I would direct everyone to our most recent 10-Q to see all the warnings that exist there. So Neurocrine is in a real fortunate position. We have a very strong balance sheet. And as COVID has taken the entire country pretty much by storm, we've been able to weather it fairly well right now. And one of the main reasons is we have a drug -- a medication in INGREZZA, that patients and doctors value very much. And even in this kind of environment, we've seen that refills and even new patient starts have held up -- has held up very well, especially the refills. It shows that once you are on this drug, it's highly valued by the patient. And so that has really maintained very well. Now in addition to INGREZZA and its performance, we have, like others in the industry, we've seen that we've had to put on hold some clinical trials that we had ongoing. There were 3 that we had ongoing that we had to put a hold on because the clinical trial sites were just not able to bring in patients. That was our CAH trial in the pediatric population. That's our Huntington's disease trial with valbenazine or INGREZZA. And then that's also NBI-1817b (sic) [ NBIb-1817 ], which is our gene therapy for Parkinson's program. So those 3 are currently on hold. We're in contact with all the trial sites, and as they are opening back up, we will be going back into each and every one of them. We are in, again, a really fortunate position, we have multiple studies that we had planned on kicking off in the second half of this year. And so everything that's been in our control now leading up to kicking off 4 additional programs in the clinic. That has gone on without any hesitation. So we're right on track for our time lines. And as things open back up, we're hoping that our partners, the clinical trial sites, the CROs that we use, will also have -- be ready for us as we enter back in there. At this point, it seems like that will be the case, and we will stay on course with those 4 new programs going into the clinic, and they'll be going in as mid-stage programs. And then also the opening up of the other programs that we've had to put on hold. But as I said, in a very good position here with INGREZZA and with the fact that we're financially very sound. We have over $1 billion now in the bank. It allows us to continue to invest in ourselves at all level of the company, even during now. So we keep all of our hiring right on track as we've been building the company internally. And we're able to continue to invest in this growing pipeline, and it allows us to be continuously looking on the external side. So our business development efforts continue forward also during this time. So Brian, I'm going to stop there with that brief introduction, so we can get to your questions.

Great. So definitely want to dig into a lot of the things that you just mentioned. I guess first off, as mentioned, INGREZZA, a strong performance in the first quarter. We've heard some successes of your field team helping physicians and pharmacies navigate some of these dynamics but maybe also some of the unexpected resilience that the drug has shown in terms of new starts during the end of March and into April. Could you maybe, I guess, expand a little bit more about the other trends that you're seeing coming out of April and perhaps even with some May data on hand that have helped build your confidence in the strength of the franchise through this pandemic crisis?

Yes. And as I said, what I'm going to focus on is 2 things, 2 different parts of the INGREZZA business really, and that is the refill rate that we have with this, the persistency of patients who are already on the drug. And that remains very high. And then the other side of it is the NRxs or the new prescriptions that are coming in. As we've talked about many times, Q1 is a tale of 2 quarters. Q1s are always going to be Q1s for specialty products. The first half is really a slog, quite honestly, because of the massive amounts of reauthorizations and also prior authorizations that come in at the beginning of each year. But the team -- the commercial team was really well prepared to handle that. And we got through that exceptionally well as the quarter showed. The second half, then, of the quarter is, as we usually see gaining momentum as you go then in the second half of the quarter, you get to see the natural momentum of the drug. You get to see the NRx adds going on. You're more into kind of business-as-usual with this drug. And that's what we saw here. It was in the last 2 weeks of the quarter is when COVID hit, things closed down. And we overnight went to having a field force that was 100% in the field to being 100% at home. They transitioned exceptionally well in that. And we entered April with a lot of momentum. And it was one of those things where you're sitting, okay, now what's going to happen as we are into April and going forward. You saw that your sites were actually -- and your visits into your sites across the industry were down about 70%. And that means digital visits, phone calls and video into your sites were down approximately 70%. That causes a lot of angst. Are you going to see -- and again, I'm not going to talk about the refills. Those -- that's a life of their own. So I just want to speak to NRxs. So what you would -- what your fear is, is, wow, NRx is going to take a big hit, while this is going on. 70% down is what you could look at. I didn't see anything like that which was really reassuring. NRxs held up much better than that. I'm not saying by any stretch of the imagination that they're unaffected, but not nearly to the level that you would have thought that call volume -- that you saw the call volume was affected. And we continue to see that, okay? So NRxs are holding up much better than what we would have thought from call volume. And as I said, refills continue to do remarkably well as they always have. And now we're in yet another transition. And it seems like you just hit your rhythm in adjusting to this new environment of doing everything like we're doing here via WebEx. But now things are opening up around the country. So we're reintroducing the sales force back out. It's in a limited way, obviously, different parts of the country are opening at different rates. And really, it starts with the acumen of our sales reps in their individual regions. for them to do the reach out as they've been doing their calls with their physicians, are they open to them, visiting there, are they open to going from a digital learning format back into the clinic now where we run programs for the physician and their staffs. And so we'll see that transition now taking place. I'm going to be curious over the next few weeks to see how that rolls out. I would anticipate that the portion of the sales force that's able to go out soon is probably going to be spending maybe 1 or 2 days a week doing their calls, face-to-face. But still the majority of their week is going to be digital in nature.

Got it. Good. Certainly, interesting times for sure. We understand that you are expecting -- so maybe shifting gears to opicapone. We understand you'll be expecting to have some more info on the supply situation with BIAL later this quarter in the early summer. What's the latest on where things stand there for that program and when you might expect that to be resolved?

Yes. So we're real happy. And it doesn't get lost on us that we have an -- we had an approval. Our third approved drug in 3 years. So -- and this one fits so well into the company is why we did the deal. And also, it's going to be a really important drug for Parkinson's patients. This is going to help them tremendously to deal with their motor fluctuations. And so we really can't wait to introduce this drug out there. Now 2 things going on. I don't need to mention the obvious. But the second one, which I think is more impactful on the timing of the launch of this, is the supply chain disruption that's taken place. And I started speaking about this in January publicly. And we have all of our launch supplies in place right now and have had. That's not the issue here. BIAL, our partner, who's the inventor of ONGENTYS, they had an incident at one of their manufacturing sites in Europe. And that manufacturing site is coming back online but we don't have, neither BIAL nor us have sufficient insight into exactly when that's going to come back online. There are a few things that have to happen for it to be fully back online. That needs to come back online in order for us to have the assurance, and it has to be an extremely high level of assurance for us that our resupplies in 2021 and 2022 are going to be there. Because we're not going to launch a drug, if we don't have great assurance that there will be no discontinuity of care that takes place. So we're going to know that in late June or mid-July. As soon as we have that we'll be making that publicly available.

Got it. And how should we be thinking about the launch trajectory once you do launch that drug? Are there specific lessons from the commercial experience outside of the U.S. that you might be able to apply or even look to improve upon here domestically? Or any other specific challenges you might foresee for a successful uptake there that you're going to work through?

Yes. No, clearly, BIAL has had great success over in Europe with ONGENTYS. And so we have -- we've been sharing -- they've been very good in sharing that with us. And as international meetings have taken place over the last couple of years that U.S. neurologists have been going to meeting with their counterparts in Europe, and has really generated a lot of excitement for the U.S. neurology community on this, at least the thought community out there and the KOLs. As you know, we didn't have to do another registration study in the United States. So that's kind of odd that you have a drug that's approved, yet physicians in the U.S. have never had their hands on it. So it's good that the sharing of information has taken place in the last 18 to 24 months that have taken place there. To frame it, there's about 1 million Parkinson's patients in the United States. 800,000 of them are on the gold standard treatment, which is levodopa. The problem being is levodopa is rapidly broken down in the periphery before it gets the chance to reach the brain by 2 major enzymes. One of them has been dealt with forever, almost immediately, and that is with carbidopa. So a physician never prescribes levodopa without it being in combination with carbidopa. But what's been forgotten is that second enzyme that breaks down levodopa rapidly, and that's COMT. And that's what ONGENTYS does is ONGENTYS now inhibits that. So when patients -- when in the natural course of the Parkinson's disease, as we just said, 80% of the patients are on carbidopa/levodopa, but over time, they have to increase the frequency of their dosing, because it keeps getting broken down much quicker and they become a bit less sensitive to it also. And so then you start adding adjunctive therapies. And the adjunctive therapies that you're adding are either one of the very old COMT inhibitors, which are weak and have lots of side effects, have to be given with each dose of levodopa/carbidopa, so really didn't fulfill any of the real promise that COMT inhibition was supposed to fulfill. Or you are being given a dopamine agonist, they are falling out of favor right now. Or you're going to give another drug, which is the monoamine B drugs. Those are the kind of adjunct therapies that are being given, and COMT has been at the very end of that as they cycle through. Just taking over the COMT portion of that market with a drug that really fulfills the promise of COMT inhibition. Once a day. So no big pill burden there at all, allows the patient to go through the entire evening and not have the anxiety of when they wake up that they're not going to be able to move because of the off times and not have to wake up in the middle of the night to take another levodopa dose. And none of the side effects, the severe GI side effects or the discoloration of bodily fluids like saliva and tears. That -- just taking over that portion of the adjunctive market, that's not really success for us. And quite honestly, that's only about 8% of the adjunctive market. Success for us is going to be moving ONGENTYS much more forward in the treatment paradigm. So that as a physician is thinking now, okay, I've got my patient on 2 or 3 doses of levodopa/carbidopa a day. Now I'm thinking about increasing those doses or I'm thinking about increasing the number to a fourth dose or a fifth dose. Or I'm thinking about adding one of the adjunctives. No, what you would do is add COMT inhibition, add ONGENTYS in there and really optimize that gold standard of levodopa/carbidopa. And so that's what we see there. So taking a page out of the INGREZZA book, there's a lot of education that goes on here. There's a lot of change of behaviors that are fairly ingrained. We've been very good at that in the INGREZZA field. And part of that, obviously, is bringing a great drug to TD. I really think this is a great drug for Parkinson's. And so we're going to bring that to those patients.

Good. Also on the pipeline side, it sounds like you're going to be -- you're going to have some exciting CAH data to come imminently with the rest -- I guess published imminently with the rest presented at the virtual ENDO conference in just a couple of weeks. I know in your earnings call, you provided some great context as to how to look at this data. But can you tell us a little bit more in terms of framework of what we should be looking for out of this data? And then any additional color you might have from the ongoing regulatory interactions? How you're progressing towards initiation of the pivotal? And where the pediatric trial stands as well?

Yes. So as you know, with our CAH program, with this disease, where patients can't make endogenous cortisol. So there's the first problem. The underlying disease is a genetic defect that doesn't allow them to make cortisol. That has a whole cascading effects, health effects. One of the -- the patients all used to die shortly after birth or very young. But then hydrocortisone became available. And so there was a drug that allowed them to live, but unfortunately, they have to take super therapeutic doses of hydrocortisone every day of their lives. That causes an entirely new host problems for them. What our drug crinecerfont does is: one, I'll tell you what it does; one, I'll tell -- the second, I'll tell you what we aim to show in Phase III. What we have shown in the data that's going to be presented on June 8, is that we can treat the underlying disease. We can recapture this feedback mechanism that is completely dysregulated in these patients, that's the hypothalamic pituitary adrenal axis. It's a mouthful, but we call it the HPA axis. Usually, cortisol being made then goes back and does a feedback in this loop and regulates it on a 24-hour cycle in all of this. But if you can't make cortisol, you don't have that feedback, and it's dysregulated. That is the basis of the disease. Our drug, once -- an orally active small-molecule drug, recaptures that. So it fundamentally treats the underlying disease. That's what is going to be presented on June 8, and that's huge to be able to go after the underlying aspect of the disease. So what you're going to see on June 8 that Dr. Rich Auchus, probably the most preeminent CAH physician in the world, is going to present is data from a Phase II study in adults with CAH from 4 different cohorts, treatment cohorts. And this was an adaptive trial. So after we finished 1 cohort, it gave us the information that we needed in order to go onto the second, the third and the fourth. So we didn't give you very much information at all leading into this trial, nor when it was done. What we said is that success for us from this trial is going to be seeing a 50% reduction in 2 very upstream hormones, ACTH and 17-OHP, 2 very important proximal hormones in this feedback loop. And if we see that 50% reduction in 50% of the patients, that's success. What you're going to see on June 8 is all of the data, in aggregate, for each of the 4 cohorts and aggregate for all 4 cohorts, but most instructive is you're going to see individual patient data in each of the cohorts going there. You're going to see individual safety data and individual efficacy data, meaning on ACTH, 17-OHP, but we're going to give you more hormones, those that are farther down in the cascade now, which are very important. And so you're going to see all of that. This is the data that we took to FDA and EMA in Europe. And that formed the basis of the agreements that we reached for the single Phase III pivotal study that we're going to be conducting in the adults with CAH and that we're going to be kicking off in the second half of this year. Now the details of that study because I can see your lips move, you were just about to ask, so about the end points. The details of that study are going to be posted on clinicaltrials.gov. Now as I said when I started, there's 2 things we want to -- that are important to accomplish with this drug. One, we've shown that we can recapture the fundamental basis of the disease, which is that HPA Axis. The second part is by doing that, can we now lower the patient's dependence on taking exogenously added cortisol and all the problems that -- or hydrocortisone, and all the problems that, that causes. We won't replace that. They'll always need hydrocortisone. But can we take it from those very, very high super therapeutic doses down to a much more normal manageable range. So then you get rid of all the deleterious effects of that. So it's going to be a big day on June 8 because you're going to see what the agency saw, which led to a very good discussion with them, and I think a very great outcome.

Excellent. Well, just in the last minute we have left, I know we're running low on time. Just a week or so ago, you exercised an option to develop and commercialize a program from Idorsia. Can you maybe talk about what's driving your decision to step into epilepsy overall now with multiple programs? And how you think about building an epilepsy portfolio? And maybe bigger picture, how are you guys thinking about business development overall? How much of a sense of urgency do you have in terms of building out further your mid- and late-stage pipeline? And how do you think about capital allocation given the favorable capital position that you talked about at the very beginning of our conversation?

All in 1 minute? So first off, what you and outside don't really have great visibility into at Neurocrine because we don't talk about our research programs until they're in the clinic. But for quite some time, we've been very interested in epilepsy. We've been very interested in ion channels. And that makes sense when you're a neuroscience company as we are. And along with our internal efforts, we have been networking externally because there are several really, really good companies out there, doing a lot of great work on ion channels. Xenon and Idorsia were 2 of those. Xenon, in particular, I think our first discussions with them were like 13 years ago. It's been a long time. Both of those companies, what they've done with 2 completely different families of ion channels is so similar and so impactful. They both started out with a genotype and they both used precision medicine in order to identify and optimize orally active small molecules that treat the disease. So it is a precision medicine aspect here. Xenon is using the sodium channel, Na(v)1.6, Idorsia T-type calcium channels. So 2 different channel families, highly specific correcting -- not correcting genetic mutations but being able to impact genetic mutations that are known to be caused in 2 different rare debilitating pediatric epilepsies. We were fortunate enough to be able almost simultaneously to bring both of those internal to Neurocrine, and we're really fortunate that not only are they the lead molecules that will be going into Phase II studies a little later this year, but we have the opportunity to have a research collaboration with both of these companies moving forward, in order to identify yet more compounds within those 2 different families of ion channels. That's very powerful. And this gives you kind of an idea of how we approach business development. It's in areas that we already have a lot of interest and a long history, and even though it may not be completely obvious to the outside world, and that is over time as we've built relationships and a good common understanding with our partners.

Great. Well, with that, unfortunately, we're out of time. But Kevin, thank you so much. We covered a lot. Really appreciate you taking the time to be here with us today. So thanks again.

Brian, thank you very much. Take care.

You, too. Nice to speak with you.