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

Welcome, everyone, to the 39th Annual JPMorgan Healthcare Conference. My name is Anupam Rama, I'm one of the senior biotech analysts here at JPMorgan. I'm joined by Tessa Romero and Matt Bannon from the team. Our next presenting company is Neurocrine. And speaking on behalf of the company, we have CEO, Kevin Gorman. [Operator Instructions] Kevin, why don't you take it away?

Thank you, Anupam, and to JPMorgan, broadly, as always, I really appreciate the opportunity to speak here today. Laurie, next slide, please. As -- and the one after that, please. I'm going to come up with our safe harbor statement here. And because I will be making forward-looking statements. Next slide, Laurie, please. I -- bear with me for a moment. There's something I wanted to say right from the very outset. I've been in this business for over 30 years. And I've got to say that in that time, there's never been a time that I feel more fortunate and thankful to be a part of this industry. The way that our industry, and I'm calling out biopharmaceuticals overall, has reacted to the COVID epidemic is nothing short of incredible. Those companies that have stood up immediately, providing testing of all different platforms, which was crucial, providing therapeutics that have saved countless lives and then those companies that have been working relentlessly in developing the vaccines that we now have available and that are really going to turn the tide here. This is 2020, I think the year that biopharm showed its mettle and really stood out and shined, and I can't tell you how grateful I am to be a part of that. And it goes beyond the companies that have taken a direct role in COVID. It is to all of us and our colleagues, my colleagues out there, that through all of this, we were able to persevere, and we made sure that the life-saving products that we have on the market or that we're discovering, developing, we made sure that we didn't lose any time in bringing these to patients. And so I wanted to say that I'm especially proud of our company here in Neurocrine, and what we, the employees here, have done. We've kept our promises to the patients who suffer from tardive dyskinesia. We have continued to bring the product to market. And we've actually grown substantially during this part of time. We've added a new commercial product to our portfolio. We have increased our pipeline by nearly twofold, and we're extremely well positioned as we still march through this. Laurie, the next slide, please. We have been, as a company, for nearly 30 years, working in neuroscience. And the way that we look at neuroscience is very broad. We look at it neurology, neuroendocrinology and psychiatry. And I truly believe that the field of neuroscience is poised in the next few years to be the next great breakout field, much as like we've seen with immunology and with oncology over the last several years and seen the amazing leaps forward there, we're going to see that in neuroscience, and I'm convinced of that. And I think -- next slide, please, that not only have we grown INGREZZA during this period of time, we've launched a new product and we are well positioned to be able to lead as we see this breakout in neuroscience. Next slide. It's through this deep and diversified portfolio that I believe will be leading the way. And as you see here, we hit on all 3 of those areas of neuroscience, and we have multiple programs in each and every one of them. Today, I can only take you through a couple of things with any sort of depth at all in the 20 minutes or so that we have together. In the next slide, I would like to point out that if you look at all the activities and the momentum that we're going to have through 2021, there are going to be 2 key data readouts, 1 from a Phase III study in the chorea associated with Huntington's disease and the other is going to be some extremely interesting Phase II data in the negative symptoms of schizophrenia, which we'll talk about in a moment. So next slide. Let's now focus on neurology and in that, let's focus on INGREZZA in more detail, Laurie. And what we see here is that, as I say, I think it is a great testament to this -- the quality of this medicine and to the quality of the people within our commercial organization. How, in this type of environment, we have seen over 30% growth in both the total prescriptions written for the sufferers of tardive dyskinesia and then also in revenues. And we've basically reached $1 billion in sales in only our third full year on the market. And this is a year where 3 quarters of this year where we were going through COVID. We've adapted to COVID. As many of you who follow us know, I've talked about that we have a COVID-sensitive franchise here. What quarter 4 has taught us is while being COVID-sensitive, we are no longer tightly linked to COVID. We have adapted, we've learned and I would say that in quarter 4, where we saw very nice growth in both prescriptions and in revenue, that we're going to see now that we're going to learn more and we're going to perform better. Clearly, COVID does cast still a bit of a shadow on us. But as I look forward to this Q1, it is not going to be any different than any of our Q1s. And as I think many of you have understood, Q1 for a specialty product such as this is the same each and every year in that you're going to have the prior authorizations and the reauthorizations that take place, which is a challenge in the first few weeks of Q1, but then we usually come out of that very strongly and that's what I see here. Make no mistake, I'm not saying, while we've got nice, good growth going on again, it's not the same pace of growth as pre-COVID. We will return to that as the year progresses and as psychiatrists are able to move back into their offices and see more of their patients in-person. But I have no doubt, and I think that this year's performance shows that there is no ceiling that was put into effect on us by COVID, and we have a robust franchise going forward. Next slide. And one of the things that is very apparent now, we have an extremely high adherence and compliance rate with our tardive dyskinesia patients, much, much higher than any of the other medications that they take. It goes directly to the value that INGREZZA brings to these patients. And that's recognized by the patients, their loved ones and the physicians that are treating them. And if you go to the next slide. I would want to reiterate, this is -- we're in the very, very beginnings of this marketplace. 80%, just about, of patients suffering from tardive dyskinesia are not yet diagnosed. Now that was about 97%, 98% when we first introduced INGREZZA, the very first medication to treat tardive dyskinesia about 3.5 years ago. So we've made real good headway having 20, 20-plus percent patients diagnosed but there's a long way to go within this market. We've only just begun. And it's worth noting that even amongst that 20% of patients who have been diagnosed, only half of them are being appropriately treated with a VMAT2 antagonist. So we -- every aspect of this marketplace, we have room to grow in the diagnosis and in the treatment with a VMAT2 antagonist. Next slide, please. Now we have a number of tools, levers, if you will, that we're investing in, in order to continue the growth that we have in INGREZZA and to accelerate that growth when we come out into more normal times. It always begins with education. We still need to focus constantly on educating the providers to give them the tools and the confidence in an in-person environment still and certainly in a telemedicine environment to be able to recognize tardive -- a movement disorder, to be able to correctly diagnose it as tardive dyskinesia and then take action in prescribing INGREZZA to these patients. A couple of things that I'd like to just touch on. One of the big ones was the American Psychiatric Association just recently came out with updated guidance for tardive dyskinesia first time in over a decade. And in that guidance, it recommends anti -- that VMAT2 inhibitor should be used as first-line treatment in tardive dyskinesia and not the only lever that providers thought that they had, which is ineffective, is just changing the antipsychotic therapy. Second is we have seen that providers have switched over to telemedicine, psychiatrists more than any other specialty. They were the biggest users of telemedicine prior to the pandemic, and they continue to be the biggest users now of telemedicine. That is not going to change. That is going to stay the same going forward, even after they come back into their offices. And we continually invest. We're seeing the fruits of that investment coming. Q4 was a testament to that, that will continue. But we look at the investments in telemedicine going straight through for the rest of this year where we will be bringing these health care providers new tools to be able to really be optimal in diagnosing their patients even in a telemedicine environment. And we look at telemedicine is playing a strong role in the growth of tardive dyskinesia diagnosis and treatment in the future. I think that what it's going to end up is that this pandemic is going to lead to an even greater ability to treat tardive dyskinesia patients in the future. And then the next slide, please. We will always invest in INGREZZA, known as valbenazine. And one of the main investments that we're doing into a new indication is the chorea associated with Huntington's disease. Approximately 90% of the 30,000 patients who suffer from Huntington's disease have significant chorea. And so we have a Phase III program, a single Phase III pivotal study that is going on. And that will read out at the end of this year, and that will be an important value-added to movement disorder community and then our ability to even interact with the neurology community more than what we already do. And if I could have the next slide, please. While I talk about interacting with the neurology community, I would remind you that while about 75% of our call activity with INGREZZA is to psychiatrists, 25% is to movement disorder specialists neurologists, those same ones who treat Huntington's chorea patients and also the same ones who treat Parkinson's patients. And this year, we introduced a very important medicine for Parkinson's patients who are seeing motor fluctuations, meaning, that their levodopa is wearing off at several times during the day. And ONGENTYS is the first drug, I think, that really fulfills the promise that this mechanism called COMT inhibition. It can truly satisfy that need. We've been very happy. It's recently been launched with the reception in the neurologist office on this to learn more about it. And in addition, it really is very synergistic with our tardive dyskinesia drug, INGREZZA, and it gives -- it really gives a lift, both of those drugs, to each other. Next slide, please. Now let's move on now to our neuroendocrine franchise, and I'm only going to speak about one program here right now in the next slide, and that's our lead program overall in our pipeline, and that is congenital adrenal hyperplasia. This is a rare orphan disease, approximately 30,000 sufferers in the United States and approximately the same number, a bit bigger over in Europe. It is a congenital disease, as its name implies, you're born with the defect that you can't make cortisol. Now we're going to try to really press our luck, stretch Zoom to its full potential. And I would like to play a video for you in order to give you a real good explanation of CAH and our approach to it. So Laurie, if we could go and start that video now, please. [Presentation]

Thank you. Now, Laurie, could we skip a couple of slides that I put in there just in case the video completely failed. Skip that, skip that, and let's stop at Slide 20. This truly will be a paradigm shift in the treatment of CAH. As you saw from the video, where physicians and their patients are constantly struggling with is getting this balance between the disease itself, which means high androgen levels that are being created and then the disorders that are caused by trying to treat that with the only drug that they've ever had approved for them in the last 50 years, and that's glucocorticoids, which cause their own problems. The promise of crinecerfont is to be able to treat the underlying disease as well as relieving the burden of having these super therapeutic doses of the glucocorticoids. And so as was said, and I want to reiterate again, we have reached agreement with FDA and EMA and now have a global phase, single Phase III registration study ongoing in adults suffering from CAH and we will be starting a single registrational Phase III study in the pediatric population, just a little later this year. Laurie, next slide, please. What we have learned during this pandemic is there is more than one pandemic that's ongoing and that is mental health, and it has really reached the forefront of recognition that we have a mental health crisis going on in the United States and worldwide as a matter of fact. Neurocrine was founded as a neuropsychiatric company, we have been in psychiatry for decades and so we were really fortunate -- next slide, please, that we were able to partner with Takeda Pharmaceuticals on a number of their programs that they have in psychiatry. And I show 3 here, and we don't have the time to do any of these justice. But in each one of these, which Neurocrine is taking the lead now on -- in developing these drugs, there's huge unmet medical need. The quality of these molecules that were discovered by Takeda and the targets they have really attracted us here and the translational medicine approach that has been used and we will continue to use here in biomarkers and target engagement, things that were not able to be done in psychiatry up until very recently, we're taking advantage of that now in moving these forward with our partner Takeda. So I would like to point out that one of the massive unmet medical needs is that negative symptoms of schizophrenia. And just in the first half of this year, a large multinational Phase II trial will be reading out in that. Could I have the next slide, please? So I hope that I've left you with that Neurocrine is a well-positioned company and a company that has continued to perform regardless of the environments that we found ourselves in. We -- I feel very privileged that our patients have trusted us, their physicians have trusted us, and our many partners, both biotech and pharma companies that we are collaboration with, have entrusted us with their molecules that they've discovered and are extremely important to them. And so with that, I'd like to thank you for your attention, and I would like to bring Anupam back in to lead the questions. I would like to also bring in the broader team at Neurocrine here in order to answer questions. We have Matt Abernethy, who is our CFO; Eric Benevich, our Chief Commercial Officer; Eiry Roberts, our Chief Medical Officer; and Kyle Gano, our Head of Business Development and Head of Strategy at Neurocrine. Anupam?

Okay. Thanks for that, Kevin. [Operator Instructions] I'll kick off here with sort of on the INGREZZA 4Q number. On an inventory adjusted basis, it looks like you had scripts growth of about 4%. How did that scripts growth look over sort of the quarter? Were there ebbs and flows in the quarter? And I guess I'm trying to understand the trajectory going into 1Q, really.

Yes. I'll let Matt and Eric pick up that question, if you will.

Sure. Anupam, as you said, from an inventory adjusted basis, we did grow around 4%, which we are quite proud of given the COVID impact on, as Kevin mentioned earlier, people coming back in-person to psychiatrist offices. So we're quite encouraged with the growth that we saw sequentially Q3 to Q4. As we entered the pandemic, we were actually at record levels of NRx. And then what you saw once we entered into April, you saw pretty steep decline that was pretty correlated to that -- the drop of in-person patient visits within psychiatry, which actually went to around 70% telesite. Once we have that step-down, we pretty much flatlined as far as NRx perspective until late Q3, we started to see a bump up. And then how I describe the trajectory from there is we had another -- we had a step-up in NRx growth, and that was, I guess, a new plateau for us. So we were sustaining nice NRx, even when the pandemic worsened in the second half of the fourth quarter, and I think it positions us well heading into 2021. But I would say we're not out of the woods yet. I mean the pandemic is still here. The biggest driver for us to get back closer to historical growth levels is going to be in-person -- people going back in-person to visit their psychiatrists, and then as Kevin said, the psychiatrists going back into the office. We've adapted. We've done well to be able to compete in the future on the telemedicine front. But I would say a good barometer is going to be the improvement or increase in in-person patient visits within psychiatry. Eric, you want to add to that?

Yes. The one thing that I would add is that our split of business is between psychiatry and neurology. Historically, it's been about 80% psychiatry driven, about 20% neurology. And with the recent launch of ONGENTYS, our Parkinson's drug, into neurology late Q3, that's given us an opportunity to increase our promotional activity in neurology. And we did see a step-up in terms of neurology calls and the amount of time that we were getting with neurologists. The benefit there is not just for ONGENTYS, it's also for INGREZZA with 100% overlap in our call points there. And so neurology is relatively less impacted than psychiatry, both in terms of the drop-off in patient volume over the course of the pandemic and also in the degree of utilization of telehealth. And so we've made a concerted effort to make a push into neurology and we think that it's part of what explains the benefit and growth that we saw in Q4 versus Q3 as well as just getting better overall at helping our customers to diagnose -- recognize, diagnose and treat TD remotely.

Maybe expanding on those comments a little bit. You've talked about the physician groups, but what about any trends on the types of patients that are driving the new scripts growth that you saw in the fourth quarter?

Yes. We don't have any data that would suggest that the patient types have shifted. Ultimately, the majority of patients that get treated with INGREZZA are newly diagnosed. They may have had their TD symptoms for months or for years. But essentially, patients that get put on INGREZZA have been recently diagnosed with TD. And we've made the effort, obviously, to help our providers be more adept and more sensitive to recognizing TD when they're seeing a patient remotely. But we've also made an effort on the direct-to-consumer side with our DTC campaign called Talk About TD to encourage people to bring up these abnormal movements they're experiencing, when they're having a visit with their provider, whether it's a remote visit or whether it's an in-person visit. So I think the patient types have been consistent versus pre-pandemic. I think the real difference here is that we've had to adjust, we've had to help our customers adjust in terms of how they recognize TD and make sure that they're not skipping over it during those telehealth visits.

I think Tessa from the team had a quick question as well.

Yes. Guys, this is Tess. Yes, just I think, Kevin, you made some comments about growth returning to pre-COVID levels, I think, you said later this year. Did you mean later this year? Could you just kind of comment on, Kevin or Matt, of how you're thinking about that given kind of the up and down we're seeing with COVID, COVID ramping back up again? So just can you talk a little bit about that?

Yes. Sure, Tess. It is that it has been up and down, which is why I always say it's best to look at INGREZZA on a yearly basis with such a nascent market than a quarterly basis. But what I see is, is that it's probably going to happen region by region. It's not going to be a smooth transition all over the country, it's not going to be a smooth transition throughout the year. But as we, as a society, return more to normal, as Matt and Eric have said, as physicians, particularly psychiatrists, return more to in-office visits, you will see us return to those historical growth patterns that we've seen. It's not going to happen in a lockstep straight up, it's going to be a gradual return to it. And it probably will be choppy as we do that. But I'm confident, the entire team here is confident that, that's going to occur, and it's going to occur this year.

Kevin, in your presentation, you talked about the APA guidelines and how they've been updated to recommend VMAT2. Just wondering what kind of pull-through you think that will have. How quickly? And then was there any specification on which VMAT2? Or was it just a class?

Yes. I wish. It was the medical team really had a pivotal role to play in that. And I'd like to first turn that over to Eiry to talk about that and the significance and then to the latter part of your question, pull-through, to Eric.

I think just a couple of comments. And as Kevin alluded to in his talk, the -- historically, I think clinicians, when they think about tardive dyskinesia and actually that in and of itself has been a bigger educational challenge for us is to get clinicians to think about that. They really had very few options available to them that had been shown to be effective in managing treatment -- the treatment of patients with that condition. And including, as Kevin alluded to, the most oftenly used approach being just to change or reduce the antipsychotic dose, which, as you can imagine, is very challenging for clinicians and for their patients as they seek to control the mental illness. So we were delighted to have the opportunity to engage in a scientifically driven way in the APA guidelines updated -- getting updated and seeing that VMAT2 inhibitors became part of that guideline as the recommended first-line treatment, given the body of evidence that existed from the clinical trials that have been conducted to support the use of that medication and the efficacy and safety that's been seen with that class. And I can ask Eric maybe to comment on the potential pull-through and how we're able to understand that and use that with physicians on an ongoing basis.

Yes. Briefly, believe it or not, the prior guidelines from APA dated back to the mid-1990s. So they were incredibly out of date. And then in September, they published their guidelines for the treatment of schizophrenia, and there's a whole section devoted to tardive dyskinesia. As Eiry mentioned, they recommend VMAT2 inhibitors, not by brand, but VMAT2 inhibitors as first-line treatment, which is a dramatic change from the prior guidelines. And in these new guidelines, they also state that simply removing or reducing the antipsychotic, the "offending agent," is not supported by evidence, which had been the standard of care previously. And importantly, they also specifically call out anticholinergic agents as potentially being harmful for the treatment of TD. And a reason that's important is that anticholinergic agents such as Cogentin have traditionally been utilized by psychiatry as a potential treatment for TD. So in terms of how we're pulling that through, we've already folded these new treatment guidelines into educational content for peer-to-peer programs as well as incorporating it into the material that our field sales team is utilizing with providers, whether it's in-person or via remote sales calls. So personally, I don't believe that it's going to -- that the audience, the target audience of psychiatrists is going to sort of organically see all this information quickly enough. So we're making sure that we put this in front of them and help them understand that VMAT2s are the new standard of care as recommended by the APA and, of course, INGREZZA is the most preferred, most prescribed VMAT2 inhibitor for TD.

And Anupam, if you recall that slide that I showed, the nascency of the marketplace that we're in, approximately 20% of the patients are diagnosed now with TD, and I said only half of them are being treated appropriately with a VMAT2 inhibitor. The other half are being treated with Cogentin or still modulating or the underlying antipsychotic. A lot of work still to go, but a lot of opportunity there.

Maybe a final question here to wrap up the session. Just looking forward to 1Q, maybe talk a little bit about the donut hole dynamic as well as how we should be thinking about inventory levels. I know there was a drawdown of about $18 million this past quarter.

Yes. I'll take that. Thanks, Anupam. And good to see you as well. I know I chimed in earlier and good to see the tie. And I apologize for the shiny head. But anyway, over the last 4 years, I mean it's amazing to think this is our fourth Q1. The dynamics really haven't changed, where we're really focused on really 2 dynamics. The first one being the impact from gross to net, which is, as you alluded to, Medicare Part D donut hole driven and then any change in payer contracting. The second piece is then the reauthorization part that Eric will talk about as patients have to go through that reauthorization process, as Kevin mentioned in the presentation. So from a gross to net perspective, what I'd guide to is a sequential change from Q4 to Q1 of around 4% to 5%, which is very similar to last year, and that includes all aspects that we know of today. And in addition to that, I'd just reaffirm what I said on the Q3 call that we would expect our net revenue per script in 2021 to be very similar to 2020, which is around $5,600 net revenue per script. Importantly, we see nothing on the access side that would disrupt if somebody gets prescribed INGREZZA, that they won't ultimately get INGREZZA. Over 70% of prescriptions in the past, regardless of formulary status, have ultimately -- 70% of prescriptions written have ultimately been filled with INGREZZA. So we feel good on the gross to net side for next year and then also access. So now I'll turn it over to Eric to talk through the reauthorization piece that impacts seasonality in Q1.

Yes. Just to tack on to what Matt said. This is a annual process that occurs. It's not specific to INGREZZA. It's because INGREZZA is a specialty medicine that especially Medicare plans require that the physician reauthorize or go through an approval process at the turn of the calendar year for patients, existing patients on drug. And so this has happened over the early phase of the launch the last 3 years, each January. And each January, we've gotten better as a company in terms of helping our customers to navigate this process, working with pharmacies in our network as well as working with the providers. And certainly, this work started in Q4 to make sure that the providers that identify patients that would likely require reauthorization and get the paperwork started in December versus January. The other thing that I'll mention is that, as Matt said, we expect to have favorable coverage again in 2021. And if you look across all 3 payer segments, whether it's Medicare, Medicaid or commercial, we expect to have a net add in terms of covered lives this year versus last. And so we're confident that coverage is going to remain favorable in 2021.

Anupam, I realized I didn't address your question on the inventory front. So over the last 4 quarters, we had a build of over $30 million of channel inventory, $18 million of it came out in the fourth quarter. And as you know, we've been encouraging the investment community to really measure our growth, measure our success on an inventory adjusted basis. So there is some incremental excess inventory still hanging out in the channel. It's really hard to predict when that's going to come out. But for Q1, I've flagged this has occurred for 4 years now. So nothing incremental that we'd really flag going on. We're prepared, we're ready, and I assume everybody would expect Q1 to look like a Q1 and then the nice recovery in Q2. So we're prepared.

Okay. We're all out of time. I want to thank the Neurocrine team for a really productive session here. And I hope everyone has a good rest of the day.

Anupam and Tess, thank you very much. Happy New year.

Thank you.