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

Good afternoon, and welcome once again to Cowen and Company's 41st Healthcare Conference. Hopefully, our only virtual edition. I'm Phil Nadeau, a biotech analyst here at Cowen, and it's my pleasure to moderate a fireside chat with Neurocrine Biosciences. We're really happy to have with us from sunny San Diego, Kevin Gorman, Neurocrine's CEO.

Kevin, to kick things off, could you give us a brief state of the company overview, biggest strengths, biggest challenges? And what needs to happen to drive outperformance over the next year?

Yes. Thank you, Phil, and thank you, Cowen, for the opportunity to speak here today. I will be making forward-looking statements, so I direct people to our recent SEC filings. Neurocrine is a dyed-in-the-wool neuroscience company, focusing on neurology, neuroendocrinology and neuropsychiatry. We have a strong commercial presence with our lead program, our product, INGREZZA, which reached blockbuster status in 2020. And we look for continued growth in 2021. We added our second drug through a licensing with BIAL, which is called ONGENTYS for Parkinson's disease. INGREZZA, since I forgot to mention, it is for tardive dyskinesia or TD. And we have a robust pipeline where we -- this year, we will have 8 compounds in mid- or late-stage development. And so those span all 3 of those areas that I spoke about. One of the things that is very powerful in our pipeline is that each and every one of the compounds can have multiple indications that they can be applied to. And the way that the pipeline is constructed is one that is there to mitigate risk as much as we can. Those that are homegrown, we look at as a bit less risky, such as our CAH program. Those that we have partnered run the gambit through different mechanisms in different disease states that help mitigate risk or through how we've constructed the deal in order to mitigate risk, but we can get into all of those. But I think our pipeline is quite powerful, quite compelling. And then of course, INGREZZA has -- it's been basically one of the most successful neuroscience drugs in the last decade or 2.

You mentioned the pipeline. The news this morning is obviously on NBI-844 where you announced top line results from the INTERACT study. Could you, for those less familiar, maybe give a brief synopsis of what you disclosed this morning? And what are your next steps?

Right. 844 is part of the collaboration that we have with Takeda Pharmaceuticals. It was one of the assets of the several that came over into that. I would first like to say that this study, that is for the primary endpoint, was in the negative symptoms of schizophrenia, high unmet medical need. Takeda did an outstanding job in all of its preclinical Phase I and the design and the implementation of this Phase II study. This was not a failed study. This study gave an unequivocal answer. There are no ifs ors or buts about it. The conduct of the study, the placebo performed just as one would expect placebo to perform. The drug did not have an effect on the negative symptoms of schizophrenia. So that was its primary endpoint, and that was a very clear answer that we got from this study. What is intriguing to us, and I really want to put an emphasis on the words that I use, what is intriguing to us is that in the secondary endpoints, one of the things that Takeda wanted to look at carefully was cognition in this patient population. And there are 2 endpoints that were secondary endpoints in cognition. And the -- in this study, it hit on both of those endpoints. The top line data tells us that it was statistically significant and clinically significant on both of those endpoints. The reason why I use a word like intriguing and not a word like compelling is they're secondary endpoints, okay? We have several weeks to go of interrogating this database with our partner, Teva. We have checked in with several of our leading world experts to talk about this data with them. We have several more to meet with and go through the data with in the coming days. So there's a lot more work we have to do. As I sit here today, it is intriguing that we did see this signal in both of those measures of cognition. And we believe that it warrants further investigation to see, is this a real signal? Or is it spurious? Is it an artifact? And so we would plan on doing a Phase II study than looking at cognition.

The patient population that's enrolled to look at cognition differ from one of negative symptoms of schizophrenia or from negative symptoms and cognition related and you tend to have deficits occurring in the same patient?

Yes. So they both occur in by and large, the same patients. In the schizophrenic population, about 70% of them suffer from negative symptoms. About 80% of them or more suffer from cognitive deficits. And these are cognitive deficits that have to do with the disease, not with their medications that they're taking. So there is a big overlap between the 2. And again, because what we want to do, as I sit here today, and I'll keep using that caveat, there's a lot more work, a lot more information to come. As I sit here today and being as open and transparent is that we want to see if this replicates. This is -- this could be really interesting. But right now, all that it is, is intriguing, until you can show -- until we can show that it's reproducible or not. And we're going to be very disciplined in looking at reproducibility.

Have you been able to assess whether there's been baseline imbalances in cognition in...

Yes. So thus far, I can tell you, no, okay? But again, there is so many more analyses that have still need to be done. We always say this is top line, and top line is just that, as you're well aware of. There are so many analyses that you do and then you start digging in order to try to deal with how robust is this, what can I find? Where can I poke holes, where can I see vulnerabilities in the validity of the data, all that still is yet to come.

Got it. That's very helpful. I think with that, we'll move on to INGREZZA first and then circle back to the pipeline later. So on INGREZZA, as the drug approaches its fourth anniversary of launch, how much growth remains. So where do you think INGREZZA is currently in its penetration in the market? And where could it be at peak?

Yes. You and others have heard me say it many, many times. We're still at the tip of the iceberg with this. This is the very early innings here. When we launched the drug, the very first drug to treat tardive dyskinesia, only about 3% of the 500,000 TD patients estimated in the U.S. had a diagnosis of tardive dyskinesia. Now through nearly 4 years of educational effort out there, we're at probably 20%, maybe just a tad above 20% in diagnosis. So there is still a large number, the vast majority of patients are yet to diagnose. In addition, looking at those 20% that are diagnosed, only about half of them are appropriately treated with a VMAT2 compound as INGREZZA is. How are the other half being treated? The other half are being treated either with anticholinergics, which the data shows makes TD worse, but it's been a staple for psychiatrists over the decades. Or it is with trying to change the underlying medications, what we call the 3 Rs, either remove the antipsychotic that they're on, if that's possible; replace it with another antipsychotic; or reduce the dose of the antipsychotic since the antipsychotics are the ones that cause this disorder. But none of those have ever shown to be effective. And in addition, the American Psychiatric Association, really importantly, and this is a sea change, just recently revisited and gave and updated their guidance, first time probably in a couple of decades. And they recommend first line of treatment in tardive dyskinesia is a VMAT2 inhibitor, that there is no evidence that remove, replace or reduce antipsychotics have any effect and that you should not be having these patients on anticholinergics. That's very important. That's very new. And so I think that's going to be helpful. So you can see that even if we recruited no more diagnosis, you can still double the amount of patients that have already been diagnosed but are not being treated adequately.

What is the current impact of COVID on INGREZZA? What are the latest figures on in-person visits to neurologists and psychiatrists? How do they compare to pre-pandemic levels?

Yes. The neurologist is primarily back in the office. I would say probably 5% or less of their practice is telemedicine at this point. So they've opened back up again. The psychiatrists, they are still the very last of the physicians to come back in the office. As we said in our year-end earnings call. The 50% to 60% of psychiatric visits still in the U.S. are telepsychiatry. They are seeing upwards of 20% less patients. And by that, I mean in any form. They are having interactions in any form with 20% less patients than they were pre-pandemic. So the patient flow through psychiatry is down, and the majority of patient flow in psychiatry is telemedicine. So that had a large impact on INGREZZA starting in Q2 of last year. We adapted to it. We brought up -- we launched several initiatives to help us interact with the -- with psychiatrists while they were remote. That helped. Then we brought in more initiatives in order to respond to our psychiatric prescribers in giving them tools to help them feel that they can accurately be able to become aware in a telemedicine environment of a movement -- some potential movement disorder and then be able to diagnose it as tardive dyskinesia. So we've seen step-ups in our new prescriptions throughout last year. And we saw that we kind of decoupled from COVID. We're still COVID sensitive, but we're not tightly COVID linked from those. That's been very helpful. We're not at the NRx levels that we were pre-COVID. That's still yet to come. Importantly, our refill rates have stayed very high. Our compliance and our adherence has always been exceptionally high for a treatment in this patient population. And throughout COVID, it has remained high. So we have a very sticky drug. The docs, the patients, their loved ones, they all recognize the value that INGREZZA brings to holistically, not just the movement disorder, but holistically to these patients' lives. And so that's real important. But coupled with additional initiatives that we have ongoing that will be launched throughout the year and all the way through the end of the year in telemedicine and a reopening that we would expect in the second half of this year with psychiatrists coming back into the office, repopulating their office with their support staffs, we think that's going to go a long way to get us back onto that growth trajectory that we've had for the first 4 years or the first 3 years of our launch.

Now that we do approach the fourth anniversary. Any thoughts on when Neurocrine could provide INGREZZA revenue guidance? Is that something you're contemplating?

Yes. So it is something that is in the future for us, but still not right now. And when you're launching into the first drug ever for a patient class, and I think everyone was real understanding why we did not provide guidance then. Then COVID hit, and we're just now kind of starting to see that this third wave is behind us, I would say. And hopefully, that's going to be it for waves of COVID, other than sporadic things that are going to go on forever. What we're left with, though, is an environment that's unusual. And I say unusual from the standpoint of is that it's a very heavy telemedicine environment. Telemedicine has, by and large, been nearly completely deregulated during COVID with the emergency health orders. It no longer has to be something that's through a secure line, HIPAA compliant. It can be just over a telephone. You no longer have to be in a medical environment doing telemedicine. You can be anywhere with it. The reimbursement used to be much reduced reimbursement for telemedicine versus an in-office full visit. Now they're equal. We have to see where CMS in conjunction with Federal regulations that clearly, it seems like Congress is going to want a hand in. We kind of have to see how that sorts out, so we can best see what the future lies for us. And so that's -- those are the things that are up in the air that make it a little difficult for us to give guidance now.

When we last checked, current consensus for INGREZZA is $237 million for Q1, which I believe is a down quarter and $1.1 billion in 2021. Do those numbers spark any feelings in you?

Yes. The feeling that it sparks is you always do such a good job about asking about guidance, and then saying, here's some numbers, would that be the guidance you'd give? So Phil, as I am repetitive in my old age, you were repetitive in your old age. So what I will say about Q1, as we did at the end of Q4, is that it is always a tale of 2 quarters. The first couple of months of Q1 are just a slog, getting through the prior authorizations and the reauthorizations that the insurance companies put in front of patients in order to kind of like try to reduce the number of scripts per that quarter. We've gotten better and better at being able to anticipate that. Put things in place in order to help that process go as smoothly for the physician, the pharmacy and the patient as possible. We do suffer from our own success there. Because every Q1, we have a greater and greater number of patients. So the burden on the paperwork is even that much more. And then this time around, we have COVID, which where that expresses itself in Q1 is that the doctor's offices being closed or even if open and the physician not there, their support staff. Those people, front office or back office that would be doing a lot of this paperwork, they're either new or they're not there any longer. So it is that. But it's basically, as I said, Q1 is going to be Q1, it will be that way forever. And this one just has a bit of a shadow of COVID on it, but we're getting through it.

Maybe last question on INGREZZA is on Huntington's disease. We expect to see data in the fourth quarter of this year. Can you talk about that opportunity a bit? How big is it for INGREZZA? And maybe more importantly, how is INGREZZA going to differentiate itself from AUSTEDO, which has been on the market for some time?

Yes. And you're right. This single Phase III study for Huntington's disease that we're working with the Huntington Study Group in doing this trial is scheduled to read out at the end of this year. And there's about 30,000 Huntington's patients in the United States. 80% to 90% of them suffer from the chorea associated with Huntington's. And a good 70% of them are those that have moderate to severe chorea. Yet only about 20% are being treated with the VMAT2 antagonist. That means the several generic versions of tetrabenazine and also deuterated tetrabenazine from Teva. So there's still a lot of that marketplace that is available to us. The reasons that I think we can be very successful in there, even though we're coming in behind those others, are those attributes that have made INGREZZA the most preferred brand in tardive dyskinesia. This is a once-a-day drug with only 1 pill. That's really important to these patients because of the pill burden that they have and the severe difficulty they have in swallowing. Number two, just like in TD, the first dose you start with is an efficacious dose. That's very different from deuterated tetrabenazine and tetrabenazine with the titration, multi-pill and multi-week titration that they go through. As soon as you start INGREZZA, you're starting with an efficacious dose. Number three is that unlike deuterated tetrabenazine, these patients could bite down and break those deuterated tetrabenazine, and that could cause a dangerous drug dump into the patients. That is not a problem. We're not a formulated -- a modified release formulation is deuterated tetrabenazine. And then finally, we do not have a black box warning on our drug for suicidality. And so I think all of those, and those are not insignificant in this patient population, are very powerful differentiators for us as we enter into that market next year.

Maybe one last question on INGREZZA. European commercialization strategy, what are you -- what's your latest thinking?

The latest thinking is, is that this is a U.S.-based drug, because of the very, very old approval back in the 1960s of tetrabenazine, which although rarely used for anything in Europe, it would probably still be the price comparator. And so that just does not make it viable in any way that we keep trying to look at that we could bring INGREZZA over to the patients in Europe.

Moving on to ONGENTYS, the most recent launch. How are you feeling about the trajectory there? What's the ultimate market opportunity? The ultimate...

Yes. It is as expected with ONGENTYS. And as expected, leading up to it, we knew that it was going to be a slow launch, I would say that probably COVID kind of shifted that curve a little bit to the right. And the main reasons for that are that because of the timing of the launch, we're on -- and this is primarily a Medicare population, almost 90-some-odd percent Medicare. That -- we're not on any formulary. So every script written has to be an exceptions process that has to run through it. That's time-consuming and tedious for the physician and their office. Number two, which is an unusual situation, no U.S. physician has any experience with ONGENTYS. It was developed completely outside of the United States. And FDA accepted that development program without requiring us to do a U.S. Phase III. So this is an introduction to this. And number three is, is that there were 2 previous COMT inhibitors, which is the mechanism that ONGENTYS works at that were introduced to the market nearly 15 years ago, and they were both roundly disappointing. There was a lot of enthusiasm for this mechanism, but those drugs did not deliver on the promise. So older physicians, older neurologists, they remember that. Newer ones, they don't even think about COMT. So there's that education process. I think we've shown with INGREZZA that, that falls into our sweet spot, but that takes time. And so that's what we're dealing with. On the very good side of this, we made sure we price this drug below specialty. While it's an important drug, and it will be a real game changer for physicians and patients alike, we wanted as broad of a distribution as possible. And into this patient population, co-pays are very important. So we priced it well below the specialty tier, so co-pay wouldn't come into the equation. And then the other thing that I would say is the anecdotal data feedback that we get from physicians has roundly been positive. Their patients are saying to them, this is great, why didn't you put this -- me on this earlier? So that's very encouraging. It is still going to take time. It won't be until 2022 that we're going to be on formulary. And the goal here is not just to eclipse the existing COMT inhibitors. That really isn't the goal. The goal here is to be the first-line adjunctive treatment in Parkinson's. So the gold standard for treating Parkinson's is levodopa. What ONGENTYS does, is allows you to maximize levodopa. So don't go to an MAO inhibitor, do not go to a D2 antagonist, a dopamine agonist. Go to ONGENTYS. Don't even go to an extra dose of levodopa, optimize it first with ONGENTYS once a day, drug with a very good efficacy and safety profile. That's where we're going to have the greatest impact, and that's what we aim for with the drug.

Moving to the pipeline crinecerfont's in a Phase III trial in adults. What's the status of that trial? And maybe more importantly, what data do you think crinecerfont needs to produce to be adopted as a standard of care agent?

Yes. So crinecerfont, the single Phase III that we have agreement with FDA and EMA on, and it's a worldwide Phase III trial. We started up late last year. It is ongoing, and I'll give updates a little later in the year as we get this wave throughout Europe and the United States of COVID behind us. What we've shown in Phase II is that we can fundamentally affect the underlying disease of CAH. So what we can do is we can recapture control of the hypothalamic pituitary adrenal axis. We can lower from ACTH all the way down that cascade to the androgens. We can capture those and reduce them. That's powerful. In the logic then of treating this disease, that should mean that you can then now start reducing the doses of exogenous corticosteroids that those patients have to take. Because they take these very high super therapeutic levels every day in order to lower all of those endogenous hormones that I already said, now crinecerfont does that. So that should allow the physician to now decrease the hydrocortisone. Those are the 2 things you need to see in Phase III. We've shown the first one in Phase II really well. We need to show it, the second one in Phase III. We're also going to be starting shortly, the phase -- single Phase III trial in the pediatric population. That will be a worldwide trial. So we'll have those 2 Phase IIIs ongoing simultaneously.

Other members of the pipeline include 352, 104, 845, 846, which of those would you highlight for investors to do work on? Which ones do you think have the best potential to contribute to Neurocrine's revenue and earnings?

Well, like, when I'm asked, who do I love most, my son or my daughter? I quickly answer my daughter. But unlike that -- yes, when you have a 23-year old son, you'll answer the same way. What -- however, here, what I would say is our pipeline drugs, I think all are compelling. But again, different risk profiles, and that's deliberate. What we're doing as we construct the pipeline is to have a pipeline that has different risk profiles, utilizing different mechanisms, treating different high unmet medical needs. If you look at the epilepsy franchise that we have, here's 2 different mechanisms that we're going after that are known mechanisms in multiple epilepsies, sodium channels and calcium channels, but even more specifically derisking those 2 programs, the very first indications we're going after are ones that are genetically defined orphan indications, where you know it is that genetic abnormality that is causing in these sodium or calcium channel that is causing the epileptic seizures. And these molecules were designed specifically to interact with those receptors and only those receptors. So that risk reduces it. In addition, though, you know that in different epilepsies, they -- it's either sodium channel or a calcium channel abnormality that's taking place in wider epilepsies. We'll be exploring those also. So there's a way to de-risk and expand the opportunity with those. When you look at the rest of the Takeda assets that we are collaborating on, whether it's treatment-resistant depression, whether it's anhedonia and there are other within both of those 2 compounds and those 2 programs, there are additional -- by mechanism, additional psychiatric diseases that can be explored. So we have a wealth of work to be done there. And I like all of them. And so as they're looking from top to bottom through the neuroendocrine, the neurology, the neuropsychiatry, I think it gives us a lot of shots on goal. I wouldn't trade this pipeline for anyone's right now.

That's great. With that, it looks like we are out of time. So thanks, Kevin, for yet again, an interesting discussion, and congrats on all the progress in over the last year.

Thank you, Phil. I enjoyed the discussion. Take care.

You too. Bye.