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

Okay. Good afternoon. This is David Amsellem from the Piper Sandler Specialty Pharma team. And for the next 25 minutes, we're going to be chatting with Neurocrine Biosciences. Lots to talk about. And with us is CFO, Matt Abernethy; and Chief Medical Officer, Eiry Roberts. Thank you both for joining us. I wanted to turn it over to Matt to make some brief introductory remarks and then we can dive right into Q&A. So Matt, take it away.

Yes. Sounds good, David. Thanks for hosting. And I do apologize upfront. I'm at home. I have a dog at my feet. But Eiry can help cover for me when I -- when my little puppy distracts me too much. But today is November 18, 2020. I wanted to date stamp that since this is being pre-recorded and we will be making forward-looking statements. So I direct you to our latest SEC filings for the related risk factors, uncertainties associated with our company and then also our, sorry, I got my dog here, also the industry. So Neurocrine has been around for quite some time, over 25 years now. And over the past 4 years, it's been completely transformed by the introduction of INGREZZA to help many patients with tardive dyskinesia. Tardive dyskinesia is an involuntary movement disorder caused by prolonged exposure to antipsychotics. And up until 2017, there were no approved treatment options. So at this point, INGREZZA is on blockbuster trajectory and we're quite encouraged. On the back of INGREZZA, we've been able to expand our pipeline significantly, growing from just a couple of assets 2 years ago to around 10-or-so assets in our pipeline today. So it's been quite the transformation for Neurocrine over the past 4 years. Coming out of the third quarter, I think our growth in INGREZZA surprised people a bit. And it's largely and clearly attributable to COVID, in our minds. And there's a couple of pieces I want to comment on specific to COVID. The first piece is: Are patients staying on INGREZZA. And I can answer you. Absolutely, patients are staying on INGREZZA. Refill rates are very consistent with what we've seen historically. And that's so encouraging when you think about a product like this and I think reflects the value that patients see in the product. The second piece is: Then how is the TD market growing? How is it developing? It's largely an undiagnosed patient population that we believe is around 0.5 million patients. And clearly, a movement disorder that we're asking largely psychiatrists to make a diagnosis for, it has been impacted. So coming out of the quarter, the 2 biggest questions I've been asked, David: Number one, how do you know it's COVID? How do you know it's not something more structural about the TD market? You've just reached the top of the opportunity. And then the second question is: Okay. If it is COVID, what are you doing about it? How are you adapting and where do we go from here? So I'm sure our questions and answers will help dig into INGREZZA as well as our pipeline. So I'll hand it back to you, David.

Sure. So yes, that's a great start. And I guess let's dive into how do we know -- this question of how do we know it's COVID. So can you speak to the trajectory of new starts now and just remind us where the trajectory of new INGREZZA were pre-pandemic? I think that would be instructive as a starting point.

Yes. Let me describe the trajectory for you. So entering COVID, we're at a record weekly NRx -- sorry, a weekly NRx that was higher than what we've ever had. Once COVID hit, we had a steep decline. Now that decline was not as steep as the drop in in-person patient visits but it was a steep decline. And we pretty much were flat April, May, June, all the way through most of Q3. What was important, though, that we saw coming out of Q3 and then more recently in October is we actually saw the NRx trend going back up. That was encouraging on a couple of fronts: One, it's nice to see your numbers start going up after they've been flat for a while. But the second piece is I just think it reflects the promotional sensitivity of INGREZZA and how much opportunity there is to still develop this market and diagnose more and more patients. Clearly, we're not out of the woods yet. As Kevin said on the call and I'd reiterate here, what we're guiding to is we could have a Q4 that is slightly -- that's similar to what we saw in Q3 on an inventory adjusted basis, which was around $248 million with the pandemic resurging. So for us, we're going to manage our best way we can through COVID. But at the end of the day, we need COVID to cooperate a little bit, patients getting back into the office. And we're adapting our business model to account for telemedicine.

Why do you think this client base has continued to be so telemedicine heavy even with other specialties essentially opening up? And let's suppose that, that remains the case in psychiatry even as things start to normalize. If that's the case, then what does that mean for INGREZZA?

Well, psychiatry is primarily a listening profession. And as you and I were speaking about prior to this call and then knowing what's going on in the economy, the mental health pandemic is only going to grow. So the ease of a psychiatrist that engage with the patient and help them with their underlying mental health condition, telemedicine has been a really good platform for that. So right now, we estimate around 40% or so of -- at least 40% or so of patient visits are actually being done virtually. That may be voice-only or that may be voice and video. But it's going to stay higher than what it was pre-COVID. We don't think it will stay up 40% but it will stay higher than what it was pre-COVID. As we think about a patient and how do they engage with a clinician and how does that then translate to tardive dyskinesia, if it's a voice-only appointment, it's really hard to diagnose TD unless you're asking specifically about movements, which is something we train on. The second piece is over a video. You could see mouth movements if you're looking for it. It's doable but it's not optimal. The most optimal is an in-person patient visit. But through this pandemic, it's opened our eyes. And it's something that we've -- we're working on prior to the pandemic is how do you engage with those patients via video communication and make sure tardive dyskinesia stays on the radar. So I thought it may be more helpful to hear from Eiry on how we're adapting the types of approaches that we're taking to help enable a psychiatrist keep tardive dyskinesia on the radar in a telemedicine visit.

Thanks, Matt, and thanks, David. Thanks so much for having us today. Just to add a couple of things to what Matt was saying. I mean firstly, I would say you asked the question about why is telemedicine being so popular in the psychiatrist office. And as Matt said, psychiatry is and has been historically predominantly a listening specialty. The other thing that happened in the context of the pandemic is that we know that several of the regulations that had been in place governing psychiatrists' ability to work in a telemedicine setting, including their ability to see patients across state boundaries, were lifted. And I think that really helped for patients in many, many ways and at a time when obviously their neuropsychiatric symptoms in many circumstances were getting much worse for patients and they were feeling much more isolated. So we do know that -- from psychiatrists that things like compliance rates, things like patients just turning up for appointments have been much more regular and reliable in the telemedicine setting. And so I think that does create an incentive for psychiatrists to continue to support their patients in as many different ways as they can. Given that, I mean as Matt said, we have been working for some time on trying to understand how to support the diagnosis and treatment of tardive dyskinesia at a distance for clinicians. And much of our effort has been around increasing the confidence of psychiatrists in their ability to make the differential diagnosis at a distance and also just really increase the likelihood of them thinking about tardive dyskinesia and understanding whether what they're seeing on the video screen in front of them could be tardive dyskinesia and driving them to ask more specific questions. So as Matt said, about half of our interactions in telemedicine are by phone. It's difficult by phone to make the diagnosis. But there are still a series of questions and interactions that we can educate our psychiatrists and the psychiatry office around that increases their likelihood of being able to pick up signs and symptoms that the patient may be suffering from a movement disorder, including just asking, "Has anybody ever commented on the fact that you -- or looked at you strangely in the street?" or, "Have your loved ones ever felt embarrassed to be along with you around the potential that you may have abnormal movements?" And so it's just simple things like that, that can increase people's confidence in their ability to ask those questions. The next thing then really is trying to understand what technologies we can bring to the table in the video setting to really increase the likelihood of clinicians being able to pick up abnormal movements as they exist in that video interaction. And so we have several things that we're working on and applying in the field even right now that have protocols to help with that. And we're partnering with other organizations in the AI and other space to be able to bring more advanced technology to the table in due course to support clinicians in this endeavor.

Okay. That's very helpful. I guess it sort of begs the question, does there need to be greater investment in DTC down the road? Does there need to be more physician education? I know there's been quite a bit. But with psychiatry being something of the unique specialty, to your point, how does that inform how you're thinking about investment in physician education and direct-to-consumer?

Yes. I'll take that. So there's really 3 buckets for INGREZZA. One, is there something we can do to make sure patients are staying on INGREZZA? And we're pretty clear there. We're in good shape. The second piece, as Eiry said earlier, you need to spend the time educating the psychiatrist to gain confidence in how to make a diagnosis of tardive dyskinesia. So we're going to continue to invest in that both for in-person visits as well as for video conferencing. But to your point, patient engagement in this has never been important than it is now. A patient, by and large, doesn't attach any movement disorder with their underlying psychiatry medications that they're taking. So for them to go to a psychiatrist and ask them about a movement that they're experiencing, that's something that wouldn't be a natural -- that wouldn't naturally translate for a patient. It'd be like a patient going to a dentist and asking the dentist about their sprained ankle. So for us, the more we can spend for educating a patient that this tardive dyskinesia, you can get help with those movements. You can engage with the clinicians. That's something that's extremely important. So you've probably seen more heavily our unbranded direct-to-consumer advertising campaign. That's on air much more than it was historically. And we continue to think through how can you prompt a patient to ask their psychiatrist to get them help with their underlying movements. So definitely on the radar and it's a really good observation, how important that is for the long-term strategy here.

Okay. And then one more question on INGREZZA before we move on to pipeline. Just -- can you talk about your approach to contracting? And I know you get this question a lot. But what I'm interested in here is how you're navigating the payer landscape? And do you need to get more aggressive regarding [ contracting ]?

So access has just been incredible since we launched the medicine. By and large, if the prescriber prescribed INGREZZA, they ultimately got -- the patient ultimately received INGREZZA. Over time, we have selectively entered into contracting to ensure access remains smooth. And this most recent quarter, we had a bit of a hit to gross to net as a result of us contracting and ensure that access did remain pretty clear. As we look into 2021, nothing on the horizon that would cause us concern about, will patients continue to be able to get access to INGREZZA? We work with payers to make sure they understand the value proposition. If we're not on formulary, we use the coverage determination form process. We have an entire team helping in that regard in a compliant way to ensure if a patient has involuntary movements and INGREZZA can help that they can ultimately receive a prescription. So nothing big on the radar that I would flag either from access or a major change to our net revenue per script versus what you saw in Q3.

So let's move on to pipeline. I think a logical place to start and I might sort of ask a rapid fire on some of this because I want to make sure we run through as much as we can here. Valbenazine in Huntington is something that's pretty -- so I wanted to ask you, Eiry, with history data not that far away. Can you talk about how you frame this opportunity? And specifically, how we should think about current penetration of VMAT2 inhibitors and the availability of AUSTEDO?

Yes. That's great. Certainly, we are very encouraged to be completing our pivotal trial in Huntington's disease. And we hope to read the data out from that study towards the end of next year. But Huntington's disease, it's about 30,000 patients in the United States. Of that, about 80% have chorea. And of that, about 70% are moderate to severe. And so in that regard, obviously, there are currently VMAT2 inhibitors approved for use in Huntington's disease. But given the profile of the approved drug, really, the penetration in that patient population is only about 20% of patients who could gain benefit from treatment of their chorea, we believe, currently get access to a VMAT2 inhibitor. And most of that is due to the nature of the challenging and difficult titration scheme that is required for that medication, also the tolerability and side effect profile and the challenge that there's not -- it's a more than once-a-day dosing regimen. And for patients with chorea and Huntington's disease, often they have significant challenges with swallowing medication. And so we really believe that, that is an issue currently for patients in the Huntington environment. So we're really encouraged with the profile that we've seen with valbenazine up to this point in INGREZZA. It's a simple, once-a-day treatment with no complex titration and a very favorable tolerability profile in patients. Furthermore, there's no black box warning currently for suicidality for INGREZZA. And so we have been working with the Huntington Study Group. We were very pleased with the interest level that we saw in the trial as we set that up initially. We had to pause the trial briefly over the summer due to COVID-19 but we are back up and enrolling now. And I will say there's an enormous amount of interest in the trial and it's going well. And so I think that also speaks to the interest of having additional options for treatment of patients here in this space.

Got it. Okay. Let's move on to crinecerfont. That's another important late-stage pipeline product. And you have a Phase III in adult CAH patients. I specifically was interested in how you frame the primary endpoint of reduction in corticosteroid burden here? And I know that this is hard to sort of encapsulate in a very -- in a short discussion. But talk about, real quick, how you view the clinic meaning of that particular endpoint and then how you think about, I guess, how game-changing the therapy would be?

Yes. So congenital adrenal hyperplasia is obviously a lifelong condition, presents very early in life and patients require treatments throughout their life. And so the only currently available treatment for patients with congenital adrenal hyperplasia is corticosteroid treatment. And that is necessary for 2 reasons: first, to replace the physiological level of corticosteroid needed for survival; but secondly and most importantly in our context, that high doses of corticosteroids are required to suppress the androgen levels that cause so much problem for patients with the disorder. And so the problems at the patients with CAH base are twofold. Firstly, they have raised androgen levels. And that causes, in and of itself, problems for growth in fertility and other issues throughout the patient's life. And secondly, in order to suppress those androgens, they have to take very high doses of steroids usually. And those steroids, in and of themselves, as we know from other disease states, cause long-term problems, metabolic syndrome, osteoporosis, other issues that are broad. So crinecerfont as a CRF1 antagonist acts in a very different way from steroids and is able to reduce those androgens without the need for the really high-dose steroids that are used currently by patients. So our trial is focused on measuring 2 key areas. It's very important that we're able to control those androgens and other steroid markers that are important in the control of the disease for patients. But it's equally important and that's why it's our primary endpoint for the study that we're able to allow patients to reduce the dose of steroid that they take. And we are -- as you said, we have a single pivotal trial. It's a global trial. It's ongoing and right in the midst of our being -- generating -- adding patients to the trial right now. And we took insight from all the external stakeholders that were needed, including patients, advocates, regulators and including payers when we were thinking about how to frame that primary endpoint. What's very clear from all of those stakeholders is that any reduction in steroids over a long period of time is good for patients. And so, as we think about that endpoint, it's designed to allow this trial to detect what we believe will be a clinically significant reduction in the steroid levels. It doesn't mean everybody has to go back to pure normal physiologic levels. But it's designed and powered in a way that will allow us to make an important statement about the reduction in use of steroids that's required for the long term in those patients.