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

All right. Thank you for joining us. I'm sorry about that. We had some technical difficulties on our end. I'm Stephen Sloan, I'm an associate on Tazeen Ahmad's small mid-cap biotech team. And it's my pleasure to be here with Neurocrine for the next, I guess, 20 minutes now. On the call, we have Kevin Gorman, CEO; and Eric Benevich, Chief Commercial Officer. So thank you for joining us.

Thanks, Stephen, and thanks to BAML for giving us this opportunity today.

No problem. It's our pleasure. So for those who aren't familiar with the company, could you just provide a brief overview before we get into some deeper questions?

Sure. Before I start, I just want to remind everyone that we will be making forward-looking statements, and therefore, I would direct you to our most recent SEC filings. Neurocrine has been around for a while. We've -- we're going to be coming up on our 28th anniversary of the company. We have been successful in getting several of the compounds through discovery, development and to patients on the market. The one that we market ourselves, which we'll be talking quite a bit about today is INGREZZA to treat tardive dyskinesia, by and large, irreversible movement disorder that is caused by the long-term taking of antipsychotics. We also have a second medication that is also a movement disorder, it's to the Parkinson's community, called ONGENTYS, and that is one that we did a deal with BIAL Pharmaceuticals, who discovered and developed that and markets it in Europe. We market it in North America. And then in addition to that, we have a number of early-, mid- and late-stage compounds in our pipeline right now that we're progressing. And then finally, I'll say that we're in a good financial position with over $1 billion in cash and short-term investments, allowing us to continue our investment, which we'll be talking about in INGREZZA, not only in tardive dyskinesia, but in other indications there.

Okay. Great. Thank you for that overview. Before we dive into INGREZZA, can you just remind us about the key data catalysts and readouts that we should be looking out for, for the remainder of 2021?

Yes, sure. So in addition to our quarterly sales progress that we'll be reporting, obviously, every quarter with INGREZZA, the -- we have 9 programs that will be entering mid- to late-stage clinical trials this year. One will read out towards the end of the year, and that's INGREZZA in Huntington's disease, so the second indication that we're going to be seeking approval for. And the other 8 will be a very data-rich year in 2022.

Okay. Perfect. So I guess, given the acceleration vaccinations and the continued reopening of the country, what are you hearing from your commercial sales force as it relates to INGREZZA and the uptick in growth?

Eric, why don't you take that?

Yes, I'll take that question. So things are trending in the right direction in terms of our ability to access customers. We've seen an increase over time, both in terms of the volume of sales calls. And in terms of the percentage of them that are face-to-face. So we're seeing our customers more frequently now and more often in person. And we're not all the way back to the way things were prepandemic. But about 70% of our sales calls are now face-to-face with customers. And as the conditions around the country continue to improve in terms of the pandemic, we're seeing more of these practices opening up to patients and to our field teams. We are seeing a difference, however, in terms of the specialties that we call on. We cover both psychiatry and neurology. Neurology, for the most part -- neurologists are, for the most part, practicing medicine in-person, less than 10% of their total patient visits are now telemedicine. Psychiatrists are an outlier here. About half of all patient visits still are via telehealth. And so we've invested a fair bit in terms of making TD diagnosis and INGREZZA initiation as easy and as compatible as possible for telehealth platforms. But as we continue to see clinics opening and providers returning to their practices, we'll continue to see an uptick in both TD diagnosis and importantly, new starts for INGREZZA. So we're happy that things are improving. And certainly, the fundamentals are trending in the right direction.

Okay. Great. So, there's the 2 key physicians, the neurologists and the psychologists -- psychiatrists. What is your view of when psychiatrists might be returning to office, say, in 3Q and by year-end? And yes, just when you think you'll see more, I guess, greater than 70% in-person interactions with your sales force?

Yes. I mean, I think we're going to see things continue to improve over the second half of the year. What's -- frankly, what's holding psychiatrists back for the most part is the waivers that the government put in place that made the relax of standards around telehealth and the parity reimbursement that's in place for an in-person patient visit versus a virtual visit. And so what we've done is we've decided that telehealth is here to stay. It's probably not going to be utilized as frequently post pandemic as it is now. The pendulum swung very hard and quickly last year towards virtual patient visits, and it's slowly trending in the other direction. But in the meantime, we want to make sure that patients get diagnosed with TD, regardless of whether they're seeing their provider in person or whether it's via a virtual visit. And to that end, we've invested a fair bit in new tools and screening techniques that allow especially psychiatrists to be more comfortable and confident in their ability to recognize and diagnose TD remotely. And so we've been rolling those resources out over the latter part of last year and the beginning of this year so that even if it's just a virtual visit, a video-plus-voice or voice-only, that providers can recognize what's happening with these patients. They can ask the right questions. They can see the abnormal movements, and they can advance that diagnostic process. So I do think that things are trending positively, and we are seeing more providers coming back for face-to-face patient care. But in the meantime, I think we've done a nice job of adapting to the environment.

Stephen, I would also add one other thing to what Eric was saying is that as he mentioned a little earlier, the physician's offices are opening up. And that means the front-office staff, and importantly, the nurse practitioners are back in the office, by and large. The psychiatrist is still working remotely. In many, if not most places, those nurse practitioners or physician assistants, they have prescriptive authority. And so they're very important in the treatment of the psychiatric patients and therefore, the TD patients. And so we do spend quite a bit of time with them. And that has always been and continues to be a big educational effort for us. So it -- for a given practice, it's not just the psychiatrist who is working remotely that is important for the patient care. The advanced practitioners, those nurse physicians, they are just as important for that patient care.

Okay. Great. Yes, I really appreciate that color, Kevin. I'll ask maybe 1 or 2 more on INGREZZA and then we can move to the rest of your pipeline. Just curious, as you see the landscape of tardive dyskinesia, what do you currently estimate the penetration of branded VMAT2 inhibitors, such as INGREZZA, into the addressable patient population? Kind of what are your thoughts on competition in this space as well?

Yes. So really, a couple of things. First of all, we just had the 4-year anniversary of the launch of INGREZZA. So we're just entering the fifth year. This remains a mostly undeveloped therapeutic category. And what I mean by that is at the time that we brought INGREZZA to market in 2017, we estimated there was north of 500,000 patients out there with TD, but only a very small fraction of those individuals had actually been given a diagnosis or an explanation for their abnormal movements. Now fast-forward 4 years later, our estimate for prevalence is closer to 600,000. TD continues to grow. It occurs secondary to exposure, as Kevin said, to dopamine-blocking drugs, primarily antipsychotics and antipsychotic uses only continue to grow over time. Now we estimate that around 20% or so of all patients with TD have been diagnosed, but that means that around 80% have yet to be given a diagnosis. And even amongst those that have been diagnosed, only about half the time are they offered treatment with a VMAT2 inhibitor. The old standard of care is something that we're working to change over time, but it takes -- these approaches to TD management have been in use for decades, primarily antipsychotic adjustment, so reducing the dose or switching to another antipsychotic or adding anticholinergic agent, like Cogentin, which does not help TD, can actually worsen it. So we've got a lot of opportunity ahead of us in terms of continuing to drive recognition and diagnosis, but we also need to get a higher proportion of diagnosed patients treated with VMAT2 inhibitors. INGREZZA is the most-prescribed and the most-preferred VMAT2 inhibitor for TD. And the recently published and updated APA guidelines should help accelerate that trend. And the APA guidelines do recommend VMAT2 inhibitors as first-line treatment for TD. In terms of the competitive dynamic, Teva has a VMAT2 inhibitor, which is deuterated tetrabenazine. Teva also is educating and helping to develop the market. However, INGREZZA has about 2/3 market share of the TD patients. And we're going to continue to invest in developing the market and exhibiting what I call market leadership-type behaviors. And to that end, one of the things that we announced last week during our earnings call is that we're going to be launching a nationwide-branded DTC campaign starting in May, which should really help more people that are living with TD recognize their symptoms, and we're encouraging them to talk to their doctor and ask for INGREZZA. So we have a lot of confidence in the potential of this market opportunity for INGREZZA in TD, and we're continuing to invest in various mechanisms, whether it's with health care providers or with patients to drive recognition and diagnosis and treatment with INGREZZA.

Okay. Great. We'll definitely be on the lookout for updates in the coming months, and we'll be tracking sales and everything. So now moving on to the pipeline. Could you maybe talk a couple of minutes about the opportunity of valbenazine in chorea and Huntington and kind of the level of data that we should be expecting from the upcoming readout?

Yes. With all the programs that we have in our pipeline, a common theme other than they are all in neuroscience, either neurology, neuroendocrinology, neuropsychiatry, is that they all have multiple indications that are potentially there. And so that's part of how we do drug development. The targets we go after are ones that give us a number of indications that, that same pathway and often times that same molecule can be utilized for. Valbenazine, which is INGREZZA, we have in a single pivotal Phase III trial in Huntington's disease. And Huntington's, as you may know, there's approximately 30,000 patients in the U.S., 90% of them have chorea, which is the movement -- uncontrollable movements due to the disease. And about 70% of those are severe enough that they require treatment. Yet the best treatment for them would be a VMAT2 inhibitor. The tetrabenazine and deuterated tetrabenazine in that marketplace only yet capture only about 20% of those patients. So there, again, 80% of them are being untreated. Some of the reasons why the existing VMAT2 inhibitors in that space may not be capturing or may not be utilized as frequently as they should be and where we believe INGREZZA has a real place here is the pill burden that they impose on the patients. Each of those drugs is given multiple times in a day, and there's multiple pills each time. INGREZZA is once a day, 1 pill. Each of them require a fairly drawn out and at times very complicated titration, where INGREZZA does not. From the first dose that you take it, it's potentially an efficacious dose that you're working with here. And the side effect profile is very good with INGREZZA for these patients. So we believe that it brings a lot to the Huntington's population. The trial itself we're doing in conjunction with the Huntington Study Group, which has been involved in virtually every drug that has been approved or even that has been introduced into clinical trials for Huntington's patients, so they've been a terrific partner with us in this study. We have 120 participants in this study, and we're looking at change from baseline at 12-week assessment in the Unified Huntington's Disease Rating Scale and the total maximum chorea. So we're on track to be able to report our top line data at the end of this year.

Okay. Perfect. And then can you maybe just briefly mention some other indications for valbenazine that you think has good potential?

Yes. So we're in 2 other indications that we're going to be kicking off those mid-stage or late-stage trials of valbenazine a little later this year. What we have disclosed is one is in a neurological disorder, and the other one is in a psychiatric disorder. We'll give more specificity when the trials start-up a little later this year, when they're posted on clintrials.gov (sic) [ clinicaltrials.gov ], and then we'll be able to talk more fully about them. But we said, starting years ago, that we will be taking INGREZZA and backup compounds into multiple indications. And that is the case now.

Okay. Yes, we'll definitely be on a lookout for updates. I guess switching to crinecerfont in congenital adrenal hyperplasia, I was just wondering if you could kind of quantify the disease burden and the unmet need there and why you think you have the right therapy for this indication?

Yes. Congenital adrenal hyperplasia, which is a mouthful, or CAH for short, this is a genetic disorder that up until the early '60s was always fatal shortly after the child was born because it is a gene defect that doesn't allow for the biosynthesis of cortisol. We need cortisol in order to survive. When hydrocortisone was invented back in the early '60s, it was then applied to the CAH patients. That's great. And that was the last drug that was approved for CAH patients. It allowed them to survive. But the unfortunate aspect here is that it causes lifelong use of hydrocortisone or steroids, as we know, have many side effects, some of them serious and devastating. So the physicians that take care of these approximately 30,000 patients in the United States, 50,000 in Europe, what they're doing is they're doing a balancing act from birth throughout the patient's entire life of undertreating them on the one hand with -- and therefore, letting the disease run unchecked or not well checked, which leads to potential adrenal crisis in these patients, infertility, poor bone health and reduced stature, blood pressure problems, amenorrhea, severe fatigue. Or they can aggressively treat them with the steroids and by aggressively treating them with very high doses of steroids, you're getting insulin resistance, obesity, metabolic syndrome, impaired glucose tolerance, hypertension, or cushingoid disorder. So what you see in a patient's life, actually from year-to-year, is the physician having to constantly balance these 2 things, going from an undertreatment to an overtreatment back again to an undertreatment. There's not a whole lot of time that the patient is in control, if you will. What our medication here does, crinecerfont, is it recaptures endocrine control here of the underlying disease. We don't have enough time to go through exactly how that is accomplished. But what it does is it, you get control -- cortisol normally would control the hypothalamic-pituitary-adrenal axis. Now crinecerfont can control that. And we've shown that very well in the Phase II program. Phase III program is then designed to show that again, but also to show that by virtue of now controlling the underlying problem, you now no longer have to give those massive doses of hydrocortisone. You only have to give replacement doses. So you can take -- you can basically put those scales into balance easily and simply. We have 2 patient populations here. The pediatric population and the adult population. Each one treated separately and each one has its own single Phase III clinical trial.

Okay. Great. Yes, I think maybe in the last minute we have here, if Kevin or Eric would like to highlight any last bit. I know that we're cut a little bit short due to some technical difficulties, but anything you'd like to highlight before we end the call?

Yes. I think that -- I think what I would like to highlight is that we have -- we invest tremendously and will be continuing to invest tremendously in INGREZZA. We've only just begun to bring INGREZZA to the -- to, as Eric said, 600,000 patients who suffer from it. The vast majority are suffering needlessly from it right now. And so that is our #1 charge and then expand the number of indications and the number of patients that we can treat with INGREZZA. And then second is that our next best use of the capital that we have is to advance our pipeline that we have. And I said, we have multiple programs that are in psychiatric diseases, multiple programs that are in epilepsy at this point in time. And we have crinecerfont, which is perhaps the most important pipeline drug that we have in our endocrinology going forward. So there's where our investment is focused and will continue to be for quite some time.

Okay. I think getting a lot of great takeaways for those listening in. So again, sorry for the technical difficulties, but Kevin and Eric, thank you so much for joining us today. And I'm sure we'll be in touch.

Thanks. Yes. Take care.

Thank you.