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

All right. Good afternoon, and welcome to the Barclays Global Healthcare Conference. My name is Carter Gould, Senior biopharma analyst here at Barclays. Pleased to welcome Neurocrine Biosciences to the stage. We have Kevin Gorman, CEO; Matt Abernethy, CFO. Kevin, Matt, thanks very much for joining us here today. Really glad we could meet in person finally after a long period. We are overweight, Neurocrine, and very glad to have you guys today.

Thank you very much, Carter, and thanks to Barclays for the invitation here. Really looking forward to -- good to see a lot of familiar faces. Before you start grilling me, I just wanted to say that we are going to be making forward-looking statements. So I would encourage you to look at our recent SEC filings.

Okay. And maybe, I might ask you just make a minute or 2 of opening comments and then you can -- we can do the grilling.

Absolutely. So Neurocrine is a young company. We're only about 30 years old. We have our lead product on the market that we market in North America ourselves, that's INGREZZA to treat tardive dyskinesia. We're very pleased with the progress that we've made with that serving the needs of these patients who have never had a treatment for a devastating movement disorder prior to our launch about 5 years ago. We're at the very beginnings of the market still. We are selling a bit over $1 billion after 4 years on the market. So that was -- we're real happy with the uptake, but a long way to go. We're going to talk about that a lot more. So I'll just move on to what we probably won't have a chance to get to very much is that we have a very deep pipeline. As I said, we're a neuroscience company. What does neuroscience mean to Neurocrine? It means that we have discovery and development in the fields of neurology, neuroendocrinology and neuropsychiatry. We hope actually in the not-too-distant future we're going to add that fourth leg as we define neuroscience and that's neuroimmunology to our portfolio. We have currently 12 molecules -- 12 drug programs in development in Phase II and Phase III. Over the next 18 months or so, a number of these programs are going to be reading out with Phase II and Phase III data. The last Phase III study that we read out was late last year, so just a few months ago, but it seems like so much longer than that. And that is with valbenazine known as INGREZZA. One I was just talking about that we have on the market for tardive dyskinesia. We took that into Huntington's chorea patients, to treat the chorea -- those movements in Huntington's chorea. The drug proved itself very effective in that and with a very nice safety and tolerability profile that we are going to be filing for the sNDA for that indication towards a little later this year and then knock on wood with an approval, we would then be on the market with that indication in addition TD it would be Huntington's chorea. But as I said, our portfolio is 12 compounds in Phase II and Phase III clinical trials, again, covering everything that we focus on, neurology, neuroendocrinology, neuropsychiatry. We're in a very good financial situation with over $1.2 billion in the bank, we're not dependent on the markets at this period of time. So it's a good time for us, but it is not something that we're resting on our laurels at all. We have a lot of hard work still to do with INGREZZA in the TD population, and we have to perform on all these clinical trials. They're not all going to work, but many of them will. But it's up to us to enroll them in a timely fashion. I think we've designed good studies. We just got to stay on top of things keep moving the company forward. And we're not done with a dozen in the portfolio. We are constantly on the lookout for more coming externally, and we have a robust R&D engine. Our research engine has given us INGREZZA, that was discovered and developed in-house as well as our women's health compound ORILISSA, which we partnered at the end of Phase II with AbbVie. So with that...

Perfect.

Now you get to grill.

Great. And I promise I'm not going to ask any guidance questions, but we'll have stuff for Matt to address too. So I guess, first off, when we think about Q1, putting aside all the kind of seasonal dynamics that always come into play. When you just think about sort of starting to come out of COVID, maybe some evolution in sort of psychiatry treatment patterns and psychiatrist behaviors return to office. Can you maybe just give us sort of a state of the state on that front? And are we starting to see real shifts away from telemedicine?

Well -- so -- it's a big question. Yes, I think the shifts that we're seeing are very encouraging as evidenced by all of us being here today in Miami. Psychiatrists who are our main point of call right now, about 80% of our call pattern is psychiatrists, 20% are neurologists. Psychiatrists were the biggest users of telemedicine before the pandemic. About 15% of their patient visits were telemedicine. Obviously, like everyone else, they went to 100% virtual. But everyone has been coming back slowly but surely over the last year or more. I would say neurologists are all completely back in the office, very little use of telemedicine. However, psychiatrists have been slower to come back in about 40% to 50% of their patient visits are still telemedicine. Also, psychiatrists are seeing fewer patients during the pandemic. That may still counter to what you would have thought with the mental health crisis going on. But they're down about 20% in the number of patient visits that they have, whether it's virtual or in person. But you are seeing more and more of them coming back into the office. Like I said, it's 50% to 60% of their patient visits now are face-to-face. And that's important for us, important for INGREZZA because what we're talking about is a movement disorder. It's something that you need to see the patient in order to diagnose. And what we do primarily at Neurocrine from the very first day of launch, being the first drug that's ever been on the market for tardive dyskinesia. We are teaching. We are teaching the psychiatrists to acknowledge the movement disorders, the disorder that they're seeing in front of their patients, gain confidence in being able to accurately diagnose it as tardive dyskinesia and then the call to action to now you have an obligation to have it treated effectively with INGREZZA. And what was nice is that early last year, American Psychiatric Association, APA put out revised guidance for the treatment of tardive dyskinesia for the first time in 25 years. And their recommendation is first-line treatment is with the VMAT2, which is an inhibitor, which is exactly what INGREZZA does in a highly specific manner. So you're seeing that we're returning to more normalized growth. You see that we gave guidance for the first time for the year in our earnings call back in February, said that we were giving guidance of sales this year between $1.25 billion and $1.35 billion. And within that guidance range, is that we don't believe there's going to be any real change in telemedicine or behaviors. We do not think that the more liberalization of the telemedicine rules that exist under the emergency health order will change this year. We believe that, that will go on through the entire year. Any change in that would be upside to us. So we have been equipping psychiatrists with more and more tools that we've developed to help them diagnose TD in a flat environment, meaning on the computer screens as we continue to educate them. And the last thing I'll say about this is that when we launched out of the 600,000 patients in the United States that have tardive dyskinesia, only 2% to 3% of them had a diagnosis for TD. Now 20% to 25% of them have a diagnosis for TD. So we've made some real inroads. A long way to go, it will go much higher than that as we continue educating. But in addition, as I said, there's that call to action of that 20% to 25% that have received an actual diagnosis for TD, only half of them are receiving VMAT2 inhibitor.

Some of the -- you talked about making a number of investments on the commercial side, expanding the sales force. Launching DTC, other kind of education awareness campaigns. Maybe just give us an update kind of on where those stand and the timing and magnitude of impact even qualitatively, you expect those to have over the next year or two.

Well, the one that I'd say is the biggest investment at least right now is our expansion of the sales force. We've recently expanded from 215 to 350 territories, and I think really reflects the conviction that we have around the market opportunity. Over 500,000 patients right now are not getting treated with a VMAT2 inhibitor and the opportunity is quite significant. Kevin and I actually just got back from the national sales meeting, and the energy is extremely high. Those reps are going to be in the field fully in the second quarter. And I would expect that, that would be contributing to growth here in the second half of this year. This is clearly since launch has been a very promotionally sensitive medicine. The more call activity to a clinician, the higher likelihood TD stays on the radar and the higher likelihood of script ultimately gets written. So I think increasing our sales force by 2/3 is only going to help get us to the next leg of growth. And then the second piece is on the DTC campaign. We launched that last year. So what I was talking about on the sales force side, that's deeply engaging with your clinician. On the patient side, the patients, by and large, have this movement don't really know what's causing this, and they definitely don't think about asking their psychiatrists about this. It's -- I always use the analogy, it's like somebody going to the dentist office and asking them about their ankle. So what the DTC campaign is intending to do is engage a patient or their caregiver to say those movements, those might be TD. Ask your clinician if INGREZZA might be right for you. So we're right in the middle of that launch. It's been out for 8 to 10 months at this point. And I would expect that the combination of DTC engaging the patient and the sales force engaging the customers will have an additive effect to our growth here later this year and into 2023.

That's helpful. If we take a step back and you talked about sort of treatment rates only in like the mid-20s percent range. In the past, people -- a common question is, where do you think that ultimately can go? I'm not going to ask you that question today. But when you think about the long-term trajectory here, what are the 2 or 3 things that you need to get right to really maximize that opportunity?

Yes. And I'll sound like a broken record, Carter. And by the way, I appreciate not asking about the first quarter and how that's going and trying to pull things out like that. And I also appreciate not asking where do I see the treatment rate is going to end up, although it will be multiples of the 20% to 25% that we're at. So I'll throw that in. What we have to get right is what I think we've done a very good job to date, but we just have to keep at it. And that is removing all the barriers to between the psychiatrists and the patient in getting recognition of TD, getting the diagnosis for TD and then appropriately treating them. It actually is as simple as that, although it is difficult, and it's difficult for some very reasonable reasons. Number 1 is generally, when a psychiatrist, especially these days is coming into the office, what is top of mind for them is I'm going to be seeing 3 patients today who are suicidal. I'm going to try to walk them back from the ledge. I'm going to try to make sure I keep them out of the hospital. So those are the -- that's the top of mind things that they have coming in. We have to keep top of mind that if any one of those patients has tardive dyskinesia, or there are other patients who are apparently stable on their antidepressants of their antipsychotic meds, tardive dyskinesia can be the thing that throws them over the edge. It really does impact their quality of life, their sense of well-being, their sense of work. And so it is to keep that at the top of the mind, show them the data that's been developed now over the last several years of the real impact that beyond the movements, beyond the biting of the tongue, the breaking of teeth, difficulty swallowing, walking, holding things, go to how it actually impacts your social interactions. How it isolates the patient, yet once again, and get that call to action, have them than prescribe and treat.

Perfect. With that we'll talk a little bit more about that pipeline that you were teeing up before. We did a deep dive, I think, last week on the essential tremor landscape. I wanted to ask a couple of questions on that front. I think during that work, one of the things that really kind of stood out to me is the Phase II, I think, is really structured well to give a pretty clean look on if you're seeing an impact on these tremors. And then there's a couple of aspects that I wanted you to comment on, which is use of accelerometers, the crossover design, single sites? And just maybe if a signal does emerge out of that -- out of that study kind of the fidelity of that signal and how you think about that as you think about the potential next steps?

Yes. And I appreciate that. You're right. We're giving the drug a real good shot here. So this is a -- by mechanism, this is a T-type calcium channel blocker. There's quite a bit of data that would, I think, implicates calcium channels as being involved in essential tremor. And what is the essential tremor. Essential tremor is a tremor that develops with age and it starts unipolar so that you have a tremor that starts out in 1 hand and arm and then eventually progresses to both hands and arms. Initially, it starts out mild, but then it gets more and more such that you can no longer write, you can no longer type. You -- difficulty holding anything. So that is essential tremor. And it generally comes on towards 50s and then progresses throughout life. It is -- the trial that we've designed is small. It's only a 28-patient study. But it's a crossover design. So the patient is on drug and then for several weeks, then they wash out and then they go on placebo. And so we -- or they start on placebo, wash out and go on to drug. And so we get a good idea of each patient serving as their own control. We've enrolled only moderate to severely suffering patients into that so that we're certain to see a signal. Now there's a number of different ways that you can measure the effectiveness or measure essential tremor. One of them is a subjective endpoint, which is called TETRAS. And it is measured by the doctor in an observation and it's also through Q&A with the patient. So we have TETRAS in the trial, but we have as a secondary end point. What we wanted to do is technology has gotten a lot better over recent years with accelerometers. So what we're doing is we're measuring their -- the amplitude of their tremors at peak frequency. And so what that means is we put accelerometers on each of their hands. We have the patient stand and then hold the arms out in front of them and then let the accelerometer measure that. So a very objective measure that we're looking at. So there's the primary secondary is the TETRAS measure, which if you talk to FDA right now in the absence of data, they would say, we want you to do TETRAS as the primary end point. Part of the study is to go to the FDA with data and say, hey, look, what we found with accelerometers, look, what we found with TETRAS, let's have a discussion, what do you want us to do going forward. And we found that engaging FDA early in your clinical program and asking them questions and asking for their input and making them a partner in the drug development is has always been very helpful to us. And that's the same, not just with FDA, but the European regulators because we're developing this worldwide. We also have quality of life measures in here. They are part of TETRAS, but we have some other measures outside of that. We also have in here patients and physician global impression to chase. So we're going to get a lot of data from a small trial. We're giving the drug a really good chance at it, but it is a signal-seeking trial. So we're going to look at the totality of the data and see does this convince us that there's a powerful signal here. And obviously, you're looking at safety and tolerability because you need a well-tolerated medicine because you're going to be going into an elderly patient population. So we're putting kind of a high hurdle in what we need to see here in front of this drug, because we have a lot of things to invest in at Neurocrine and also because essential tremor is the largest movement disorder that exists in humans. There's 10 million people in the United States who have ET. There's 12 million in Europe. So if this trial convinces us that this deserves further development, then we're going to go into a large phase to a true dose ranging study. And then from that, we would go into a Phase III program and these would be worldwide. So that's expensive. So we put a high hurdle in front of us to take a look at this.

Makes sense. I think one of the things that really stood out to us when we did our calls with movement specialists is how those docs really spend their day and they really kind of highlighted spending 50% to 60% of my time with Parkinson's patients. 30% to 40% of my time with ET patients. TD is a little small rounding error at the bottom. You could imagine the impact that might -- positive data there might, it'll knock off.

Absolutely. Absolutely. It is -- it would be a -- that would be a very important drug to have. And we already are in all of those movement disorder neurologist office with our essential tremor drug. And we have in our bag also ONGENTYS that we sell with our partner, BIAL, but we sell it here in the United States and that is for Parkinson's disease. So we're already meeting with all of these stocks already.

Okay. Maybe coming back to INGREZZA, but in some of those indications that are not in street models, if we look further out, we think about cerebral palsy. And then also...

Adjunctive treatments for schizophrenia.

And how success then either of those indications could be transformative to the company or really kind of further expand upon an already large opportunity in front of in growth.

Yes. So I would be remiss to not mention again that I think it's already something that everyone just assumes, we had terrific results in the chorea associated with Huntington's with it. That was the first label expansion that we anticipate to get next year. And so we are in 2 Phase III clinical trials, 1 in the adjunctive treatment of schizophrenia, 1 in the dyskinesia associated with cerebral policy. Both of those are going to read out next year. Dyskinesia cerebral policy is a small patient population, yet it is the largest movement disorder amongst children. So it is not insignificant. There's nothing for those kids right now. So we view that as very important to go into. The adjunctive treatment for schizophrenia that's something that right from the very beginning of our development with INGREZZA, when we went into FDA and we said to them, look, here is our drug. It's a highly, highly specific and potent vesicular monoamine transfer (sic) [ transporter ] 2 inhibitor. This is what we're going to be taking in the tardive dyskinesia. And the agency was very supportive of that. We had great dialogue for several years as we went through with them on that. One of the things they came back to us early on and said, especially when we showed them the efficacy that we were seeing, the safety profile they were seeing, they said, you know by mechanism, this could be an antipsychotic. This is lowering dopamine levels, which is what you want to see in an antipsychotic. And so they said, will you be exploring this? And we said, in due time, we were a little company back then. We were like 100 people with no revenues. We've come a long way since then and now is the appropriate time for us to go in. We have good animal model data as good as animal model data gets in models of schizophrenia, but it works well in there. And so we would look at this as we're looking at in these clinical trials to be additive to their current antipsychotic treatments to see if we can actually potentiate that.

With the last minute half, I want to ask you a question. You mentioned something earlier, which I haven't heard you really mention too much before, and that's neuroimmunology. And to the extent -- is that something that is going to be homegrown, are you going to look externally for that? How much of a focus is that for the company?

Yes and yes. It's internal efforts that we have in the neuroimmunology, early days. It's also that there's some really good academic work that is being done at some major labs around the world in neuroimmunology, just aside when starting the company over 30 years ago. It was started as a neuroimmunology company, just a little bit ahead of its time. I think we're getting very, very close to having the molecular targets for inflammatory diseases of the nervous system. And I think that, that can be very important going forward. But that's really early days, but very excited about it.

Perfect. We'll have to stop there. Kevin, Matt, thank you very much for the time. Thanks for attending.

Thank you. Appreciate it. Take care.