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

Great. Thanks very much. Good afternoon, everybody. It's my pleasure to be hosting Eiry Roberts, Chief Medical Officer at Neurocrine; and Kyle Gano, Chief Business Development Officer. I think we're going to use this as an opportunity to really kind of dive deeper into some of these pipeline assets and preview some of the data that's coming up.

Maybe to kick things off, maybe, Eiry, I think it'd be interesting if you just give a quick sort of high-level overview of the status of each pipeline program. And then Kyle, maybe you could sort of follow with some just sort of thought strategically on Neurocrine and the types of transactions you've been doing, and as the company matures, if maybe the types of transactions you might be willing to do either from a stage or size perspective might mature as well. But Eiry, do you want to go ahead, please?

Yes. Thanks, and thanks so much, Paul, for having us here today. It's a really great pleasure to be here. Always happy to chat about the Neurocrine pipeline. And considering all the progress and expansion of that pipeline that's gone on over the last few years, we're very excited about where we are now. We have a very deep and diversified pipeline, both in terms of mechanism of action, but also in stage of development and in the therapeutic areas that we're seeking to serve. Right now, we have 12 mid- to late-stage programs, 5 in Phase III registrational trials and 7 that are in Phase II or currently in proof-of-concept phase. So those span across our 3 focus therapeutic areas, that being neurology, psychiatry and neuroendocrinology. And if we think about our closest 2 registration program, that's in the neurology space, that's our Huntington's disease program, where we read out our Phase III pivotal trial at the end of last year and we'll be coming forward to file a supplemental NDA on that program later this year; and then in Phase III, we have a mixture of both psychiatry assets for our valbenazine program and neurology assets for dyskinetic cerebral palsy for valbenazine as well. And then if we go into Phase II, we have a whole series of molecules that will read out data either this year, and I think we'll get to talking about the 104 T-type calcium channel antagonists that we have important readouts coming out on in the near future in the essential tremor and in a rare pediatric epileptic encephalopathy, CSWS. And then beyond that, obviously, for our remaining neurology assets, the Nav1.6 sodium channel antagonist and our psychiatry assets across a range of disorders in depression and schizophrenia, we have the opportunity to read out data from those programs, together with several of our Phase III studies over the next 24 months. So it's an exciting time here at Neurocrine. As you can probably imagine, that means we're very focused on execution against our pipeline this year and into the next year or so. And hopefully, as we bring forward results from those programs, we'll be able to continue to grow our opportunity to serve patients across these important set of diseases in the neuroscience arena.

Great. Thank you. Kyle, do you want to chime in?

Yes. So I mean, I think for me, it's hard not to talk about the pipeline without business development and vice versa, and I tend to keep a scorecard in my mind of the pipeline over time. And if you want to just think about between this year and next year, 4 Phase III readouts and 5 Phase II programs, an sNDA filing and hopefully, an sNDA approval, that's a lot going on here at Neurocrine. And obviously, a lot of that goes to Eiry's group. In terms of business development and strategy, probably just a couple of things. I know, Paul, you and I talk about this a lot, and there are various forms that we get together with. I think maybe a couple of new things just to add to some of the things that we've discussed over time. And firstly, we're very realistic about our BD efforts and objectives and what we can reasonably expect from bringing in a new program to the pipeline. We don't expect a [ probably ] like success for externally derived assets to be different than internally derived assets. And I think that's an important thing to call out because I know in some organizations, there is an internal expectation that assets from the outside do look different and are perceived differently than those that are discovered internally, and that can cause issues over the long term. So I think that's 1 piece. And I mentioned that because I know that we've discussed in the context of some challenges that we've had in programs that we brought in from the outside. Again, I wouldn't expect those challenges to be any different than if they were programs that we had discovered and brought to the same stage here at Neurocrine alone. I think the second piece is whether it's a partnership or a collaboration, we try to structure these to mitigate our risk. And just a couple of things to point out, like in our Voyager collaboration, there's something in the gene therapy space. All the collaborations or programs that we have, therefore, are stand-alone. If one doesn't succeed, that doesn't pull down the whole collaboration. We pivot our resources to the other 3 programs. So there's 1 piece. We also structure our deals from a financial perspective to mitigate risk. A good example there is in the Takeda collaboration, where we cost share through Phase II and to the clinical stage assets. And I think that even when we look at the studies that we design alone with programs that we bring in or with our collaborators, we structure these studies, and Eiry, I'm sure, will speak to these later, with pieces of the studies in mind that if they're not exactly what we're looking for, we acquire learnings to pivot into other studies or other disease states and allows us to maintain these mechanisms that have the ability to cut across multiple disease states to be explored a new study. So in all these pieces, we're gaining and hopefully giving us leverage on programs that we bring externally. And then the last piece is just a reminder, in terms of our capital allocation, we're exclusively focused on investing in INGREZZA in the pipeline and business development as a part of that investing in the pipeline. And with that, we have over $1 billion in cash on our balance sheet and the ability to look at even larger deal sizes than our cash position from anything from $1 billion to the $4 billion ZIP code is all possible. I think at the end of the day, that despite continuously searching for any and all licensing deals and M&A opportunities, while we're in a position of state strength, we understand that attractive opportunities that touch on our interest are scarce. So we know what we're dealing with in this environment, and we're looking at anything that we think can add and deliver on long term -- our long-term growth objectives for the companies, but we appreciate our universe is small. So maybe I'll pause there and let us move on to other questions.

Yes. No, that's great, Kyle. Thank you. And just to kind of clarify, you had mentioned a few of your criteria. I want to keep it high level, but you had mentioned composition of matter and new chemical [ NV ]. Any others that are high level that are kind of beyond, say, specific therapeutic areas that are important to you?

I think there's a couple of pieces in there. Obviously, we look for partners whose expertise and technology complements our own. It may not be overlapping with ours, but it's something that we feel like if we pick up, it can be put in with our R&D teams and be utilized without pause that can be used to help us get into areas that we haven't been. So you can think about differentiated modalities, other technologies for drug discovery. I think what we've shown, if you look a little bit deeper on all of our pipeline programs, they're all connected to the originators. And the originators continue to invest in these spaces, targets, disease states. And we find that expertise very helpful as we bring these programs in. If you look at something like Idorsia, here's a company that's been working on T-type calcium channel blockers for 20 years, and they continue to work on that with us. There's a lot of expertise there. We like that type of relationship versus assets that have come through multiple parties, and we've lost that institutional knowledge, and they may be an optimized on different disease states. That's not as appealing to us. So there are some tangible things and some intangible things that we look for there.

Yes. Okay. Okay. Great. So maybe Eiry, I'll target a question at you now, and that is related to this T-type calcium channel module that you're setting in tremor. I think most folks listening in have at least a high-level background, but to maybe add some context, 1 question I get from some investors who dug in more is that when you look at the data from Cavion or Praxis, it seems like there's some proof of concept of activity, but the magnitude of activity isn't huge. So how do you view that data? And how does your molecule compare and differentiate from others as you sort of look ahead to this Phase II catalyst coming this summer?

Yes. I mean I think there are several reasons to believe that we have a great profile in the 104 molecule and one that we're really keen to read out the data from our first 2 Phase II trials in soon. The first thing is this is a highly selective, highly potent Cav-1 -- 3.1, 3.2 and 3.3 inhibitor. And it was particularly designed by Idorsia after much of their work that Kyle alluded to, to be highly centrally penetrant and in terms of their brain to peripheral ratio, I think that's very high in the case of this molecule might not necessarily be the same for other molecules that have been studied previously. I think all the molecules are a little different, and I think it is early days in the clinic for each of them. But what we can say about our own molecule up to this point is that if we look at the preclinical and clinical data, we have a very well-tolerated clean molecule in that regard. We've published the Phase I data. Idorsia did that. And we have a very benign side effect and tolerability profile in Phase I, together with the ability from that Phase I program to effectively identify a dosing regimen that allows us to go into the Phase II studies, both in essential tremor and in CSWS. Furthermore, no evidence of any cardiovascular signal in either the preclinical or in our Phase I data. I know that's something that has been a question in these areas you look across the molecules. And in particular, as I said, this very high cell activity for T-type calcium channels in the CAVs 3.1, 3.2 and 3.3 space. So if you look also at our Phase II studies themselves, I think I'll talk a little bit about ET first, if that's okay. The way we've designed that trial is we did try to learn from the experience that Cavion and Praxis have had before in terms of the design of the program and that we were very keen to go into a very well-controlled single site setting to do a crossover study in patients with moderate to severe essential tremor because we believe that controls for a lot of the variability that I think has been a real challenge in the previous Phase II studies done in this space. So -- and indeed, our endpoints that we're looking at are a little different from those that have been published on before as well. The primary endpoint in our study in this crossover study is a comparison between 104 treatment and the placebo treatment, looking at an objective measure of maximum tremor in the upper limbs and that is measured by an accelerometer. And obviously, in the context of a highly contained single-site center, we're able to really understand the variability associated with that end point. And by having 28 patients in that crossover trial, we believe we have a great degree of power to compare to, say, some of the other programs that have been done in order to be able to look at that primary end point. Now obviously, people are going to be interested beyond that so-called biomarker or surrogate of tremor measurement about what's the actual impact on other measures such as TETRAS and functional outcomes for these patients. And so we do have those measures all built into the trial as well as well obviously as important tolerability and safety measures. So at the end of the day, as we come forward in the middle of this year and read out the data from that study, we'll be looking at the totality of data. We'll obviously be reporting on the primary endpoint in terms of the impact of the medication versus placebo on accelerometry measured tremor itself, but we will be looking at the [ ADL ] and performance measures within the TETRAS, the functional endpoints as well and tolerability and safety, together with obviously the pharmacokinetics of the drug as well.

So Eiry, maybe -- that's great overview. So maybe to boil it down, is your thesis that these other T-type calcium channel modulator either aren't hitting the right subtype or have a narrow therapeutic index?

Yes. I mean I think it's probably a little different from medication to medication. Now the amount of data, particularly for the Praxis compound, that was a relatively small data set, and there was a high degree of variability. I think even the company themselves have commented on the impact of COVID on some of their data as well, given where the studies were being done. Obviously, the Cavion study data set is larger, but they had a great deal of variability and the emergence of some of these psychiatric types of side effects, which are a little difficult to understand. And so I think all I can say is that we have a highly selective, highly potent CNS-favoring calcium channel -- the T-type calcium channel antagonist in 104. And we don't have to wait too long for us to read out some of the data to understand exactly what we're seeing in comparison.

Maybe, Paul, I could just add a little something there. I think what we've seen, thus far, is that we believe even the competitor compounds have shown that the MOA is active. However, we're in that stage right now that appreciates there's been no medicine discovered for essential tremor since 1970. So we've gotten these end points that we have to use from the FDA but no one's taken that start from the start to finish to optimize both the dose, the right patient population, the wording of the endpoints, and that's where kind of all of us more or less are right now. We think that there's a signal there, but it's going to take some effort by all the parties involved here to get it over the finish line. The good news is that at the end of the day, there's a 10 million patient population waiting desperately for a new medication for their essential tremor. And if you think about some comparator-sized markets that we're familiar with and that we may have the opportunity to talk about here, if you look at something like schizophrenia, there's some 2 dozen products for the 3 million schizophrenia patients, 70 million prescriptions. None of that is available for any of the 10 million patients with essential tremor. So we're very excited about the opportunity here. Definitely, I know we throw around a lot high unmet medical need, but the last medicine was approved 50 years ago. There's a lot of room to add medicines here to the armamentarium and physicians and certainly for patients to win here.

Yes. Yes. Okay. And is a win in this study succeeding on both the accelerometer and quality of life endpoints, do we -- I kind of think about it a little similar to TD with the AIMS and the CGIs. Is that a fair analog?

Yes. I mean I think we are interested in the totality of the data. And in particular, as well to the point that I think Kyle and you both made, it's going to be important what the therapeutic index looks like in terms of the tolerability as well. But -- but I think this is an area, to Kyle's point, given the huge unmet need here, that we will learn from this current study. It may be that it's incredibly straightforward for us and we get to go to the agency and talk about the registration package right off the bat, or it may be that we'll learn and understand what the next piece of work we need to do to inform our thinking. I certainly think that the only thing I'd add from what I said previously is this [ palamacotical ] oscillation abnormality that exists both in essential tremor and in epilepsy, CaV 3.1, 3.2, 3.3 recept the channels genetic mutations in those channels are present in that area in a lot of different patients. So it's very -- it's quite reasonable to believe that targeting this set of targets is going to be beneficial for patients provided that we can navigate the therapeutic index, and we can get the right design or program in place.

Yes. Okay. Switching gears to epilepsy, you're going to have some data later this year. How did you choose this seizure type? And again, I don't want to dismiss that having a clinical benefit would be obviously awesome in this patient population. But from just a market perspective, is this indication big enough to be needle moving for a company like Neurocrine? Or would it need to be more of a foray into other epilepsy subtypes, too?

Well, I think as I mentioned a minute ago, the genetic mutations that you see in these channels in the [ pelamacotical ] part of the brain, those are applied to multiple different epilepsies. The reason for choosing CSWS is a couple of reasons. The first is, obviously, there's a very significant unmet need in this setting. It's a rare pediatric epileptic encephalopathy of which there are no approved treatments right now. And as a result, I think it's also something that presents a lot of times with cognitive decline and other issues of neurodevelopmental nature in patients. And so we were very interested in that setting in terms of the unmet need that existed there. Furthermore, patients with this encephalopathy present with a characteristic EEG finding, which we can look at in the context of our first Phase II study. And that's a very good biomarker or surrogate for the clinical impact that we could have on both seizures themselves but also on outcome for patients with this disorder. And so for that reason, we thought that in the context of this 24-patient study that we're performing, we will get a good idea of the signal and the benefit that we see against that EEG signal during sleep in this patient population. And that will then give us good insight both from a dose response perspective and an understanding of potential efficacy for other epilepsies outside of the CSWS space as well, in addition to potentially generating the significant benefit for this patient population that has a huge unmet need.

Yes. Let me just add to that, too, Paul. I mean, I think the way you can look at the 104 program in isolation, we like to look at it as a portfolio. If you look at our interest in the sodium NAV 1.6 program and what we want to do in the sodium channel program, in general, and combine that with our efforts here, we're looking at developing a portfolio of assets for rare diseases. So any one of them may not be attractive in and of itself from just simply a revenue perspective. But you put them together, what you have is a portfolio of higher, I would say, relatively higher probability of success given the translatability of some of the animal models that we have available here. You put them all together, you've got quite a nice series of niche kind of products that get you to some really nice overall revenue opportunities here. And that's how we see this. And with 104, you think about CSWS and moving in the [ Obsons ], it's a [ part ] disease but obviously much higher in terms of prevalence. And then you really start thinking about a significant opportunity, you layer on top of that essential tremor, and you've got a nice portfolio there within a single program.

Yes. Yes. Okay. Great. I want to try to see in the next 5 minutes, how many drugs we can cover. On the [indiscernible] compound, what gives you confidence that this is not too far behind Karuna and Cerevel? And that this is going to have a hope for differentiation?

I think a couple of things. First of all, I think we were really interested in getting into this area because I think both Karuna and Cerevel have validated the M4 mechanism in the treatment of acute psychosis. I think Karuna alone couldn't do that because of the broad pharmacology of [indiscernible]. Secondly, I think we have a selective agonist here, not a positive allosteric modulator. And as a result, that gives the breadth of opportunities beyond schizophrenia, I think, that relate to not requiring acetylcholine to be present, because in certain disease there is obviously the acetylcholine levels are much lower, such as in cognition. And thirdly, I think we have a suite of preclinical and Phase I data that gives us a great deal of confidence in the dosing schedule and the approach that we're taking to go into this first Phase II study in schizophrenia. And fourthly, I think there's a lot of learning that we can gain from those that have gone ahead of us. There's a huge unmet need in schizophrenia. There's definitely room for more than 1 molecule that would attack a new mechanism of action, since everything up to this point has been mediated dopaminergic mechanisms through D2 antagonism in schizophrenia. And so for those reasons, I think we believe that we have a well-designed program going into Phase II later this year, and we are working as hard as possible in parallel to understand all those things that will allow us to catch up. I don't know, Kyle, if you want to say anything else?

Yes. I think the excitement here is the opportunity to be a player in a whole new potential antipsychotic class for patients. There are 70 million antipsychotic prescriptions written each year, some 2 dozen different antipsychotics. And what we're talking about here are the 3 leading clinical candidates are so different in terms of what they bring to patients and physicians. You've got 1 product that you're using an add-back to block side effects. I mean we're not talking about the difference between Zyprexa and Abilify here. The deliveries and the profiles of these 3 different approaches are widely different other than the fact that one of the things they passed through in M4. So I think that no medicine among the 3 that we've been talking about here is created equal. And I think that what we're trying to do is offer the most straightforward contemporary approach of attacking -- targeting a mechanism that we think is going to be very important in this space in the future.

Yes. Okay. And how far -- how close are you, to say, Cerevel? How far are you from POC?

Well, obviously, we will generate POC in our upcoming Phase II study. We're still in the final stages of preparation for that. And once we know exactly what that study looks like and exactly what the time frame of that study is, we'll obviously be able to make more comment around that.

Okay. Okay. And then I know we're close out of time, I would have like to talk about more. But for [indiscernible] program, this is one that I'm really interested in, and you're going to have Phase III data next year, right? I think one of the questions that we've talked about -- is that right next year? Correct?

I'm sorry. I didn't hear the beginning. You cut out, Paul.

I apologize. The CAH Phase [indiscernible]

Yes, yes, yes. Absolutely. Yes.

I was just curious -- I know it's a complicated question because it's always hard to answer. But how did you take the initial data and power a study based on how much steroid sparing you might expect that to translate into? And how do you think about like a threshold of steroid sparing and implied clinical benefit?

Yes. So that is a question for more than 2 minutes. I'm happy to talk for more the 2 minutes at some point. But I think one thing that's very clear is if you took the Phase II data that we saw, we were really impressed by the dose response that we saw in terms of the impact, particularly on A4 levels. And so I think that gave us a high level of confidence since that was on a background of stable steroid that in the setting of a longer-term treatment, we could significantly reduce the steroids in the face of still maintaining androgen control. And so it is a relatively small data set to power a Phase III study. So what I would say is that the study in terms of the primary endpoint that we're looking at and the biomarker endpoints, the hormone level endpoint, it's actually significantly overpowered relative to our estimations because we had to generate safety data set that meets the needs of the 6-month long-term treatment. And so I think we have a high level of confidence that we're addressing that variability question in the context of the trial that we have designed. And just 1 comment. I mean we continue to be on track with those trials. I think in particular, the pediatric trial is really going well right now in terms of that registration trial. And yet a significant unmet need exists in that pediatric space with respect to the impact that high dose steroids and high androgens have on normal growth and development. And so I think we're particularly pleased with the fact that we have those programs going on in parallel and that they will both read out next year because that will give us a chance, hopefully, to address the full population of unmet need in CAH.

Great. Well, thank you both very much. So tremor data midyear, epilepsy second half, and then a bunch of other readouts next year. We didn't talk about that XEN901 compound, but that's next year as well in epilepsy, correct?

Yes.

Yes.

All right. Great. Well, looking forward to it. Thank you both so much. I appreciate it.

Thank you. Take care. Bye. Thank you.

Thanks, everyone. Bye-bye.