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

All right. Let's go ahead and get started. Welcome, everybody, to the JPMorgan Healthcare Conference. My name is Anupam Rama. I'm one of the senior biotech analysts here at JPMorgan. I'm joined by my squad, Malcolm Kuno, Priyanka Grover and Rati Pinge. Our next presenting company is Neurocrine. And presenting on behalf of the company, we have CEO, Kyle Gano. Kyle?

Thanks, Anupam, and thanks, everyone, for joining here at this early hour on day 1 of JPMorgan. A couple of quick housekeeping items. And I know the first one you're all looking forward to. I will be making forward-looking statements, so I'd like to direct you to our latest SEC filings for the risk factors of the business. The second one, this is not my first JPMorgan. It's not the first time I have represented Neurocrine at a health care conference, but it is the first time I've presented here on behalf of Neurocrine on the podium at JPMorgan. So I would like to take a moment and thank Gary Lyons, our Founding CEO; Kevin Gorman, our Founder and my predecessor. A couple of quick fun facts and a little bit of light humor here today. I'm only the third executive to ever present here at Neurocrine. We have a lot of long-standing executives that have presented here. So the pressure is on me starting here today. The other piece is, I think it's a reflection of how much fun and how much enjoyment we have working with our leadership teams at Neurocrine. And many of my leadership team is here today, and we look forward to taking your questions at the end of my presentation. I also enjoy and we all have enjoyed over the years working with our employees to discover and develop innovative medicines for patients. So with that, when I stepped into the CEO role last October, I inherited a company -- the responsibility for a company that's strong, stable and growing. We've got a dynamic culture at Neurocrine. And as I've mentioned or alluded to, we've got the best leadership team in the business, and I truly believe that. Opportunities like this don't come along very often, and I'm really grateful to have this opportunity here at Neurocrine. So today, our purpose is to release suffering for people with great needs, and we've largely fulfilled that purpose over time. If I look at our focus in neurology, neuroendocrinology and neuropsychiatry, we've combined that with our expertise and experience and converted that into a competitive advantage. And with the strategy that's founded with that approach, we come here today with a humbling and enviable place. We treat thousands of patients each year with tardive dyskinesia and Huntington disease chorea. And just as of a few weeks ago, we're bringing for the first time in over 7 years, a new patient -- a new medicine for patients with congenital adrenal hyperplasia. So it's an incredible exciting time here at Neurocrine, and I'm looking forward to share with you some of these things that make Neurocrine unique today as well as why I'm energized for all the good things that are in store for us in 2025. It is going to be a year of both execution and evolution that's going to require -- be required of us for success. On the side of execution, what I'm really talking about here is driving forward those things that are in process that will deliver near to midterm value for our investors as well as the patients that we serve today. On the evolution side of things, I'd like to bring into focus the Neurocrine of tomorrow, where we have a supercharged R&D engine that's going to drive us into new therapeutic areas, new modalities and have the opportunity to increase productivity above and beyond what you're used to seeing from Neurocrine. So let's talk about where we are today. We're on the cusp of exciting opportunities that up to this point are based off our past achievements. If I think about the company and telling people about what we have here at Neurocrine, we start with we're fully integrated. We have capabilities across research, development and commercialization. And over the past few years, we've gotten through discovery and development, 4 FDA-approved medicines over the finish line. When each of these medicines were approved, they were each first-in-class. And I'd like to talk about 2 of the medicines that we commercialize here in the U.S. The first one is INGREZZA. INGREZZA is a medicine that was initially approved for tardive dyskinesia in 2017. It's a VMAT2 inhibitor. It's a growing blockbuster. It's changed the standard of care for patients with tardive dyskinesia. Subsequent to our approval in TD, tardive dyskinesia, we received approval in the Huntington disease associated or the chorea associated with Huntington disease. So it's a very nice medicine for us, but it's not the only one. You heard me allude to another medicine in my opening remarks. CRENESSITY was approved last month as a CRFR1 antagonist for congenital adrenal hyperplasia. CRF and CRF1 antagonism represents founding technology of the company from over 30 years of research and development. So for our employees, for our company, to say that the approval is rewarding is an understatement. Like INGREZZA, CRENESSITY has all the hallmarks of being a blockbuster and to change the standard of care for many thousands of patients with CAH. So I'm hoping between INGREZZA and CRENESSITY, you see a theme for the types of things that we like to discover and develop here at Neurocrine. And it's important to mention that because not only are changing the standard of care, they represent growing revenue for our company and the opportunity to have a diversified revenue stream over time. So that's important when we talk about the future because I think we're well positioned for sustained and long-term growth. It does start with INGREZZA though. It's our medicine that we've been commercializing the longest. As you know, CRENESSITY was just approved. With the 2017 approval of tardive dyskinesia, we've had the opportunity to build a market in TD. In Q3, we saw sales of roughly $613 million in revenue. That's 25% year-to-year growth 7 years into launch. It's phenomenal. We upsized our guidance the second time for the year to $2.3 billion to $2.32 billion, which also represents 25% year-to-year growth at the midpoint. Considering 80% of patients with TD, over 800,000 patients are still not being treated with a VMAT2 inhibitor. There's a lot of work ahead for us, a lot of opportunity and a lot of growth still that remains between now and 2038, the end of our period of market exclusivity. So it's important to point out those key facts, financial periods of market exclusivity because tardive dyskinesia and INGREZZA have provided a very strong financial foundation for the company, almost $2 billion in cash, durable cash flows and attractive P&L. We built a very deep and diversified portfolio over the past couple of years, and it's built to be sustainable for the first time. And by sustainable, I mean to consistently develop and share, provide data flow from year after year after year. That's a very exciting time for us to be able to say something like that. INGREZZA has also afforded the opportunity to develop CRENESSITY or crinecerfont into CRENESSITY. And I think that's a good segue for me to talk about all the fantastic things that we like about CRENESSITY. It starts with we got an early Christmas gift in December. Our approval for CRENESSITY came over 2 weeks prior to the PDUFA date on December 13, and it gave us a good chance to jump start 2025 with all of our commercial activities. But about CRENESSITY, we love the label that we have, kudos to our development and regulatory teams for getting this over the finish line. It's the first and only medicine approved as an adjunct to glucocorticoid replacement to control androgens in adults and pediatrics aged 4 and above with classical congenital adrenal hyperplasia. The broad label that we have is no doubt the result of the strong efficacy that we saw as well as the good safety and tolerability in the largest ever CAH program conducted to date. This was combined or this is combined with 2 patient-friendly formulations for pediatrics and adults. So very exciting here to have this type of medicine for patients who have been waiting 7 years for one that's been discovered specifically for their needs. And that's really exciting to be able to provide that to them. About CAH, it's a very serious disease. It affects about 30,000 patients in the U.S., and it's caused by mutations on the CYP21A2 gene. And this is a particular gene that's important because it encodes an enzyme, 21 hydroxylase, which is key in the synthesis of cortisol. We all know cortisol is the central regulator of the HPA Axis. So what this means for CAH patients, low levels of cortisol, high and uncontrolled levels of ACTH and high and uncontrolled levels of downstream androgens. For over 70 years, the only way to treat CAH is to use chronic and high-dose glucocorticoids like hydrocortisone. And we know the consequences of this, poor bone health and a multitude of different diseases and disorders associated with metabolic syndrome. So that's where CRENESSITY enters the picture. CRENESSITY allows patients to recapture their HPA Axis. Let's take a look and see how that happens. This particular slide here, we show a healthy individual on the left depicted by having colored lines here for both cortisol and ACTH. In a normal individual, cortisol regulates ACTH production at the pituitary and produces the right amount of ACTH and downstream androgens. In contrast, in patients with CAH, they have low levels of cortisol as depicted here by the broken dashed black line. And what this means for patients as enlarged on the right, you're not able to control the production of ACTH. You see it be uncontrolled and high and that affects downstream androgens accordingly. Where CRENESSITY fits into the picture, then is it antagonizes the CRFR1 receptor at the pituitary. And by that, patients are able to block for the first time, put a brake on the production of ACTH, allows them to control that, capture it as well as the downstream androgens. So what are the benefits? For the first time, patients are able to decrease excessive ACTH stimulation and target tissues and organs. And here, I use the plural tissues and organs because I think it's important that we all appreciate the ACTH receptor is in other organs and tissues besides the adrenal gland. So controlling ACTH is very important globally in the body. And then the next piece that comes from that, patients are able to normalize their androgens or at least bring them back to the normal range. And equally important, patients are able to reduce the reliance on excessive exogenous glucocorticoids like hydrocortisone. In fact, what we're able to show from our own pivotal program is a good portion of patients are able to use a physiological level replacement glucocorticoids. So a very exciting day for patients. No longer do they have to deal with the choice between the consequences of high-dose glucocorticoids and high dose -- or I should say, high dose or excuse me, high ACTH and downstream androgens. So it's a super good day for patients to have this medicine. A lot of work ahead for us to maximize access for CRENESSITY in patients with CAH, but we're up to the challenge. Now if our commercial medicines, INGREZZA and CRENESSITY wasn't enough, as I mentioned, we do have a deep and diversified portfolio. As we stand here in January, we've got 12 programs ranging from Phase I to Phase III clinical development. I'm going to highlight just 2 areas today for the sake of time. First, new entrants to the clinic in January of 2025. We have a selective sodium channel blocker, 1.2/1.6 that we're moving forward for seizure disorders and an additional VMAT2 inhibitor that we'll be targeting like NBI-890 and with valbenazine for movement disorders and other CNS indications broadly. This is NBI-675. I'm going to spend the majority of my time talking about our industry-leading muscarinic portfolio that has 5 programs: 4 on the muscarinic side of the equation; and on the other side, an M4 antagonist that we're pursuing for movement disorders, Parkinson's disease tremor as well as dystonia. That's NBI-986. But in terms of the muscarinic portfolio, given the volume here on the agonist side, I'd like to spend a little bit more time here talking about what we're doing. So we have a number of programs that range from selectivity of M1 to M4. On the M1 side of things, the molecule in development is NBI-567. On the M4 selective side, it's NBI-568. It's also our most mature asset in this portfolio, having achieved proof of concept in Q3 last year in schizophrenia. We also have different versions of M1 and M4 behind these 2 molecules. In particular, we have a dual M1/M4 agonist, which is NBI-570 and then rounding out the portfolio, a molecule that has the majority of pharmacology and M4, but with some M1 pharmacology as well, and that's NBI-569. So it's interesting. The muscarinics have been around for over 30 years, but there have been little work -- there has been little work being done to actually tease out what are the benefits of M1 specifically and M4 and also different flavors of M1 and M4 in the same molecule. We have the luxury of doing that here in our portfolio, and we're spending the time in Phase I to understand what the different pharmacologies could offer patients ranging in diseases of cognition to psychosis. So stay tuned on that. These are programs that will continue running this year. But I'd like to switch gears here a little bit and talk about NBI-568. I mentioned proof of concept in Q3 of 2024. This is our schizophrenia program. We saw excellent data coming out of our proof-of-concept trial. Recall, this was 200 subjects in our Phase II, 4 doses of 568 versus placebo. All doses worked with 1 dose performing better than all others. That was our 20-milligram dose. The efficacy there on the primary endpoint of the PAMs was impressive, a placebo-corrected score of 7.5 point improvement, total PAMs improvement of 18.1 with an effect size of 0.61. So that's rare air. If you put all those pieces together with a medicine that's once a day, no titration, really good safety and tolerability and no food effect. And that's why we're really excited about the data that we have and why we'll be moving this program forward this year in schizophrenia. So we like the data, and we also like the competitive positioning of 568 relative to other muscarinic programs today. And just to level set everyone, there are 5 muscarinic subtypes, M1 through M5. The important ones here to talk about are M1 through M3 and M4. M5 actually is expressed in very low levels in the brain. It's not expected to contribute to efficacy or safety and tolerability. So it really is a story of M1 through M4. What we know about M1 through M3 is that these receptors are also found in the GI tract and a source of safety and tolerability concerns and mechanism that agonize these particular subtypes. Well, with the selectivity that we have with 568 over 100-fold on these subtypes, we don't see this problem in our Phase I or Phase II trials thus far. The other piece that's interesting to note, because of that selectivity, we don't require an add-back medicine to block these peripheral effects. And we have seen this with other molecules that bind to and agonize all the different muscarinic subtypes. I didn't mention upfront, but because we are a selective and direct M4 agonist, we do not require cooperativity of the endogenous ligand of M4 to drive efficacy. So we don't have to worry about adding back anything or worrying about or leaning on something else to help drive efficacy. NBI-56 is the only molecule in development that works just fine by itself. And that's why we're excited about our competitive positioning here relative to other programs in the space. The other thing that I want to mention is a company that spent the better part of the past 2 decades developing a medicine for tardive dyskinesia is if we're developing a medicine for psychosis for patients with schizophrenia and bipolar, we'd like to have one that has an improved TD profile. If we can eliminate it altogether, even better. But NBI-56 doesn't bind to dopamine D2, that particular receptor, which we know is common to the antipsychotics that are commercially available in the source of TD today. So very excited about for a number of reasons, the data, the competitive positioning and the potential profile relative to other antipsychotics today with NBI-568. So we talked about our commercial products. We talked about the pipeline. What about our R&D transformation that's ongoing right now? This is the evolution part of the company, and I'm really excited to share with you what we have going on here. We start with this concept of moving away from our reliance on external innovation for a lot of our pipeline to our internal discovery engine and efforts. And then it expands to moving away from small to multimodality molecules from unvalidated to validated targets and then from symptomatic disease modification and curative therapies. If you follow us down that path, where we've seen it take us to is a point where we're matching the right modality or approach to a given target and disease state. And when you do that, we're seeing it afford a number of benefits here at Neurocrine. One of them is increasing our probability of success moving from one phase to the next. It's improving our cycle time lines, development time lines across different phases of development. And importantly, it's maximizing the value of our investments on a given program. And then this manifests itself in something that's tangible for us all to appreciate. It's increasing the number of programs that we see in our pipeline. And you'll get a feel for that as I conclude here today. But it really means for us that on average, we think we can deliver 4 new Phase I starts per year, at least 2 new Phase II starts per year and at steady state, at least 3 Phase III programs. But we're in the business of making medicines for patients. So what does that mean in that metric? Well, if we continue this thought process and we see our productivity here, we believe we have the real opportunity to bring forward a new medicine on average every 2 years. So that's very exciting in and of itself. We've never achieved any of these metrics across Phase I, Phase II and Phase III here at Neurocrine. So to hit one of these is incredible, to hit them all is amazing. And it's something that I see us being able to do here in a very short period of time. So let's conclude and talk about where we are here with 2025. Remember, I said upfront is a year of execution. Well, the execution starts with those things that are in process today, and it all goes back to INGREZZA. We need to continue doing what we've been doing from a commercial perspective, driving diagnosis of patients with TD and ensuring that we have maximized access for patients that want to have the opportunity to be treated with a VMAT2 inhibitor. Number two, while it's early days for CRENESSITY, we believe we have a strong foundation to have a successful launch and lead us down that path of changing the standard of care for patients, but that does take time. On the R&D side of things, we've completed our end of Phase II meetings for NBI-845. The generic name now is Osavampator osovamfetor and NBI-568 for schizophrenia. So the next steps here with these programs is to figure out those activities needed for us to work through the initiation of the registration program, and that's something that's on track now. We can't keep our eye off the pipeline. We have to remain focused. We have a number of data readouts this year as well that are going to be important. For valbenazine, 2 Phase III data readouts, one in the adjunctive treatment of schizophrenia and the other in the dyskinesia associated with cerebral palsy. We also have a proof-of-concept study that will read out with our NR2B NAM in MDD. This is NBI-770 that will occur later this year as well. And then I spent some time talking about the muscarinic portfolio. Our Phase Is are ongoing, but we'll look to wind these down this year and continue to execute on all those learnings that we have to pick one molecule or more to move forward in a variety of different diseases of cognition to psychosis. So the new starts this year go back to where I began in the R&D update. We're going to take the successful end of Phase II meetings that we had with the agency recently and pivot those into the initiation of the registration programs for Osavampator in MDD as well as NBI-568 in schizophrenia. Now some new starts in Phase II. We spent a lot of time talking about the muscarinics. We spent a lot of time internally looking at the data that we've collected today across all of our molecules, including the Phase II data in schizophrenia. And we like what we see, and we'll be expanding the indication of 568 into bipolar mania. The same learnings have been helpful for us to understand the opportunity with our M1, M4 dual agonist, and that will be moving into Phase II for schizophrenia this year as well, both second half starts. On the Phase I side of the equation, you saw the programs entering the clinic in January this month early -- in our earlier pipeline slide, we'll execute the Phase Is there this quarter. And that takes us really to the stronger evolution part of our thesis. We see clear line of sight to 4 new programs entering the clinic this year that will advance from preclinical to clinical development. It starts by leveraging our history on CRF and our leadership position in CAH. We'll be moving forward a peptide in this space, MPIP-1432 that will start this year. We've also been working for quite a long time on a novel neuroendocrine target that will be addressing diseases within the metabolic space. That's a program that will start this year as well. And then returning to a familiar therapeutic area, neuroimmunology. We have an antibody in the space that will be advanced for the area of CNS and immunological disorders. And of course, we're on track. We've spoken about our gene therapy programs in the past. We're on track for these programs to enter the clinic this year for Friedreich's ataxia and GBA1-related Parkinson's and Gaucher's disease. So a lot going on this year in terms of new starts, new programs, the evolution of the pipeline and the new therapeutic areas and modalities. Too much to go through here. We will be hosting an R&D Day this year to go through a lot of the data that is underpinning some of these new starts, and we look forward to those discussions when we next get together. Now they often say a picture is worth a thousand words, and I believe in that. You saw our pipeline slide that starts here today at JPMorgan. We see significant growth going from today to the end of the year from 12 to 18 programs. That's 50% growth, 4 in Phase III, 3 in Phase II -- or sorry, 4 in Phase III, 3 in Phase II, 11 in Phase I. That productivity exceeds the productivity I shared just a moment ago that we're hoping to achieve at steady state. So we're making good progress along this R&D transformation. The key is we need to do this year and year and year after year. The last piece to point out here is that diversification of our approach is important. And you can see from the slide here that 30% of our pipeline comes from modalities outside of small molecules. So I think we're about on time. I'd like to thank everyone for taking the opportunity to listen to me here this morning. We look forward to your questions now and throughout the course of the week and giving you an update on our R&D transformation as the year goes along. Thanks so much. So our team, if I could have you all come up here and have a seat.

All right. I just want to remind folks that there are 3 ways to ask a question. You can raise your hand and do it like the old school way. You can e-mail me your question or you can put it in the question portal, and it will be right here.

Anupam, should we do a quick introduction of who's here?

Yes. Go ahead.

So I'm Matt Abernethy, CFO of the company, been with the company 8 years. And as Kyle said, feel quite fortunate to be in the spot where we're at today, launching CRENESSITY is a dream come true for the company and then also for a lot of patients out there. And so really encouraging. I would also just say a big shout out to Kyle, doing JPMorgan like that, his first time through, well done. And I think he covered 10x more ground than Kevin Gorman, if you're listening. So...

Start from the beginning.

Yes. Yes. Good job, Kyle.

Maybe I'll just do a quick introduction. I know we have a lot of time for questions. Ingrid Delaet Delett is here, our Chief Regulatory Officer. Samir Siddhanti Sidanti, to her right is [indiscernible], now in business development. He heads up our group there. So anything BD related, please direct that to Samir. He's also the leader of the muscarinic portfolio that I just shared. So he's worn multiple hats at Neurocrine. Eric Benevich, our Chief Commercial Officer; Eiry Roberts, our Chief Medical Officer; Jude Onyia, our Chief Scientific Officer. So you got 15 minutes, Anupam, fire away.

I'll start out with a couple of questions. Realize it's only a couple of weeks into the CRENESSITY launch. But any sort of anecdotal things that you would highlight that you've heard from the marketplace in the early innings here, very early innings.

Yes, I'll start us off. We're super excited about the opportunity to bring CRENESSITY to the CAH community. We were very pleased with the clinical data that emerged from our registrational studies and a tip of the hat to Ingrid and her team for the clean label and broad label that we were able to secure. And as Kyle noted, we got approved 4 weeks ago today. So a few weeks early ahead of our PDUFA date. So far, we're off to a great start. The receptivity from the endocrinology community has been very strong and even more so from the patients and the families. It's very early. We're just a few weeks into this launch. So we're not reporting any metrics yet. But ultimately, the word is getting out and the response has been very favorable. Eiry, do you want to comment?

Yes. I mean I think to build on what Eric was saying, I mean, we were very pleased with the clinical data from the Phase III program, which was, as Kyle mentioned, the largest Phase III program that had been conducted in pediatric and adult patients with CAH. I think it did afford us the opportunity to understand that -- and we hear this also from the external environment that up to 80% of the population of pediatric and adult patients with CAH, we think, have the opportunity to benefit from crinecerfont, CRENESSITY. And so it's clearly, though, going to be a need to change the paradigm in terms of how these patients are treated. There hasn't been a new medicine for over 70 years in this space. And so there's an enormous amount of education that needs to happen both at a clinician level and at a patient and community level to understand where this medicine fits into the treatment paradigm. We started that educational process many years ago, but I think it's accelerated really over the last 6 months as we got ready for the approval and launch. And so we're now really excited to be able to engage fully with the community and understand how to serve them.

Just, Kyle, maybe a clarification point. I think one of the slides said that you'll have one new medicine every 2 years. Is that right?

That's the plan. I mean, obviously, it starts with the to market. The substrate, we like to use that word here at Neurocrine, really begins by emerging from efforts from research into clinical. And there, we think that you can even see from our pipeline advancement this year, 4 new Phase I starts per year, 2 new phase starts per year, and that gives us a nice steady-state portfolio of about 3 programs in Phase III. And if you look at those and you look at your normal progression from there, and that gives you that opportunity. Of course, these are all averages, but it does require productivity that we haven't seen at Neurocrine over time. Now we're not just talking about productivity here, we're talking about quality assets that we're investing in. I think that over the past 6 months, we've made some tough decisions in the portfolio. Some programs have been discontinued, and we've been investing in other programs that we thought could benefit more patients, and we'll continue to make those difficult decisions on programs to make sure that we're making the right ones to advance into the clinic and certainly to support the late-stage development and bring forward...

It's amazing when you look back just 5 years ago, we probably had 1 to 2 programs in the clinic and to see the evolution of the company to now have 18 programs is really a testament to a lot of the efforts, both on the in-licensing front, but now you're starting to see the fruits of Jude's organization and everything that we've in-licensed that was very early stage. So we find ourselves quite fortunate to be able to invest the way that we are right now in a pretty balanced way from Phase I through Phase III.

And on Jude's organization, just wondering, we've talked previously about just maybe diversifying away from small molecules, right? So big biologics, maybe even gene therapy. So how do we think about -- you outlined the 18 months, right? How do we think about, let's call it, the 36-, 72-month time frame when we might see a little bit more from different modalities?