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

Great. Good afternoon, everybody, and thanks to all who've been joining these panels all day, and who've submitted questions it's been awesome. It's my pleasure to be hosting the Neurocrine team. Here with me is Kyle Gano and Grace Liang, and we're going to talk about a bunch of different Neurocrine pipeline programs.

Starting with the muscarinic. So instead of kind of doing the token question on just overall scope of the pipeline, you guys just had an R&D Day. People know the company well. I think to start out, right, I think the main question from investors is just the M4 agonist compound that you're setting in this Phase II, how can we all get comfortable that this asset is competitive with the other Muscarinic that have set a pretty nice and high data bar. So maybe I can start with this with you, Kyle, and Grace, if you want to chime in. Do you want to talk about the work you did on the M4 and the diligence you did before in licensing it and your comfort that this molecule stands up to the standards of emraclidine and KarXT.

Sure. Maybe I'll start, Paul. First off, maybe just to add to your comment about emraclidine and KarXT, I think we recognize they've got a good data set there, both from an efficacy and safety tolerability perspective. Everything that we talk about here comes from the perspective as -- we believe we've got a nice program, but ultimately, we got to deliver on data later this year, and then we can talk more -- with more conviction about our data set versus the others in the space. I think when we go back in time, we think about our work on diligence for this program. You really have to think about what are the types of things that lead to successful outcomes when you bring in programs from the outside. And I can think of 2 things that I've learned over the years. One is having very good internal expertise in a particular disease state, and that goes with working in schizophrenia in different patient populations within that broad category, and we've been able to accumulate that expertise over time to the discovery, development and commercialization of INGREZZA. The other piece that would go into that is actually significant expertise within the target. And -- but many may not know is that prior to working with Sosei Heptares and the muscarinic is that we had, I think, prior to that 5 or 6 years working in the discovery research stage on our own muscarinic agonist and antagonists. So we are playing both sides of the target. And the challenges that we ran into over time were ones that were familiar to everyone working in the space at that particular period of time, which is getting selectivity in the discovery and development of just standard [ orthosteric ] antagonist. So I think we had the ability to diligence the program with an expertise in schizophrenia as well as on-target expertise. I think the other piece that has turned out to be a very good add to our fundamental understanding of this target. And when we were having the discussions with Sosei Heptares, just appreciating that our Chief Medical Officer, Eiry Roberts; and Chief Scientific Officer, Jude Onyia, both came from Lilly. And spent a good portion of their early career working on xanomeline. So it seems like we've got a good soup-to-nuts knowledge base of the muscarinic rather we're talking about things from discovery over all [indiscernible] rate through the clinical piece of development on muscarinic agonist. So that helps stepping into the program that we have with the Sosei Heptares. So I'd add those 2 pieces there. I think the other things that are important to keep in mind is that this is a program that we've had our eyes on for several years or had our eyes on for several years before striking a partnership in November of 2021 Sosei and Neurocrine had discussions in 2015 about the program. And for those of you that are familiar with the Neurocrine story, this was pre INGREZZA approval. We weren't really a licensing and collaboration entity at that particular time. So while we would have liked to really have combined efforts, their program on our own, we weren't really in a position to do so at that time. So they partnered their early assets on the muscarinics namely M1 agonist with Allergan at the time with a lens on developing into Alzheimer's disease. And those early programs got some really interesting data in Phase I, looking at some biomarkers in cognition gave us reason to believe that M1 is an important target. But unfortunately, those particular molecules ran into preclinical toxicity issues. The compounds behind them were the M4 agonists of different flavors, M4 and M1 agonist. And about that time is when Allergan was acquired by AbbVie. So when AbbVie inherited this program, most of these assets that we're talking about today were in preclinical moving into Phase I and AbbVie returned these programs to Sosei Heptares in about, I think, January of 2021. So they tech-transferred everything back into the company, and that's when we started our discussion early in Q1 of 2021. And then there is a series of fortunate events that took place for Neurocrine. The Karuna KarXT came out with their New England Journal of Medicine article that release showed a nice data across all the different endpoints and safety and tolerability. And then right there in the middle of our diligence, Cerevel published the emraclidine data in their Phase I/b study. And that really put a stamp on M4 and M4 alone being responsible for the psychosis element that we are studying now in schizophrenia made our business discussions difficult because it happened right during the middle of our diligence activities, but we were able to secure that license later in 2021 in the rest is history in terms of our efforts in 568 schizophrenia. So that kind of gives you a long window into over a decade of being on this target and really investigating the molecule in all the data set not only with their specific program, but comparing to that, what we have contributed to this space over that same time frame.

Great. Thanks, Kyle. Good perspective there. So ahead of the Phase II, what additional data did you generate? And I guess more specifically, right, if I was running a muscarinic development program, which I'm not qualified to do, I would think about target engagement in 2 ways. One would be doing a PET study or the other would be understanding my Plasma-to-CSF ratio. And then in light of that, right, looking for certain side effects that are PD markers like changes in heart rate and blood pressure. And so with that context in mind, as you went into this Phase II study, what clinical experience do we have that shows that this drug is potently engaged in the target?

Right? So I think if you start all way back in preclinical, we looked at all the standard models of schizophrenia, those that we're all familiar with. And we've compared the data sets that we have there with 568 really all of our molecules that we have in our basket of muscarinic with Xanomeline and emraclidine, they all performed very similarly. So hard to differentiate that. You can get to the same efficacy depending on what dose and exposure you are targeting. In terms of 568 in the clinic, what Sosei Heptares has done in actually -- maybe those of you don't know this, Sosei Heptares has actually ran the entire Phase I program, even though it was partnered with Allergan. They did all the initial clinical work and this -- these Phase I results were just coming out during the time of our diligence activities. So we've seen the data there across about 120 subjects in terms of single ascending dose study, multiple ascending dose study, there is a food effect component to that, which is standard for Phase I, and we also looked at safety data in the elderly. So we got a nice composite picture of how this drug performs over a wide range of doses and also looking at not only the exposure in the periphery, but also collecting CSF as well. What we see there is we're able to achieve the exposures in the CSF that we think are important from all of our preclinical work. So it's getting into the CNS. And we believe that's obviously where you want to start from when you think about a Phase II program. And the safety and tolerability picked up the standard types of muscarinic effects that we've seen thus far, the heart rate and the blood pressure through a low dose to high dose. So we think we've mapped out all the exposures that we think are relevant for this target based on our preclinical studies. And now based on the Phase I work, we moved into Phase II with the doses that we think are going to be optimal across the dose range study thus far. We've started -- we've also done other Phase I work that are more check-the-box types of exercises that we need to have for a Phase III registration program, special population studies. Those have already begun at Neurocrine. All the long-term tox is complete. So that's not a barrier for us to do longer duration studies moving forward. So I think we're well poised to move into registration trials should the Phase II trial that's ongoing now readout positive.

Yes. Okay. So let's talk about the design of that study. It has multiple dose arms. I think more patients on drug versus placebo, but I'm not sure you disclosed that ratio. And you said at Phase, it's underpowered. And I think that, that's seems to be true in light of maybe a traditional schizophrenia Phase III, but the emraclidine study hit a p-value at, I think, smaller number of patients per arm. So maybe with that perspective, can you talk about this trial? And I guess, in your mind, what constitutes a positive outcome that moves you towards a pivotal study?

Right? It's a multiple arm active study or multiple active arm study versus placebo. We haven't disclosed the ratio of active to placebo, but it's not one-to-one, of course, but it's also not all the doses of the active versus placebo. We tried to mitigate placebo that to the extent we can in this early study, but acknowledge it's not a one-to-one active to placebo. Overall, we're seeing that at the end of the study, we'll have just north of 200 subjects and the primary endpoint is the pans at 6 weeks. And the goal here in the dose range that we've selected is one that we will be able to outline the minimally effective dose all the way to we think is the maximum tolerated dose. So we will see efficacy, hopefully, along this dose curve. And from that, we'll take out 1 or 2 doses that we will move forward into a registrational program. This data set, this trial is on track to deliver top line data in the second half of this year.

Yes. Okay. At least on paper, and I know we won't know until we have data, is there any significance to you guys pursuing an agonist where some emraclidine as a PAM? Like should we expect anything materially different in schizophrenia in terms of efficacy or safety?

Yes. I think from a schizophrenia perspective, and emraclidine performed very well in the Phase Ib study. And I don't want to discount that in the absence of having our own data set. I think we just have to recognize that was a good effect size that they saw there and is safe and well tolerated. From a mechanistic perspective, there's no dependency on 568, which is our molecule in acetylcholine. Acetylcholine [ at low ] levels can vary and be present or not, and our molecule is going to perform the same way because it's activating the receptor directly. For emraclidine, you can't think of patient populations and we've seen these in other studies where apparently, acetylcholine levels are depleted or deficient. And in those patient populations, given that they have a PAM, they will have a dependency on acetylcholine to drive efficacy. So I think for us, at least the hypothesis is that for PAM, it may not be as effective in different patient populations, maybe by age, other disease population like Alzheimer's, for example, but with our approach, it's a more traditional one where you're just activating the receptor directly. So we'll see how the data pans out for our approach. But I think where we go is if we see good data in schizophrenia, we'll quickly pivot to other indications as well. And I think our concern is greatly diminished that we'll have a different outcome if we directly activate the receptor.

Yes. Okay. Maybe lastly, as it relates to pursuing other indications like Alzheimer's psychosis or bipolar disorder, you have other compounds in the pipeline. Does it make sense to pursue or I guess, to develop an M4 selective compound in these other indications? Or does it make more sense to go with M1, M4 in Alzheimer's for kind of the obvious theoretical reasons. Like what's your sort of thought on the whole portfolio here and how you might position things.

I think if we've got good data with 568 and schizophrenia, that's really your bird in the hand, and you're going to drive that aggressively moving forward in multiple indications. If you can't, our dual M1 and 4 agonist is not that far behind in the latest stage of our Phase I assets in this. And that's something that we would see moving quickly forward as well. I think it's safe to say that for the assets that we have, there are 3 other agonists and M1 preferring agonist and M4 preferring agonist and that are dual, that you're going to probably see 2, maybe 3 of them, all move forward in parallel. And the data sets guide us to where we move those forward into different indications or even the same ones. It would be a good problem to solve for is if 568 data is really strong. We're moving forward in multiple imitations and we put 570 in the same schizophrenia trial and the data is even better. I think that's something that we'll have to see how that plays out down the road. Usually, and I think you would agree, you often see benefits and efficacy with multiple pharmacology.

Yes.

I think we're going to have to be aggressive, be flexible in how we look at these different assets and think about developing to a certain stage across the different molecules in parallel.

And I think I can chime in, too. Suite of agonists that we have, again, have slightly different profiles in terms of their M4, M1 selectivity and it's nice to be able to utilize the data that will be coming out of 568 to characterize that better, certainly on the psychosis side, but we are evaluating very carefully too, as you said, in different populations. The potential benefit for cognition as well, which we know can be affected due to multiple factors. And so that will be very important, but as many of these compounds are moving into the Phase I space, we're also planning in the clinical development plans for those studies, getting an early read on characterizing the clinical profile as certainly as possible.

Yes. Okay. Very good. So we only have another 10 or 15 minutes. So let's try to get through a few other programs. But looking forward to the muscarinic data, maybe switching gears quickly on crinecerfont. I know you've talked a lot about it, but what's the latest update on how things are progressing on the regulatory side and your expectations on potential priority review and whether there will be a [indiscernible].

Yes. In crinecerfont CAH, everything is on track for Q2 submission. As we've stated before, we've got our teams basically pulled up here at Neurocrine finishing up the NDA as we speak. There's nothing gating. It's simply taking all the data set that we've generated this past year and making sure that it's organized and prepared accordingly for an NDA. So we're on track there. I think we're really excited about the opportunity to submit this NDA in Q2. We've got breakthrough designation, as you know, Paul. And usually, there is a good correlation there between breakthrough and priority review. So we'll have to see what happens with that as we move into the review process. Typically, you learned that after your NDA is accepted, they give you your PDUFA date, tell you if you've got priority review. So we won't know that right out of the gate, but when we learn of the NDA's acceptance, we'll have an idea at that particular time and point.

Yes. Okay. Okay. Great. And from a label perspective, I know, again, the caveat is we don't know what the label is going to be. But is your expectation that your label for this drug, if you ultimately can get what you want from the FDA will be for all CAH regardless of steroid burden, regardless of androgen level, regardless of whether or not androgens are controlled in steroids kind of the different -- basically regardless of any of the sort of permutations you could contemplate?

Yes. I think, obviously, it's going to be a review issue, but it really helps to start from the position of having really strong data, Phase III data in both pediatrics and adults. I think the other piece that gives us a good position to be in is that these Phase III trials across these different patient populations, we're done in consultation with KOLs, patient advocacy of the FDA and EMA and the underlying principle of the study design was to create a real-world study. It wasn't to enrich either one of these studies with patients that had higher androgen burden or a higher glucocorticoid burden. It was to take kind of all comers. So I think the combination of the strong data and how we work through the different stakeholders and the design of these real-world studies puts us in a good position. But ultimately, we'll have to submit the NDA, get the feedback from the agency on our initial label and see how those discussions go. Again, we like our position, but ultimately, we know it's going to be a discussion with the agency, and we'll hopefully get into that later this year. If we do get prior to review to my last point, this is something that could get -- could give us an opportunity to launch another product early in 2025, and that's really exciting.

Yes. Yes. Okay. Okay. Great. Anything to add on crinecerfont or we just kind of keep going through the pipeline?

Do you have anything to add on crinecerfont?

No?

Okay. Let's keep it going.

I assume you're not going to tell me what the price is. So I might just move on. I guess, from a BD perspective, where is your head at right now, Kyle, like what's your appetite for deal size, deal stage, sense of urgency? Do you want to wait for the muscarinic data before you kind of like get something that's more meaningful? Like what are the things you're weighing right now? And what's the discussion inside Neurocrine to the extent that you can share?

Yes. No, I think it's a really exciting time at Neurocrine. There's a lot of what it felt like back in 2017 going on here at Neurocrine terms of a period of great value creation that we saw with INGREZZA during the -- or the INGREZZA launch. I feeling that same type of excitement here with a good line of sight to second revenue -- second leg of revenue growth for crinecerfont that could be happening this year. And the thing that's different about it is that we have a position that we're in a -- we have a deep pipeline right now in a pipeline transformation that's undergoing that includes efforts from research to things that we have in the clinic. So we've got a focus right now on moving away from externally derived programs to internally discovered programs from small molecule to multimodality programs, unvalidated to validated targets and symptomatic to disease modification and gene therapy. All these elements, you're seeing at the very early innings right now, we have put 5 new programs in the clinic in the past 12 months. We started a Phase II study with an NBI-770, which is a program that we're developing for MDD. We have 3 Phase II readouts this year that if one or more of them are positive, we'll be talking about registration trials next year. And we have a good line of sight as well on 2 gene therapy programs starting clinical development in 2025. There's a lot to be excited about there. So for our business development efforts, our team always works with great urgency. But I think the need to do something large or strategic or even doubling down on our licensing strategy that we've been doing the past couple of years. That need is not necessarily there right now. Most of our team's effort is assisting our research teams to make making sure or make sure they have all the tools and technology they need to accelerate the programs that are in that shop, so we can drive programs to Phase II as quickly as possible. And that's who we know people like yourself start valuing them. So we'll see how those data cards turn over this year. I mean that will be a guide for us in terms of what we might need and look for in the future. But right now, we're helping our research colleagues and keeping on top of everything that's out there.

Yes. Okay. Makes sense. So beyond what we've discussed so far, what do you two think is the most underappreciated or undervalued asset in the Neurocrine pipeline.

I'll let Grace start at that one.

Well, there are a lot of cues from which we're almost excited about. So as Kyle said, seeing the productivity that we've had within our internal research engine as well as with our collaborations has been a really great time to be here on the clinical development side and overall for R&D. Certainly, what we're seeing within the psychiatry space, as Kyle mentioned, 770 is something that is progressing nicely, I think, and will be producing interesting data around a different mechanism to address MPD. And my space, neurology area, we are certainly moving forward with the gene therapy programs, as Kyle mentioned, with a new development candidate for FA recently announced and things on track with the other programs coming shortly behind to move to potentially clinical programs, yes.

So 770 is a super interesting program. Can I ask you one question about that? So I think you're talking about the -- that's the NRB2 NAM. Is that right?

That's right.

In depression. So I guess the idea here, at least, and you tell me if I'm wrong, right, is you can try to in an oral molecule, recapitulate the mechanism of ketamine that drives the efficacy of ketamine in depression. Is that correct?

That's right.

Ketamine seems like the mechanism is so pleiotropic? And it might be a security drug. I guess, how did you guys come about this molecule and what shows you, Grace, to highlight this molecule kind of in light of how the biology here, at least to me, a late person seems a little bit more complicated.

Well, I think, again, knowing the history behind the ketamine story, there's, again, pretty deep expertise around [indiscernible] about as well as some of the pitfalls and challenges of understanding that from a clinical value point of view. So we have taken that knowledge into developing this program to answer some of those questions with the 770 and to really see how it could be differentiated from Ketamine, for example. So.

Yes, I think just to add to that, I know we're about out of time, is that Ketamine works through NMDA by inhibiting GABAergic inhibitory neurons. So it basically works upstream of activating the [indiscernible] synaptically. So we like working in biological pathways that are validated. We understand that targets along those biological pathways may have more or less opportunity. But within NMDA NR2B NAM, it's not just ketamine. We also know that other IV small molecules by other companies have shown strong proof of concept on this specific target NR2B NAM. What we were able to do with Takeda is have an oral medicine that's well behaved, that gives us good opportunities for high exposures without worrying about some of the side effects of working through NMDA.

And this [ anesthesia ] is here to avoid the psychosomatic effects.

Yes. It's certainly at a minimum -- have minimal effects there. I think we'll have to wait and see how we get into the patient population but also add for ketamine, it's an intranasal product that has to be administered in office, and you have to have monitoring on top of that. So I think there's a lot of room for improvement there if you have an oral medication that could be delivered in a normal way as in other antidepressants. That being said, Ketamine is a -- or Esketamine is a really nice product out there. I think they're well on the way for making $1 billion in sales this year, and many people may not be aware of that. So if you have an oral medication that's safe and well tolerated. It has a fast onset of action. I think you've got to -- a good medicine there for patients.

Yes. Okay. All right. Well, very good. We covered a lot and a lot to look forward to this year. So thank you both very much for your time. I appreciate it.

Thanks, Paul. Appreciate it.

Thank you.

Okay. Thank you.

Bye-bye.

Bye.