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

One senior biotechnology analyst here at Canaccord Genuity, and it's my pleasure to have Neurocrine with us here today. They made the trip all away from the West Coast. So thanks for that. We have CEO-elect Kyle Gano here; and also Todd Tushla who is Head of Investor Relations. So they know everything about the company. So we'll have a Q&A. We'll keep this interactive. If you have any questions, please keep raise your hand. We'll get a mic across to you and I'll ask Kyle and Todd to make a few opening remarks, and then we'll go straight to Q&A.

There's also some room up at the front for anybody coming in here...

Thanks, Sumant. Thank you for the Canaccord team for inviting us out here and being part of the afternoon session. Really appreciate that. Welcome the opportunity to share a little bit about my thoughts about Neurocrine and Todd Tushla, our Head of IR is here to take questions as well. A little bit about me. I'll be taking over the CEO role in October once our current CEO, Kevin Gorman, steps down. He'll be moving to our Board at that time frame. I've been at the company for almost 25 years. I've served in a variety of roles in the company, either by title or indirectly trying to help out where I can over this time frame. Currently, a lead at the business development strategy team here at Neurocrine, and we'll look to continue to support that with my lieutenant that will be stepping into my shoes as I move into the CEO position later in the fall. So a little bit more. I think Neurocrine for you that aren't familiar with the company, it's a very special place to me and to the 1,500 or so employees that we have in the organization, it really is a community. And we owe a lot to who we are today and our future to our previous leaders, Kevin Gorman; and Gary Lyons, who was the CEO before, Kevin, and really look forward to the opportunity of leading Neurocrine to its next leg of growth. A couple of things also just to share in terms of what I'm working on here in the near to long term. In the near term, as I mentioned, Kevin is the CEO here, and I'll be looking to support him for the next couple of months as he's in this role. For me, that's given me the opportunity to go out there and really do a listening tour with the employees trying to hear from them what's working, what's not. I'd really like Neurocrine to be the best company it can be, which means executing on the strategy that we have set forth over the past couple of years and executing on that to be a leading neuroscience company here in our industry. In the long term, really focused on maintaining the culture that we have here at Neurocrine. It's a very important part of who we are and how we've been successful over the past 35 years or so. And it is something that's quite important to me. And then the last piece, I talked about near term and long term areas that I'm looking at supporting, it's really what's happening in the pipeline, both in terms of our R&D pipeline and what we have on the commercial side of the business. And that's what I hope to get here in some of the details about you, Sumant today talking about INGREZZA, crinecerfont, and we have ongoing now in the Phase I through Phase III pipeline in the research transformation that's currently undergoing at Neurocrine. Maybe I'll stop there. We can use the time as you see fit.

Sure. Thanks. So you touched upon this a little bit. It's really nice to see the bench strength that Neurocrine had. So you're now in the CEO elect position. So what are kind of goals you've set yourself over the next few quarters as you take over the role?

Well, I touched on a few, but let me get more prescriptive on the pipeline and commercialization front. INGREZZA had a great Q2. For those of you that followed our earnings, we had $580 million in revenue that was about a 32% year-to-year growth, 15% quarter-to-quarter, and that was based largely on strong demand and improving gross to net. Over the next few quarters, months, next year and years, it's all about INGREZZA still. We want to make sure we maximize the value of our product for tardive dyskinesia in chorea-associated with Huntington's disease. The other aspects of the medicine other than the qualities and the areas that we're in, has a long-dated market exclusivity period out to March of 2038. So there's a lot of reasons to continue to invest in the medicine and that's what we look forward to do is delivering on good performance on INGREZZA over the coming quarters. There's also crinecerfont. We have that medicine in review with the FDA currently. The PDUFA dates for the 2 NDAs we have 2 separate formulations are in December 29 and December 30 of this year. If approved, that will be a medicine that we can launch in early 2025. So stay tuned on that. And then we have a couple of data cards this year that we're turning over. One is our selective M4 agonist. This is NBI-'568 that we have in development for schizophrenia. We also have luvadaxistat, which is our -- the amino acid oxidase inhibitor that's in a Phase II study for the cognitive impairment associated with schizophrenia. So we have those cards turning over and the reason why those are important several reasons, either 1 or both of those are positive, they'll join medicine that we had spectacular results in Q2 in major depressive disorder. That's with NBI-845. They'll join 845 next year in Phase III programs. So a very exciting time just over the next couple of months, quarters, looking at 2025, the crinecerfont launch. We have a couple of Phase III readouts with INGREZZA in the jacked up treatment of schizophrenia and in the dyskinesia associated with cerebral palsy. We also have our other MDD program, major depressive disorder program, NBI-'770 that will readout in Phase II next year as well. So those are all things I'm focusing on. We have to make sure we continue to execute at a very high level to deliver on the time lines that we've communicated externally and certainly to deliver on continued commercial performance both across INGREZZA and hopefully crinecerfont in '25.

So that's a great overview, and you have a large pipeline, right? And you kind of grew up on the business development side of things. So how do you expect that business development philosophy to change when you are CEO especially with respect to the stage of product that you might want to get in? Or are you going to be internally focused for some time now given all the stuff that's going on?

The portfolio has 15 programs from Phase I to Phase III. It's a pretty broad and deep portfolio. And we're in disease states that range from neurology, psychiatry to endocrinology. And we have line of sight to new programs next year, namely we've communicated to gene therapy programs that will be starting clinical development. So coming back to business development, where does that fit in? Well, we continue to look and behave as if there is a high urgency to add something to the portfolio across neurology, psychiatry, endocrinology. These are the areas that we've become familiar with and really track all the companies in the space, probably in a fashion that's similar to you and your team. However, I think that there's no significant need for us to do something significant at this point or even bring something smaller to the pipeline. We'd like to see our 2 Phase II data cards turn this year and see if there's a need to bring something in, in 2025 or beyond. Right now, we like where we are. It's continuing to monitor the space and be ready to act if there's something that's there that we need and becomes actionable.

So you mentioned INGREZZA clearly, that product has done really well. You were 1 of the few biotech stocks that could buck their lets chart the launch trend, and you did that really successfully. So it's been out in the market for a few years. What do you think the most important source of growth can be from here? Is it new patient starts? Is it something else?

Yes. No, you hit the nail on the head there. It's new patient starts, primarily in the tardive dyskinesia indication. And for those who are unfamiliar with what tardive dyskinesia is, it's an irreversible movement disorder that emanates in the face, the jaw, the tongue and your trunk and the extremities, your hands and legs, and it's caused by prolonged use of antipsychotic use -- which antipsychotics are used for among other things, schizophrenia, major depressive disorder, bipolar. And looking at the prescription volume trends for antipsychotics in the U.S. over the last several years, the rate of prescription growth is outpacing the population growth. And with that comes an increase in the prevalence of tardive dyskinesia. So today, our best guess in the U.S., there's about 600,000 patients who are suffering from tardive dyskinesia. Some other folks estimate that to be higher. Over the course of -- it's been 7 years since launch, actually, and we've been able to increase the diagnosis and treatment rates up from basically 0 in 2017 to the diagnosis rate is about 35% today. That's the good news. The bad news is still the vast majority of patients are either undiagnosed or untreated with a VMAT2 inhibitor like INGREZZA. So we continue to invest in the brand, and we do have another indication, that's a smaller patient indication in Huntington's disease chorea. So we have patent exclusivity out to 2038. So 7 years since launch. We've got 14 more years of patent protection. And so being in Boston with the Red Sox here as a baseball analogy, we're in the third inning of this game. But clearly, the additional growth is going to be driven from new patient starts in tardive dyskinesia.

And then we know the product is some promotional sensitive, right? So what's the type of promotion that gets you the best bang for the buck?

Yes. There's really 2 ways to think about promotion, and it's all about education for us. There's the sales force and they're calling on 3 call points. That's primarily psychiatry, where the vast majority of the patients are treated, movement disorder neurologists and then long-term care, which is our newest part of the sales force. And so you might sit there and scratch your head and say, "Wow, 7 years since launch, why the heck are you still educating people? And it comes down to a couple of factors. One, is that TD is just not top of mind for these folks. If you think you're treating somebody's underlying health, mental health condition, you're not thinking about a movement disorder as well. So we're bringing that to top of mind. You're also seeing a lot of turnover, particularly in psychiatry where psychiatrists or what's known as the advanced practice professionals, these are nurse practitioners, physician associates are jumping from office to office clinic to clinic. So that requires refresh of the education about, one, if you have a patient that has been on antipsychotics or is to look for 1 of movement disorder, then two, diagnose it as tardive dyskinesia, then three, treat it with the standard of care VMAT2 inhibitor. So the education continues. We see a real good return from that with the sales force. And then the other piece of the promotional mix has been direct to consumer. We've done unbranded campaigns when we first launched, we're now doing a branded campaign. And so that really helps with the patients and their loved ones who are caring for them to help them identify maybe I have this movement disorder that's bothering me physically. It could also bother you. You could imagine you have this movement in your face socially and emotionally when you go out to a restaurant, it's more than just the physical pain. And so that's helped drive the patient into the healthcare provider office to have the conversation to help with diagnosis and treatment rates.

So you brought up a good point, which is 4 more years of product exclusivity -- patent protection, right, not exclusivity, but patent protection. So at what point would you consider a step change in investment on the sales force side might be needed? Because you've had...

You bring that up, we just did one.

But what's the next one.

No. Well, I'll tell you what it's been -- Eric Benevich, our Chief Commercial Officer, has said from the get-go that this is a learning launch. We were the first product approved in tardive dyskinesia and the market evolves over time. And what we've seen are 2 primary things. One, the patients number of people who have tardive has grown. So we always have to evaluate that. And then the second piece is, particularly in the psychiatry community, these APPs, the nurse practitioners, physician associates really are the backbone of psychiatric care. And with the -- we've done 2 increases to the sales force. The last 1 was to create 3 separate divisions across neuro, psych and LTC. And what we've seen with both of the previous investments is that you get the commensurate return in the form of increased diagnosis and treatment rates. Ultimately, that's what you're trying to help more people. And so this last most recent increase really is focused on adding some more muscle to the psychiatry group to help them go broader and deeper with the psychiatry community. And then on long-term care, as an example of learning, when we first launched into long-term care, we thought our best estimate was maybe this is 10%, 15% of the opportunity. We found it to be higher than that. And so we're increasing the size of that sales force to be able to cover more long-term care centers that were not at. But typically, I'll just say, typically, you see -- it takes a couple of quarters to see that to see that return in the form of increased treatment rates, but we're excited about the growth that we still see out there.

All right. So let's move on to the pipeline now. You have a muscarinics portfolio, that's probably an understatement. It's a hot area of neuropsychiatric probably also an understatement. So with 568 to the Phase II data that's coming, you've mentioned in the past that an 8-point delta on the scale might be something to keep in mind on this product. What gives you confidence that this bar might be able to be achieved? And what might be something that might make it not able to be achieved?

Well, I think it's important to keep in mind when we talk about schizophrenia, we're all talking about an endpoint that referred to it as the PANSS positive and negative symptom score scale. And we often look at the PANSS corrected change placebo effect change as the primary endpoint in these schizophrenia trials. There's a lot of history here in this category. It's not just the companies are in this muscarinic space. This has been pioneered by many companies over the past 50 years that have developed antipsychotics in schizophrenia. And if you look at the spectrum of the PANSS corrected scores that are out there today, you see a range from about 5% to 9% or 8% to 9% is kind of like the top end of what you see on the PANSS scores. And more recently, we've seen from CORONA in the Phase III trial, they got about an 8.4%. So it's not like we're trying to pick a number out that's specifically tied to our program. We do see the spectrum of PANSS scores that are out there that are ones that we can all point to that are tangible. So we look at the antipsychotic category. We appreciate the band that's out there in the range for the primary endpoint, and we also appreciate where these initial programs are on the muscarinic side. But ultimately, what we're looking at in our Phase II trial, just to back up a little bit on the design of the study, there are 4 active doses of 568 versus placebo and we're looking at the PANSS effected score from a 6-week design trial. And with that, we hope to take out a dose or doses that would allow us to move into a registration program next year. So in addition to advocacy on the PANSS score, we look at the total PANSS change from baseline, we look at deck size and that's combined with an equal interest in safety and tolerability. We really have to have both here to make us really excited about the opportunity in schizophrenia. But even more importantly, it gives us the confidence to pursue other indications, which I think is what everyone is attracted to this new particular class is where you could go and people often point to the success of the antipsychotics moving outside of schizophrenia and other disease states like bipolar and MDD. So we have those same thoughts as well. I think it's up to us at this point to deliver the Phase II results that other companies have done in this space and then be able to comment at that point.

So you alluded to this a little bit, but what do you think the highest value indication might be for muscarinic agonists as things stand?

Well, I'll take a positive schizophrenia trial that we have ongoing first. I think schizophrenia's table stakes that kind of validates the biology and approach that you were using here. I will say when we talk about the muscarinics, there's 2 other flavors or approaches that we're familiar with and that many of you probably have done research on. One is the KarXT program, which is now in the hands BMS. There the approach is taking a PAM muscarinic agonist that has off-target muscarinic events. And the hope is to block some of those with an overactive bladder medicine called trospium. They have different pharmacologies, different half-life. So it's not a perfect hand-in-glove type of fit to counter the side effects, and you still have some of the breakthrough GI issues that are common with the pharmacology, the muscarinics with KarXT, also administered twice a day. On the other side of the coin, there is a muscarinic PAM that's in development now in the hands of AbbVie and their good results in a small Phase Ib trial but it requires the [indiscernible] of acetylcholine to drive the activation of receptor. And we know in different patient populations, in particular, the elderly that acetylcholine levels are compromised in Alzheimer's, for example, all patients at some point during the course of their disease will take a acetylcholine esterase inhibitor. And the reason for that is that elevates acetylcholine in the brain and allows them to reap the benefits of the agonism of the muscarinic system. So our approach, and it's 1 that we've thought about and debated for years because we've worked in this space ourselves is let's remove the uncertainties of acetylcholine and let's find a or discover a selective muscarinic M4 agonist and use that as the anchor for us to pursue schizophrenia and other indications. So we're the only company that has a selective orthosteric agonist to our knowledge. Everyone else has a flavor of the KarXT approach or a flavor of an M4 PAM. So while the biology is exciting, we feel also that we're paving a new territory here with our approach. So that's why this Phase II study that we have is ongoing. I believe it's such high interest because this is the last card to fall in the muscarinics biology space.

Yes. So let's fast-forward to a time when maybe there are several muscarinics agonistics approved for schizophrenia. It's already a fairly well-penetrated market in terms of medications available, those clearly have downsides in terms of side effect -- so how do you see the second, third core product playing out you're on the market [indiscernible] muscarinics agonist.

Well, today, just to level set everyone, there's over 30 antipsychotics approved in the U.S. market. 75 million prescriptions written annually and that, as Todd mentioned, that's increasing about 3.5% per year. Most of these medicines are generic. 90% to 95% of this market is generic. We get the new antipsychotic brands that are coming on the market and Vraylar that comply, they're going to be blockbusters. And the differentiating properties that they have, in addition to have an indication in schizophrenia as they branched out into other areas. So I think if you bring forward a novel class, we can call it a novel class of antipsychotic just for the sake of simplicity here. That's void of some of the antipsychotic downsides. We talked about metabolic disability side effects, the weight gain, you talked about tardive dyskinesia, other extrapyramidal side effects. And I think that that's a very compelling argument for physicians to pick up a new approach to treat their patients and it will be something that sure there's going to be generic antipsychotics, but everyone is going to want to use these at some point during the course of a patient's life because of the cycling that we see with current medicines. So I think there's a very significant opportunity in schizophrenia and certainly, if we're able to show utility of the disease states that only adds to the story.

Let's move on to luvadaxistat now for cognitive impairment associated with schizophrenia, or CIAS, that is a really challenging indication. It's several neuropsychiatric indications are challenging, but that one is kind of almost takes the cake. So what gives you confidence that luvadaxistat might work in CIAS.

Well, I would agree with you. This is a high-risk, high-reward type of program. It's a classic psychiatry program in the sense that to this point, there's no validated endpoint. There's no clinical pathway that's resulted in approval and we know that going into the study. That being said, let's go back to our first Phase II trial with this molecule was in the negative symptoms of schizophrenia. The primary endpoint was the negative symptoms scale of the subset of the PANSS and the 2 secondaries were cognition scales. One was the brief assessment of cognition scale or the BACS and the other 1 was the schizophrenia cognition rating scale or the SCoRS. On both of those secondary endpoints, luvadaxistat hit it out of the park, the stat sig in both of those in a very nice effect size. We brought that in-house. We were pleasantly surprised to see that because we haven't seen that before. So we did go out and speak with a lot of KOLs in the space, and they too hadn't seen any program in this space that hit on both of those endpoints. So we talked with the agency, we mapped out the next step in the program, which is basically a replicate study that we ran in the negative symptoms of schizophrenia, but we flip the end points. So the secondaries that we saw in the first study now become our primary. And the BACS endpoint will be the primary endpoint and the SCoRS will be the second. Everything else in the study is virtually the same. So we'll see. I agree that this space has been 1 that has resulted in a lot of failure. I think we have that first Phase II trial is something that we can think about as a backstop. We also know that the biology is supportive of this particular indication particular, cognition in schizophrenia has been tied to a hypo glutamatergic state. So the idea is if we can activate the system using a co-agonist, which is d-serine of NDA, we can reverse the effects of this NDA pathway. The DAO inhibitor that we use, basically how it works is it blocks the metabolism the d-serine allows this endogenous ligand to increase in its concentration in [indiscernible] activate NDA and then sets forth a cascade to help with the cognitive deficits in schizophrenia. So there's both a clinical study and there's biology. But ultimately, those have to come together and you have to have a little bit of luck in a Phase II psychiatry trial to get a good result. And that's what we'll have here, here very shortly in terms of the Phase II data.

So you are in Neurocrine focus on the neuro part, let's go to the crin part. So crinecerfont, we have pending approvals in pediatric patients later this year. Do you expect the product uptake to be different in those 2 types of markets? And why -- do you have any preliminary thoughts on pricing that you can share?

Well, I would say that our clinical program that we started in Phase III at Neurocrine was really developed around input from KOLs, patient advocacy as well as regulatory authorities in both the U.S. and Europe. And the idea was to show the dynamic range of a CRFR1 antagonist in the patient population in a real world setting. What did we show in Phase III that we show that we can reduce A4 quite significantly in both the pediatric and adult patient population, 65% to 85%. And we could reduce glucocorticoid doses in these subjects while controlling A4. We did all of this with a really excellent safety tolerability profile, and we did this across 2 formulations, an oral solution and a capsule. So all of this when we saw the results, we were ecstatic, the data exceeded our expectations. We actually had to go back and do a lot of our research because we had to rethink how we thought about this medicine and the treatment of CAH. And ultimately, where we landed in the market research, and we heard this from our KOLs is we think 80% of patients can benefit from crinecerfont. So then you project that on to the 30,000 patients that you have here in the U.S. is about 1/3 of the pediatric patient population, 2/3 that are adults. So you look at that a little bit further. We think that children, adolescents are going to be the easier patient population to address an unmet need in terms of controlling their A4, making sure that they don't worry about adrenal insufficiency. They have regular growth, both in terms of their size as well as the bone health that's an easier lift. We think those would be patients that will start the medicine fairly quickly. And then you have women coming on board wanting to avoid virilization, irregular menses or hirsutism, et cetera. That would be kind of a mix leg of growth, if you will, or penetration in the market. The ones that are going to be hard are us here. Men tend to not want to go see doctors, surprisingly. And that's how we bring them into the mix of showing the benefits of crinecerfont and lowering their glucocorticoid doses over the course of their life. There are significant benefits to that, but it might take a little bit more time for that segment.

I'll switch back to 845 in the last few seconds we have here for inadequate response to treatment in major depressive disorder or MDD. What do you think the key discussion points there might be as you meet with the FDA on a Phase III program?

I'm going to give you a very unsatisfactory answer. So we will have the end of Phase II meeting with the FDA with intent to start the registrational programs next year. Right now, it's a very generic answer, study design, dose, primary and secondary endpoints, we'll let you know more about that when those get up and going.

Thanks a lot.

Thank you.

Thanks so much.

Thanks for joining into the webcast.