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

Hi, everyone. My name is Phoebe Tan, and I am an Associate on Akash Tewari's team. And today, I have the pleasure of hosting Neurocrine. I think I'll just hand it off first to give some high-level remarks.

Thanks, Phoebe, and thanks to Jefferies for having Neurocrine here at the Jefferies Conference in London. It's always great to be here at this time of year, especially in London. The only challenge that we have is sometimes keeping our energy up being from the West Coast. So to help with that energy, I think I'll start with our favorite. We will be making forward-looking statements here this afternoon. And I would like to direct you all to our latest SEC filings for the risk factors of the business. So with that, hopefully, that we're all level set here today. Maybe a quick introduction on Neurocrine. The key pillars of our near to long-term growth really begins with INGREZZA, and I'll be talking about all these pillars in a little bit more detail, but just to highlight them here. INGREZZA is our medicine for tardive dyskinesia, it's approved in 2017 and subsequently a few years later for the chorea associated with Huntington's Disease, that's Pillar 1. Number two is CRENESSITY. It's our recently approved medicine for a rare endocrine disease called congenital adrenal hyperplasia. It was approved in December '24. So we're in our first full year of launch. And the last piece I'd mention here is a deep and sustainable R&D pipeline. So a lot to cover here in my opening remarks, but I did want to outline those here, and then we'll walk through each one of these. Maybe to start back on Q3 and our performance, a reflection on Q1 and Q2. In my opinion, Neurocrine is entering a new chapter, one on revenue growth, and we've seen that over the years, driven solely by INGREZZA, but also revenue diversification now with CRENESSITY and then a deep and sustainable R&D portfolio. If you think about the revenue drivers here of INGREZZA and CRENESSITY, they're driving performance and giving us a lot of momentum here towards the end of the year, and it will set us up quite nicely in '26. In terms of actual numbers in Q3, $790 million in enterprise-wide revenue. That's almost 30% year-to-year growth. We also saw double-digit quarter-to-quarter growth on revenue, and that diversification piece that I mentioned there with INGREZZA, on top of INGREZZA, we saw at 12% for the quarter. So a lot of things exciting here at Neurocrine as we transition to a multiproduct commercialization company. So a few things on INGREZZA, that first pillar I mentioned. It's amazing to sit here today and talk to you about a medicine that was launched 8 years ago, and we're still talking about record new patient starts. We're still talking about gains in market share. In Q3, we saw $687 million in revenue. That's about 12% year-to-year growth, 10% quarter-to-quarter growth. And again, a record quarter for new patient starts and TRx. All these things are really good. They don't happen by accident. It's because of the strength of the brand, the execution of our team. Eric is here, he will be able to talk about some of that today, as well as the demand among patients and physicians out there for a medicine like INGREZZA in particular for tardive dyskinesia. And that growth piece is really important. We reaffirmed our guidance in Q3 of $2.5 billion to $2.55 billion this year, and that's with a context or a drop background of 800,000 patients in the U.S. with 90% still not being on a VMAT2 inhibitor. So it's a very sizable product, really good growth and still a lot of growth that remains out there. And we're going to lean into all the differentiating aspects of INGREZZA. Unsurpassed efficacy that has 3 different domains. One of them is the first dose is an efficacious dose. We also have best-in-class efficacy when it comes to symptom relief of the movement disorder itself as well as quality of life measures. We also have a novel formulation for INGREZZA for patients that suffer from dysphagia, and we have advantages in specific special patient population. So a lot to be excited about INGREZZA. I mentioned about the performance, the growth that remains and we have intellectual property out to 2038. So that's INGREZZA, that's been driving a lot of our performance over the past 8 years, and we look to build on that with our medicine that was recently approved, CRENESSITY. I mentioned this is our second pillar. In terms of where we are with the launch, we often say, so far so great. It has gone exceedingly well and we're beating the expectations that we put upon the product in terms of its first year performance in sales. We saw 540 enrollment forms in Q3, $98 million in revenue and our reimbursement rate was very high, 80% of all dispensed scripts went on to get reimbursed for the patients. So a very good early start here thus far. In terms of annualized rates with that $98 million, you can see we're already on a clip for $400 million in revenue. From Q1 to Q3, you sum up our enrollment forms, we're about 1,600 new patient starts this year with an eye on 2,000 by the end of this year. That's 10% of the prevalent population in our first year of launch. So a lot of exciting things with CRENESSITY as well with intellectual property out to the early 2040s. We're hoping to change the standard of care for patients. So excited about CRENESSITY as well on top of INGREZZA. And then the last piece I'll mention here is our R&D portfolio. While our commercial franchises are thriving, we've had a lot of productivity gains across research through Phase I and Phase III development. This will lead to a lot of advantages for the organization in terms of long-term growth. I think one of the things that we often don't appreciate is the effort that is required to develop a deep and diversified portfolio, and we've got that at Neurocrine now, and we're looking at being able to leverage that in terms of the focus of the programs that we have currently in the development today. So a couple of other things to mention here on this is that we do have some very admirable but achievable goals for R&D productivity over the next couple of years at steady state, which I'm hoping is by the end of this decade. We hope to be able to offer patients one new medicine every other year. We often get asked, Kyle, how are you going to do that? Well, it's simple. We've changed the way with which we approach research in our organization. We brought in capabilities that take us and expand upon our small molecule expertise into peptides and biologics. And we've also had a very deliberate focus on validated targets, genetically or clinically. And when you bring those pieces together, you can actually talk about bringing the right modality and attaching that to the right target and the right disease. And there's a multiplier effect that you see there, both in time and moving programs through development as well as probability of success. And we're seeing that already. This year, we have at least 4 new Phase I starts on our radar, 2 new Phase II starts, 3 programs in Phase III, and we hope to do that over and over again, and that gives rise to this opportunity to develop multiple medicines for patients over time. So we'll be sharing some of these ideas with you and our productivity at our R&D Day on December 16. Hopefully, we'll be able to see some of you there. We'll have a focus on the neuroscience aspects of the portfolio, namely in psychiatry across osavampator, our program for MDD that's in Phase III right now. Our industry-leading muscarinic program, which is led by direclidine. That's in 2 Phase II trials for schizophrenia. We're moving that same molecule into Phase II later this year in bipolar mania. And then one of our other muscarinic programs that's a dual M1/M4 agonist will be moving that into a Phase II trial as well. So information around that, our strategy across the muscarinic as well as information and data pertaining to our VMAT2 follow-on program to INGREZZA will all be topics that we'll cover, and then some of our early stage programs that will be graduating and moving into clinical development across some of our core therapeutic areas. We'll be able to frame the strategy around those molecules and bring in some data into focus as well for you all to see that. So I think we'll have a lot of good discussion that comes out of that. Jude Onyia who's not here, but is our Chief Scientific Officer, will lead that discussion on the earlier aspects of our portfolio. Sanjay here, our CMO, will lead you through the clinical aspects, and we hope to have a good day around that. So to sum things up, looking ahead, I'm really confident of the direction of the company. Our strategy is sound. I like the execution that we've seen here in the past couple of years. It moves forward our organization in terms of the pipeline of our products with both clarity and purpose. We're expanding the commercial portfolio. We're advancing and growing the pipeline, and we're investing in the next generation of innovation. So I think with that, we can turn it over to questions.

Great. Thank you for that intro. So starting with INGREZZA, for your full year guide, you're saying $2.5 billion to $2.55 billion, which implies a low growth rate quarter-over-quarter of negative 6% to 1%. Can you talk about the dynamics there in terms of -- I know there was 1 extra week in Q3, but just kind of expectations there and the pricing dynamics.

So we did see in Q3 of INGREZZA, just to level set everyone, $687 million in revenue. I mentioned this in the opening remarks, that's about -- depending on year-to-year growth or quarter-to-quarter growth, that's 10% to 12%. So it was a very sound quarter for us, there was 1 extra week. But even still, the volume that we've been seeing across the various quarters, whether you're looking at NRx or TRx, it's interesting 8 years in. Every quarter this year, we've had a new record NRx and a new record TRx. And I think that speaks to a couple of things. One is we had a sales force expansion late last year as well as some improvements in market access this year. Those 2 have come together and really helped us drive future growth for the plan or for the medicine. And we're going to lean into that for the remainder of this year, it's going to give us great momentum into 2026.

Great. And then just to confirm for Q4 and Q3, there's a 5% negative impact on pricing. And how should we expect that to continue into 2026?

Yes, we did pay a bit of a price with some of the market access gains that we were able to acquire in Q2 and Q3. The way that I think about it is that the second half of this year, we saw about a 7% price decline relative to our 2024 net revenue per script. And we expect that to be relatively consistent all the way through 2026. We're not expecting much of a change moving into next year.

Okay. Great. And can you talk about kind of the dynamics that made you result in increasing access and kind of the pricing impact there?

Well, let me share the wealth a little bit. Eric, do you want to comment on that one?

Yes. Certainly, everyone. Eric Benevich, I head up the Commercial Organization. So coming into 2025, we had less than a 50% Medicare formulary coverage. And we certainly recognize that, especially going into this new IRA era, that coverage is becoming increasingly important that health plans are putting more and more pressure on new medicines, branded medicines in terms of getting patient starts going. And so as we were negotiating for the 2026 plan year, we were able to pull forward some of those formulary wins into 2025. As Kyle mentioned, in Q2, we jumped up in terms of our coverage from under 50% of covered lives. And then again, we have some additional formularies in Q3. And now we're over 70% covered. And so I do think that, that's a bit of a price volume trade-off that we made, knowing that we wanted to take some of the friction out of the system for our customers in terms of getting new patients started on INGREZZA. Together with the expanded sales team that we put in place last year, we did see that translate into an acceleration of growth and continued records from a new patient start and a TRx perspective. So overall, we feel really good about the fundamentals of our business. There's still a ton of opportunity in terms of organic growth. As Kyle mentioned, less than 10% of the estimated over 800,000 TD patients in the U.S. are currently on a VMAT2 inhibitor. So a lot of headroom for us and we'll continue to drive growth into 2026 and beyond.

Great. And do you think that any part of that sort of strategy was kind of anticipation of the IRA and kind of trying to get more patients on to INGREZZA? And I know that Teva has kind of mentioned on their Q2 -- on their Q3 call that they still keep their long-term guidance for AUSTEDO. So it kind of seems based on our calculations that the IRA pricing for them is maybe not as impactful as some people might be concerned about. So any comments on your expectations there and how you expect to kind of be treated through now and through your 2029.

Yes. And just to level set a couple of things. One, our fundamental approach to growing the INGREZZA franchise and growing the market remains the same. The majority of patients today are still as yet undiagnosed and the vast majority are not yet on a branded VMAT2 inhibitor. INGREZZA is the market leader from a TRx and from a patient share perspective. So those things don't change. But you referred to deuterated tetrabenazine and the MFP moment. So Teva hasn't yet disclosed what their MFP price is. We expect that sometime in the month of November. So it could be any day now, they'll disclose what that price is. At that point, we'll know what the pricing looks like for 2027 and beyond. And currently, we're starting the bid process for Medicare formularies in 2027. So we expect that we'll have some back and forth discussions with the Medicare Part D plans. Ultimately, we have a scenario planned around various price points. The commentary coming from Teva, they have essentially said that the negotiations have been in line with their expectations. They've reaffirmed their 2027 guidance and beyond. So it sounds like the incremental discount that they'll be giving in 2027 and beyond is maybe a little bit less than what the market was expecting previously. Ultimately, we do expect that there will be likely some incremental discounts that we'll be negotiating with health plans in order to maintain formulary coverage during that 2027, 2028 time period. But we do expect that we'll be able to maintain adequate coverage or sufficient coverage to continue our trajectory from a patient growth perspective and ultimately get to 2029, which is our MFP moment. So yes, there are -- there is some thinking around deuterated tetrabenazine and their price negotiations. But fundamentally, our strategy remains the same.

Yes. Maybe just to add a little bit to that. Part of the strategy just comes from the recognition that this is in TD in particular, an incredibly robust and dynamic market. It continues to grow. It's one of those few disease states that actually grows faster than the growth rate of the general population. And you can often ask why, it's because the cause of TD is the utilization of antipsychotics and that continues to grow in the low single digits, multiples above the growth rate of the general population. So TD, as a disease state, if you will, continues to grow from a prevalence perspective. And it always requires further investment to continue to hopefully get these patients diagnosed and on a VMAT2 inhibitor. With the increased utilization of antipsychotics, there's also new prescribers every year, and it's something that you have to address from a commercial organization as well. So all these things point to a very robust, strong market that continues to grow and the investments we've been making helped us leverage that maximally.

Great. So just 2 follow-up questions here. So first, is it fair then to assume that for 2026, it's flat sort of pricing, then 2027, 2028, there's some incremental decline for INGREZZA?

Yes. I think what we would see based on the contracting that we did for '26, it was pulled forward into 2025, we kind of see where we are settling on a price per script being pulled into '26 relative to where we are now and seeing that be flat. The only change that would be is if, for some reason, we were approached by another plan to further expand access for '26. We don't see that right now. That's always a possibility, especially in this environment that we have now where plans are trying to maximize the rebates as some medicines fall off of that due to IRA. But we'll see. Right now, our market where we are, from a company and business perspective, is pretty secure through '26. And then when it comes to '27, '28, until we approach our own MFP year in 2029, we would expect probably some incremental rebating on top of what we've done this year for '26, as we may have to adjust any further price discounts that -- or lower price that Teva has to pay ultimately in their MFP year in '27 and '28.

Okay. Very helpful. And then my second follow-up question was for AUSTEDO, I think something that has kind of going under the radar is the much more higher price of XR. How much do you think that contributes to their expectations that they continue the long-term growth? And also how much you think that contributes to the market share dynamics that you see in Q3 and based on full year guide at around 53% to 55% market share to INGREZZA?

Well, I don't know necessarily we're the best organization to ask about their levers that they have for AUSTEDO. I do know that if you just look at the wholesale acquisition cost of our medicine versus there, depending on what dose that you look at, it could be as much as AUSTEDO, our competitor's product, could be as much as 75% higher. So that's something certainly that the plans and payers understand. But for us, we try to focus on what we can control through our own commercial strategy. And that's really maximizing the number of patients that we can get on our medicine. That's a combination of the efforts that we're making, investing in now either from a sales force expansion perspective, education perspective, and the contracting piece does play an important aspect of that for access both now and in '26, and we suspect it will play a role in '27. Those discussions that we have for '27 are beginning now. It's about a year-long process. And I imagine those will be more meaningful in terms of discussions in the new year once the next round of MFP medicines are published.

Okay. Great. Moving on to CRENESSITY just briefly. Right now, it looks like the launch is outpacing INGREZZA actually at its time of launch. So I guess just commentary on how launch is doing and kind of your expectations for patient adds going forward.

Yes. So we have -- we're really very excited about the early performance that we've seen with CRENESSITY in classic CAH. We have a saying at Neurocrine, so far, so great. But ultimately, it's exceeded our internal expectations from day 1. Just to level set everyone, we got approved last December and had priority review. So we got off to a really quick start right at the end of 2024. And we have seen that the adoption rate within the endocrinology community has been ahead of what we had expected really from day 1. The other variables that I think were favorable versus expectations were reimbursement. So as a non-formulary drug, we expected that it would take a little bit of time for new prescriptions to get approved. We had put a free goods program in place so that if patients submitted -- if their prescriptions got submitted that we could get them started on medicine while the specialty pharmacy was processing their prescriptions, Ultimately, a lot lower utilization of that free goods program. Most patients are getting their prescriptions approved within a week and getting put on CRENESSITY right away. And then the other variable that's been really favorable has been persistence. So ultimately, we're still just a few quarters into this launch. It's a learning launch. We're developing a new therapeutic area essentially in classic CAH. And we've got a long way to go. As Kyle said, over 1,600 patients on treatment, on our way towards 2,000 or about 10% of the overall prevalent population within that first year. But I feel really good about the trajectory, the prescriber base that we've been able to develop. And as we mentioned earlier, the fact that we're also increasing our investing in our CRENESSITY team to help really accelerate that adoption.

So touching on that, do you expect to see sort of a similar dynamic that you see when you increase INGREZZA's sales force? Or too early to say?

Yes, when you say similar dynamic meaning being able to increase new patient starts. Yes, I mean, obviously, I think that is one of the reasons for doing this. We want to get as many patients on treatment as quickly as possible, and we're really sort of doing a two-pronged investment with our CRENESSITY franchise. One is to expand the field sales team. And I will clarify that this is a much smaller sales force than our CRENESSITY team. There's currently less than 50 representatives on the CRENESSITY side. So in terms of number of FTEs, it's rather modest. But the other thing is that we're investing in technology that allows us to identify where these patients may be out in the endocrinology and in some cases, primary care practices. So we're leveraging different data sets, electronic medical records that are blinded to the patient identity, claims data sets, lab data sets, kind of merging them all together with a machine learning approach that can point our representatives towards practices that we feel are likely to have classic CAH patients. And so that allows us to go deeper into this patient population. We're doing both a building of depth and breadth with our CRENESSITY launch here. We know that most of the endocrinologists that have prescribed CRENESSITY so far have only treated one patient, and many of them have more than one classic CAH patient. So we're able to go back and get additional patients from that base, but we recognize there's a lot of endocrinologists that have yet to prescribe and they have patients as well. So I think you'll see, as we get into 2026, an expansion of the prescriber base, but also more patients coming from the existing current prescriber base.

Okay. Great. And quickly before I run out of time, touching on pipeline. Recently, you announced that NBI-'770 didn't meet the primary endpoint, but you're still looking at next steps. Can you provide some color on kind of what you saw in the data? Is it safety related? And why -- kind of what you're thinking about for next steps?

Yes. '770 was an NR2B NAM program. And so what we did was a small signal-seeking study. We did see some signals with respect to both safety and efficacy. And currently, we're still making a decision in terms of the next steps forward. So we will obviously let people know when we made that decision.

Yes. Maybe just to add to that, the primary endpoint was at day 5, and of course, we collect additional data beyond that, that feeds into some secondary analyses that we're working on. So stay tuned on that. But really excited about osavampator data that came out last year, that's the centerpiece of the Phase III program that we have right now in MDD.

Okay. And two last questions or just one, I guess, where do you see '770 versus osavampator in the space for MDD? And then lastly, if you have any comments on your TransThera deal and any future thoughts on BD?

Well, we're super excited about osavampator. This, for context, is an AMPA potentiator, pretty unique in terms of mechs of action. It does correlate closely with ketamine's glutamatergic effect. But relies on endogenous glutamate, so we think it's more physiological. We haven't seen any dissociative side effects, it's safe and well tolerated in the Phase II SAVITRI study. And the efficacy we saw was pretty substantial. We had a mean change in MADRS, which is a primary endpoint depression of 7.5 points, which is -- represents a very large effect size. The Phase III studies are ongoing. We should have Phase III data in 2027 from the Phase III programs.

So then the TransThera deal, this is for NLRP3 or the NOD-like receptor protein 3. It's an area that we've followed for quite some time. It lies at the intersection as a target between neurology, immunology and endocrinology, which if you know Neurocrine's story, that's right in our sweet spot. We've seen some really compelling data that come out of Novo and Ventus, Sanofi and Ventyx as well as Nomura recently. And what we're able to bring in here from this TransThera collaboration is a combination of molecules that span peripheral as well as CNS-acting that gives us nice, differentiated profiles of other compounds that are in the space. And if things all go well, an early clinical candidate by 2027.

Great. Thank you so much.

Thank you.

Thank you.

Thank you.