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

Great. I want to welcome everyone to the Jefferies Healthcare Conference today. I want to introduce our next company. We have Neurocrine Biosciences, and their CEO, Kevin Gorman. This is going to be a fireside chat. So welcome, Kevin. Thanks for taking time out. I know you're in the midst of going to the beach and sitting on the beach in San Diego. So thanks for taking 25 minutes to speak with investors.

But let's get to it. You had a really good Q1. You weathered I think -- or weathering COVID at the time. If you could just talk maybe about where the situation is as it relates to any COVID impact that you've been seeing over the last few months with INGREZZA.

Yes. Thank you, Biren, and Jefferies for the opportunity to speak here today. I will be making forward-looking statements. So in lieu of a safe harbor that I would put up, I would direct everyone to our recently filed 10-K. Biren, so you're right. At the end of Q1 is really when the COVID pandemic started to take effect. We had a very nice Q1. As we had spoken about in our earnings call is that we had delayed the earnings call because we knew people were going to be very interested in -- Q1 really didn't tell the tale of COVID. It told a tale that is recurring every single Q1 that you're well aware of that it's -- that quarter splits into 2. The first half of it is all the challenges that are there and will be there every year in the amount of paperwork for reauthorizations of existing patients and prior authorizations of new patients to pile up. And then the second quarter -- second half of the quarter, you then pick up your normal cadence. And then right at the last 2 weeks of that COVID hit, but we retained very good momentum that we had through there. That took us into April also. And April was a very hectic time for everyone, us the same, in order that everybody became a work-from-home, shelter-in-place, if you will. Our entire sales force had to transition to going from face-to-face interactions with health care providers to only working from home. All -- virtually all of the health care providers closed up their practices to seeing patients, except on an emergency basis, in there. And they went to basically all virtual interactions with patients. That has continued, although now it is starting to open up. So different parts of the country opening up more or less. And therefore, it has allowed us now to open up our sales force to just now -- a portion of our sales force to be going back into the field. Now that doesn't mean by any stretch of the imagination, they're back in the field 5 days a week. They're contacting their clients. They're going back in the field, those that are prepared and ready and have policies and are open to having sales reps come in, and we're very respectful of that. Still, by and large, most of the practices are spending most of their time interacting virtually with their clients. So there's still the vast majority of our interaction with our customers is still virtual. We've gotten good at that. And I think that we have a bit of an advantage here in the therapeutic area we are and in the doctors we call on in that psychiatrists have always used telemedicine more than any other specialty. And so they were more prepared in order to interact this way. In addition, the CMS had really relieved a lot of the regulations that governed telemedicine. So it really allowed there to be a far easier access into their patients. So -- such as the patient didn't have to be at a video center. They didn't have to be on a secured line. So now they can just video chat by the telephone or their computer. Doctors can actually treat patients who are across state lines. That was never the case. Reimbursement is easier for the physician in this current environment for video conferencing. And all of those things work well now in allowing our sales professionals to have access into their physicians and their health care providers -- the other health care providers. What we're still able to do because this is still a launch that requires a lot of teaching, a lot of education. And so we are still able to do in-service programs with local key opinion leaders to come into the practices. We're still doing those, granted at a lower rate, but we're able to do those. So what we've seen overall in this is that patients who are on INGREZZA and physicians who have -- who have prescribed it to those patients, it's extremely important for them to continue without any interruption on INGREZZA. And so we see our fulfillment rates or refills holding up just as well as they always have. And that's very gratifying. And that base keeps growing and growing and growing as more and more patients who need INGREZZA are being prescribed INGREZZA. New patient starts have held up much better than what we would have predicted. And what I mean by that is when you look and you see that your ability to call on physicians drops nearly 70% from what you were doing. Well, we didn't see anything close to that requisite drop in new prescriptions. It held up much, much better than that. So that was very gratifying to see that in the way that, that has held up. And that led to not only very good Q1, but in the final 2 weeks, but a continued momentum into Q2. And I'm not saying that the NRxs are right up where they were before. No. But what I'm saying is they're nowhere near what one may have predicted or thought the fall-off could have been in this environment.

And Kevin, I guess, on the NRxs, they can be driven by patient switches as well as new patients or naive patients. So are you seeing more switching now and less new patients? Or are new patients still able to access through telemedicine the psychiatrist or the neurologists?

Yes, and we -- unfortunately, we can't capture if there's a switch going on. That's just not something that we're able to capture. But having said that, my bias is that, there's probably little switching that is going on. We're the dominant market leader. We have 75% of the tardive dyskinesia patients that are under treatment with the VMAT2 inhibitor. It is -- my perception is this is all new patients coming onto here. As you know, in telemedicine and as we sit here and look at one another, depending on how far back you are from the camera, you can probably see me from mid chest up. And if I lean forward, you're actually getting a much better view of my face, the physician can get a much better view of the patient's face than they really would in their office, where you're spending more time looking at one another when you're on video here. And because 70% of tardive dyskinesia patients have TD in the face, that's maybe a positive from this environment. Now the negative is, is that it is much tougher than to see it in the hands, the arms, the feet, the legs and the trunk. Unless there is someone there with the patient who can hold the camera or help them in order for the physician to do a full examination. But with those challenge -- presented with the challenges that not every -- certainly not every telemedicine call is on video. Some patients don't have video. So it is actually just on the phone. But even with that, you are seeing a healthy NRx taking place. So the physicians are meeting that challenge. And it really is, I think, due, number one, to the efficacy of this medication and the importance that the field is ascribed to it. But number two, it also has to do with the efforts of 3 years in launching in this drug, in the education efforts that we have put in place. And then number 3, the unbranded direct-to-consumer television advertising that we have done in order to spur the patient to have a discussion with their physician.

I ask this question I think whenever we meet each other at the Jefferies conference, and I think it's one question that's on top of mind for many investors, given INGREZZA is such a big value driver for the company, is where do you think market share is currently in the TD space with INGREZZA? When do you foresee a peak for INGREZZA, for example, if you can share that? Are we close to that? If you can maybe just provide some color commentary running on all of these questions.

Yes. I think that INGREZZA is still a tremendously underdeveloped -- or TD is still a tremendously underdeveloped market. Three years ago, we estimated that maybe 2%, 3% of all TD patients, of which there's 500,000, 300,000 is what we put as our addressable patient population that we thought that there were 2% to 3% of them that actually had a diagnosis of TD. We think now we're in the high teens, maybe we've hit 20% as far as diagnosed. Still a long way to go with diagnosis. But even within that diagnosed portion, like I said, about 20% are diagnosed, about half are not receiving a VMAT2 antagonist. So half of the patients are still being suboptimally treated. They're being treated with an old view to TD. Before there was ever an INGREZZA, the first drug that was developed and approved to treat this, they were doing what we call the 3Rs. They still do this. And that is they either replace the antipsychotic with another one in hopes that, that will stop the TD movements. They will reduce the dose of their current antipsychotic, or if it's a patient that they could actually remove the antipsychotic drug. There's no literature evidence and not any APA guidelines, and APA now says none of those have been shown to have any effect on TD. So we have 2 ways to grow here, and this is where our efforts are. One is to continue with what we've been doing. There's still a long way to go in educating physicians and their staff, to be able to recognize TD, to be able to feel confident that they can differentiate TD from other movement disorders, and then to prescribe INGREZZA and to advocate to that patient INGREZZA. The other part of it is still breaking through the old ways of thinking about TD, which is those 3Rs.

Great. And then I want to shift a little bit to the pipeline as well as opicapone. You received FDA approval, and you're going to launch in the second half of the year. I guess the supply issue was, in the sense, blessing in disguise, given the COVID situation and that you probably wouldn't be able to launch at least right now. So can you just talk about launch dynamics? I feel that the company doesn't really get much credit for this program. What are we missing as investors and why is this going to be a bigger drug than what we're anticipating?

Yes. I think ONGENTYS is our third drug that's approved in 3 years. And then I would have to go on to ORION, which was just approved with AbbVie, and there's the fourth drug in 3 years, therefore, uterine fibroids. ONGENTYS is really going to be an important drug. And I think that's what's being missed right now. It's just that one fact. ONGENTYS is going to be a very important drug in the Parkinson's community. There's 1 million Parkinson's patients in the U.S. 800,000 of them are on levodopa/carbidopa, 600,000 of those have motor fluctuations. There's our patient population right there. Why is it underappreciated? Well, if you try to go to the existing COMT inhibitors, which that's what ONGENTYS is as a COMT inhibitor, look at the old ones that are about 14 years old now, tolcapone and entacapone, they never delivered the promise of COMT inhibition. Tolcapone, highly toxic. Entacapone has its problems and weekly active. It causes also diarrhea, drug-induced colitis and it discolors bodily fluids and Parkinson's patients will drool. And so their skin and their clothing will be discolored because of that. All of the -- and it has to be -- probably the biggest thing is it significantly adds to the pill burden in these patients. It has to be given with every single dose of levodopa/carbidopa. Now comes ONGENTYS, once-a-day drug, you just give it at night. And what that gives the patient confidence of is that they're taking it at night, and they've taken their last dose of levodopa/carbidopa for the day, they don't have to wake up in the middle of the night with an alarm in order to take another dose of levodopa/carbidopa. Their levodopa is going to last all the way through the morning. They're not going to wake up slowed or frozen. They're going to be able to have good on time when they wake up. And then they can take their next dose of levodopa and make it through the day. The goal here is not just to replace, let's say, entacapone. That's only about 8% of the marketplace here for adjunctive therapies. The real goal here is to move ONGENTYS up way in the beginning of the treatment paradigm. Yet beyond, use it before you would use the dopamine agonist, use it before you would use the MOA-B inhibitors. You want to have the physician, when they have increased the dose from 1 dose of levodopa a day to 2 doses of levodopa a day, before they go to the third dose, think about optimizing levodopa, the gold standard, optimize it with ONGENTYS. And then you're going to smooth that curve and make levodopa far more available in the brain without increasing frequency of dosing or the amount of levodopa that needs to be given to the patient. And so again, that's where -- I think that is what is being missed right now is the ability to move this much, much earlier in the treatment paradigm.

And since approval, have you reached out to physicians in terms of physician education? Has that started even though you haven't launched the drug? And also, have you had -- maybe you can share your discussion with payers in terms of whether there's going to be any prior auth or step edits with this drug.

So as far as reaching out to physicians, we don't -- let's be clear, even though it's an approved drug, our sales force is not trained on it. So they, in their interactions with neurologists, which is about 20% of our call volume, and we call on all of the Parkinson's stocks in the United States, if the sales force has asked about it, they are directed to our MSLs. And there's where our MSLs will then have that conversation. So that's still within medical. It's not within commercial even with the approved drug as it stands now. What we have been doing is -- with physicians is we started an outreach through the medical magazines and literature, print and online, unbranded. Just bringing back to the top of the mind of the neurologists, again, about COMT inhibition because it's been forgotten. They don't -- many neurologists interestingly don't even realize they're using an adjunctive therapy from day 1 with their Parkinson's patient. They always give them carbidopa with their first dose of levodopa. It is always given as a combination. Carbidopa inhibits 1 of the 2 enzymes, dopamine decarboxylase, which breaks down levodopa to dopamine in the periphery and doesn't allow then that dopamine to get to the brain. COMT is the other major enzyme that breaks down levodopa into dopamine in the periphery, and therefore, doesn't allow it to get into the brain. And so we've already started that outreach. And we started that several months ago in an unbranded way. Now when it comes to payers in the second half of your question, yes, way leading up to this, we've talked to payers. And one of the things that in doing all the research that we do with the physicians, with the patients and with the payers is that in every situation that we go into, we want to make sure that the important drugs that we develop, we make them broadly available. We don't want price to get into the way of those drugs. In this patient population, which is, by and large, a Medicare patient population on multiple drugs, their out-of-pocket costs are really important to them. So after doing a lot of research, we made the determination that we're not going to price this as a specialty drug. We're going to price this below the specialty level. The specialty level, by the way, is $670 per month. So it's going to be priced below that in order to relieve the out-of-pocket costs as much as possible for the Medicare patient there. And it really is a situation, I think, that not all high-priced drugs are high-value drugs and not all high-value drugs need to be high priced. And you're going to see that ONGENTYS is going to be a very high-value drug for patients, their families and their physicians.

I also want to talk about the pipeline. You've got Phase II data from the CAH trial that's coming up. What should we expect? I know you're looking at biomarker reductions on 17-OHP and ACTH. What would be considered to be clinically meaningful in this patient population? And how did this study, I guess, inform on the Phase III adult CAH trial?

Yes. So we're very -- we're really looking forward to next week. June 8, Dr. Auchus is going to be presenting that Phase IIb trial that was an adaptive design. It had 4 cohorts in it. What we said at the very beginning, as you said, we would look at success, very good successes to see a 50% reduction in 17-OHP and in ACTH in at least 50% of the patients that we treat there. This was an adaptive trial. We went through there. And when we came out the other end, we stated that we saw that. And that's not a lot of information for you or the rest of the Street. We took all of that from that trial to FDA and EMA because we're this -- what we want to do is a simultaneous worldwide development on this. And I got to say those discussions went extremely well. We came out of that with an agreed-upon single Phase III trial in these patients, looking at biomarkers and what you're going to see come June 8 is the strength of the data that led to that nice outcome with the regulatory agencies there. You're not only going to see those 2 -- those 2 hormone levels, but you're going to see even on downstream hormone levels that you're going to see data on. You will see aggregate data from each of the cohorts, and you will see all the individual patient data from each of the cohorts for all of the hormones and on safety and tolerability throughout this. It's a really powerful data set that ended up with a very nice agreements with the regulators. And as we're talking about the regulators, I do have to give a shout out to the FDA. During this period of COVID, we had several really important interactions with the FDA. Obviously, all the activities that happen at the end of a review of an NDA for ONGENTYS. And then with a very complex program like CAH that's never been done before, having all those interactions, the FDA never missed the beat with any of our correspondence, with any of our meetings, which was supposed to be face-to-face, then became videos, worked out great with what they were having to deal with at the time and continue to deal with. I do have to say an outstanding effort by FDA.

We've got 2 minutes left. I do want to ask you. So you've got the CAH product. You've got the gene therapy that you've licensed from Voyager as well as the compounds from Idorsia and Xenon. So the pipeline is a lot more fuller than it was a few years ago. Which of these pipeline opportunities are the most compelling to you and why?

Well, I -- honest to God, we don't prioritize them. We -- when we bring things in, we bring them in to be fully loaded and ready to put everything behind them as if it's our only project. And so all of these are equally funded with project teams who have one mandate. Those individuals who work on each one of those programs, that's the only program Neurocrine has as far as they're concerned. And come hell or high water, they're going to get that to patients as rapidly as possible. So we don't kick them. So it's like my son and my daughter, maybe easier. But no, Biren. This is -- and we still have capacity for more from internal that all the programs that we have going on in research and preclinical right now and still being very active looking at the outside.

Great. I think we're about out of time. I want to thank you, Kevin. Enjoy the beach. And hopefully, I get to see you with a haircut and clean shaven.

Thank you very much, Biren. It's been great joining you. Take care.

Take care. Bye.