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

Good morning, and welcome once again to TD Cowen's 45th Annual Healthcare Conference. I'm Phil Nadeau, one of the biotech analysts here at Cowen. It's my pleasure to moderate a fireside chat with Neurocrine. We have with us Kyle Gano, the CEO; Eric Benevich, the Chief Commercial Officer; Matt Abernethy, CFO; and Todd Tushla, IR is in the front row.

With that, Kyle, I'll kick it to you. Can you give us a brief state of the company overview, biggest strengths, biggest challenges? And what does Neurocrine need to do to create shareholder value over the next year?

Thanks, Phil, and thanks to TD Cowen for having us here. No, I will be making forward-looking statements. I'd like to direct you to our latest SEC filings for the risk factors of the business. But beyond that, let me jump into Phil's question. For those of you that are not familiar with the company, we're a fully integrated biotech company located in San Diego, California. We discovered, developed and commercialized in whole in part 4 FDA-approved medicines. And all those when they are approved, we're first-in-class. I think that speaks to what we focus on here at Neurocrine. And the reason why I start there is that we didn't get to these approved medicines without a pipeline. So that's where we're actually going to begin today is talking a little bit about the pipeline. So in the current portfolio, we have 12 programs from Phase I to Phase III. And I'm going to tick -- where we -- tick down all the boxes here from late stage to earlier stage in Phase I. So in Phase III, we just initiated our MDD trial and program with [indiscernible]. This is our AMPA PAM. And very shortly, we'll be kicking off the Phase III program for our selective muscarinic M4 agonist. Part and parcel with that is a real interest in the muscarinic category as a whole. We have the largest, deepest muscarinic portfolio in the industry. So NBI-'568 program for schizophrenia, we'll be moving into a bipolar mania trial later this year. And then our M1/M4 muscarinic agonist will be moving into a schizophrenia program Phase II later this year as well. So we'll be able to compare for the first time an M1/M4 agonist directly with an M4 agonist. Beyond that, we have a number of programs that are in Phase II development and Phase III development that will read out this year. namely in valbenazine, we have a Phase III trial in the adjective treatment of schizophrenia that will read out as well as dyskinesia and cerebral palsy. We have a Phase II trial that will read out in major depressive disorder as well that's NBI-'770. Beyond that, we have a couple of Phase I programs that will be entering the clinic very shortly. One is NBI-'675, our VMAT2 follow-on to INGREZZA as well as a dual NAV1.2, 1.6 inhibitor that we'll be pushing forward in epilepsy. So a very full pipeline. I think it speaks to this idea that this year, it really is about execution and evolution. On the execution side of things, it's bringing forward all those new study starts that I just mentioned. It's also making sure that we close out those studies that are in flight right now to deliver top line data throughout the course of this year. On the evolution side of things, it's launching and supporting a successful launch for CRENESSITY in congenital adrenal hyperplasia, which I'm hoping we are able to speak more about here today. And it's also the evolution of the pipeline. I didn't yet tell you all the things that are going on in the preclinical phases of development. We have a number of programs that will enter the clinic later this year in neuroendocrinology, in immunology and in gene therapy that will expand the breadth and depth of what we can do at Neurocrine moving forward. So a lot of excitement there across the portfolio. And the reason why I started with the pipeline is that all this has been made possible because of INGREZZA. We spent a lot of time here talking about INGREZZA the past couple of weeks. It is our growing blockbuster to think that 8 years in. We'll be talking about a medicine that we're guiding towards $2.5 billion to $2.6 billion in revenue is amazing. I never thought we would be here at this point. That's a 10% growth from year-to-year at the midpoint. So a very exciting product there. And thinking about all the areas of differentiation that we have with INGREZZA that range from efficacy, not just on the movement disorder. For those of you that follow Neurocrine, you probably saw last week that we announced some really interesting data that showed cystic and clinically meaningful benefits on function and quality life measures in patients with tardive dyskinesia. This is the first time that any company, any product has shown benefits on function and quality of life. And we think combining that with benefits on the movement disorder as well is going to be quite differentiating for us to utilize with our physicians and patients moving forward. So the efficacy is expanding in terms of our knowledge about INGREZZA and the benefits. We also see the lack of a need for titration, which is differentiating the first dose is an efficacious dose. We also have a specialized formulation that allows patients with aphasia, which is about 10% of TD patients and patients with Huntington's chorea, which is the other patient population we have approval for helps them utilize this medicine more efficiently. Last, but not least, we have benefits and advantages in certain patient populations, in particular, those with hepatic impairment. So there's a lot of things to like about INGREZZA. You overlay that with the fact that 90% of the patients with TD 800,000 patients are still not being treated with the VMAT2 inhibitor, and there's a tremendous amount of growth still ahead. It's important to flag that because we do have 30 more years of market life -- market patent protection. So that's something that we will continue to invest in over time and grow this market. And the reason why I ordered things here today is that we have been spending a lot of time, Phil, thinking about questions, fielding questions from investors and the community about Q1 to 2025 guidance. So I would like to spend just a minute here on that. When it comes to Q1 dynamics, I mean, there's always growth impediments that we see here this time of year. And I think there are a number of things that are new thinking about 2025 that we just wanted to flag to everyone to make sure that we're all on the same page. Q1 is typically a slow and challenging quarter for us. But there's extra factors here that I will be a little bit more descriptive on. So Q1 is typically the quarter that we're fighting through reauthorization any specialty product typically sees this type of situation play out during the course of the year. And basically, what it means is that new patient starts, whether you're a new patient to INGREZZA or you're getting a renewal of your prescription have to go back through the authorization process to get your prescription that will be utilized throughout the course of the year. And the net effect of this challenge is that it pushes out prescriptions that would normally come closer to the time that your claim was approved, get pushed out to the end of the quarter. I think that's an important consideration here because when you think about either the dynamics around Q1 or your guidance, it's important to call out that the earlier get prescriptions in Q1 because there's an accumulation effect of revenue for each patient throughout the course of the year, the higher your revenue will be at the end of the year. So Q1 has a lot of important considerations for us when we think about not just the number for Q1, but for your guidance throughout the year. So reauthorization, not new for Q1 for us and others with specialty products. But what's new is that this year, we have one less ordering week. Now what I just told you is that prescriptions are delayed from earlier in the quarter to later in the quarter. So weeks in Q1 from a revenue standpoint are not equal. So losing that last ordering week has an oversized effect on our performance for Q1. Another item that I'd call out, and this is something that we shared at the earnings call, our 2024 earnings call is that we saw last year, in particular, in Q4 a decrease in our growth rate for new patient starts. And we lean on that to help give us good momentum going into the new year. So without that momentum with one less ordering week, we're certainly going to be challenged here in Q1. We do have a lot of initiatives that are on going here now that will help us recover in Q2 and see an acceleration of growth in the remainder of the year, second half of this year. And that's what variables played a role into the guidance that we gave you for $2.5 billion to $2.6 billion. So I'll just call out these things that will accelerate growth here, and then we can get into these further, if you'd like, in our Q&A. But number one, our sales force expansion. That was something that we executed in Q4. That's certainly a significantly scaled organization now that will be out there with new messaging this year. We have the ProConnect or ConnectPro data that I just mentioned, highlighting the new efficacy data that we have with INGREZZA on function and quality of life measures. We have optimization of access across formularies, plans as well as the pharmacies to ensure greater efficiency of prescription fulfillment. And last, but not least, this overall greater investment to support INGREZZA in the areas of DTC in education that will start rolling out in the month of April. So a lot of things that we'll be leading on this year, but Q1 will be noisy, no doubt, Q2 and the remainder of the year will be areas of growth for the INGREZZA. So I think that's the additional detail and description that we want to add here. But part and parcel with the business that will be ebbs and flows. We've seen this before at Neurocrine. We were just talking here earlier about COVID and Cowen being associated with that event a number of years ago. It was a period of time at Neurocrine where INGREZZA had its own challenges, and we had to adapt the business for things like telemedicine, and we did that through an initial slow growth year, but we rebounded with these investments, and we've seen significant growth since then. It feels an awful a lot like that now here in 2025. So that's what I'd like to say about INGREZZA. I would like to turn it over to CRENESSITY. Eric is here to share some of the thoughts on the launch of CRENESSITY. But just let me say a really exciting time here at the company. It's what we believe is our second blockbuster. It's the first medicine approved for CAH in over 7 years. It's first in class, as I mentioned early on, that's a theme here at Neurocrine and we do believe it's going to change the standard of care. With that, changing the standard of care often comes associated with that a measured launch. And that's what we see with CRENESSITY, but we do feel that once there's traction here and utilization with a product we'll see an acceleration to market share peak unlike what we see with INGREZZA, which is more steady. But overall, a very exciting time here at Neurocrine with the medicine that we believe has patent protection now to the early 2040s. So with INGREZZA and CRENESSITY real anchors to the organization moving forward to further grow the pipeline. But I think I'm going to stop there. I think I've said enough, and we can turn it back to you, Phil.

Yes. That was great. Maybe we will start with CRENESSITY. Eric, can you give us an update on how the first 3 months of launch have gone? How has the uptake physician awareness, payer access track compared to your initial expectations?

Yes. So first of all, just really excited about the launch dynamics that we see unfolding. Very happy with how the launch is happening. And we're actually about 2 months now since the approval. So just to kind of recap here. CRENESSITY was a product that had breakthrough designation, had priority review. We had a PDUFA date set for the end of December, and we actually got approved in mid December. So an early approval on top of an earlier approval time line. Thankfully, we were prepared for that. And actually, we wanted to start to develop the market last year. One of the ways that we did it was to hire and deploy a field team actually Salesforce and a field medical team that were out visiting endocrinology practices. They were doing disease state education on CAH. They were profiling these accounts. They were scheduling appointments for the other side of the PDUFA date, and they were doing some patient finding activity. And we think that getting a team out there in advance has benefited us on the other side of the approval. As I mentioned, we got approved about 2 months ago. We're really happy with the labeling, a very broad label that enables a wide range of patients with classic CAH to be treated. And so far, the receptivity from the patient community and from the endocrinology community has been very positive. Our field teams have pivoted from talking about exclusively disease state. Now they're able to talk about the pivotal trial data in both pediatric and adult patients, and of course, the prescribing information and how to prescribe it. So we're well on our way in terms of the adoption curve. And I can share just a few, I guess, the tidbits and some color in terms of what that looks like for us. This is a condition that spans patients from birth all the way through their adult years. And certainly, we look at the market opportunity in terms of being able to benefit these pediatric patients, if you look at our label, any 14 years or older, it could be a candidate for treatment. If you look at the prescriber universe or the potential prescriber universe for CRENESSITY, the way to sort of break it down is the pediatric endocrinologists are caring for what we think is about 1/3 or so of the CAH patient population. There was less than 1,000 pediatric endos out there. So it's a relatively compact prescriber base. And the good thing about these doctors is that, for the most part, they're pretty comfortable and experienced in terms of managing CAH patients. Most of them, in fact, have one or more CAH patients currently in their practice. The second group of doctors to think about or those endocrinologists that are affiliated with centers of excellence. There's less than 10 centers of excellence out there that are accredited by the Cares Foundation, which is the patient advocacy group for CAH. And there's a similar number of centers of excellence that don't have accreditation, but have most of the services. These are typically outpatient clinics that are affiliated with teaching hospitals. And those centers of excellence, we think, account for less than 15% of the total patient volume. Most of the patients that flow through those COEs are pediatric patients. Once you get past the pediatric endocrinologists and the centers of excellence, now you're into the adult endocrinology community, and there's over 8,000 endocrinologists in the U.S. Many of these doctors don't have a CAH patient or have even treated a CAH patient. So that's sort of the, I'll call it, the third wave of adoption, so to speak. So in terms of setting expectations of what uptake is going to look like. Certainly, we expect earlier and more rapid adoption amongst the pediatric population and through those pediatric endocrinologists. Also the patients that are being cared for at those centers of excellence we would expect more rapid adoption. And then over time, as we reach more of these adult endocrinologists and we continue to do that patient finding work, that's where we'll see the majority of the adult population get put on treatment. So it's early days yet. The other element that I can share is sort of what -- how things are sort of shaping up from a reimbursement perspective. CRENESSITY is a brand-new medicine, as you know. It's a rare disease drug. It's a specialty drug. We've partnered with a rare disease pharmacy called PANTHERx Rare. They're an excellent pharmacy. We have been working with them over the years with INGREZZA, and they have delivered great service to our customers in the TD world, and now they're doing the same in the CAH world. When a doctor decides to prescribe CRENESSITY the way that it works is they complete a treatment form that captures most of the information that we believe the health insurance plan would require to be able to adjudicate that claim that gets sent into PANTHER. They start working that claim. And if after about a week. They haven't gotten the approval yet for reimbursement. But go ahead and ship the patient, their first month supply. We have a quick start program, which is free goods. So essentially, not delaying treatment initiation for these patients. We expect the majority of patients would get started initially under that Quick Start program, while PANTHER continues to work with the insurance company to get that claim approved. So early in the launch, because it's a non-formulary product, essentially, all of these initial prescriptions have to go through a formulary exceptions process, which can look a little bit different from health plan to health plan. And most of these patients are commercially insured. So that's really what's been happening here in the initial 2 months of this launch. The treatment forms are coming in, PANTHER receives them. They start working the claim. And what we have found is that as expected, most of these patients are getting an initial product supply through that Quick Start program. But we have been pleased to see that there have been examples of patients that have not required that, that the health plan has approved their claim within that first week and they're getting started initially right out of the gate on commercially reimbursed product. So that's an important factor for us to continue to track over time. The other thing that I'll say is that over time, we do expect these health plans will start to look at CRENESSITY, and they'll start to formulate coverage criteria. We have had a couple of plans published their coverage criteria. In fact, one did their review only a week after CRENESSITY was approved. So -- but we will see many of the plans kind of push that out into the second half of the year. Some will look at CRENESSITY into a formal formulary review and they'll publish their coverage criteria. Others will decide not to bother because it's a rare drug in a class of 1. And so they continue to cover it on an exception basis. But I think the coverage criteria will sort of take shape over the second half of the year. In the meantime, though, we expect CRENESSITY will be very affordable. Most of these patients are commercially insured and we're able to buy down their co-pay to 0. And the second largest insurance segment is Medicaid. And these patients for branded products have a co-pay of either $10 or $12 per month. So the vast majority of patients will pay less than $12 per month. So very affordable from that perspective. And we're very confident in our ability to get these claims approved. And like I said, we've had a great experience working together with PANTHER. So all in all, receptivity from the physician audience and from the patient community has been very positive. Obviously, there's a lot of people that we still need to reach and educate. We need to walk these endocrinologists through the data and through the labeling. But our team is making great progress in that regard both the commercial sales team as well as the field medical team. And I started off by saying we are off to a great start, and I couldn't be more pleased.

So maybe just to add a little bit to that. I mean there's a lot of excitement, obviously, at Neurocrine launching a second medicine. It's one that we've been spending better part of 30 years trying to discover and develop. So I think seeing that get over the finish line is very rewarding for the team. But just as an organization beyond that to have a second product that we believe will be a blockbuster to add certainty on continued revenue growth for the organization, for investors, revenue diversification, and I'm hopeful that you get a hint at a minimum, if not conviction that we have a pipeline that's sustainable that we can continuously bring out new medicines for patients. CRENESSITY is certainly going to help with that versus just looking at INGREZZA each quarter. So a lot of things to be excited about here and this milestone that CRENESSITY offers the organization.

It's interesting in a meeting earlier today, somebody asked Eric, how is the launch going? In one word, he said, "Great." And I can say as a finance guy, between having a $2.5-plus billion medicine in something that's going to grow like CRENESSITY, the financial profile of our company and the flexibility that we're going to have to continue to invest and grow a company and build a leading neuroscience company. It's quite exciting. I'd be remiss not to call this out because somebody also asked me earlier, what should I expect in revenue for CRENESSITY? We've not given a guide yet. It took us 4 years for INGREZZA to give a guide. But I would say the #1 metric that we want you to focus on coming out of the quarter is going to be enrollment forms. Enrollment forms are going to be a reflection of the new patients that have been prescribed medicine and that's going to be able to show you the strength in the underlying demand for the product. So that's one aspect that I think I would just point you to. We will, of course, provide information and insight into reimbursement and what we're seeing there, but enrollment forms are what matters most. And then the last comment that I'd make, it's going to be really cool to see in the second quarter when some of these new patients are seeing their biomarkers and getting blood draws and seeing what happens to their glucocorticoids. And you think about what causes the ultimate adoption to be higher, it's going to be if the drug works as advertised. And what we saw in the clinical trials was significant reductions in A4, significant reduction in glucocorticoid. And we had over 90% of patients roll over into the open-label extension study, and they're still on it today. So I think that everything that we have from a clinical perspective would point to a very durable, important medicine for the CAH patients. And I would say we feel quite fortunate sitting here today, Phil.

On the enrollment forms, there was controversy going into the Q4 report exactly what was going to be reported. Are you going to report the Q1 enrollment forms on the Q1 call? Like as what date will you give us [indiscernible].

It will be through the month March.

Through the end of March.

So we'll be giving a calendar quarter enrollment forms on a quarterly basis. And then we'll see how metrics evolve from there. There's not really a good analog that you could point to in terms of what you should assume around compliance and persistency and the rate of adoption. I think as Kyle mentioned, and Eric, we would expect this to be a medicine that is adopted in a much shorter path to peak than compared to INGREZZA.

I think it's worth clarifying when it comes to the enrollment for Q1, like I mentioned, most of these patients initially will be on the free goods program. And so you think about the treatment forms or the enrollment forms as sort of the NRx that are coming in the top of the funnel, and then net sales is what's coming out the bottom. And so someone started early in the quarter, most likely, they're going to be on at least a month of free goods and then maybe a month or 2 of reimbursed product. And so there's a little bit of a shift time wise between starting treatment and actually getting to reimbursed product. But I do think that as we get further into the launch, we'll see more alignment between treatment forms coming in and revenues.

I'm sure it's only a matter of time until a hedge fund calls me and ask what is a good number of enrollment forms for Q1. So I'm going to ask you guys because I don't know what the answer to that question would be. Any thoughts on how we should frame expectations for Q1 enrollment forms?

I think framing expectations for the overall market expectation here, you have over 20,000 patients. And this is CFO now, I've been accused of. So you're going to have to give it an appropriate haircut. But you have over 20,000 patients with CAH. What we saw in the clinical trial, Dr. [indiscernible] the thought leader says up to 80% of patients with CAH go in and out of control, and they may benefit from a medicine like CRENESSITY. So those are the 2 highest macro items in terms of the ultimate opportunity. The pace of adoption, I think you can look back and just say, well, gosh, these patients only go into the clinician's office 1 to 2 times per year. So there's going to be this natural phasing if you just straight line the patients coming in every 6 months or 9 to 12 months. That's one aspect. And then the second question you would ask is then what percentage of prescribers are actually willing to treat those patients and at what rate. So no exact number for you, Phil, but I would just say that we're bullish over the medium and long term for CRENESSITY, just like we are for INGREZZA.

Maybe one last question on CRENESSITY before a couple on INGREZZA. TD Cowen projects 2025 revenue for CRENESSITY of $55 million and $1 billion in 2030. Any feelings about those numbers? Do they provoke any emotions?

Well the emotion that I would say has provoked is it only with our sales price, call it, $400,000 only takes 2,500 patients to get to $1 billion. So I will be very disappointed in Eric and team by 2030, we're not at 2,500 patients. So our internal projections are higher than that. But on the flip side, it's up to us to help these patients. And I think if the patients are helped and benefit from the medicine with the [indiscernible] patient community, there's going to be a lot of adoption.

Sure. Perfect. I know we only have a couple of minutes left. On INGREZZA, Kyle, your opening remarks were very helpful in clarifying what happened or what is likely to happen in Q1. Two questions on that. First, Matt, I think in your prepared remarks on the earnings call, you talked about competitive pressure and things going on at payers. What happened in Q4? What were the dynamics around that? And how confident are you that you're now properly resourced to counter the payer issues and the competitive [indiscernible]?

Well, it's probably good for Eric to answer part of that. But what I can say is that from an investment perspective, the #1 investments that we've made over the last handful of years has been sales force expansion. We've found by and large, call frequency, keeping tardive dyskinesia on the radar of a clinician, largely leads to a new script getting written and ultimately filled. So from a share of voice perspective, relative to our competitor, I'm very excited to see our new sales force in the field. Calls are going up in a significant way. Education is going up. And so we do expect that the market is going to develop in a very positive way. On the payer front, still pressures as you would anticipate, with the overall environment associated with the IRA and those who participate in Medicare Part D coverage. Our goal is to ensure that if a script gets written, a patient ultimately ends up on INGREZZA. And these are new patients. So a lot of effort going on right now at payers associated with payers associated with formularies associated with ensuring a medicine can work through the exception process. And then at the pharmacy level that they don't get worn out through this process that payers might be taking them through to ensure pharmacies actually lead to fulfillment. So early days on some of these activities, but the leading indicators associated with their sales force, I would say, are positive. But back to Q1, just to make sure we address it because it's probably the #1 piece of buy side gives me feedback on relative to the sell side is just to make sure that the sell-side has only factored in this phenomenon of one last order week. And just to be clear on what that means is that typically wholesalers order on a Monday product gets delivered on a Tuesday, and that's when revenue is recognized. In the first quarter, you only have 12 Tuesdays. You have 13 Tuesdays in Q3, which would be in our Q2, which would be a normal quarter of '14 in Q3, which is more than normal. And so you do have this phenomenon. So our main focus for Q1 is beyond the noise of what revenue you get reported. The focus is really on did we ensure that patients stayed on therapy through the reauthorization process. And then the second key point that we'll be looking for is did the pace of NRx pick up like what we would have anticipated in the second half of the quarter because that's really what sets you up for the rest of the year.

Eric, do you want to talk about the sales force and how you're countering [indiscernible] a bit?

Yes. Just to kind of build on what Matt was talking about, we have a competitor out there that's pretty aggressive. And they did -- I would say, they increased the competitive pressure last year. They did a sizable expansion of their sales team in late '23 and early '24. They rolled out a reformulated version of their product that got them to once a day dosing and they fired up a DTC campaign. And we started to feel the tangible effects of all that, mostly in the second half of last year. Combine that with the payer dynamics that Matt was talking about from payers, making it a little bit more difficult for those new patient starts to get approved sort of slowing down the approval process for NRx. Those 2 things combined led to a slower pace of new patient adds in the second half of the last year and most acutely in Q4. And that's really that momentum that we were talking about coming from '24 into '25, that is part of the calculus for our guidance. And I think that it's important to emphasize why new patient starts have such an impact on our business. New patients. NRx actually just a single-digit percentage of total prescriptions in any given week, month or quarter. So it's not a large magnitude. But the reality is every new patient start accounts for a handful of refills. And there is a cumulative effect. When you have a really good quarter from an NRx perspective from a new patient start perspective, you really see the impact of that several quarters later. And so for us to have a slowdown in the second half of last year, we can predict that it's going to impact really most acutely the first half of this year. And then you layer on what I would call the disruption of scaling up, hiring, training and deploying a new sales team. In the near term, that can affect the overall productivity of your sales force. And we've seen it in the past when we did expansions. It's a little bit of a distraction for the legacy team. They're kind of pulled away to help with recruiting and training. And then, of course, there's customer relationships that get several new people to get dropped into these realigned territories and so on. And so it takes some time for the new hires to get up to the same level of productivity as the legacy sales people. And the way that we look at their productivity is based on their ability to generate new patient starts. And so in the near term, you see a dip in the productivity of the sales team. And then over time, as the new hires become more proficient and they reach the same level of productivity as the legacy team members, you see the full benefit of that -- and the value of the expansion. And as Matt said, we are seeing all the metrics trending in the right direction in terms of increased call activity, increased peer-to-peer programming, increased sampling activity, et cetera. So things are moving in the right direction, and we are still in the process of optimizing that team. But in Q1, it's sort of the post expansion phase.

Perfect. With that, I think we're out of time. Thanks, everyone, for [indiscernible].

Thank you. And things are going great with CRENESSITY.