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

All right. Let's go ahead and get started. Thanks, everyone, for coming. This is the 41st Annual JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by my colleagues, Malcolm Kuno and Priyanka Grover from the team. Our next presenting company is Neurocrine, and presenting on behalf of the company, we have CEO, Kevin Gorman. Kevin?

Thank you, Anupam, and thank you, everyone, for being here today. I almost feel like I need to be running back and forth on here. Before I get started, I put up our safe harbor statement. I will be making forward-looking statements. What I want to accomplish this morning is to tell you about Neurocrine, how we -- what we look like today, what our philosophy is, what our strategy has been, that's got us here and where we see that strategy taking us throughout the rest of this decade. And so if you look at what Neurocrine fundamentally is, we're a neuroscience company. That's what we call it. But how do we define neuroscience because it's much broader than just CNS diseases. Neurology is only one aspect of us being a neuroscience company. There is neuroendocrinology and neuropsychiatry. And one day, I hope, that we will be definitely doing drug development in neuroimmunology, but it's a little early for that. So that is fundamentally who we have been for 30 years and the way we will remain going forward. We've been a commercial company for 5 years. We've been a very fortunate company that if you look up at these drugs, INGREZZA, ORILISSA and ORIAHNN, these are drugs that were discovered at Neurocrine. They were developed at Neurocrine through late-stage development, INGREZZA all the way through development and INGREZZA is commercialized by Neurocrine, ORILISSA and ORIAHNN with our partner, AbbVie. We also look on the outside for opportunities. And so you can see ONGENTYS and now more recently Alkindi, as being other drugs that we've added to our commercial platform. So we've been very successful internally, developing some life-changing drugs. But we also look on the outside, and we're very active on that. And while we talk about how active we've been on the outside, this is a snapshot of our business development activities probably over the last 4 to 5 years that we have here. We have, as with many CNS companies to date, symptomatic treatments of various diseases. We have now stepped into what is the next generation beyond that, which is precision medicine, genetically identified disease states targets and then using very focused resources and drugs towards them. And then the step into the future, which is where neuroscience is going to be. You're always going to have symptomatic treatment, small molecule orally active compounds, but neuroscience is evolving rapidly. The way we've seen immuno-oncology and the outstanding progress that it's made over the last 15 years, that's what you're going to see in neuroscience over the next 7 to 10 years, which means we're going to be tackling diseases that are going to be -- we're going to be curative. And in order to do that, we make those investments now, one of which was announced this morning. And so I think what that brings us to is the ability here, we have probably one of the deepest portfolios in CNS gene therapy that exists out there. These take a while. Gene therapy is not something that happens overnight as we know. It's been evolving. We've been in it several years now. I think that we're now one of the leaders with our partner, Voyager in here. What allows us to do this? And what allows us to do this is an outstanding medicine, INGREZZA, which, as I said, we discovered fully developed and commercialized in the United States. We've given guidance for 2022 that we will sell between $1.4 billion and $1.425 billion. This is our fifth full year on the market. The drug has been so successful because of the tremendous benefit that it brings to patients. There is no denying that it has been life-changing for tardive dyskinesia patients. And we're going to talk about how we continue to invest in this medicine in order to bring it to all the patients that are suffering today. We have a robust pipeline at Neurocrine. And I'm going to speak more about that, but that is what we've built and what is the philosophy and how have we built that to date? And then how are we going forward. And then last but not least, we have a very strong financial position. We've been very careful in the deals that we do. We have plenty of firepower as we stand here today to do deals that can be licenses or can be much larger deal, and we have plenty of that firepower. None of that has changed to date. Neuroscience means automatically you're tackling some of the most difficult and devastating diseases that exist. It's not easy. But we've been successful to date, and I think we're going to be very successful in the future. Not everything is going to work, absolutely not. But we hope that many will work. And how do you increase your odds of success? Now that you've made the fundamental decision, our strategy is to be a neuroscience company. Well, what you want to do is you want to invest in mechanisms, and we can say compounds that can have multiple different indications. So one mechanism that can be applied to different indications; let's take our blockbuster drug, INGREZZA. It is approved in tardive dyskinesia. We have it submitted to the FDA for the chorea associated with Huntington's disease. We have 2 late-stage programs going on here for the adjunctive treatment of schizophrenia and for the dyskinetic cerebral palsy. So there's where a single mechanism can be broadly applicable. It's not the only compound that's like that. We have another compound, which is a sodium channel blocker, which can be utilized -- which we're utilizing and exploring in a very orphan seizure disorder that's genetically defined, so very much precision medicine and then in a much larger focal onset seizures. We also have the other drug that we had identified which is a small molecule GnRH antagonist, ORILISSA and ORIAHNN, same active moiety, 2 different large indications that are being pursued by AbbVie. And then down at the bottom, you see that we have 568 in schizophrenia currently. This is our muscarinic agonist and you are going to see more muscarinics coming into the clinic very shortly by us that will expand that franchise, that mechanism of the muscarinics. Now that is a very powerful way to increase your probability of success. But we don't stop there, we overlay that now in that several of the diseases, especially psychiatric diseases that we go after, they're tough. Don't bet on a single mechanism that's going to get you success. So what you want to do is you want to bring several mechanisms against those diseases. Take several different mechanisms against major depressive disorder, several different mechanisms against schizophrenia. That is our philosophy. That's how we've built this pipeline that we have today, and we're not done by any stretch of the imagination. I told you, where neuroscience means neurology, endocrinology and neuropsychiatry to us. And now you see how the pipeline fits into all of that. It is not an early-stage pipeline. We have 7 Phase II studies going on here. We have 4 registrational programs that are going on here. So we have a later stage. Some of these are much low or lower relative risk. Some of these are higher risk. The way we deal with that is we try to get into those Phase II programs, get to data as rapidly as possible as low cost as you can, and then cut the ones that don't work, take the ones that do work and invest heavily and rapidly in them. And that's what you've seen as we've moved over into these programs that are in registration. I'd like to talk a little bit about the milestones that we have set up for 2023. There's a number of them that we have here. I'm going to go into a little detail in just a moment. But 2024, early on, we have even more. So over the next 18 to 24 months, there's quite a bit of data that is going to be flowing from Neurocrine. Let's look at some of those one by one here that are coming this year; Valbenazine, that is the name -- the generic name for our tardive dyskinesia drug, INGREZZA. As I said, we have submitted the NDA to the FDA for chorea associated with Huntington's disease. Last year, we reported out outstanding Phase III data with this medicine. It is proving as efficacious in Huntington's as it has in tardive dyskinesia. The PDUFA date is in August of this year, and we look forward to continuing to work with the FDA throughout this year all the way until hopefully an ultimate approval. Crinecerfont. This is undoubtedly the next most exciting drug that we have that is in 2 registrational studies. Crinecerfont is for a very small genetic disease, neuroendocrine disease called congenital adrenal hyperplasia. There hasn't been a drug developed in here since the early 1960s. And much like we were the very first company to ever develop a drug in tardive dyskinesia, we are the first company basically that in the last 60 years is developing a drug into CAH. We don't go after the easy things. We go after the hard things where patients have had little to no drug development going on. What is congenital adrenal hyperplasia? Prior to the 60 days, it was deadly for all the children that were born with this. They can't make cortisol. And so you die. Hydrocortisone was discovered and developed and commercialized in the early 60s, mainly for inflammation, but the endocrinologists who are seeing the CAH patients realized, "You know what? What we can do is try to use hydrocortisone and then later on prednisone in very high doses to save these patients." So every day, high doses of because without it, they don't make cortisol, low doses, they are making massive amounts of androgens. Each one of these situations, extremely high androgen levels or extremely high hydrocortisone levels are deleterious to human health and shorten lifespan. So it's a constant balancing act, but that's all there's ever been for these patients. Crinecerfont Phase II data showed we can recapture the underlying disease. It's not a steroid. It basically blocks the action of a neuropeptide, and it brings back into regulation those high androgen levels. Therefore, hopefully, and what the Phase III program is designed for and intellectually, it makes a lot of sense. Now you can just give replacement levels of hydrocortisone and not have to have the serious problems that come with the high levels. We've taken care of the underlying disease. Both of those Phase III studies, one in pediatric population, the other one in adults will both read out later this year. We've hit all our enrollment targets, and so we're looking -- we're right on track, and we're looking very forward to that. I mentioned the NBI-352 is we use it for shorthand. And this is a very selective sodium channel blocker. We have it as a precision medicine in a rare pediatric epilepsy called SCN8A, but we also recognize that there's a lot of evidence that sodium channels are involved in a very large epilepsy population called focal onset seizures, the largest numbers. So what we embarked on is immediately a quick proof-of-concept study so that we will see a little later this year, will this very selective sodium channel blocker, highly potent be one that can change the standard of care in focal onset seizures. And then finally, one of our major depression drugs, which is NBI-846, we're taking a part of the depressive rainbow, if you will, anhedonia, the inability to feel pleasure because this drug hits those regions of the brain, the target is in the regions of the brain that have to do with motivation and pleasure to see if we can have an effect here. Here is something where you see what the numbers say, 16 million patients. That's because anhedonia goes across the spectrum of severe mental health problems. It's major depression, it's bipolar, it's schizophrenia, it's substance abuse. So we've got a very focused program here to see if we can, for the first time, have a drug that can address anhedonia. Again, one of a number of mechanisms that we're utilizing against major depressive disorder. Where we are fortunate and very fortunate as a company is that we have an outstanding medicine in INGREZZA and what it has brought to the tardive dyskinesia population. We're talking about a population that is major depressive disorder, bipolar, schizoaffective disorder, schizophrenia. To give you an idea of how important these patients, their caregivers, their loved ones, feel this medicine is, this is a patient population that on average is highly noncompliant with every other medication they take, whether it be their psychiatric meds, or their metabolic meds, their cardiovascular meds that they're taking, they're woefully compliant, not with INGREZZA. With INGREZZA, they -- when they get on this drug, they stay on this drug. They do not go off this drug. The changes it makes in their involuntary movements throughout their face, their mouth, their hands, arms, trunk, legs, is palpable. They understand it, it changes their lives. INGREZZA, we continue to invest in as you see. We want to bring it to as many of the patients who need this drug as possible. Right now, when we started, when we launched this drug 5 years ago, since there was never a drug developed for TD, only 2% to 5% of the patients in the United States who had TD were diagnosed with it. It was something that psychiatrists and other physicians stayed away from, don't see, don't talk. Now 5 years of hard work, 30% of TD patients we estimate have now received a diagnosis. That's tremendous progress. It being 7 out of 10 still have not. A huge number of patients that we still have to go and we make strides every day in that. Another aspect of those 30% that have received the diagnosis, APA guidelines say, first-line treatment is a VMAT2 antagonist, INGREZZA. However, only half of those 30% are prescribed a VMAT2 antagonist. Old habits die hard with physicians. So we can double the amount of patients that are on drug just by taking even those that are already diagnosed, the hard work that it takes to get to the diagnosis and just flipping that over to the optimum and correct treatment of these patients without even thinking about the other 70%, we're doing both. That's where our investment comes from. And then we're taking this outstanding drug, as I showed, immediately into Huntington's disease. Our commercial folk out there whose lives are basically dedicated to INGREZZA, they know that that's not just what they're working that's the drug that they educate health care professional side, but that's not all that it does. This drug has patent protection that will take it out to the mid-2030s. And lots of room to invest, both in this medicine, but as I've shown you others. That drug, the efforts of that commercial organization of ours with this drug, they know that we're treating children, we're treating people in the prime of their life, we're able to treat the elderly with devastating diseases. Thanks to INGREZZA. The sales from INGREZZA, we plow right back into this company. Our goal may be audacious, but we think is highly attainable is to be the world's leading neuroscience company by the end of this decade. That is with symptomatic treatment of devastating diseases. That's with having precision medicine, and that is ultimately by the end of the decade, having drugs that can change the course of the disease and be curative. I'd like to thank you very much and ready for your questions, and I'd like to bring up the rest of the Neurocrine team here so that you'll have representations from clinical, regulatory, commercial, business development and finance.

Okay may be we'll get started. [Operator Instructions]. I'd like to just start with the deal announced this morning in terms of if you could provide a little bit more kind of color on the strategic rationale, given it's a new modality.

Yes. So what I'll do is, down upon if I may. You're flanked by the 2 people who did the deal and champion the deal.

Let me just scoot back...

Jude Onyia, who is our Chief Scientific Officer; and Kyle Gano, our Head of BD, whichever you -- 2 of you would like to start, please.

Sure. I'll start by introducing myself. Jude Onyia, Chief Science Officer for Neurocrine. I've been at Neurocrine 13 months. And prior to Neurocrine , I spent well over 25 years of my career at Eli Lilly and Company, leading their biologics research organization. And shortly after leaving Lilly, I spent 4, 5 months of the sabbatical as a Chief Science Officer for a gene therapy company in Thousand Oaks, called Capsida, and from there, Kevin and the leadership team here convinced me to join Neurocrine. It's been exciting 13 months. But let me tell you a little bit about the 25 years, especially for the last 14 years at Lilly, leading their biologics research organization. And what my team did, it was part of a team that created well over 65 clinical candidates, 10 of those are drugs today, 3 in regulatory review. And another 2 or 3 that I believe will be drugs in the next 2 to 5 years. I cite this for a couple of reasons. One is, frankly, the incredible opportunity we have in this business to change patient's life. And I joined Neurocrine for that and to do more of the same and to be part of this great team. And it's been an exciting 13 months. The second reason I cited it's relevant to the deal with the voyage today. I spent much of my career building and advancing platforms; biotech platforms from antibody to proteins, peptide, antibody conjugate bispecific, you name the combinations thereof. And I want to make a point. There are good platforms, there are bad platforms, there's no perfect platform. A good platform is one that is significantly differentiated from the current state, okay? And these are a premium. And this deal with expanded collaboration with Voyager really gives us an expanded opportunity at such an industry-leading platform. And I'll talk a little bit about the platform in a minute. But it's not just the platform, it's where you point the platform. And this expanded opportunity gives us the opportunity to create an industry-leading pipeline and franchise in gene therapy. We have -- with the GBA announced as a lead, we have the opportunity to advance well over 7 clinical candidates, and we hope that the first of these efforts will make it to the clinic in about -- maybe 2025, okay. So the pipeline is key, a diversified pipeline of gene therapy franchise, but the thought piece is one that you listen to Kevin is strategic. This is part of an intention of the strategy to begin to diversify the modalities that we have. To be clear, we are a small molecule company. We will continue to strengthen our core in small molecules, but diversify into additional modalities, particularly participate in biologics to include gene therapy. And what this deal does is accelerates our ability to do this. So while we have some internal programs, this gives us a significant acceleration. With these improved modalities, it gives you the chance now to pick the right modality against the right target and against the right disease and will facilitate the quality, the speed and the value that we put in our pipeline. So that's at the high level. I can let Kyle talk or I can give you a little bit more about the technology that what we've seen. As you know, we've had the relation loss and relationship with Voyager. In this time, we've learned a lot about ourselves, about them, and our collaboration together. Importantly, the evolution of the platform, okay? This platform is clearly today the #1 industry lead in my assessment, #1 industry-leading platform for CNS delivery. These brain penetrant capsids that allow you to get into the brain in a way the first-generation capsids can. As you know, for CNS gene delivery, that is the #1 challenge. Ability to transverse the blood-brain barrier and to get the intended cargo into the CNS into the neurons or astrocytes as the case may be to deliver the therapy that you want, okay? If you look at the field today, all of the clinical assets and many of the preclinical focus on first-generation vectors, The first generation vectors have very poor brain tropism, very poor transduction when they get across the blood-brain barrier and hence has to be given at whopping doses, really whopping doses that result in the safety, exacerbation of the safety that you see with these therapies and also limits where you can go in terms of disease indications with this. This can be obviated throughput and engineering, and that is exactly what Voyager has done and done very well in creating this next-generation, BBB penetrant, capsids that will now allow you to do one less invasive IV delivery. Second, it's lower the doses and the third is to push the efficacy safety in a way that will usually allow you to get what the patients need and desire. And the last is broaden the disease spaces that you can go with this particular capsids. And when we look in the space today, our judgment, that Voyager truly leads in this particular space.

And again, I would say not to steal Kyle's thunder since he worked on this for quite a long time, and I think got us to a very good spot here is that this is a foundational deal for us, for the technology, for the space that we want to be a player, but at the same time, it's actually just a small piece of Neurocrine. And at the same time, it leaves us, as I said, with plenty of firepower to do additional deals of very different sizes going forward.

We've actually got an e-mail question that came into my inbox, which is since your last collaboration with Voyager, which was unsuccessful, what have you learned? And why does this deal make it so like different, I guess, and you call this a transformational modality and platform. So like what's changed? What have you learned?

Yes. Kyle, why don't you start out with what we've learned and what's changed because Jude wasn't here in 2019 when we first did the deal.