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

Good afternoon, and welcome to day 2 of the Barclays Global Healthcare Conference. My name is Carter Gould, covering U.S. biopharma. I'm pleased to welcome Neurocrine Biosciences on stage. Joining me on stage, Dr. Kyle Gano, Chief Business Development and Strategy Officer; as well as Todd Tushla, heading up the IR front. Before we launch into Q&A. Kyle is going to make some opening comments.

Well, thanks, Carter, and Barclays for having us here today. Really appreciate the opportunity to come here and tell our story and take your questions. In terms of a catch-up on Neurocrine, this is a really exciting time for the company. If I look back at where we were in 2023, we see -- clearly, we've got a nice growing blockbuster that is INGREZZA with long-dated LOE out of 2038. Last year, we reported $1.84 billion in revenue, which was almost a 30% year-to-year growth. We also now have a second line of -- a line of sight to a second leg of regrowth that's crinecerfont, this is our orphan drug medicine or CAH. We had some spectacular Phase III data that we released last year that related -- that brought us to a breakthrough designation from the FDA and we have a line of sight to submitting the NDA in Q2 of this year. On top of those -- those milestones and that great news that we've had over the past year or so, we really see a pipeline transformation currently playing out at Neurocrine and it's being done in many different ways. We see the pipeline evolving from an externally derived portfolio to one that's comprised of internally discovered programs. We also see this moving from non-validated to validated targets from small molecules to multi-modality programs as well as disease states that range from symptomatic disease modification in curative therapies. But this translates to -- are the early phases of this transformation. We saw us put 5 Phase I program in clinical development in the past 12 months. We see a line of sight to 2 gene therapy programs in ENDO clinic next year. We have one of the deepest muscarinic portfolios in the industry with 4 muscarinic agonists as well as a muscarinic antagonist that we're looking at for a number of movement disorders. In terms of things we look forward to this year in terms of milestones, we've got 3 Phase II studies, which we can talk about in our Q&A here. But just at a high level, we've got MBI-845, that's a Phase II study in MDD that will read out in Q2 and in the second half of this year, we've got additional Phase II studies, one for the cognitive impairment associated with schizophrenia. That's with the molecule that we call luvadaxistat and then rounding out the Phase II results are the latest stage muscarinic agonist that we have, which is a selective M4 agonist. We call this MBI-568, and that's in a Phase II study of schizophrenia. So a lot going on in Neurocrine, a very exciting time for the company. And I think with that, we'll open it up for questions.

Perfect. So why don't we start where sort of you started in terms of pipeline with crinecerfont? And obviously, top line data last year, you talked about in an analyst event and shortly thereafter. But maybe as you've had now a considerable number of months to discuss that with KOLs, kind of how that -- those conversations with KOLs have evolved? How they're viewing that benefit? And also the implications of this for really revolutionize in the...

Yes. Thanks for having us, Carter. And I just want to note for the record, I am wearing a green old socks from a couple of years ago. So I know Matt, we'll be proud of that. Yes. So we've been pursuing an indication for CAH for 10 years now, right? So we've worked with the key opinion leaders for a decade or more. We know them well. In fact, when we designed the 2 registrational studies in adults and pediatrics, we had KOLs help us with the study designs. And what I would say or what you heard from Dr. Auchus, who was a leading KOL when we read out the registrational studies. He was very excited. His eyes lit up and we saw the data. And as Kyle mentioned, he thought that in his opinion for the 30,000 patients in the U.S. who have CAH, this genetic disorder, he thought it would be appropriate for 80% for most of them to be able to regain the androgens and also bring down the level of excess steroids that these patients have to take for their entire life. But this is going to be -- we've gotten past the data and now we're going to be submitting the NDA. So the conversations with the KOLs are about the limitations of the only treatment option that they're very familiar with because it's been the only thing people have been able to use over the last 60 years or so and then also continuing to educate the broader set of KOLs, about how you can antagonize CRF1 receptor and what that can do for a patient and looking at the registrational trials and doing it in a good plan way right now. This is going to be similar to the INGREZZA story where nobody thought TD existed. We had to educate the market and grow a market from scratch. We have the similar making here. We have the recipe with a really good product that had great data, but it's going to take an educational lift on our part to get this going once it's launched.

So part of that is presenting the data, getting it published?

Yes.

What is sort of the expectation when we could see that at this point?

Yes. So kind of fresh news that we were accepted for ENDO. So we will be at ENDO, we'll also be at the Pediatric ENDO Society, which is a little bit earlier, I think, in May, ENDO is in June. What you're going to see -- you're going to see a bit more data as it pertains to androgen reduction over time, steroid reduction over time. In particular, what is probably not as well appreciated because we didn't give you any of that data was the tightness of the androgen control that you'll see in the crinecerfont arm. If you note in the placebo, the androgens actually went up, which shows the kind of variability these patients can have in the crinecerfont arm, in particular, it was pretty stunning data but we'll also provide some more safety data. So more to come. I think we're leaning right now probably having a [indiscernible]. We're kicking it around, but I think it makes sense, but we're going through those discussions right now.

Okay. And then think about the steps remaining before you can file? How you're thinking about that?

There's really no gating factors to submit the NDA here in Q2 other than getting all the paperwork and the team did want me to let you know that they're locked in the room, they are getting food and water, but that's about it.

And Todd just some comparisons to -- with INGREZZA but when you -- this is really an opportunity for you guys to really shape the treatment paradigm over the next decade plus. We've seen some instances like that within rare disease for sure. But I don't know if there's a case study or another example in which you could really kind of draw some parallels between the opportunity you have with crinecerfont and something...

It's building a market from scratch that has not had anything in 60 years, right? So nobody -- the investment community, the patients, the doctors, there's been only one blunt force object and that is long-term use of the steroids, which are bad for the brain, bad for the bones, bad for the heart. And so there's no direct analog that we can look to other than in a rare disease where you're creating a market from scratch. You know it takes a lot of hard work and education.

I think the key here is that there are some correlates here to INGREZZA in the sense that number one, to be successful, we're going to have to change the standard of care for these patients. Number two, you need to deliver great efficacy for patients, and we've got that both crinecerfont, as we did with valbenazine. And the last piece is you need to have really good safety and tolerability to give patients and physicians all the reasons to try. And we believe we've got all that with crinecerfont but ultimately, we need to get the medicine approved and get it out there and start working on the education piece of the equation and making sure that these elements all play out ultimately on the commercial...

I don't know what other disease areas where you call it the standard of care, the only thing that you can use is treatment with toxic levels of exogenous steroids. So we're looking forward to...

Changing that.

Yes.

One of the things we could increasingly ask though, is on sort of the competitive front. You guys are clearly out in the lead, but there are...

On a far lead. There are competitors. So I would say, having met a couple of CAH patients and the CARES Foundation, which is an advocate CAH patients. It's nice for that community to have people paying attention to this disorder. So a great that there's more companies that are looking to advance medicines to help these patients. As it pertains to us, we do have a competitor with kind of a similar grease molecule than crinecerfont. Their trial structure quite different than how we've decided to take an all-comers trial which was more straightforward to us. Their pediatric study is years away. So we feel when you say we're ahead, we're far ahead there. And then there's another competitor that works a little bit downstream from where CRF1 antagonist works, and there's still a lot that remains seen from a safety and efficacy perspective there. So using a baseball analogy, they have the Triple Crown in baseball, home runs, RBIs and batting average. We feel like we have the Triple Crown here with crinecerfont in terms of efficacy as it pertains to antigen reduction, efficacy for steroid reduction and then you have a really clean safety profile, good tolerability. It's a high bar to beat.

Okay. Let's move on to -- what I would say is probably the most important catalyst in the year of the import. And I guess as you think about that, there's been -- I think somebody that's been maybe gotten a little bit less focused is really the trial design here. And it does seem to be -- it's an adaptive design. And can you just talk through some of the nuances there? And I guess it is a Phase I, but at the same time, how that will give you sort of enough information to really guide your decision metrics going forward?

Sure. So for our lead molecule that's in the muscarinic portfolio is MBI-568. It's in a Phase II trial currently for schizophrenia. I know that's what you meant. In essence, it's a typical dose range finding Phase II study where we've got 4 doses of active versus placebo. And that study is currently enrolling now. We'll have just north of 200 subjects overall in the study, all said and done. And we'll be looking at the PAN score, the typical primary endpoint in all schizophrenia trials at week 6, and this is an inpatient study as we're going to see when it comes to the competitors that are ahead of us, emraclidine from Cerevel [ to ] AbbVie and KarXT and BMS's [indiscernible] from Karuna. So it's a very typical, I would say, study design at this stage of development. And from this data set, we hope to be able to pick 1 or 2 doses that will allow us to move directly into registration quality studies.

One of the things I think that came out of the Analyst Day or at least in one of the side discussions was sort of the real intense effort to minimize some of the placebo variability and avoid some of the issues that have fall from the prior schizophrenia studies. Can you maybe just talk through some of those efforts?

Right? I think one of the things that's different about Neurocrine that many of you may not know is that we run a lot of our clinical studies in-house,, Phase I, Phase II, all the valbenazine trials, INGREZZA trials were run by Neurocrine directly, not a CRO. So I think that's an important difference because we found over the years, getting quality patients into the study, having a good cadence to recruitment, having a good quality well-conducted study has been done because of a high-touch white-glove approach with the clinical sites that we use for any of our studies. So I think that's a big part of who we are in Neurocrine. It does take a lot of diligence on our part to actively visit the sites, visit the principal investigators to speak to them about their questions about the patients they're seeing, potential subjects that could be recruiting into the study. And it's from that high-touch white-glove approach that we're able to work and with the instigators to make sure the subjects that are ultimately enrolling are those that fit our entry criteria. And I think that's something that is required to be done in real time. And when patients come in, there is an advantage of having that call being made directly to the sponsor versus a CRO and into the sponsor. So I think all those things are playing out for us in this study as we've seen in prior studies at Neurocrine.

And when we think about that data and to the extent that we'll derisk and inform a Phase III, as we talked a little bit more [indiscernible] around sort of specific p-value around one of the doses and a little bit more of the dose response. And I guess, how does that drive the decision versus the backdrop of you have a whole portfolio of these muscarinics with different kind of profiles?

Yes. I think we're in an unusual position for Neurocrine with 568 and really the muscarinic portfolio. If you look at valbenazine or crinecerfont, we've always been the company that's been the leader in the field. We've had to figure out and sometimes not so easy manner. The path forward in clinical development ultimately to approval. In the case of 568, we don't have to do that. We've seen the path paved for us from KarXT and emraclidine and they've done a very good job in design of those studies and gotten very good results. It sets the bar for us in terms of what we need to see in terms of being comparable at a minimum. So I think for us, that's what we look for coming out of the Phase II trial is what types of doses allow us to have a comparable type of profile with the way that we're activating the M4 receptor, which is entirely different than KarXT or emraclidine, and that's the novelty here. We're working in the same pathway, but we're activating them for directly. We don't require [ proactivity ] of acetylcholine through a combination of the positive [indiscernible] modulator. And we don't require M1, M4 and other subtypes that are tied to an agonist that have an activity and having to selectively block off target effects with another medicine that is an antagonist. It's a very simple activation process that we're seeing directly with the molecule that we're developing.

When you think lessons from schizophrenic agents potentially have these 3 agents moving towards approval. How do you think this ultimately this market will -- what will be the key differentiating feature? Or what's going to really kind of drive adoption across all these agents?

Right. So -- anything is possible [indiscernible] the absence of data. I think that I'll acknowledge -- we'll acknowledge if you speak to us outside of this forum that I think we see good data from emraclidine and from KarXT, what we would be offering again as an alternative approach to activating receptor. I think if you look at what we've learned from antipsychotics over the past 30, 40 years is that patients and how they respond to individual antipsychotics is quite variable and not only crosses the threshold of efficacy but in the safety and tolerability. So ultimately, I think that there's going to be ample room for the 3 medicines that we all make it over the finish line to do quite well for patients and ultimately, the disparate ways that we're attacking the system, the muscarinic system are so different. I'm almost assured that we'll see different levels of performance in different patient types or different indications as all these programs get more mature and beyond schizophrenia. Just some rough numbers, there are about 35 antipsychotics in the market, in the pharmacopeia here in the U.S. Over 70 million prescriptions in antipsychotics written today of the first and second generation type. What we're talking about if everything proves itself out here is a new antipsychotic class, and we're amongst the first 3 and I think that we've seen from the efficacy, there's differentiation over the existing antipsychotics. It doesn't appear that there's a rationale for there to be tardive dyskinesia associated with this pathway. So being a part of this group of 3, if we were able to make it over the finish line, I think is a very good position for Neurocrine. And we've got subsequent molecules, in particular, and M1, M4 agonists, again, that does not require an add-back type of strategy that's going to propel our investment in muscarinics for many years to come.

Maybe the last question on the M4 is as we sort of KarXT nears approval, any specific focal points or lessons we should glean from the label?

I think that what we've learned about medicines that involve more than -- or 2 or more compounds is that their medicines is that their labels can be complicated. So I'll be curious to see if that plays out here, you've got the trospium label in aspects of a label that might be specific to that medicine. And then you've got all the -- the language and information that would be applicable to KarXT that might complicate the label. I'm hoping that it's simple. We want KarXT to do very well in this space. I think that would help provide a nice halo effect to any future muscarinic agonist that comes down the pipeline. So we hope it's a simple label. We know how we can differentiate moving forward, and we want products to do well.

Sorry. I lied a little bit there. One more question on M4. Then as we think then around having that data, to what extent are you guys then going to prioritize speed to sort of catch up or at least minimize that [ ENDO ] versus, I don't know, maybe doing something more comprehensive in the Phase III or...

That's right. Now we've gotten a similar question before. I think it's a good point to put a finger on here. If the 568 study in schizophrenia does well, that means we get a good profile, it's competitive. It looks really clean from a safety and tolerability profile. We're moving as quickly as we can in the registrational quality studies. We will not be waiting for data from any of our earlier muscarinic agonist compounds that are in Phase I right now to make a different determination. We're going to run and run fast. You probably also see us with positive data pivoted into another indication that would occur almost in parallel to the registration program, so we can be competitive there in other disease states.

Okay. So we've got 20 minutes and haven't mentioned INGREZZA.

Yes. That's fantastic.

You guys put out guidance, a very strong '23. Just as you think about the key drivers that have driven growth over the past couple of years, and you've kind of overlaid that with some, let's say, tweaks of sort of the sales force and the advertising plan. How do you then think about that growth going forward? Can you -- are things like continued outreach of patients by our commercials or the more institutionalized setting? Are those going to continue to be drivers going forward?

Yes. We've made some notable investments over the past couple of years to increase the size of sales force because we saw that opportunity that we realizing same thing with [ DTC ] to drive a conversation with their providers if they have TD. And so we think those have been generating good returns, they'll continue to drive good returns, but it's still [indiscernible], it's all about education to keep improving diagnosis and treatment rates. We've made really good progress in the 7 years we've been on markets to get diagnosis rates to about 35%. Still only half of those folks are receiving or offered treatment with a VMAT2 inhibitor. So you think, well, there's half of the diagnosis population that hasn't been treated. So that's an opportunity for growth that we'll continue to drive. And then there's the remaining 65% of the TD patients who haven't been diagnosed. So we know it's a promotionally sensitive drug. We're out there every day and what will continue to drive growth is keeping our ability to drive diagnosis and treatment rates over time. And with IP protection out to 2038, we have -- I look forward to talking about this for years to come with you.

We're going to tell you on some aspects of that in a second. Maybe thinking a little bit more near term, though. Q1 has historically been a challenging quarter for you guys for a number of reasons. You seem to have manage that better in the more recent years, maybe just set the stage as we think...

Yes. I don't think we're alone in those challenges for Q1 because of the insurance reauthorizations that patients have to go through. We've gotten pretty good at managing it through the years with teams that are dedicated towards it. The denominator gets bigger every year as we grow. So yes, I think we're anticipating that we're going to see the same kind of seasonality from Q1, and we'll manage through it as best we can. But that's something that's here to stay until for the time being.

Right. And so when we think of -- at least certainly across our [indiscernible] universe, when we think about companies that are impacted by IRA, you guys certainly pop out. And it certainly mattered a little bit more when there was a sole focus on INGREZZA, clearly as the pipeline has evolved. That's come down a little bit as a point of focus. Nevertheless, it's there. We're going to get presumably some update on those pricing negotiations later this year. As you start -- INGREZZA is still going to be sort of the underpinning of the business going forward. To what extent does that impact your decisions or as you think about budgeting and long-term planning?

Yes, I would say that the one thing [Technical Difficulty] in this room is nobody [Technical Difficulty] what the IRA. But we do know that INGREZZA qualifies for 2 unique exemptions, small biotech exemption and the small manufacturing exemption. The small biotech exemption, in particular, gives us some really nice protections to where the earliest we would feel any impact would be 2029 in terms of government discount and even then there would be a cap on it at about 25% which grows to 34% by 2031. So would we rather not have to deal with it? Will there be a financial impact if it plays out as you think it could? Yes. But I think what you alluded to earlier when it was more of an INGREZZA only story and people were first digesting the IRA, folks were -- some folks are treating it like a patent cliff. We're viewing it more as a dip and then you recover and grow out to your IP -- protect the year at 2038.

Okay. Got time for about one last question. I'm going to ask Kyle. When you think about the life cycle management plan -- potential line extension opportunities for INGREZZA, which seems the most tractable or exciting for you as you think about the opportunity?

I think when we -- it's an interesting situation to think about life cycle management for INGREZZA. We're 7 years into the launch. We've guided the $2.1 billion and $2.2 billion as the revenue goal for this year. After these 7 years, we [indiscernible] 4 more years on the market. So life cycle management is an interesting conversation to tackle. I think where we are right now, we've got 2 studies with valbenazine, which is the active ingredient of INGREZZA in the adjunctive treatment of schizophrenia and dyskinetic cerebral palsy. On the adjunctive treatment schizophrenia, our goal here is really to get a signal from the use of valbenazine in the schizophrenia population. Why do we believe this is an important study to execute on while we've heard anecdotally from physicians that patients appear to get better in terms of underlying disease or longer they're on INGREZZA. We also know that mechanistically, VMAT2 inhibition shuts down the dopamine pathway that feeds dopamine receptors postsynaptically, albeit a different way than antipsychotics. And although we don't put a lot of weight in pre-clinical animal models of disease, valbenazine works just like all the other antipsychotics do in those same animal models, as a monotherapy and as a combination therapy with antipsychotics. So we'd like to get these study results. And with these study results, we don't intend on filing indication an sNDA with valbenazine. Rather, we want to plow these learnings back into a follow-on molecule that we just advanced into Phase I, which is NBI-890 and this is the first step of our life cycle management for INGREZZA. This molecule offers certain advantages over INGREZZA that we haven't been able to achieve namely, we believe we'll have a nice opportunity in evolving a long-acting injectable that would be obviously something that physicians are quite familiar administering in the psychiatric patient population. So we'd be considering that for schizophrenia. And obviously, we have a lot of knowledge in tardive dyskinesia offering that formulation advantage would be something that we would think about down the road. So there's where I think I would probably turn in terms of life cycle management.

Perfect. Well, we'll have to leave it there. Exciting year. Another potentially transformative year for Neurocrine. Thank you.

Thank you so much.

Thank you.