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

Hello, everyone, and welcome to Oppenheimer's 31st Annual Healthcare Conference. I'm Jay Olson, one of the biotech analysts at Oppenheimer, and I want to thank you all for joining us. It's my pleasure to welcome Neurocrine Biosciences to our conference, and it's an honor to introduce Matt Abernethy, the CFO; and Eiry Roberts, the CMO. And with that, let's get started. Maybe if there are any opening remarks, you'd like to share with us before we get started, Matt or Eiry?

Yes, sure, Jay. Good to see you. Good to see you in your office in New York. It's satisfying given a year out. Eiry and I are both in the offices as well. And actually, both fully vaccinated at this point. So happy to say that. Before we begin, we will be making forward-looking statements, so we direct you to our SEC filings for the related risk factors and uncertainties associated with our company and then also our industry. So before we jump into Q&A, Jay, maybe a little bit of background on Neurocrine. We've been around for quite some time, over 25 years now with the specific focus in neurology, endocrinology, and then also neuropsychiatry. At this point, we have 4 approved products, 2 of which are marketed by our partner, AbbVie, and we have over 10 programs in the clinic. So we feel great with how we're positioned right now. So our lead commercial asset is INGREZZA. INGREZZA was approved in 2017 for tardive dyskinesia. And what tardive dyskinesia is, it's an involuntary movement disorder that's caused by prolonged exposure to antipsychotics. And as a result of that prolonged exposure, some patients end up developing movements in their mouth or in their hand. And until 2017, no approved treatment options existed. And the unfortunate part about this, I guess, side effects/diseases, even if you remove the underlying antipsychotic the movements by and large stay. So at the time of launch, with around 500,000 patients we estimated with TD. We've had tremendous success over the last 3 or 4 years. We're currently around $1 billion in sales and have a lot of opportunity ahead of us. On the pipeline front, I would just highlight our lead program, which is our congenital adrenal hyperplasia program, which Eiry is going to spend a lot of time on, I'm sure, today. It's currently in a registrational study for adults, and we're in the throes of starting our pediatric trial. So it's an important medicine to be able to deliver to these patients where they've not really had any improved standard of care for over 50 years. So looking forward to that. Now COVID has clearly had an impact on many people, in particular, had an impact on our business. INGREZZA, we're asking a psychiatrist to actually make a physical diagnosis of a movement disorder. And that's difficult, in a normal environment, let alone in the pandemic. But we really are very optimistic about the opportunity that we have ahead of us for INGREZZA. And with that, Jay, I'll turn it back to you for questions.

Excellent. That's a great setup. Thank you, Matt. I want to go back to 2019 when INGREZZA achieved record numbers of new patient starts each of the first 3 quarters that year in a row. And then as a result of the pandemic, at the beginning of last year, new patient starts didn't hit that same cadence. And yet INGREZZA still delivered 32% total script growth last year. So -- and you mentioned COVID, but can you talk about how you -- how were you able to deliver high double-digit script growth last year despite the decline in new patient starts and facing COVID?

So what I'd say is this is basic one-on-one selling. You have to have a significant need in a marketplace that's not being met. And then the second, you have to have a product for us a medicine that actually meets the unmet need and really provides a lot of satisfaction. In bottom-line, you can't grow a product unless it's making a tremendous impact on the lives of people, in our case, patients. And that's what we've seen really since launch with INGREZZA. So many people who are getting diagnosed, get on treatment and they're staying on treatment. I think that's reflecting the value that the patients see from the medication. We made some significant investments in 2018. We expanded our sales force by about 50%. We invested initially in direct-to-patient advertising. And that is really what was the catalyst for the growth that we saw in 2019. And actually, Jay, a lot of people overlooked this. We had a record number of NRx's per week coming out of Q1 last year. And we were set up very well for success. And it would be nice to know what would the growth had been, should the pandemic not have kicked in. So bottom-line, a big market opportunity here, a great medicine and a lot of momentum that we've been able to create just by filling that unmet need.

I think one aspect of your impressive performance with INGREZZA is that the revenue growth has really been volume driven.

Right.

I think you mentioned that net pricing for INGREZZA should be the same in 2021 as it was last year. And we looked back and found that the net pricing for INGREZZA has been essentially flat since it launched. Was that by design?

Jay, we have crystal balls, but I would never say that was absolutely by design. I would say when we launched INGREZZA, the most important aspect was ensuring if a script was written for INGREZZA. If that doctor made this step to diagnose TD and want that patient to get on INGREZZA, we wanted to make sure that patient ended up with INGREZZA. And we've been -- we've had tremendous success thus far in our launch. And I think that it's more of a derivative of: number one, adding ourselves on to certain formularies over time, offset by some price increases have allowed our net revenue per script to hang in there. But I think you mentioned it earlier, we are driving volume here. Our game is not going to be a price scheme or even a dose migration scheme. This is truly developing the market, giving patients who have TD on to INGREZZA and helping them with their TD. At this point, what we've said is that around 20% of patients with TD have been diagnosed and only around 10% or so have actually been taking and be met, too. So we look forward and say, access remains very critical for us. And with knowing that there's a significant opportunity at.

Excellent. And the 20%, is that of the 500,000 that you mentioned earlier?

We've had 500,000 on all of our slides for like 8 years. And so I think now we say over 500,000. I know there's different data sets out there that would point to 700,000 to 2 million. So not going to say the exact number here, but it is a growing patient population. Unfortunately, with the proliferation of second-generation antipsychotic use, TD is going to continue to manifest itself. And those with depression, bipolar, schizophrenia, significant anxiety. So it's just an unfortunate side effect that everybody has lived with for quite some time with no treatment options, and it's just great to see when we were approved and what the stories that we hear back from families and patients, just really encouraging to see the impact it has on their lives.

Great. And I know you're not giving long-term guidance, but as you look out into the future and recognizing that INGREZZA very quickly, became a $1 billion drug in just a few short years. Really just 3 full calendar years since launch. What are the key steps to getting INGREZZA to $2 billion? And what is the timeline for getting there?

Yes. It's interesting. We're talking about billions here, Jay. I think at the time of launch, there is thoughts that this could be a $600 million medicine. And now quickly, I think, we all understand there's a significant market here. There's a lot of runway ahead. It's of course, natural for a psychiatrist not to have tardive dyskinesia front of line. They drive the work thinking about a mental health disorder. They're not driving to work, thinking about tardive dyskinesia. So it takes time to ingrain screening per TD. TD may not be a subject that they necessarily want to address with the patient. So it's just going to take time to continue to build the market. But I would say there's 2 aspects here that I'd point to from $1 billion to $2 billion is: one, post-COVID, TD has to stay relevant and on the radar of nurses, front office staff in the psychiatrist. So that's one piece that we're absolutely focused on right now. The second piece is engaging patients more specifically in this process. So these patients do not identify that these movements are caused by their underlying antipsychotic, they may think it was from drug use, they may just think its part of their condition. So it's not natural for them to go into their psychiatrists and talk to them about a physical movement disorder. I always say it's like -- you go into the dentists and asking them about your ankle. It just doesn't connect. So from a direct-to-patient advertising campaign to be able to allow them to associate their movements with their mental health condition, encouraging them to talk to their clinician, and seeking INGREZZA specifically, is really going to be another important aspect to this market development activity that we have ongoing.

Okay. Thank you. That's helpful. And then now that you have filings in Asia, and you have the positive JConnect study in Japan with the filing on the way there. How much will Asia contribute to the ultimate commercial potential for valbenazine?

Yes. First of all, what I'd say about that, and Eiry can chime in here as well. I mean there's always risk when you do a study overseas. And what about if the cards turn and it gives you a different answer. And so we were quite encouraged by the answer that we saw over in Japan. They've not disclosed the full data set yet, but nonetheless -- I would just say, it was really compelling data. And it seems as if INGREZZA once again was validated to show significant efficacy with a positive side effect profile. So I would say it's just nice to see that. And I think some of that data -- even it might be helpful for us here in the United States. From a financial perspective, you can think about milestones in the tens of millions, and then, call it, mid-teens to upper teens, depending on the level of sales that we have coming out of Japan. It's not a huge market, but nonetheless, great to see more patients being helped with their TD in Japan and other Asian markets.

Okay. And that's a royalty that's in the upper teens?

Yes. Yes. It's a tiered royalty that you can think about it starting in the low double digits, capping up in the high teens.

Okay. Got it. And then, I guess, as you think longer term, since there are new antipsychotics and the next generation of antipsychotics in development that may not cause TD. How does that factor into your long-term plans for INGREZZA?

First of all, we would -- Eiry and I would high five If somebody came out with an antipsychotic that doesn't cause TD. This is just an unfortunate side effect that's -- that occurs as a result of the first-generation and second-generation into psychotic. The second piece I would just say, Jay, is that we don't see anything in the near-term horizon that we see as disrupting our strategy around treating patients with TD and the opportunity for valbenazine. But it would be nice to see. But it's -- there's nothing that at least internally, we have a lot of confidence in that's going to make a huge shift in the market. And with the proliferation, as I said earlier, use of antipsychotics over the last 5 to 10 years, there's going to be a lot of continual occurrence of TD in new people.

Okay. And we are going to shift gears in a moment and direct some questions at Eiry. But before we do that, maybe just quickly on elagolix and ONGENTYS. What's -- I guess, when you look at the consensus revenue estimates for elagolix and ONGENTYS, do you see potential for upside?

Well, on the elagolix side, interesting news came out last night that AbbVie is looking to divest potentially their women's health business. So I can't necessarily comment on their strategy. It's obviously better for them to comment on what that would all entail. But as you know, Jay, covering the company for a long time, it was thought that elagolix could have a potential bigger opportunity than valbenazine. And I think that's because there's a significant unmet need with patients with endometriosis who are living in significant pain. And then on the UF side, significant bleeding as well as pain. So our hope is, whoever is marketing it that if we can see the sales trajectory kick in, it's definitely below our expectations and likely AbbVie's expectations. But I think the market need is absolutely there to help many patients. On the opicapone front or ONGENTYS now is the brand name, I guess, it was clear to us that COMT inhibition is used very sparingly in the market. It makes up around 8% of adjunctive therapy that most Parkinson's patients take. So for us, we see the controlling of their off episodes and the value of what opicapone can deliver is to be significant. However, it is going to take time to educate. It's going to take time to get on formulary. And it's going to take time for real-world experience to occur because as you recall, this medicine was ever studied in the U.S., it was all done outside the U.S. So experience is also going to be helpful. So I don't want to sit here, Jay and pound my chest and say, consensus numbers are right or wrong. But I would say it's a big focus of ours. It's going to be interesting to see how it develops over the course of the launch.

Okay. All right. I do have a couple of questions for you, Matt, I'm going to hold on to for now, so we can shift gears over to Eiry.

Okay.

And so with that, maybe we'll start -- I'll go back to valbenazine for a moment. And Eiry, can you talk about chorea and Huntington's disease? And what are the symptoms? How easily is that diagnosed and how large is that patient population?

Yes. Jay, nice to be here, and good afternoon to everybody. It's a pleasure to be here and happy to talk to you about Huntington's. So Huntington's disease is a rare inherited disorder, occurs in about 30,000 people in the United States, and it's really made up of 3 different elements in terms of the symptoms of the disorder. There are cognitive impact of the disorder, there are the movement parts of the disorder, and there are the psychosis and psychological related symptoms that occur in patients. Valbenazine, given its mechanism of action as a VMAT2 inhibitor is very well suited to address the movement disorder part of the disease, so-called chorea, which is like a dancing type of movement. It comes in the Greek word chorea. And these involuntary uncontrolled movements are really problematic for patients. And they occur in upwards of about 80% of patients at sometime during the course of this neurodegenerative disorder. In spite of the fact that, obviously, diagnosing this is pretty well established, and the diagnosis of Huntington's itself is done, in many cases in -- through genetic testing. The treatment of chorea is very tough for patients. There's been use of several treatments off-label, but VMAT2 inhibition is one of the only approved drugs treating the movement disorder here. And in spite of that, only about 20% of patients currently get treated with approved VMAT2 inhibitor, deutetrabenazine or tetrabenazine. And in looking into this and then going into the study that we're currently conducting in Phase -- as a Phase III registration study, it became clear that many of the issues that patients suffer in terms of taking that treatment are associated with the benefit risk profile of currently available VMAT2 inhibitors, the fact that more than once-a-day treatment in these patients, many of whom have issues with swallowing and actually also psychological issues associated with compliance, that's a real problem. On many of the side effects that were being seen as well with currently available treatments prevent patients from getting access to what we believe with valbenazine could -- we hope will be a very helpful therapeutic for patients with their chorea.

Excellent. That's very helpful. And I guess, as you look at the potential profile for valbenazine in Huntington's chorea, I think you touched upon a number of advantages versus AUSTEDO in terms of dosing and the titration that's required with that drug. But what are the key points of differentiation that we should think about?

Well, I mean, I think we're very confident in the profile that we've seen with valbenazine up to this point in the tardive dyskinesia population. As you mentioned, it's a once-a-day treatment, very simple titration schedule. In the majority of patients, the starting dose of the drug is actually an effective dose of the drug, and there's no need in the TD population to titrate up to that higher dose level of 80 in a substantial part of the population. And so carrying that over into Huntington's disease, study is designed again to demonstrate that simple straightforward dose titration once-a-day treatment. The other feature, obviously, is that for some patients, swallowing and chewing is very difficult. And there is a risk with currently available, particularly deuterated medicines in this space that if you damage the medicine as you're taking it, you actually get an inappropriate exposure to the drug. And as a result, that can translate into challenges in and of itself. And so from a benefit risk profile, we have a very -- we believe an optimal profile with the valbenazine data that we've demonstrated up to this point. We're running a well-powered single registration study, which allow us to reconfirm that benefit risk profile, if successful, and using that, obviously, we'll be going forward to enable what we believe will be a differentiated label in the United States. The other thing I would say is, obviously, currently available VMAT2 inhibitors have a black box warning for suicidality in the context of treating Huntington's chorea. And we do not have a black box warning for INGREZZA at this point in time. And that's clearly currently a differentiator for this -- for the VMAT2 inhibitor INGREZZA.

Excellent. That's super helpful. Thank you for that. And then I also want to make sure we have time to talk about crinecerfont. I know that's another important catalyst on the horizon for Neurocrine. Can you talk about why does CAH remain such an area of large unmet medical need? And what are the disadvantages of the standard of care in terms of corticosteroids?

Certainly happy to do that. So as you mentioned, there is huge unmet need still in treating congenital adrenal hyperplasia. As a reminder, this is a rare inherited disorder. Usually diagnosed at or around birth, very simply using blood test or clinically some individuals that actually -- and genetic testing. And so the patient has to manage this lifelong disorder, which manifests itself in different ways during childhood and into adulthood. And there's 2 elements to what have to be done in the management of the disease: One is to replace the steroid levels that are required for normal everyday life. And that's just pure replacement therapy of glucocorticoid mineralocorticoid. And that's easy to accomplish. The problem is that in CAH, the only way you can currently control the excess hormones produced in the disease, which are predominantly androgens that are of concern, is by giving very high dose of glucocorticoids. And so the patients have to deal with not only the problems of the disease itself with the androgen access and all the issues with growth in fertility, other problems that arise from that, but also the fact that they're taking high doses of steroids for the duration of their lives, and therefore, they get the metabolic syndrome bone impact, growth impact, and other issues that are associated with excess steroid use. So for the past 60 years, the only treatment has been this steroids in different dosage levels and different formulations. So what we're doing in the context of our registration trials for crinecerfont, based on the clinical data that we generated in Phase II, which showed that we could control androgen levels in the phase of that ongoing steroid treatment for patients over just a 14-day period of time. The purpose of the current program is to demonstrate that not only can we control those detrimental androgens, but we can do it while still allowing patients to reduce that excess glucocorticoid dosage that they need to give. So you get a double benefit there. And essentially, you're resetting the disease for these patients. If we can do that, that will be a substantial step forward for patients in this area. And it really will allow them to manage this long-term problem that they have as a teeter-totter of managing androgen levels versus their excess steroid dosing in a much more simplified and effective fashion. We have 2 key sets of registration trials going on right now. A single registration trial, which is global in nature, will enroll 165 patients in the U.S. and Europe. And we also are kicking off right now, as Matt mentioned, a pediatric study, given the importance of treating patients very young and controlling the disease from a very young age. And with that holistic database in hand, we intend if successful to get registration for this new treatment paradigm in Europe and in the U.S. from very early age in children all the way through to adulthood.

Great. Thanks for that overview. Is there any update you can share with us with regards to the timing of the top-line data for the study and the timeline to filing and registration?

Well, we're actively enrolling both sides of the Atlantic in that program right now. We're obviously keeping a very close eye on the impact that COVID and other elements are having on that program. I think as we go through this year, we'll be able to give a much better indication. And as I mentioned, we're just kicking off the pediatric study itself. And we have a lot of very significant interest in that program, I would say. And so we're engaging very directly with multiple investigators around the world right now.

Okay. Great. Excellent. And then I wanted to ask you about the work that you're doing in epilepsy with your Xenon Idorsia collaborations. Can you just talk about the differences between voltage gated calcium and sodium inhibitors for epilepsy treatment? And how you plan to devise your clinical development for those 2 compounds?

Yes. So I think the -- absolutely. So voltage gated sodium channels and calcium channels really have been integral as targets to the treatment of epilepsy and other neurological disorders for some time. But up to this point in time, the major challenge has been that the medicines that are in the market targeting these targets really are not selective or specific in terms of their design. And as a result, there are a lot of issues in terms of benefit risk profile for several of these medications that currently exist. And in many cases, it's not really possible to dose these medicines to the dose that can be optimally effective because of the side effect profile and challenges that are associated with that. And the challenges are a little different for each of the classes. So take the Nav1.6 Xenon molecule -- collaborated molecule 352 that we have in our hands right now. Historical sodium channel antagonists tend to be pan channel antagonists, and that results in a lot of toxicity associated with the molecules. What we have in hand is the Nav1.6 selective antagonists, which means it attacks just one of the specific channels within the sodium channel finally. And in the initial indication that we're going into, SCN8A, which is a rare pediatric epilepsy, we know that that disease is driven specifically by a gain of function mutation in that particular receptor -- that particular channel. And so it's a perfectly designed drug to address that specific channel, which gives us a really good optimal approach to understanding how to demonstrate benefit in that setting. So we're encouraged by what we've seen preclinically with that molecule, and we believe that we have a very good opportunity to add value for patients with SCN8A, who have very few therapies available right now and who experience a very broad range of different seizure types. So the -- beyond that, obviously, there are multiple other indications, both within epilepsy and outside epilepsy, where a highly selective precision sodium channel antagonist could be valuable. On the calcium channel antagonist side, the issue has more been about potency and the ability to get the calcium channel antagonist effects without off-target toxicities. And so we have a very uniquely designed molecule that came to us via Idorsia collaboration, which is highly potent across 3 subsets of the calcium channel. And as such, we have elected to go again into a rare pediatric epileptic encephalopathy where currently available treatments are not optimal because of the dosing challenges that are encountered in that setting. So CSWS is the first indication that we're exploring. It's a devastating disorder for children [ who sent ] with cognitive decline, cognitive delay, and night-time seizures that are status epilepticus or all-night seizures ongoing. So it's a challenging and very difficult disorder, and we're running a trial right now in terms of understanding the effect of the medicine in that setting. Beyond that indication, again, there are a broad range of other indications that we will be evaluating in parallel in order to be able to demonstrate fully the benefit risk profile of this potentially important molecule.

Great. Thank you for that. And I know we're just about out of time, but maybe just one last quick question, if I could squeeze in about the Takeda partnerships. I know that for the 845 molecule, and the 846 molecule, you're looking at some very specific subsets of depression, TRD and anhedonia. When do you expect to initiate studies in those areas?

So we are actually on track with both of those molecules to initiate Phase II studies this year. Very encouraged by both the preclinical and the clinical data packages that we have in hand, both for 845 in treatment-resistant depression and 846 in anhedonia. And so as we -- as soon as those trials hit clinicaltrials.gov, obviously, we'll be able to give a little bit more indication about the areas of focus that we have there.

Excellent. Thank you for that. I think that brings us to the end of our time. So we'll wrap things up there. I really appreciate your making time to chat with us. This has been super helpful, getting up to speed on all the work that you're doing at Neurocrine, and we'll stay tuned and look for the future updates. Thank you, both, Matt and Eiry, I really appreciate your time today.

Thank you, Jay.

Thank you.

Stay well.