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

Good day, everyone, and welcome to today's Neurocrine Biosciences Reports Q4 and Fiscal Year 2024 Earnings Call. [Operator Instructions] Please note today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Vice President of Investor Relations, Todd Tushla.

Thank you, and a good Thursday afternoon to everyone. Welcome to Neurocrine Biosciences Fourth Quarter and Full Year 2024 Earnings Call. Joining me today are Kyle Gano, Chief Executive Officer; Matt Abernethy, Chief Financial Officer; Eric Benevich, Chief Commercial Officer; and Eiry Roberts, Chief Medical Officer. During our call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. We'll go to Q&A after prepared remarks and as is our custom and with your help, we will try to get everyone's questions. At this point, I'll turn the call over to Kyle.

Thanks, Todd. Good afternoon, everyone. Over the last several years, Neurocrine has evolved meaningfully across our entire enterprise from research and development to commercialization. Our 2024 results demonstrate positive impacts from this evolution, and we are excited to build upon these successes. With 4 approved medicines coming from our own efforts, we entered 2025 as a fully integrated biopharmaceutical company that is strong, stable and growing. We are prepared to take on industry challenges and capitalize on opportunities to continue to deliver for patients and shareholders. From a commercial perspective, INGREZZA continues to set the standard. Eight years after introducing the first treatment for tardive dyskinesia, we're on track to once again achieve double-digit year-over-year growth this year. While our guidance reflects a moderated growth rate relative to 2024, which was our all-time highest growth year, we are focused on all opportunities to continue to maximize the potential of INGREZZA and its impact on patients. From a big picture perspective, INGREZZA's differentiated profile in TD and HD chorea will enable us to do just that. INGREZZA has advantages such as unsurpassed efficacy, the absence of complex titration, a novel sprinkle formulation for patients with difficulty swallowing and advantages in certain sensitive patient population, such as those that are hepatically impaired. This strong clinically differentiated foundation ensures our ability to help many more patients well into the latter part of the next decade. When combined with our expanded and enhanced sales organization, which was rolled out in the last quarter, we are now better positioned than ever to meet the needs of approximately 90% of the 800,000 tardive dyskinesia patients in the U.S. who remain currently untreated with the VMAT2 inhibitor. Just as INGREZZA transform in standard of care for TD patients, we anticipate CRENESSITY will do the same for people living with classical congenital adrenal hyperplasia. As a reminder, CRENESSITY is the first medicine specifically designed and developed for the CAH patient community and the first new treatment option in over 70 years. Launching a groundbreaking new treatment is not without challenges, but over time, we believe CRENESSITY has the potential to be Neurocrine's second blockbuster therapy. Looking at launch cadence, we anticipate growth for CRENESSITY will initially be measured but as a first-in-class, best-in-class medicine for patients, we are confident in its ramp-up and long-term growth potential. We look forward to leveraging CRENESSITY to diversity Neurocrine's revenue profile and drive near- and long-term sales growth. Turning now to research and development. In 2025, we will address new therapeutic areas advance new modality, specifically biologics and improved productivity and ultimately establish the foundation of what we expect to become a sustainable internal R&D engine of innovation. Importantly, We will expect this enhanced productivity to deliver, on average, a new commercial launch every 2 years at study state. Starting this year alone, we anticipate our clinical stage pipeline will grow from 12 to 18 programs by year-end which will represent the most broad and robust neuroscience pipeline in the biopharma industry. Importantly, we will initiate multiple Phase III programs this year with osavampator, a major depressive disorder and NBI-568 in schizophrenia, both of which have the potential to further transform Neurocrine and drive significant growth at the end of this decade and into the next. As we enter this year with a strong foundation Neurocrine is well positioned for sustained near- and long-term growth and is well on its way to becoming a leading neuroscience company. With that, I'll turn things over to Matt.

Thanks, Kyle. 2024 was a tremendous year for Neurocrine with record sales growth for INGREZZA, positive Phase II data for both the muscarinic M4 and AMPA programs, and last but not least, the approval and launch of CRENESSITY. These achievements cement a strong foundation for Neurocrine's future success. In 2025, we anticipate INGREZZA sales to be $2.5 billion to $2.6 billion, reflecting $250 million of growth at the midpoint of the range. While the guidance range reflects good dollar growth, we saw increased competitive pressure as well as increased utilization management by payers over the course of 2024. This led to a slower growth trajectory heading into 2025. We are taking proactive steps to address this, including efforts to further develop and educate the TD market, where still approximately 9 of 10 TD patients who are not currently being treated with VMAT2 inhibitor, as well as efforts for future sales growth, most notably the recent sales force expansion in Q4 last year, which we expect will have a full impact in the second half of 2025 and beyond. Turning to CRENESSITY, although not providing an annual guide, we do want to provide a few thoughts as you develop your financial models for 2025. We expect CRENESSITY to be a blockbuster medicine, helping many patients with classic CAH but early revenues are expected to be measured primarily due to 3 factors: First, the delayed timing of reimbursement for a new rare disease product; second, the frequency of patient flow into offices; and third, the trialing that will naturally occur as clinicians obtain real-world experience with a novel medicine like CRENESSITY. One additional note on CRENESSITY. We did recognize $2 million in net sales in Q4 for initial bottle orders from our pharmacy partner in late December. To close a few comments on our investment profile. We continue to align our operating expenses with our top 2 capital allocation priorities, which are: #1, drive revenue growth; and #2, advance our R&D programs. Our 2025 SG&A operating expense reflects a year of investment behind the CRENESSITY launch and also the expanded INGREZZA sales force. For R&D, the increased investment in 2025 aligns with our previous guide, reflecting the initiation of our 2 major psychiatry programs advancing into Phase III with Neurocrine now fully funding the osavampator program. Please note we included $60 million of development milestones in R&D, including $35 million for Takeda and $15 million for Nxera associated with the initiation of our Phase III programs. If other future development milestones are achieved, we will update our OpEx guide as appropriate. With that, I now hand the call over to Eric Benevich, our Chief Commercial Officer. Eric?

Thanks, Matt. 2025 marks an important year of transformation and execution for our commercial organization. With the recent launch of CRENESSITY, we have the opportunity to raise the standard of care for the congenital adrenal hyperplasia community and to add an important second growth driver to Neurocrine's commercial portfolio. Before I provide further insight on CRENESSITY, I want to take a moment to highlight that 2024 was an all-time record growth year for INGREZZA, increasing annual sales by approximately $475 million, driven by increased volume, continued strong compliance and improvement in gross to net dynamics. Even with this record performance, as Matt highlighted, we still have a tremendous opportunity ahead for our INGREZZA franchise, with approximately 800,000 people in the U.S. suffering from TD and less than 10% of them currently being treated with VMAT2 inhibitors, we foresee substantial growth potential in the years to come. With last year's investment to expand the sales force, ongoing health care provider disease state education and direct-to-consumer efforts, we expect continued growth in 2025 across the psychiatry, neurology, and long-term care segments of our business. Notably, health care provider turnover remains particularly high in psychiatry and long-term care settings. Therefore, as in prior years, our commercial and medical teams continue to address the high unmet medical need for education and to motivate health care providers to screen, diagnose and treat TD in Huntington's chorea patients. Our 2025 INGREZZA net sales guidance range of $2.5 billion to $2.6 billion contemplates the continuing growth of the VMAT2 class across tardive dyskinesia and Huntington's chorea, and takes into account key external factors like the increasingly complex payer environment and competitive dynamics. Looking beyond 2025, with INGREZZA's differentiated product profile, and expanded and talented team and 13 remaining years of exclusivity, we expect to maintain our position as the leader in the VMAT2 market, while we continue to develop the next generation of VMAT2 inhibitors. So now turning to CRENESSITY. We were delighted with the early FDA approval in mid-December and the broad labeling for this first-in-class and first-in-disease medicine. Following approval, there is a significant level of enthusiasm and excitement across the endocrinology provider in CAH patient family communities. Even though FDA approval came right before the holidays, we were pleased to receive 11 new patient start forms in the less than 2 full weeks before exiting 2024. As a brand-new medicine, CRENESSITY is starting out as a nonformulary drug across all health plans. Therefore, in the early phase of the launch, we expect the majority of patients starting CRENESSITY will initially be dispensed nonreimbursed prescriptions via our Quick Start program to get them going on treatment while reimbursement is being secured. For each patient, our team, together with our specialty pharmacy partner, PANTHERx Rare. We'll work through their insurance companies process to secure reimbursement and transition them to commercial product. Ultimately, we expect CRENESSITY to be broadly reimbursed with the majority of patients paying $12 or less per month out of pocket. Long-term success with CRENESSITY will be driven by our ability to reach and educate the CAH community on this breakthrough medicine. We know from our experience with INGREZZA that this effort can take some time. There are no shortcuts when it comes to building new markets. Our field teams have a considerable number of appointments and programs booked in the coming months to educate endocrinologists on this exciting new medicine. We've long said CRENESSITY has all the hallmarks of our next blockbuster opportunity. It won't happen overnight, but we couldn't be more excited about its potential. All in all, we're pleased with the receptivity to CRENESSITY from the CAH community and excited about the prospects to improve the standard of care for people living with classic congenital adrenal hyperplasia. So with that, I'll now hand it over to my colleague, Dr. Eiry Roberts.

Thanks, Eric, and good afternoon to everyone. When I joined Neurocrine over 7 years ago, INGREZZA had just received approval for the treatment of tardive dyskinesia and our pipeline featured just 3 programs. Over time, we have transformed into a vastly different organization today, and I could not be more proud of the significant progress we've made. Since 2018, perhaps there is no program more emblematic of this transformation than CRENESSITY. We were extremely pleased with the outcome of the FDA approval process and final labeling for CRENESSITY, many thanks to the regulatory clinical development and all other cross-functional team members who successfully steered the program through development from start to finish. With a strong label that includes impressive efficacy and tolerability data from the adult and pediatric registrational studies CRENESSITY has the opportunity to transform the treatment paradigm for patients with classic congenital adrenal hyperplasia. For over 70 years prior to CRENESSITY's approval, the only available treatment for CAH patients with lifelong treatment with glucocorticoids, usually at high superphysiologic doses, this fundamentally flawed approach was the only option for patients and their doctors until CRENESSITY. CRENESSITY is the first and only approved nonsteroidal treatment for classic CAH that enables independent control of ACTH and androgens, creating the opportunity for endocrinologists to work with patients and their families to reduce glucocorticoid dose to more physiologic replacement levels. Since approval, our medical affairs field teams have been highly engaged with the endocrinology community, conducting extensive educational programs to support launch. Meanwhile, our critical development effort continues to generate valuable longer-term data from the ongoing open-label extension studies in adults and pediatrics, and to work towards the generation of clinical data in patients younger than 4 years old. In parallel, our health outcomes teams are focused on generating important data to characterize the burden of disease in CAH, while importing the value proposition of CRENESSITY as an effective treatment for patients with CAH. I will reiterate early feedback from KOLs and advocacy groups has been encouraging, as we bring this new treatment option to patients with great needs who are looking for a better choice. Turning to late-stage programs. Neurocrine's Phase III pipeline is also set to transform this year as we initiate multiple registrational studies starting with osavampator, our AMPA potentiator for the adjunctive treatment of major depressive disorder in adults. Last week, we announced the initiation of the first of 3 registrational studies of osavampator in MDD. The remaining 2 Phase III studies will initiate in the months ahead. Separately, we will also initiate the registrational program for NBI-568 our M4 selective orthosteric agonist for the treatment of schizophrenia, following the recent successful end of Phase II meeting with the FDA. The positive Phase II results from last year's proof-of-concept study give us the confidence and conviction to rapidly advance this molecule into Phase III studies as well as to initiate a Phase II study in bipolar mania in the second half of this year. Meanwhile, our early-stage muscarinic portfolio is progressing through healthy volunteer Phase I studies. And notably, we anticipate initiating a Phase II study for the dual M1/M4 agonists, NBI-570 in acute psychosis in the second half of this year. The early-stage pipeline continues to expand also with several programs set to advance into Phase I studies this year. most recently with NBI-355, a selective dual NAV 1.2/1.6 antagonist in collaboration with Xenon Pharmaceuticals, as a potential treatment for epilepsy, which initiated earlier this week. We also anticipate the Phase I study of NBI-675 and internally developed next-generation VMAT2 inhibitor to begin this quarter as well. Furthermore, our Chief Scientific Officer, Jude Onyia and his team have made tremendous progress with our preclinical portfolio of internally developed large molecules including peptides, antibodies and gene therapies. As these molecules progress through GLP tox in the coming months, if successful, they set us up very well for additional potential first-in-man clinic entries later this year and into 2026. In closing, we've built what we believe to be one of the broadest and deepest neuroscience-focused pipelines in the industry, and this is just the beginning. With that, I'll hand the call back to Kyle. Kyle?

Thanks, Eiry. Operator, I think we're ready to take questions now.

[Operator Instructions] And we'll take our first question from Phil Nadeau with TD Cowen.

You've been very clear that you expect a measured launch for CRENESSITY in terms of revenue during the first half of this year. We've also guided to giving new start forms as you did today. There's a very vigorous debate among investors as to what is a good trajectory of new start forms and what isn't. I was curious if you'd be willing to provide any of Neurocrine's perspective on what pace of new start forms we should anticipate through the first half of this year and into the second half of 2025?

Yes. Thanks, Phil. This is Eric. So first off, just really pleased that we got an early approval last year -- late last year and at a great very broad label to work with. And obviously, it gave us an opportunity to get moving a little bit before the end of the year. So those -- as we had said earlier this year at the JPMorgan conference, we would be providing updates each quarter on the prior quarters treatment forms that have come in. And that 11% represents just a few working days, frankly, before the turn of the year. We're really pleased with the early launch dynamics here. I'm really excited about the feedback that we're getting from providers. And I'm not going to comment specifically on what constitutes a good ramp. But so far, so good, and I'd say more than good in terms of the CRENESSITY launch dynamics.

Just a reminder, this is the first new medicine for these patients in over 70 years. So thinking about what the adoption curve might look like, Phil, it's really -- I think everybody is wanting to know what that would look like but as Eric said, receptivity has been incredibly strong so far. And I think you probably sense that in all the market checks that you and the other investors do. So, so far, so good, but we're early in the launch, and I'm not going to claim a victory yet, and we'll share more detail in May.

We'll move next to Paul Matteis with Stifel.

I appreciate the question. Can you expound upon this INGREZZA guidance. I feel like looking at our model, I'm really confused because you grew 26%. The guide is less than 10% sequentially. And I know historically, you guys have given conservative guidance. You've done a great job of VMAT, but I'm just concerned, are you trying to send us a greater message here that this market is actually sort of changing going into 2025? Like what are you seeing during the quarter? And I'm wondering if the Street is just making something here, given that I think consensus was above the high end.

Yes, I'll tackle that, Paul. So first of all, I just want to reiterate that it's amazing that 7 years after the launch, that we had a record growth here for INGREZZA in 2024, and we're really proud about that. And as I mentioned in my prepared remarks, our 2025 guidance of $2.5 billion to $2.6 billion reflects continued growth of the VMAT2 category and external factors such as an increasingly complex payer environment and competitive dynamics, we're taking proactive steps to address the competition, including our recently expanded sales team and DTC, and historically, we've done really well in terms of access to reimbursement, and we're going to continue to provide excellent support to our customers in order to maximize their access to INGREZZA going forward. With INGREZZA's differentiated product profile and expanded and talented team, a long runway of exclusivity and less than 10% of TD patients currently being treated with VMAT2 inhibitors we really expect to see continued strong growth for INGREZZA in 2025 and beyond.

Maybe just to add Paul, this is Kyle. We did have our sales force expansion in Q4 which always causes some disruption, and we expect that to pick up steam and help us into 2025 as we get longer into the year and certainly in subsequent years. But on the growth potential, I think that we're ever more bullish on the opportunity for INGREZZA, starting with the differentiation over our other competitor in the space, the deutetrabenazine starting with the first dose being efficacious dose, the efficacy profile that we have, the ability to present a new formulation for patients that have difficulty swallowing and advantages in certain patient populations, in particular, those with hepatic impairment. All the reasons to believe the continued growth in the product over time we appreciate there are some headwinds moving into this year, some of them having to do with us and the sales force expansion, but we're ever more excited about the opportunity that remains here. And the vast majority of patients still aren't being treated with the VMAT2 inhibitor.

And we'll move next to Tazeen Ahmad with Bank of America.

Mine is also on INGREZZA. Can you talk about general expectations for 1Q '25 maybe comparing them to prior 1Q, which was part of seasonality. I guess I'm more curious about it this year, just given expectations potentially for lowered revenue per script this year relative to 2024, should we be thinking that you could have a decline on the quarter-on-quarter revenue this year?

Yes. Thanks, Tazeen. So I can't comment on the specifics of our inter-quarter performance. But typically, this is a challenging time of the year, due to the need to get our many continuing patients to reauthorize the refills in a timely manner. And our teams are really busy executing their plans and working with their ECP customers and with the dispensing pharmacies to minimize any treatment gaps and of course, retain patients. As you know, Q1 is the quarter each year with the biggest gross to net impact due to commercial co-pay contribution and sets and incremental rebate agreements kicking in. I'll be able to provide a little bit more color on Q1 performance when we get to the Q1 earnings call. But this is typical for us to be working through all of these payer-related issues. And it's something that we've got better at each year over the course of the launch.

So to be clear, Tazeen, you mentioned net revenue per script year-over-year. I would just say that embedded in our guidance is an assumption that net revenue per script in 2025 is going to be very similar to what we saw in 2024. But sequentially, there is that headwind moving from Q4 into Q1, which is around 3%, call it, this year. The other item that I just flag is that I am keeping an eye on ordering patterns. The way that the calendar sets itself up at the end of the quarter, there may be a little bit of noise, so obviously, very hard to predict how folks will order, and we obviously don't influence that, but we flag it for you just in case it causes noise at the end of the quarter, but would largely net itself out through the rest of the year. And wouldn't be unique to Neurocrine. So a lot of moving parts here. I think our focus remains for TD is to just get more diagnosis, get new patients being generated and our sales force is very hungry to be able to help in that regard.

We'll move next to Akash Tewari with Jefferies.

A quick one on INGREZZA and then on CRENESSITY. Should we expect that 60-40 market share split holding up given the evolving payer dynamic between INGREZZA and AUSTEDO, your guide currently implies a 4% to 5% market share loss versus Teva's guide. And then your team's talked about physicians will likely need to see patients in person before prescribing them CRENESSITY. Some of our KOL work has suggested otherwise, how many of your new patient starts are done actually with telehealth? And how do you see that dynamic evolving over time? .

Maybe I'll start with the INGREZZA question. What we've seen over the past couple of years is great overall growth in the category. It appears that both brands are doing quite well here. I think what we will see and expect moving forward is that we continue to be the market leader and lead on the profile that we have with INGREZZA, which we think is quite differentiating. On that CRENESSITY piece, I'll let Eric chime in on that one.

Yes. Certainly, I do think there are some endocrinologists that are prepared or comfortable to prescribe CRENESSITY remotely or virtually without necessarily an accompanying patient visit. But all the work that we've done leading up to the launch indicates that the majority of endocrinologists are going to want to see their patient first and have that conversation with them in person before they recommend treatment with CRENESSITY. And given the fact that it's a new medication with a totally new mechanism of action. It's understandable. And then over time, I think as doctors get more experience, they get more comfortable and potentially start to initiate treatment without a patient visit corresponding.

We'll move next to Cory Kasimov with Evercore.

Wonder if you can provide additional detail on payer traction with CRENESSITY kind of feedback thus far? And how long you expect the free drug program might last?

Yes. So we put a system in place to make sure that when patients get prescribed CRENESSITY that they can get on treatment pretty quickly. Coming out of the gate here with this launch, CRENESSITY is a brand-new medicine. It's not on any formularies yet. So the process is to go through a formulary exceptions process for each and every patient. In order to get people started while reimbursement is being secured, we do have a fast start program, which after about a week, if the prescription claim hasn't been approved yet, by the health plan, will ship free product to them to get them started. And the expectation is that early in the launch, most patients will require a month or possibly 2 months of free goods before they're able to transition over to reimbursed product. In terms of feedback from the health plans, it's early days yet. What we're seeing is that, as expected, many of these patients are going on to the free goods program initially. But we have had some patients that have had their prescription claims reimbursed pretty quickly, and they've been able to start on commercial product right from the get-go. So far, so good. And as I said before, we're really pleased with the feedback that we're hearing from endocrinologists and feedback from the CAH community, and we're confident in our ability to get CRENESSITY reimbursed and to make sure that it's accessible and affordable, we estimate that the majority of patients will pay less than $12 per month.

And Cory, just an example, we had a great win even yesterday. One of the major plans came out with a coverage policy that was very I guess, friendly in terms of what it would require between being over the age of 4, being confirmed diagnosed with CAH. And so I do think the plans understand the disease, the team is doing a really good job educating those plans. And so far, I'd say that things are positive. But we're only 5 weeks into launch. So a lot still to go, but early signs are very positive.

We will move next to David Amsellem with Piper Sandler.

So you cited utilization management related to INGREZZA. Can you elaborate on what that's looking like? And how does that tie in to your competitors' behavior vis-a-vis payers. In other words, is your competitor getting more aggressive with payers in terms of positioning on plans?

Yes. So obviously, access and affordability are really high priorities for us at Neurocrine. And historically, we've done really well with high prescription dispense rates and most patients paying less than $10 out of pocket per month. And in terms of utilization management, that's something that evolves over the course of time. And what we saw, especially in the second half of last year, was that some of the plans were starting to tighten up their utilization management and really what that might look like, for example, is changing the PA criteria periodically. And so ultimately, we need to stay on top of that payer environment and how plans are managing INGREZZA on a plan-by-plan basis. We have a pretty sophisticated infrastructure to make sure that we're really maximizing access for our patients. We have field reimbursement specialists. We utilize all the data that we have to make sure. And I should say that we also have a really good pharmacy network in place. So as I said in my prepared remarks, it's a complex payer environment. Payers continue to evolve in terms of how they're managing specialty drugs. And that's something that we expect to see going forward, and that's a factor in our guidance.

We'll move next to Anupam Rama with JPMorgan.

This is actually Malcolm Kuno on for Anupam. So with regard to the INGREZZA guidance, can you talk a little bit about the levers of growth amongst the segments? Are you expecting outsized growth from any 1 of the 3 segments? .

Yes, Malcolm, maybe this is Kyle. I'll start the question. We generally see the growth still continue to come from the psychiatry segment. I think we also see good investment or return on investment from our expansion in LTC over the past couple of years and see that being a larger portion of the business as well in combination with work and efforts in the neurology space. But I think largely still the growth opportunity remains in psychiatry. You know some of the headwinds there still involve telemedicine to turnover in the offices and the best way to tackle those is through keeping TD top of mind in those different groups that are using those different aspects of telemedicine and the MPPs as well. And the way to look at breaking through that is through having greater frequency of interaction, and that's where the sales force comes in for us. So in terms of growth overall in psychiatry, but it will come across the board in the segments that we're looking at in psychiatry, LTC and neurology.

We'll move next to Chris Shibutani with Goldman Sachs.

Thank you. Maybe if I could move to the operating expense side of the equation, particularly with the guidance. Now thinking about how with INGREZZA, over the course of the several years, you did have periods where you reassessed, reinvested at a more extensive levels. How confident are you in terms of the current thinking about INGREZZA and then reflecting upon what the potential will be in a market that obviously has some differences, how should we think about your confidence and potential need to adjust either up or down or in some other way with CRENESSITY's launch?

Yes. I think it's very clear within this space that the #1 driver of shareholder value is revenue growth, and that's exactly where we've been putting our money over the last 5 years in those periodic reassessments of INGREZZA that you referred to, whether it was sales force expansion or direct-to-consumer advertising and then more recently, another sales force expansion. So from an investment perspective, just over the last 3 years, you've seen us show tremendous SG&A leverage, going from the mid-50% of revenue in SG&A, all the way down to the low 40%. So the investment that you see this year in both CRENESSITY and the expanded sales force. It's going to be a little bit less leverage coming out of that. But the expectation is that when we look at '26 and beyond, we aren't sitting here today thinking that we're going to need a significant increase or change in infrastructure required to support both brands. CRENESSITY in and of itself being a rare disease and the nature of the patient population. We expect this to be extremely profitable, quite quickly. But that's something that will show up from a P&L leverage perspective as you think about 2026.

We'll move next to Marc Goodman with Leerink Partners.

Yes. Matt, with your comments on ordering patterns, are you suggesting that fourth quarter may have been helped by inventory? Did inventories change and you're expecting maybe first quarter for that to reverse? . And then I guess my question really is for Eiry to talk about the M1/M4, the 570 molecule that you're pushing forward. Can you just describe the characteristics of that product and how you expect it to be differentiated from the one that's on the market today?

Yes, I'll cover the ordering pattern question. Really is more of a Q1 phenomenon. The nature of our business, our wholesalers largely order on a Monday products delivered on Tuesday, and that's when revenue is recognized typically, and so when you just look at the calendar setup for the first quarter, you only have 12 Tuesdays. And then you have 14 Tuesdays that pop up in September. So it nets itself out throughout the course of the year. We don't do anything to dictate the timing of orders. This may not become an issue, but I know it's something that I just flagged just in case there is noise around timing of orders because of the nature of just how the calendar falls. So nothing associated with Q4 that I would mention, Marc.

Yes. Marc, thanks for the question. Happy to answer that. As we said in the prerecorded remarks, we are actually still completing the Phase I evaluation of the 570 M1/M4 molecule in that Phase I evaluation in healthy subjects, we have an opportunity to profile the pharmacology associated with both M4 pharmacology and M1. And whilst I can say that we were very confident and pleased with the results that we saw in schizophrenia in our Phase II study 4568 to the M4 selective agonist. There's obviously potential for a dual agonist to add additional potential benefit in areas such as cognition through the M1 effect. And so for that reason, we're very keen to take that molecule forward in the second half of this year to test it in a Phase II study of schizophrenia as well.

Are there obvious differences versus Karuna's drug?

Well, Karuna's drug is a pan muscarinic agonist. And so it not only hits M1 and M4, but also the other muscarinic subtype from M2, M3 and M5. And that's the reason why the peripheral trospium has to be added to the Cobenfy molecule in order to manage the potential side effects associated with the off-target M2, M3 and M5 effect. So we do not hit M2, M3 or M5, and so we would anticipate there to be differences for a selective M1, M4. And as I said, when we complete the Phase I and go into our Phase II study later this year, we'll be able to talk more about what we're anticipating and hoping to see.

We'll move next to Jeff Hung with Morgan Stanley.

Can you talk about the feedback that you heard from the end of Phase II meetings for osavampator and 568? And for 568, was there any concern by the agency on lack of dose response or the benefit was seen with the mainly with 20-milligram dose?

Eiry, do you want to take that one?

Yes. We were very happy with the end of Phase II meeting for both osavampator and for 568. And I think we got alignment and guidance from the agency for both of those interactions that was support of the registration program as we designed it and defined it, support of the dose selection particularly as you asked around 568. Now there was complete support for moving forward with the 20-milligram dose into the Phase III program. We also got alignment on the endpoints that we were using and the nature of the whole registration plan. So our focus right now is on moving to implement those programs, we already initiated the osavampator first Phase III acute study. And we are moving towards initiating the 568 study in the very near future as well.

We'll Move next to Brian Skorney with Baird.

This is Charlie Moore on for Brian. So we were just wondering, looking earlier in the pipeline about your Friedreich's ataxia gene therapy collaboration with Voyager. And it would just be great to get some color on how you think it could differentiate from current clinical stage gene therapies, 1 dual and 1 targeting cardiac tissue as well as if that's still on track to initiate first in human trials this year.

Maybe I'll take this question, and I'll have Eiry fill any gaps on this. We're really excited about the FA program that we have with Voyager. It's something that we've been working on for several years as a part of our collaboration. We've gone through first and second-generation capsids that allow us to deliver frataxin to targeted tissues. And what we have in the approach here that's so exciting is that patients have the opportunity to have an IV-administered gene therapy that delivers frataxin to the cardiovascular system as well as the CNS. So the cornerstone symptoms of the disease, either the movement component or heart disease, cardiovascular outcomes would be addressed by our gene therapy in a stand-alone treatment. So very excited about that. We are on track for graduating this program from preclinical to clinical development later this year.

We'll move next to Mohit Bansal with Wells Fargo.

Sorry for keeping -- staying on INGREZZA here. If I look at the fourth quarter number, if I just straight line it, it looks like your low end of the guidance assumes just flat line using fourth quarter. So is there something massively changing in your contracting or the pricing dynamic? It does seem like that from your comments. So can you help us understand that? And then also, are you expecting or modeling any benefit of sales force expansion here? Because that would mean second quarter -- second half bump, but that doesn't seem to be part of the guidance here.

Yes. On the contracting front, just to be clear, we did enter into some contracts that have some incremental rebates, but it pretty much offsets the annual price increase. So from a year-over-year perspective on price, pretty flattish, a little sequential down maybe Q4 to Q1, as I mentioned earlier. So I understand that the straight-line math, there's a lot of variables at play including pace of new patient additions relative to discontinuations, for example, on a much bigger patient base. And so those are normal growing launch dynamics. And as we mentioned, with the sales force expansion, we do expect to have nice momentum in the second half of the year, but it's going to take a little bit of time for them to get up to full speed.

We'll move next to Ash Verma with UBS.

So just one more on INGREZZA. So do you expect to see more of the utilization management headwind in 2025 on the Medicare Part D plans? We've heard part D plans are moving branded drugs lower because they have the catastrophic coverage. And with that burden going up, they need to make up the dollars elsewhere. If you can comment on that, that would be great.

Yes. So just a quick comment. We don't expect to see any significant changes in terms of our coverage in 2025 versus 2024. And certainly, we're looking and monitoring closely what's happening with the first wave of medicines that have been negotiated and the impact potentially of other drugs in those classes. But so far, we're not seeing any major shifts. And the other thing I'd point out is that because we are a designated small manufacturer, we get the phase-in benefit on the contribution to the catastrophic phase. So -- as does our competitors. So there's no one that's advantaged in that regard within the VMAT2 class.

We will move next to Sumant Kulkarni with Canaccord.

It's another one on INGREZZA. The product has been on the market for some time now. Your comments suggest there's still some way to go on penetration in the tardive dyskinesia market. But we seem to be at a point every few quarters when the debate around the growth trajectory around INGREZZA seems to intensify. And then you kind of grow out of that by beating your initial numbers. So to help settle this uncertainty or debate somewhat, what's your latest philosophy on offering any detail on what you think eventual peak sales potential for INGREZZA might be in the U.S.?

Yes, it was funny. Kyle and I were talking about this earlier this week original models for INGREZZA were peak sales of $500 million and here we are in 2024, having grown almost $500 million year-over-year with the market now being close to $4 billion. So we're not going to give a peak potential. But what we do see, as we -- as Eric has alluded to, that's still 9 out of 10 patients with tardive dyskinesia are not currently being treated with the VMAT2 inhibitor. So we do anticipate there's significant demand out there. And as you've said, there are ebbs and flows in the market development process for tardive dyskinesia. Some are pretty clear to understand others less clear. But we do feel like there's a lot of growth trajectory ahead.

Maybe just to add to that, part of our discussion that we had is the one of the really unique aspects of tardive dyskinesia is that we believe the underlying prevalence continues to grow at a rate that exceeds the growth rate of the general population. So getting your hands around market size and value is something that's dynamic. The antipsychotic prescription volume was about $75 million last year, and it continues to grow in the low digit number that's multiples above the growth rate of the general population. So that's why you saw us increase our prevalence number late last year, and that's something that we'll continue to revisit on the annual basis. But we're ever more surprised as we get into the market and learn more about it is how large it can be and how much work there is still ahead for us with that work, a lot more opportunity. And we're quite thankful to be in a situation where we have 30 more years of market exclusivity to help build the market.

We'll move next to Myles Minter with William Blair.

Maybe one for Eiry just back on 570. You haven't completed the Phase I yet, but just curious as to your decision to move in adults, experiencing schizophrenia, acute psychosis and not Alzheimer's disease psychosis. Does that mean you're still contemplating that indication? Or is it maybe that you're seeing something on the tolerability side for that molecule that you want to go into adults first prior to the elderly population.

Yes, happy to take that. I think obviously, we have experience with 568 for the M4 selective in the acute psychosis setting in adults, which makes it a pretty a straightforward choice to evaluate 570 in that patient population as well. With respect to other potential indications, obviously, we remain very open to that. And as we continue to generate data, you may well see us going into different indications beyond that initial psychosis study.

I think, Myles, too, this is Kyle. The interesting thing about the muscarinics to be discussed is that there's still a lot to learn about this as a target class. And fortunately, we have a number of molecules that allow us to compare and contrast the pharmacologies that we have. One way to do that is look at a dual pharmacology in the same patient population and see what type of outcomes you can get from a selective and direct agonist that we have in 568. So there's a lot of value, a lot of opportunities here across the different molecules that we have and knowing that we can't do everything the same time. We like the approach that we have here with 568 going into bipolar mania and the dual going into schizophrenia. .

We'll take our next question from Laura Chico with Wedbush Securities.

I'm sorry, just one clarification for me. With respect to the field force expansion, and I guess I'm trying to relate back to the 25% guidance here, wondering whether you're going to see the biggest benefit from driving new patient starts? Is this the channel expansion or increasing adherence. I guess I'm just trying to understand where the field force impact is most likely to be felt. Any commentary there?

Yes. A couple of things I'd point out with regards to the sales force expansion and our experience from prior expansions. First of all, I think we alluded to it earlier. When you hire essentially a new team or expand your existing team and you deploy them. It takes some time for them to come up to speed and to get their stride, so to speak. And so we do expect to see the majority of the impact from the expanded team as we go into the second half of the year. Second thing is in terms of what's the benefit of the team, it's primarily in driving new patient starts. They do a lot of education. They're able to increase our reach and also increase our presence in existing practices, driving recognition and diagnosis and, of course, initiation with INGREZZA. The 2 areas that we expanded our team into were psychiatry and long-term care. And as Kyle mentioned earlier, psychiatry continues to be the segment that has the largest patient potential and is still fast-growing. And we recognize that we hadn't really increased our footprint in psychiatry since going back to, I think it was 2018. So ultimately, we do see the opportunity to expand our footprint in both psychiatry and LTC those teams are relatively brand new, and we do expect to see the benefit of having that expanded presence, especially in the second half of the year.

We move next to Ami Fadia with Needham.

I have 2 very quick questions. Firstly, just follow-up on all the questions around the INGREZZA guidance. It certainly seems quite conservative given all the other comments around the trends. But it sounds like you're taking a conservative view, keeping in mind kind of the increased hurdles with regards to prior auth. If you can comment if that's kind of what's driving this conservatism or if you're missing something there? And then just with regards to the 11 patient forms for CRENESSITY, can you give us some color around where these patients are being treated and something about kind of what was the trigger for prescribing the drug to these patients? Were they sort of on very high corticosteroids or were they sort of not well controlled on their current treatments? Any color would be helpful.

Yes. On the INGREZZA piece, we've commented previously. I think that there are a number of variables that play out here towards the end of 2024 that reads on our thoughts on 2025. Competitive pressures there with our competitor in this space with their XR formulation, getting to a once-a-day type of medicine after a complex titration regimen. We've also seen the competitive pressures there on the payer front. But I don't want to discount also something that we talked about the disruption of our own sales force expansion in Q4 these are things that we saw play out over the course of the second half of next year -- or last year, excuse me. And we think that will still be a factor here for us as we start 2025. But I don't want to dwell too much on the headwinds that we have here also I want to call out all the things that we think will benefit us here into 2025 in subsequent years. And I've touched on these already, but really, we -- that sales force expansion that caused that disruption in Q4, will start playing dividends this year and certainly able to lean on that heavily in subsequent years as well. And then our differentiated product across things like efficacy, dosing regimen, other formulations for patients with difficulties. These are all things that will play out with this upside sales force and allow us to do quite nicely over time. So we balance both of these things in terms of our guidance. We are seeing growth this year. It's not going to be as the guidance suggests, as large as it was in 2024, which was our largest growth year ever. But we still see significant growth here in this year and certainly in the following future years as well.

Yes. And let me just quickly comment on the sort of what we're seeing in terms of the treatment forms coming in and sort of the diversity of the patients. So obviously, we've done work leading up to the launch. Our expectation is that adoption will be probably earlier or faster in the pediatric segment. We expect that we'll also see more rapid adoption in the centers of excellence. However, early on with a relatively small sample size, so to speak, what we are seeing is treatment forms are coming in from community endocrinologists, from endocrinologists that are part of teaching hospitals or CAH clinics. We're seeing patients getting started that are pediatric patients. We're seeing adult patients, getting started. So really, it's very diverse and across the board. And as I said before, just really excited about the momentum and the trajectory that we're on here. It's early days yet, and as Matt said, there's still a lot of people that we need to reach and a lot of work that we need to do. But I think that the fact that we had invested in disease state education that we had teams in the field in the second half of last year, and we were well prepared for an early approval has really set us up for success this year and beyond with CRENESSITY.

We'll move next to Uy Ear with Mizuho.

So on questions on INGREZZA, quick one on 4Q. Was there significant or any volume growth in the quarter from Q3 to Q4? And quickly on the guidance as well. Does the guidance assume benefits from the sales force expansion. Just wanted to make sure we're clear on that. And thirdly, if I can, could you maybe just help us think how to perhaps think about the INGREZZA sales post 2027 after -- I guess, after the price negotiation for AUSTEDO.

Yes, I think the answer to your questions are yes. We have included the sales force expansion in our guidance range. Obviously, at the high end of the range, it's contributing at a quicker pace. And so I would just say that the answer to your first 2 questions are yes. In regards to what happens post 2027, that's something, as Eric mentioned, we're keeping our eyes out looking to see what is happening in the space with other similarly situated product categories. But at the end of the day, for us, our main focus right now is growing the TD market, growing the presence of INGREZZA. There's going to be a whole lot of uncertainty, I'm sure through the whole IRA implementation, hard to predict, but what we can control is ensuring that patients with TD get diagnosed and get opportunity to take INGREZZA.

We'll take our next question from Brian Abrams with RBC Capital Markets.

This is Joe on for Brian. So related to the earlier question on TD market share split, I believe the market share has been pretty stable over time even after competitor XR launch. I was just wondering if there's anything more that will drive the changes to the competitive dynamics this year and how are you thinking about the changes in payer dynamics beyond 2025? Do you believe the complexity and the dynamics will persist?

Yes. So we've always said that we have a formidable competitor. And they appear to have gained a few share points in 2024 due to the rollout of their extended release formulation of deuterium-modified tetrabenazine, as one might expect. But INGREZZA is the leader in the VMAT2 category, and we continue to project growth for the class. And for INGREZZA, there is, as I mentioned earlier, a lot of headroom with 9 out of 10 patients with TD as yet undiagnosed and untreated currently with VMAT2 inhibitors. So we certainly are bullish in terms of the long-term and near-term potential of INGREZZA to continue driving that growth. And with 30 more years exclusivity I'm glad that we have that time to do it. Thinking beyond 2026 and 2027, I mentioned that it's a complex payer environment and the Inflation Reduction Act makes it even more complex. But we're going to continue to do what we need to do to make sure that patients have access to INGREZZA this year and in coming years.

And maybe just to add to that as a reminder to everyone, I think we have it in our remarks, but we do have been given these specified small manufacturer exemption as well as a small biotech exemption. So that's confirmed. And we would expect our price negotiation observation event to be in 2029. So to Eric's point, we have the opportunity to learn, prepare and adjust to the new world that we'll all be in over the next couple of years as products are negotiated at CMS and seeing how that affects potential other products in similar categories. .

We'll move next to Evan Seigerman with BMO Capital Markets.

Malcolm Hoffman for Adam Seigerman. I wanted to ask if you could talk about the decision to amend the agreement with Takeda in get worldwide development and commercial rights ex Japan for osavampator. Is this decision driven by increased confidence in pursuing additional indications beyond MDD? Or was this decision more based on just the profile in MDD alone?

I'll start. This is Kyle. I think that we're very excited about the data that we have that came out of the Phase II program and quite frankly, so was Takeda. As we've seen from Takeda over the past several years, they've been making a number of strategic decisions that move them away from kind of classical psychiatric disease and MDD osavampator fits squarely in there. And the nature of our collaboration really affected their P&L in terms of their expense profile on a year-to-year basis. So knowing that they appreciated the data that we have and still like to be involved in this. We both work towards an arrangement where they are able to continue developing this asset in their territory, which is Japan. This particular compound came out of efforts from their Japanese R&D facility. And there's quite a bit of pride there and able to take this forward in their country, and we'll continue to work together to develop list of osavampator outside of Japan with Neurocrine owing the lion's share of the economics. So it's a win-win for both companies. We're able to move forward more quickly being a smaller and nimble company. And we think that, that will ultimately allow us to have the best opportunity to bring this medicine to patients as quickly as we possibly can. So we're excited. We continue to work with our team there, and we'll look to put this into Phase III this year.

And it does appear that there are no further questions at this time. I would now like to turn it back to Kyle for any additional or closing remarks.

Thank you, and thanks, everyone, for joining the call this afternoon. As you can see we've got a lot going on here at the company. And we've hit on a number of different points throughout our conversation through our opening remarks about 2025 being a year of execution and a year of evolution. And it really is, and it does start with our efforts on our commercial products, INGREZZA and CRENESSITY. The goal here is to drive revenue growth and diversification over time. So it's very important we continue to execute on our commercial medicines and make sure that they are brought to patients as quickly and broadly as possible. The other pieces of the execution involves supporting those programs that are in process in our pipeline. We've talked about our Phase III assets, those of osavampator in NBI-568 in MDD and schizophrenia, successful respectively. And that's just the tip of the iceberg. We have programs in Phase II coming onboard from our muscarinic portfolio, we have data readouts that span Phase II and Phase III MDD and the adjunctive treatment of schizophrenia as well as the dyskinesia associated with cerebral palsy. A couple of Phase I starts this quarter. And then the fun begins the real concept of diversified and sustainable portfolio with our R&D transformation in bringing new products that are in the space of peptides, antibodies and gene therapy. Those are all things that become a reality in the second half of this year. So we're extremely excited about sharing this news with you as we move forward into 2025 and meeting you all at the health care conferences throughout the course of the year.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon. Goodbye.