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

Good morning, everyone. I'm Sumant Kulkarni, a senior biotechnology analyst here at Canaccord Genuity. It's my pleasure to kick off the second day with Neurocrine Biosciences. Thanks for making the trip. I know you've come from a really nice place. So thank you for joining us. Neurocrine is a company that has been really good at commercializing its products and also has a robust pipeline. They're in neuro and endocrine, as you can tell from the name. But like I said, very successful on their commercialization efforts. And they have a burgeoning pipeline, a lot more of which you'll hear on their R&D Day that's coming up in December. Then I'll turn it over to Kyle and Todd. Kyle is the CEO. He's been around for about a year now as CEO, but at the company for much longer than that. And Todd is -- he knows everything about the company, he is the Head of the Investor Relations.

[indiscernible] in September.

So with that, I'll turn it over to Kyle and Todd to make a few opening remarks, and then we'll go straight to Q&A. If you have any questions, please feel free to raise your hands. I'll get a mic over to you.

Thanks, Sumant. Maybe just to start off here this morning, I appreciate Canaccord for inviting us here and having the opportunity to share a bit of our story this morning. We will be making forward-looking statements. So I'd like to direct everyone to our latest SEC filings for the risk factors of the business. But again, thanks for having us. I'm really excited to be at this point of the year because it gives us opportunity to reflect a bit on where we started 2025 and probably heard us talk a lot about the evolution and focus on evolution execution on the company this year. It's important for me to have that view and focus stepping into this role about October of 2024. And we're making good progress along those lines of evolution and execution. On the evolution side of the business, it really is at the top of the chain in terms of looking at our commercial portfolio. We added an additional product in December of '24, and we've launched that now 2 quarters in, in 2025, and the launch is meeting our expectation and that has to do with chronicity in a rare endocrine disease called congenital adrenal hyperplasia. The medicine is important to us in several ways, and this is part of the evolution. It adds the second leg of revenue growth for the company. And it also diversifies our revenue away from INGREZZA. And those two pieces are very important for Neurocrine and for myself when we think about those pillars that you need to be a high-growth company and continuing down that path that started with INGREZZA 8 years ago. So that revenue growth, diversification, two of those pillars. The other one that I hope that we can talk a little bit about today is the sustainability of the pipeline, and we have elements of that ongoing now at the company. So we have that on the commercial side. On the research side, it's been a dedication to being a more productive resource organization relative to our history, which means the right focus in new areas for us. So having the right balance of internally discovered programs as well as externally sourced programs, moving away from small molecules exclusively to multimodality molecules, having the right mix and balance of validated to unvalidated targets across the portfolio. And by validated, I mean clinically or genetically. And you bring those things together and you really start talking about a research organization that is able to match the right modality to a given target. And when you bring those two pieces together, you get increases in productivity. And that's why we've seen and heard out there from our colleagues, myself, Todd, others on the management team, this idea that at steady state, we hope to have 4 new Phase I starts per year, 2 new Phase II starts per year in any given moment, 3 Phase III programs, and this would afford us one new medicine every other year. So high standards, very high bar here at Neurocrine, but that evolution is already in flight. I mentioned CRENESSITY. We started 3 Phase I programs this year. So we're well on our way for achieving our milestones on Phase I starts. And on the execution side, just for a quick update, we have all of our Phase III programs up and running for osavampator and MDD. Those are 3 Phase III trials and 2 Phase III studies for Direclidine in schizophrenia. So very excited about the progress we've made around that path of evolution and execution, and there's still a few more months left for the year. So excited to see what we can do.

I'll switch the script a little bit here. I'll start with CRENESSITY on INGREZZA. You've had a really solid start. You mentioned that it beat your own expectations. What do you think the Street or you guys were missing in terms of your ability to beat estimates so easily on this map?

First of all, I wouldn't have the Street beat itself up too much. We're beating our own internal expectations in terms of the launch. I guess what I'd probably start with and just double down on, remind people is that we started disease state education well in advance of the approval of CRENESSITY. I think that's a big part of the success that we've had to date because it really engaged, activated physicians across the 3 different groups, where you're talking about physicians at centers of excellence, the 1,000 pediatric endocrinologists that are out there or the 8,000 community endocrinologists. Being out there in advance of CRENESSITY talking about the disease state really put CAH, congenital adrenal hyperplasia top of mind. So when CRENESSITY was available, I think they could begin talking to their patients out of the gate. And I think that's been a nice surprise for us to see that we've had good uptake in terms of CRENESSITY across those 3 different HCP segments.

You mentioned those segments. What do you think the key variable is to keep the momentum going on CRENESSITY?

Well, I think that what I would say here on this is something that's not unique to CRENESSITY, but to all medicines, and that's patient identification. And when you're thinking about a disease like CAH, it's a rare endocrine disease where for all intents and purposes, there's been no medicine specifically designed and developed for the disease. What you often see is over the course of a patient's life is they become a bit apathetic about the treatment of their disease. They stop asking about new opportunities to better care for their symptoms over the years. And it's really engaging those patients to start asking those questions about what might be available as they go from a pediatric patient to an adult patient that can help them over time. So it's breaking through that barrier, identifying those patients over time and making sure that all of the patients in this rare orphan disease have the opportunity to learn about CRENESSITY and see if it's right for them. And hopefully, they'll try CRENESSITY and stay on CRENESSITY, and that's the new patient starts that you would talk about over time. But it starts with just a simple goal is making sure that patients are aware that there's a medicine for their disease and then allowing them to go down that education journey.

And how is real-world usage of steroids by patients with classic congenital adrenal hyperplasia affected by use of CRENESSITY? And do you think reimbursers might set up some bar after certain periods of time to see how that steroid usage is tracked?

I think on the GC reduction piece, right now, it's still early days in where we are relative to launch to start hearing some of the feedback from physicians that are out there. I think what we see is that it's -- that the experience of using CRENESSITY at this point of the launch is occurring in basically 3 phases. One is they're laying CRENESSITY on their background GC dose, and they're very keen, the physicians that is to understand safety and tolerability of CRENESSITY in the patient population. Safety and tolerability is what wins the day here with patients. After some time, if they see that the patients are doing well from that perspective, then they're really interested in looking at how is CRENESSITY is able to reduce their ACT androgens and control those different elements. And if that looks good, then the third piece is let's start lowering the GC dose. And really, it's with the mindset of looking at how we performed the Phase III clinical program in reducing that GC dose to below the 11 milligrams per meter square per day kind of threshold. So we're just moving through that now, and we'll learn more about this a bit more over time.

Yes. On the payer front, a couple of points. One, of the many surprising facets of this launch is the high level of reimbursement that we've gotten out of the gate. In Q2, it was 76% so that has been really great. Point two is most of this is commercial versus INGREZZA is mostly Medicare. So it's a nice way to diversify the payer mix. And then in terms of coverage determination or requirements where there are, it's right in line with the label. The patient needs to have classic CAH, need to be 4 years or older and needs to be on concomitant steroids. So, so far, so great, we like to say.

So on that note, from a competition standpoint, how are you thinking about what potential competition could come in over the years on CRENESSITY?

From a competitive standpoint, I think where we are with CRENESSITY relative to other companies that are in the space is it's probably not fair to talk too much about competition at this point. The data sets are so different across the companies that are here. I will say, generally, competition is a good thing. It's good for patients. It gives them options. I think even for the companies that are working in this space, it brings out the best of us in terms of delivering on innovation for patients. What I hope people can understand and appreciate about Neurocrine is that we have a history of being first in a variety of disease states, and we shine a light on diseases that are underserved by current medicines. And if that's what we end up doing here for CAH, that's a pretty good spot to be. I will say, as I mentioned, how we're seeing physicians use CRENESSITY today, it does come back to safety and tolerability. Efficacy gets your foot in the door, but safety and tolerability is what really wins the day here. And we really like our approach of controlling the HPA axis upstream and having us have the ability to control all the downstream hormones and other aspects of the disease that are important for CAH.

Yes. We have right now an FDA-approved clean label with unsurpassed efficacy and unsurpassed safety and unsurpassed tolerability.

That's a lot of unsurpassed [indiscernible]. What's the excitement factor around ex U.S. plans for this product? And what would that mean for Neurocrine as an organization?

Yes. If you recall a bit about the history on CRENESSITY, in particular, in 2024, we filed the NDA in Q2 give you a little bit of history on the response that I'll be giving you here. So we anticipated a standard 1-year review period. We're all hoping for priority review, but none of that is guaranteed. And certainly, we did get an accelerated review from the agency with PDUFA dates that were at the very end of 2024. So the team, whether it was from a clinical perspective or a commercial perspective was really on an accelerated path to prepare for the launch of CRENESSITY. We actually got approval a couple of weeks before PDUFA dates. And it really just has added to a lot of focus of the teams to make sure that we're doing all that we could to successfully launch CRENESSITY in the U.S. market. We're still working through that now, and we think that we've made the right choice to focus on the U.S. market right now. So we're evaluating what the opportunity is and plan ex U.S. But right now, I wouldn't say anything is imminent there from a filing perspective or a commercial perspective. Right now, the focus is on the U.S. market.

We'll switch now to INGREZZA, which is a multi-blockbuster product. You narrowed your sales outlook for the product this year. What needs to happen for you to meet or beat that number comfortably?

Well, Q2 was a very productive quarter for us with INGREZZA. Just to recap, we saw $624 million in revenue. That was 15% quarter-to-quarter growth and 8% year-over-year. Those kind of high-level numbers that we've shared are really just the tip of the iceberg of what has gotten us excited about Q2. It really is a reflection on what we're doing at the prescription volume level, the number of patients that were coming into the mix. And we saw a second quarter of record new patient starts. We saw a record quarter for TRx. And what this translated to was increases in market share in new-to-brand as well as total prescriptions relative to our competitor in the space. All those are very encouraging. In fact, I would go the extra mile and say that being 8 years into launch and seeing us succeed like we did on those different aspects doesn't happen by chance. It's because we have a strong fundamental business that's attached to INGREZZA and a very robust TD market, in particular out there, where 9 in 10 patients still are on a VMAT2 inhibitor. The other piece that came into play here was we did improve our access quite significantly from 2024 to Q3 of this year. In fact, when we began the year, we had about 45% of all covered TD and HD Medicare beneficiaries. That was where we stood from an access standpoint, and we improved it from 45% to 70%. The access improvements span Q2 and Q3 this year in terms of when these different expansions occurred improvements in access. That does come out as a cost. So when we think about guidance and the variables that play into that, in particular for the quarter, we narrowed our guidance to $2.5 billion to $2.55 billion for the year. It goes back to the cadence of NRx, persistency compliance of TRx and where certain marketing and market investments come into play throughout the course of the year. And we did have those access pieces come online in 2 different quarters, Q2 and Q3. So the guidance we've given you, we will give you because we believe we have a good shot of meeting that for this year. And all the measurements that we have out there, in particular, on new patient starts and overall volume, we're tracking right where we should be. We're looking at an expectation of double-digit growth for this year. It gives us a lot of momentum towards the end of this year heading into 2026 for a very robust.

Yes. I'll just add for 2026, a lot of the contracting for 2026 is locked up. So there'll be pricing stability from the second half of this year into '26.

So you paved the way for the tardive dyskinesia market with your product. Now you have a competitor, Teva with AUSTEDO and AUSTEDO XR. How do you expect the competition to play out once Teva's AUSTEDO and AUSTEDO XR are subject to the Inflation Reduction Act or IRA?

Well, I think we acknowledge that we don't have all the answers here when it comes to the IRA, whether you're talking about unattended consequences of brands that don't go through a negotiated price versus those that have a negotiated price in a given year in our own IRA environment, which happens starting with a negotiation in 2027 and implementation in 2029. There are things that we do know, though. One is the TD market is incredibly robust. You just heard a quote from me on 9 and 10 patients still not on a VMAT2 inhibitor. And just to add a little bit more to that, the 100,000 patients out there in the U.S. with TD. So the fact that 9 and 10 patients are still not on a VMAT2 inhibitor tells you the growth that still remains -- that would be point number one. And then number two, kind of goes back to what Todd just mentioned. We have a pretty good handle on our business through the end of 2026, both from the perspective of our marketing initiatives as where we are from a market access standpoint. And the third one is when we think about INGREZZA, when patients start INGREZZA, they tend to stay on INGREZZA. It's a very good medicine. At the end of the day, patients don't switch a lot in this category. So fast forward to 2027 when our competitor goes through a price negotiation moment on their own. It really is a story about new patient starts, not switching that goes on in different disease states. And we'll look at different ways to improve our access over that time frame as we have this past year. And we know and have shown over time that we can grow the business through an exemptions process. So we're excited still for the business moving forward, a lot of room to grow. There are things that we know and don't know. But ultimately, it comes down to growing the business in all facets, not just with INGREZZA, with CRENESSITY, the pipeline, and it will be the combination that makes the company stronger and resilient as we move.

And you've got a long tail on INGREZZA as well because we have IP out to 2038. So we got 13 more years.

So just staying on the IRA topic, what examples are you watching to give yourself insight into how a competitive product might behave if your product might behave if a competitor's product is for the same indication as IRA?

I think we're -- we'll be actively listening in a lot of different ways. The first round of 10 medicines were negotiated already and we'll see their prices being implemented next year. So we'll start listening to what companies are saying that are in those categories that is they were medicines that were not negotiated, but they're in categories where there is a brand that was negotiated. So we'll start following what they're saying and what they're seeing out there for their particular medicines. And we'll be doing the same from the perspective of PBMs because these medicines that are negotiated represent a loss in their revenue. So they may be talking about that as well, either publicly or maybe in our own conversations with them as every company has conversations with PBMs over time. And if there are learnings that come from that, certainly, we'll be looking at applying those to INGREZZA as we move on.

So we have a few minutes. I definitely want to go into the pipeline because you have a lot of products in there. This is probably a sneak preview of what's going to come on December 16. So on NBI-568, what are your latest thoughts on selective M4 agonists versus the M1, M4 approach and M4 positive allosteric modulator approach?

Well, I think maybe I'll start with the last one, the positive allosteric modulator. It's a completely different mechanism than what we're trying to employ with our muscarinics that are agonists, which are orthosteric agonist. They don't require anything else to come together to drive efficacy. So let's put the PAM aside for a moment because it's hard to compare apples to oranges there. In terms of our own programs, just a high-level overview. Our lead muscarinic program is a selective M4 agonist and it was formerly called NBI-568. We actually have a generic name now direclidine and it's in replicate Phase III trials right now for schizophrenia. And we also hope to move it forward later this year in a bipolar mania trial that will be your typical Phase II type of study. So that's our selective M4 program. Just behind that, we have a dual M1, M4 molecule called NBI-570, and that's something that we'll be moving forward later this year in a Phase II trial in schizophrenia as well. No one has the portfolio of agonists that we have that range from M1 selected to M4 selective in different flavors in between. So we have a wealth of different types of programs that we can actually study in similar patient populations and compare and contrast things like efficacy, safety and tolerability. So you're seeing a bit of that play out now between direclidine and NBI-570. We hear and appreciate the interest in understanding what is the benefit of adding M1 to M4. And we hear that from the perspective of a competitor in the space, Cobenfy, which Bristol-Myers Squibb commercializes for schizophrenia, which is a different type of approach where they have to add back peripheral antagonist to attenuate safety and tolerability. We don't have that issue or that challenge with our own dual. It has a selectivity on just the subtypes that we're interested in. But we would like to understand if there is differential efficacy versus direclidine that's in Phase III now, and we'll be able to have that data relatively over the same time frame as our Phase III readout.

To your credit as an organization, you've always run classical dose-finding Phase II studies. Now we kind of know what happened with this product in the Phase II. You went with a 20 mg dose. Could you go with an even lower dose?

I think if you look back at all the data that we've collected over time, and this range from preclinical models of disease through our Phase I biomarker work, the 20-milligram dose that we're taking forward in Phase III was always the one that outperformed lower and even higher doses. And because of that, we think we've got a good dose that we have in Phase III. We really haven't seen anything beyond that from other exposures that we've studied historically. And in the Phase II trial that we ran, that was an ambitious study design that we undertook for Phase II. And it was done for a number of reasons. One is, at a high level, we needed to catch up to other companies in the space and give us an opportunity to learn enough from that study that we could move into Phase III. So that means -- that meant at the time that we had to understand what the efficacy profile of M4 agonist was in the schizophrenia patient population up to that point, we'd only been in healthy volunteers. We need to understand if we're leaving any more efficacy on the table as it relates to that 20-milligram dose. We hadn't studied higher doses. And then last but not least, it was really trying to pick out a dose and dosing regimen for Phase III. And we were able to achieve all those from this study. Ultimately, the 20-milligram dose outperformed with an 18.1 total PANSS improvement, 7.5 point improvement on PANSS placebo-corrected, effect size about 0.61. And the other aspects that were positive about the Phase II trial is the dose that we selected has all the same features of what's made INGREZZA so important in this patient population successful. It's once a day, no food effect, no titration. And these are all things that we want to take forward and hopefully replicate in Phase III.

So on your muscarinic agonist portfolio, are there any predictions on what you might think might be the highest value indication? And do you have any early thoughts on how your portfolio might work in older patients?

Obviously, schizophrenia, we know in the antipsychotic space that schizophrenia as an indication is the smaller opportunity relative to others that we've seen. And the antipsychotics that are approved today have indications that range from bipolar disorder, bipolar depression, MDD, the list goes on and on. So that's one of the reasons why we're moving into bipolar mania later this year is to expand on the patient population that we can potentially have a medicine and they can benefit from that goes beyond schizophrenia. No one's studied this yet. So we think it's an important disease to go after, and there's a lot of biological rationale that it will work there. On the other side of the coin, if you want to think about opportunities beyond that in the elderly, there's been a lot of conversation around Alzheimer's disease psychosis. That is an interest of ours as well. And with the benefit of having multiple molecules in the muscarinic space, we're looking at all the Phase I data that we've collected across these molecules that have M4 activity, and we're looking at which one might be the best one to take forward in ADP. It's an elderly population. Safety and tolerability is very important. So we'll have more on that, I think, later this year when we come together at our R&D Day in December.

A few seconds, but I do want to touch upon the major depressive disorder market. You have a Phase II coming for 770. We've seen what's happened with the Novartis program with their similar approach with the NR2B NAM, discontinued after Phase II. You have Boehringer's product also in Phase II. Can you characterize how you view your product in light of those 2 competitors? And also moving to your Phase III for osavampator, how would you characterize success in it?

So first on the NMDA NR2B NAM program. This is NBI-770. You're right, it's in a Phase II trial right now. I'd say it's more of a signal-seeking study. 3 doses of active versus placebo has an end of about 70 subjects, and we'll have data later this year. It works through the ketamine pathway on NMDA. So it's a validated biological pathway. I think we're also looking at a fast onset of efficacy here that's based on the hypothesis that when you antagonize the NMDA receptor, you can get a transient hyperglutamatergic state. And that's what floods the neuron and activates the AMPA receptor downstream. Being a little bit more selective than ketamine, however, we expect that the glutaminergic state that we're invoking here is much less severe or high as ketamine and the associated effects that are attached to ketamine would be attenuated. And that's the promise that's been the hope of in NR2B NAMs. We'll see what our data looks like. The primary endpoint for our study is the MADRS at day 5. So we'll see what the data looks like, and we'll go from there. As it relates to the Novartis or Boehringer compound, I don't have a lot of information on those here today. I think on the Novartis compound, we know that it's IV administered. Ours would be an oral medication that would be taken just as any other type of antidepressant patients might be used to. And then osavampator, just quickly, it's in 3 Phase III studies now, replicate studies, and we'll be looking at replicating really what we saw in Phase II, which was a MADRS score at month 2 of about 7.5 points with an effect size of 0.75, really good safety, tolerability. I think the only thing that we saw that stood out from placebo was headache there, but really like that profile of potentially being a first-in-class medicine for patients with depression.

We look forward to replicating the totality of the data.

Well said Todd.

It's a good way to say it. With that, we're out of time. Thanks again. And I'll save the business development question for next year.

Alright, okay.

Thanks Sumant.