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

Hi, everyone. Welcome back. I'm Brian Abrahams, Senior Biotech Analyst at RBC Capital Markets. Our next presenting company is Neurocrine. And from Neurocrine we have their CFO, Matt Abernethy; and their CMO, Eiry Roberts. Thanks Matt and Eiry. Really appreciate you joining us.

Great to be here.

Thanks, Brian. Really glad to be here.

Really glad to have to you guys. So let's maybe start on the commercial side with INGREZZA. You guys are coming off of a quarter where you faced some change, particularly related to COVID, but also provided some encouraging metrics. Near term, what are you seeing that gives you the most confidence in the potential for demand and sales to bounce back in the second quarter and for the rest of the year?

Yes. No, I appreciate the question, Brian. And before I jump in, I will be making forward-looking statements. I would direct you to our latest SEC filings on our website for the related risk factors and uncertainties associated with our company and then also our industry. Before we jump into talking about Q2 in the second half of the year, let me give a brief overview about Neurocrine for those who aren't as familiar with the story. We've been around for quite some time now, around 30 years, and we have 4 approved medicines, 2 of which are marketed by AbbVie today. And over 10 pipeline programs, which Eiry is going to go into detail about. So we're quite enthused about what we have right now as a company. And our lead commercial asset is INGREZZA, which is what you're asking about right now, Brian, which is for a disease called tardive dyskinesia. Tardive dyskinesia is an involuntary movement disorder that's prolonged by a long duration of antipsychotic use. And unfortunately, even when you take away the antipsychotics, by and large, the movements stay and unfortunately, there's around 600,000 people who struggle with tardive dyskinesia and had no approved treatment option until 2017. Once INGREZZA was approved we quicky grew to around $1 billion in sales within 3 years of launch. So it's really exciting times for the company to be able to help so many patients out with their tardive dyskinesia. And at this point, from a market perspective we feel like only about 20% of the 600,000 have actually received a formal diagnosis of TD. So a lot of opportunity ahead for us with INGREZZA and then also our pipeline. So getting back to your question our Q2 performance, what we expect the level of confidence, and then what does our growth look like really in the second half of the year. Q2 is typically a derivative of what happened during the first quarter. Every year because it's a specialty medicine patients go through a reauthorization process before they get their first or second fill of the product of INGREZZA. So our main concern in any Q1 is are we going to lose patients through this process? Are they going to discontinue treatment of INGREZZA? So that's always our #1 concern and main goal is keeping patients on medication. And to be honest, midway through this Q1, we're a bit concerned, we weren't seeing some of the refill rates that we had expected. We were worried that there maybe had been larger discontinuation because of the pandemic and the related stress that caused on that system. However, once we got through March, saw the refills coming through, and we're able to look back to see did patients stay on medicine and very clearly, they stayed on medicine, which really sets us up well for the rest of the year. So our Q2 confidence is really founded in an improvement in refill rates per patient on the existing front. And then also the positive trends that we saw in NRx as we exited Q1 and then through April. So we gave pretty direct commentary, Brian, about what we expect for Q2. Our expectations are that we're going to grow from an inventory adjusted $227 million to somewhere in the mid-$250 million. And so I think that, that reflects a nice step upwards in growth. And our goal for the second half of the year is to grow on top of where we exit Q2. And there's a few items of momentum that we have on our side at this point. And really, for me, personally, I think about it in 3 bucket. The first bucket is commercial activity, the hustle factor, is it going up? Are calls going up? Are sampling going up? Are medical education programs going up? And absolutely, our team is out there working, engaging with clinicians. So commercial activity absolutely does drive NRx, and that's what we have been seeing. The second piece, which is actually something that we launched yesterday, is are first ever branded INGREZZA DTC campaign, it's called TD Spotlight. So that's going to engage patients in the process of seeking diagnosis of TD and then also asking for the preferred TD medication of INGREZZA. And then last but not least, is I would expect the pandemic's impact should lessen over time in 2 fronts. The first, and Eiry can talk through this as needed, we're developing many tools to ensure that TD stays on the radar for telepsychiatry visit. At this point, we have around 60% of patients are doing visits via telepsychiatry, and we want to ensure that even if there is a telepsychiatry appointment that's being done virtually that TD can stay on the radar. So effectiveness and introduction of tools within telepsychiatry should enable a greater hit rate in terms of identifying new patients. And then the second piece is our expectation is that there should be less virtual visits and more in-person visits over time, which lends itself to new patient growth. So I know this is a long-winded answer, Brian, but we are very confident that we are going to be in a good trajectory for Q2 and also have a lot of reasons to believe things are going to bounce back here in the second half of the year.

No. That's really helpful, Matt. And then on new indications, particularly Huntington's disease, can you remind us of the design of that study, the potential advantages you may have relative to trans VMAT2 competitors in that space and the extent of growth you would expect potential label expansion there to further catalyze?

Yes. Thanks, Brian. I'm happy to take that question. So just to start, I mean, obviously, Neurocrine has had a significant interest in the VMAT2 mechanism of action that INGREZZA valbenazine serves for many years. And we do believe that it has the opportunity to bring value to patients way beyond tardive dyskinesia as well. And one of the key areas that, obviously, we're focused on right now is on Huntington's disease. And Huntington's disease is a disorder that affects about 30,000 patients in the U.S., of which about 90% of patients have chorea, which is the dyskinetic movement disorder that's part of Huntington. And of that 90%, about 70% have a moderate to severe form of chorea that requires treatment. However, even with that extensive prevalent, only about 20% of patients currently use a VMAT2 inhibitor. And there are -- there is, obviously, 1 -- 2 VMAT2 inhibitors approved right now for treatment of Huntington's. And so what we learned through research as we were thinking about valbenazine in this area, that the limited use of these currently available VMAT2 inhibitors really is geared around some of the challenges with the currently available medications. They have complex titration requirements and their overall side effect profile, including black box warning, is actually -- puts a lot of patients of having treatment with the currently available medications. In addition, HD patients have a lot of problems with issues such as difficulty swallowing and jaw issues, and there's a very high pill burden associated with the currently available medication. So with all of those things kind of that we have learned over time, it became very important to us to consider how we brought valbenazine forward as a potential treatment for these patients with HD. INGREZZA to date is a simple, well-tolerated medication. We have no requirement for titration, and it's a once-a-day medication that can be taken with or without food with no black box warning. And so for that reason, we were very keen to enter into the Phase III registration study, which is currently ongoing. That is a U.S. North America focused study enrolling 120 participants. We're working very closely with the Huntington study group who have been involved in pretty much any research in the clinic -- in Huntington's patients in North America. And the primary efficacy endpoint is a change from baseline to 12 weeks of the Huntington's disease rating scale, total maximal chorea score. So that study is progressing well. We anticipate getting the top line data towards the end of this year. And with that in hand, we would go forward if positive to engage with the FDA in order to be able to gain label expansion for valbenazine for use in that Huntington's disease population.

Got it. And then you talked about other indications beyond TD and Huntington's that you've been interested in pursuing for valbenazine. Can you talk a little bit more about what neuropsychiatric diseases may be best served by VMAT2? And what the gating factors are for getting those studies up and running?

Well, the first thing I would say is that we obviously have a broad safety database that already exists across a range of neuropsychiatric disorders for valbenazine from our tardive dyskinesia program. The patients included in that registration program are now out in the community suffer from a broad range of neuropsychiatric disorders, including schizophrenia, bipolar, major depressive disorder, anxiety and other things of that sort. And so that's a really a great starting point for us in the neuropsychiatric space that we have this broad safety database. And what we showed in the clinical trials for tardive dyskinesia was there was -- the patients going into this program were obviously stable in terms of the neuropsychiatric disorder because we were focused on the movement disorder of tardive dyskinesia. But there was -- they certainly had no worsening of the neuropsychiatric disorders. And we were provided with some encouragement across the board in terms of how people did from the perspective of their psychiatric illness in those studies. And so with that in mind, we have chosen a psychiatric indication to move forward into larger scale trials with a view to hopefully getting registration and approval in that indication. There's one psychiatric indication that we'll be starting a study in later this year. And there's also an additional neurological disorder that we will be entering into larger scale studies with later this year as well. We haven't actually released the information about those exact indications. But at this point in time, as we go -- we're making good progress with starting those. And once they are on clinicaltrials.gov, we'll obviously share more information about the nature of the trial designs and the nature of the patient populations. In addition, MTPC, our partner in Japan actually reported very positive top line data results recently from the J-KINECT Phase III study, and they are moving forward with a market authorization with the Japan Ministry of Health. And so from that perspective, we see broad potential additionally now globally with respect to valbenazine as we move ahead.

Got it. Shifting away from valbenazine, you recently announced a movement of 844 into a CIAS study, cognitive impairment for schizophrenia. Can you talk in more detail about the data that supported this decision to move forward given the initial data readout that you saw and the level of confidence you have in the signal and the endpoints that demonstrated that promise?

Yes. Happy to do that. And so, NBI-844, now known as luvadaxistat, a molecule that is partnered with Takeda, and Takeda had initiated a Phase II study called the INTERACT study, which was a very well powered and size study to assess both the Cognitive Impairment Associated with Schizophrenia and negative symptoms of schizophrenia. Given the mechanism of this molecule, which is a DAAO inhibitor, and act through the NMDA pathway, there was a lot of discussion initially as to which should be the primary endpoint for that study, whether it should be the cognitive measures or whether it should be the negative symptom score in schizophrenia. Ultimately, Takeda chose the negative symptom score. And unfortunately, that study was negative against the primary endpoint of negative symptoms. However, we did see a very intriguing signal in the context of that study against the cognitive endpoint. Both the back score, which is a measure of actual cognitive function, composite score, so battery test is taken. And the schizophrenia cognition rating score, which is an interview-based measure and also measures essentially more functional endpoints associated with cognition. And we were very interested in the magnitude of the signal that we saw there and also the fact that, to our knowledge, no study had reported a positive outcome in both of those scales simultaneously. And so that gives you some additional confidence in that regard. Having said that, obviously, this was a secondary endpoint. It's very important that we replicate that finding if it is a real finding. And so our current focus is on initiating a Phase II study with as closer design as possible for the initial study but using the cognitive endpoints as the primary in the schizophrenia patients and understanding whether we have a true signal there. If we have a true signal, then that will be very encouraging for patients in this arena given that it's been a very difficult area. But also, it gives us the opportunity to consider the use of this medication for other neurodevelopmental cognitive indications such as autism and other areas.

Got it. How are the crinecerfont adult studies in CAH progressing? Any finer sense of the time lines there for the readout?

Yes. So we are continuing to welcome both the adult and the pediatric studies. We -- as I think I can remind you, we gained really good alignment with respect to regulatory input for both of those registration phase studies. And we're moving ahead with those, both in the U.S. and outside the U.S. As I mentioned, we are continuing to enroll. Our current goal around data delivery is in 2023. And obviously, as we progress through the remainder of the year, we'll give updates as to how we're doing against that goal.

Got it. And then with the pediatric Phase III design posted, can you talk a little bit more about some of the differences in that design there, in particular, some of the bone growth endpoints, what you think you'll need to show there, just given the relatively wide age range and short duration of that study?

Yes. So as you know, from the -- now that, that study is posted, the primary end point for the pediatric study is a little different from the adult study. In the adult study, our primary endpoint is the ability to reduce the glucocorticoid dosing that patients take at 6 months in the face of also retaining control of the androgen levels for patients. In the pediatric study, our primary endpoint is actually the androgen levels themselves and the hormone levels more broadly in terms of those -- the patient control of that. We also do look at the ability to reduce glucocorticoid dosing later in the study, but the primary is focused on the androgen levels themselves. And that is considered very important because of what you alluded to the fact that, obviously, in pediatric patients, we have a lot of very important aspect going on around development and growth during the course of the development of patients in that age range. And given that, as a result of that, we have a fair amount of variability from patient to patient. And so with that in mind, it's really important, even more important in that patient population to have adequate and good control of the androgen levels, which is why we're focused on that as the primary in this sense.

Got it. That's really helpful. On ONGENTYS, it sounds like you guys have been getting great doc feedback there as have we from our own KOL checks, but sales really haven't yet gotten off the ground. Is this all just formulary lag? Is it pandemic effects? What are the key hurdles from a commercial standpoint there? And how do you potentially overcome them?

Yes. Brian, I mean, there's a couple of items going on here. One is, like you called out, launching a new medicine during the pandemic, that is quite difficult and not ideal, but it was something we wanted to launch the medicine and get it into the hands of KOLs as quickly as possible to get some patient experience. So I think that, that continues to be, if you'd say, the biggest hurdle is simply getting experience with ONGENTYS. If you recall, we did not conduct any clinical study in the United States. So this is truly the first time patients and clinicians are getting their hands on this medicine. And then the second piece is just access. The timing of launch didn't lend itself for us to be added to 2021 formularies for Medicare Part D plans. So our hope and expectation is that we're going to be working towards getting on the 2022 formularies for Medicare Part D plans. So I think between experience and ensuring we have the right access setup, I would expect that this medicine will continue to help many patients control their off time much better than where they're at today.

Got it. And I know we just have maybe a minute remaining. So just one last question on the opportunities sort of bigger picture strategy and business development. You have a much larger pipeline than in past years, but external asset prices have also changed in recent months. Do you see opportunities out there that may be complementary to your existing neuroendocrine portfolio? And are there disease areas and modalities of particular interest? Or do you primarily plan to allocate capital by optimizing -- towards optimizing INGREZZA's commercial uptake, expanding the indications for INGREZZA and progressing the internal pipeline.

Well, I think I'd say in the near term, there's going to be a really high bias towards investing behind INGREZZA. We understand getting INGREZZA's growth on track, expanding indications are going to be our quickest path to drive value for shareholders. So our biggest focus is on INGREZZA; our second biggest focus is on our CAH program; and then third is focusing on shepherding all the remaining programs that we have and advancing them in the clinic. We do see a lot of interesting science on the horizon within neurology, neuroendocrinology and then also psychiatry. And you can see based upon the assets that we've in-licensed recently, whether it be psychiatry or even precision medicine focused on epilepsy, there's some great science that's out there outside of our 4 walls that we're going to continue to seek out and bring in house, whether it's from a licensing or acquisition. So we are looking forward to the future to be able to do those types of transactions with our financial profile. However, our near-term focus is myopically on INGREZZA and restoring growth there.

Got it. Great. Well, with that, I know we're out of time. So Matt and Eiry, thank you guys so much. Sorry for the technical issues that we couldn't see on video. But hopefully, in the near future, we can all get together in person again. So thanks again, and thanks, everyone, for listening.

Thanks Brian.

Thank you, Brian.