Neurocrine Biosciences, Inc. ($NBIX)

All right. Thanks very much. It's my pleasure to be moderating this chat with Kyle Gano, CEO of Neurocrine; and Todd Tushla, Head of IR, who I made the joke is also moonlighting as an aircraft controller right now.

I thought you were going to talk about my green shirt for St. Patrick's Day.

You look great, man. I like the shirt. But yes, sounds good. I mean, I think, obviously, anyone listening here knows the story well. But Kyle, do you want to just kind of give us a couple of minute sort of snapshot of 2026 as a big year for Neurocrine, and then we can do Q&A. So that sounds good?

Yes, it sounds great. Thanks, Paul. And thanks for Stifel for having us here this afternoon. So yes, if I look at 2026 as we exited the prior year, we're entering this year, with a great deal of enterprise-wide momentum, and this comes on the heels of an expanding and diversified portfolio that we're executing on this year with an exquisite focus on delivering a lot of data next year in 2027, Phase II and Phase III trials, which would really represent the first year of many years to come where we expect data flow just like we're anticipating for 2027. It's not to say there's a lot going on this year, but it is one of execution and performance. Last year, if you look at the commercial side of the business, we had just north of $2.8 billion in revenue. That's about 22% year-to-year growth, which is outstanding. That comes with the benefit of CRENESSITY adding to our topline each year now moving forward. And as a good reminder, when I talked about CRENESSITY and our revenue, it's our ability to diversify over INGREZZA, overtime, we had about 12% revenue diversification on top of INGREZZA last year in 2025. So a great way to think about the company as being a multiproduct, diversified biopharmaceutical company moving forward. Just to tick off a few things about our individual commercial products, INGREZZA, eighth year into commercialization. We saw $2.51 billion in revenue. That's about a 9% year-to-year growth, double-digit volume growth on the year, record NRx over multiple quarters. It was a great year by all accounts. Little bit of a hit on gross to net there on our net price per script with some contracts that we took on in 2025, but it makes up -- we make it up this year with a really clean year from a contracting perspective and access perspective. This year, we've guided to $2.7 billion to $2.8 billion in revenue. And we've got the focus here in a couple of different areas. I just alluded to, one, taking full advantage of the access that we acquired last year throughout 2026, leveraging our sales force expansion, which will be live in Q2. And there, we'll be looking at going deeper with existing prescribers as well as meeting new prescribers now on the antipsychotic side of the business, we've got about 30% new prescribers over the past couple of years that we weren't calling on. So we're able to reach those for the first time. And then also other sales initiatives, including a new DTC campaign that will come out later this year. So we're really excited about the opportunity that's out there. Good reminder, 10% of the 800,000 patients or Ono VMAT2 inhibitor. It's a lot of growth out there that remains, and we've got IP out to 2038 to support all the growth that we see in the product. For CRENESSITY, switching gears a little bit, first, commercial -- first year of commercial sale of $300 million in revenue last year. We had about 10% under care of CRENESSITY of the entire CH market. So that's a great milestone, but it also means there's 90% of the market still ahead for us. And by all accounts, every measure that we look at, we exceeded all of our internal expectations this past year, starting with reimbursement rates that were high, 80% of dispensed scripts were reimbursed. We saw a very good persistence throughout the course of the year, and it really sets us up well for a strong second year 2026. We're looking to continue supporting the educational needs of physicians and patients to hopefully change the standard of care in CH just much -- or much like we've done with INGREZZA and tardive dyskinesia. We've got plenty of time to do that with IP out to the early 2040s. So that's the commercial pipeline. And then we've got an industry-leading neuropsychiatry portfolio, osavampator and direclidine will deliver Phase III data in 2027, in particular, the second half of 2027 and early '28 for direclidine. We've got a number of Phase II programs that will read out over a similar time frame. NBI-570 is our M1, M4 dual agonist in schizophrenia right now. And of course, our VMAT2 efforts in terms of getting a next-generation inhibitor are moving along the pipeline nicely as well and NBI-890 is in a Phase II trial that will read out towards the end of next year. So a lot on the commercial front, a lot on the pipeline. I'll just -- I'll stop there in terms of the highlights. We really are focusing on execution this year to deliver the data across our Phase II and Phase III programs in 2027.

Yes. Okay. Great. Maybe as it relates to the INGREZZA guide, right? So I think you guys said that price is going to be flat. Is that right?

Yes. So just to recap on the guidance for this year, $2.7 billion to $2.8 billion. When we look at the guidance, whether it's this year or years past, obviously, we look at trends leading up to the time we're having those discussions internally, but it really comes down to the pace and cadence of NRxs as well as what we're seeing on TRx the prior year. And then the timing of sales force and other marketing initiatives that happened during the course of the year. When it comes to specifics on NRx in particular, when we think about this year, just a couple of things to call out. We'll be looking at about a 4% to 5% price decline year-to-year for the expanded access that we have now to be maintaining that throughout the course of 2026. So that 4% to 5% decline is relative to what we saw exiting 2025. And then in Q1, recall -- Q1 of this year, recall if we reflect back in Q1 of 2025, the differences in our business is that we brought on a couple of contracts. We did take a hit on the net price per script. So on a Q1-to-Q1 basis, that decline on a net price per script is about 10%. So we have those, I'd say, a little bit of a headwind there throughout the course of this year about 4% to 5%. You do see...

Is that due Kyle? I thought at one point...

So I'll just clarify, I think, Paul, I know where you're coming from. It was flat coming out of the second half of the year of 2025. So we had entered into those contracts over the second half of the year, coming out of the end...

But on a blended basis from the whole year is where you're talking...

That's right.

There you go on a blended basis...

I think that's helpful context for everyone's model.

And to repeat, the biggest hit -- like Kyle said, the biggest headwind is the anniversary heading into Q1, where you're going to have somewhere around 10% price hit, but that recovers a bit into Q2 and then you're on even ground in the second half of the year.

Yes. Yes. Other than that, I mean, we're looking at another strong year. We anticipate double-digit volume growth this year just as we saw last year. And with the price per script relatively flat over the course of the year, as we just described, expecting a nice strong year for the brand.

Yes. Yes. Okay. On -- just looking ahead to 2027. Do you feel like there's a lot of uncertainty on where the price of INGREZZA might be going? Like do you feel like you're going to get more information and how plans are going to be dealing with the Austedo MFP or -- because I think on the market side and the investor side, this is seen as a big source of variance, but I'm wondering if you also see it as a big source of variance.

Yes. I mean the way I think about the IRA, there's really 3 periods here when we think about Neurocrine. There's 2026 or what's left of it, when both Teva and Neurocrine are not in the period where either company is observing or implementing an MFP there's '27 and '28 where Teva, our competitor in this space is -- has their MFP implemented. And then there's 2029 when Neurocrine has its MFP implemented. So this year, relatively normal year for us. We've got great access, 70% of TD and HD patients are under the contracts that we have with plans today. So it's a really good place for us to be. That's why I go back to my earlier remarks and maximizing that now in combination with the sales force expansion that we have ongoing. So that's good. When it comes to '27 and '28, that's the Teva MFP implementation period where we're not in the same situation. And when we look at what happened with Teva and Austedo, we feel that they landed in a pretty good spot, right, within the range that we had planned on internally in terms of their discount to their 2024 WACC, which is about 38% or which was 38%. That's a pretty good spot for us, and we know that we can manage through that and can still see really good growth for the brand. And when we think about our actions and our own activities this year, we're not expecting any midterm or midyear adds like we saw in 2025, it's stable now this year. So what our focus and attention is, is negotiating with those Medicare plans now for '27. And those things or those discussions are ongoing, and we'll have an update on where they land or where we land with them later this year. Again, that will be for contracting for 2027. But we believe that there'll be a place for adjacent MFP products in these Medicare plans moving forward. We've already heard and see that from other brands that are out there today. And we know that we'll be able to manage through the next year and '28 quite well. And then we have our own MFP Imputation and IRA activities that will be supporting our 2029 year.

Yes. Okay. Makes sense, Kyle. As it relates to CRENESSITY, how are you setting the expectation of what can be a good outcome this year? And I think it's -- I think on the Wall Street side, like everyone knows that the ad rate is going to settle into some sort of steady state number, but the question is when is that going to happen? It feels like with -- this is one of those launches where people are going to be emotionally sensitive to very small differences in start forms. But how are you kind of like helping people think about like where this hits the trajectory now that we're past the bolus.

I have two cents on that. The start form piece was a big point of the Q4 call for exactly the reasons you highlighted. But I think if you're close to orphan launches, it's very typical to have a nonlinear path for new patient start forms. That's what we expected. That's what we saw. The new patient start forms internally beat our expectations with each passing quarter in 2025. And so to have that get to 10% of the patients in year 1 is a super strong start. And I think our expectations are if you combine what we're calling steady ads. And so I get that question quite a bit from Street, what do you mean study? And by study, we look at it weekly, in 2025, not providing any guidance for this year. But for 2025, what you saw were double-digit adds throughout the course of a quarter. Now they varied across Q1 through Q4. But we never had an instance where you put up a 0 in 1 week and something like a 50. It will be nice, consistent double digits. And as long as you continue that into this year and combine that with what Kyle mentioned from the outset, very strong compliance and persistence at least through year 1, in line with what we saw with the open-label extension, combined with strong reimbursement, I think we're going to get -- I think this is the year, perhaps this quarter, hopefully, where people have less emotion about the new patient starts and you're looking at the trend line in net revenue, which is going to be an upward slope.

Yes. Yes. Okay. I'm always prepared for like a first quarter for Neurocrine that is a little confusing on either like INGREZZA or re-auth or something like that. Anything you're selling weeks? And then I'm always prepared for the 2Q set up to be great. But anything we need to keep in mind with 1Q and any complexities in sort of interpreting the upcoming quarter?

We know for INGREZZA. We go through the reauthorization quarter. There's always noise around that...

Is that better now that you guys have paid up for all this access?

There's still the piece of patients having to go through their process of getting their prescription refilled. That doesn't change. They still go through that dynamic each year. And we see that across all specialty medicines. It's not something that's unique to us. In fact, we often look at other branded antipsychotics and see what their patterns look like and not surprisingly VMAT2 inhibitors and antipsychotics kind of move together in terms of their ups and downs on an annual basis. But so you have reauthorizations through Q1 for INGREZZA, and then you have the pay down for commercial for the commercial plans for CRENESSITY in Q1. That gives you a little bit of a gross to net hit, but that works itself through in Q1 as well. So we don't give any other intra-quarter guidance beyond that, but I'm looking for good years for both INGREZZA and CRENESSITY. And I think we touched a bit on the ebbs and flows and orphan drug launches, and I'm sure you've done this work, too, Paul, if you look at orphan drug launches that have some of the redeeming qualities of CRENESSITY, we're certainly on our way to blockbuster status category based on first year performance. We want to make sure we just continue focusing on that for patients, and I think one at a good place.

Yes. Yes. Okay. Very good. On the AMPA-PAM, so you have this great Phase II data, you're in Phase III. And I think -- the discounts that investors seem to give it are just one, the sort of MDD is hard discount and two, the dose response dynamic, it's like people want things to fit neatly into a nice box. But you obviously have looked at tons of MDD data sets from your time in BD and probably others maybe even at Neurocrine before I covered the company. But like what makes you so confident that this is like a replicable data set and that you know your dose going into Phase III.

Well, first of all, I will -- I'll take and appreciate that there's going to be uncertainty for any program in psychiatry. I think it's just the history of the space warrants the right level of concern because you have Phase II trials that seem to look good in Phase III, they don't necessarily replicate. There are things that we're doing to ensure that give us the highest possible chance of succeeding, but I appreciate that history. I guess I'd point to 2 things -- 3 things when it comes to our own program. Number one is that we're working already in a validated pathway and that validated pathways by esketamine and associated in the receptor antagonist. You can go back 50 years through things like PCP that run through the same NMDA pathway. It's one that's been well paved. So you have that confidence knowing that you're leaning into out of the gate. Number two, we've also been part of that validation with our Phase II data in and of itself. Now where our AMPA-PAM or potentiator operates as downstream with the NDA receptor, but it requires the same messenger, if you will, to activate the system, which is a glutamate and that's what we're utilizing here moving forward. And then the last one is that our own Phase II data was spectacular. I know we often describe an inverted or a irregular dose response. But in our view, both doses worked. This is a small signal-seeking study, not necessarily trying to get a p-value on each of the doses that we used, but that could have been probable. That would have been the case if we would have had a larger sample size here across both our 1 and 3-milligram doses. But overall, a very robust result. We move forward with the 1 milligram, but just to recap the efficacy here, we saw efficacy that improved from day 28 to 56. So there's an improvement -- or there's a robustness that continues to expand in terms of the efficacy magnitude over time, which is compelling suggests that the longer that you're on the medicine, the better you'll do. But at the day 56, we saw very robust results of about a 4.5 point MADRS improvement and 7.5 points at day 56, with an effect size that ranges from 0.55 to 0.75. Of all the medicines that I've reviewed over the years, either in our pipeline or externally, I've never seen that robust of a result. So we're quite pleased with that in addition to all those additional things about working in a validated pathway that gives us comfort. So the gold in for us in Phase II is to replicate that signal. And to do that, we try to lean into things like simplicity and trial design and also trying to not go too far from where we were in our Phase II trial. So in this Phase II study, we used 2 doses, about 40 to 45 subjects each versus about 80 subjects on placebo. In our Phase III trial, we're going to be 1:1 active to placebo and about 100 subjects of active versus 100 on placebo. So we really are dialing in to maximize both the signal and the statistics here in the Phase III trial design with a similar number of sites, similar geographies, similar team that's doing the oversight and that should ensure that we are giving this program the best chance to succeed.

I'll just add, what's torpedoed a lot of these programs and AMPA have been the safety margin, right? And here, we've studied this molecule up to 18x the dose in SAD/MAD studies versus the 1 mg got a 15 and so the safety and tolerability profile in the Phase II SAVITRI study was great. This seems to be behaving nicely on top of the efficacy that you're going to get.

Have there -- like some of these other AMPA-PAMs that have run into seizure issues. Have any of them shown like clinical proof of concept in mood disorders that would help corroborate this result?

No. And the reason why is, is that typically -- and this is a little bit nuanced, when you see a seizure or an animal model or in tox studies, Typically, you're giving a tenfold haircut on your margins by the agency. So they're never able to push the dose to the efficacious range in terms of exposures in Phase II to show an effect. And that's just been a very unfortunate kind of draw back on molecules of this mechanism. In fact, this is the second one that Takeda brought to the market. Recall this is a program that we in-licensed from Takeda. And they did an outstanding job really profiling molecules in this space, not only their own, but others to really drive a dial into a molecule that behaves like a potentiator or a positive allosteric modulator versus an agonist that would over activate the AMPA target in the system, and that gives rise to the seizure findings. It's a good point to mention here the AMPA antagonist saw the opposite of what we have actually prevent seizures. That's Fycompa. So it makes sense that if you overactate the system, you would cause seizures. And that's been the challenge of our industry is to get to potentiators or PAMs.

Yes. Okay. And so you're running a huge program here, multiple studies. The first is reading out 2027.

Second half of '27, all of them will read out...

All 3 of them in '27.

All of them will read out in the second half of '27. And is that 2 parallel group and one randomized withdrawal? There are 3 placebo-controlled trials and one randomized withdrawal. The randomized withdrawal study we have one in the direclidine program as well, really help more from a payer standpoint than anything else. We'll have all the placebo-controlled study to result so well in advance of that one. But obviously, in psychiatry, related to how we started the discussion is risky, and we have a more traditional program in terms of the number of studies that we're working on here, doing 3 and looking to get at least to that hit positive.

Yes. Okay. Okay. Do you think this IIB has any regulatory utility that you already completed?

Our work out of the gate when we started this Phase II trial or the SAVITRI trial was that it would not be a pivotal trial. It's a smaller exploratory signal-seeking study. We're really trying to magnify what we could see in the MADRS. A lot of the other measures that you'd want in a placebo-controlled trial in Phase III for payers or for other means they're fully exploiting the profile of the molecule were in this Phase II trial. So it's not something that we've planned on leaning on. And to that end, as we mentioned on the timing of the Phase III trials, they're all going to be more or less reading out on top of each other. So the value of a leading in 2 Phase IIb trial or Phase II trial may be less given what we've got going on right now. I know that a lot of the questions that we received in this area pertains to the openness right now, maybe of the FDA of looking at a plausible mechanism to bring in...

Who is asking you that?

One pivotal trial. I don't know if that's going to be a case here, but I'm just acknowledging that's there. I know a lot of other companies are trying to figure out what that means.

Right. I don't know, to me, I'm just -- my thought is like these parallel group studies can fail if you already have one in the bag. And then you're doing a randomized withdrawal study, which has a good chance right? Like you're already far along the way, right? But, yes, okay. People have talked a lot about the muscarinics. I actually wanted to ask you just quickly you have a next-gen VMAT2 that no one really talks about, right? And look at what AUSTEDO XR has kind of done to that franchise. How are you framing that opportunity? Like is there something like an XR AUSTEDO analog with the INGREZZA franchise with your next gen?

Well, it's been really difficult to get something that's been -- that has a better profile than INGREZZA. It's once a day has a lot of redeeming qualities. I mean the things that we're working on for the next-gen really are working at the margins of things that we -- that someone could poke for INGREZZA. But the overarching theme for the next-generation molecules are potency, once-daily dosing and low total daily dose. And the goal here is to drive an additional product that would be married to the oral that would be a long-acting injectable. You'd be surprised how much we hear from physicians of desiring that type of formulation to help with compliance in those patients side-by-side with their antipsychotics. And that's been something that has been the top priority for us in a next-generation approach. And we've got 2 shots at doing that now with NBI-890 and NBI-675. 890 is in the lead and just started a Phase II trial in tardive dyskinesia, and we'll have data on that second half of next year as well, goes back to our data-rich 2027. But the idea there is that you'll get the exposures that are commensurate with efficacy and you'll be able to start a long-acting injectable program around that, just using that exposure range as a guide.

Yes. Okay. And then on the muscarinics side, I think there's been enough conversation for now just on kind of interrogating that the M4 data set you had. Where are you at the M1/M4. And do you feel like that might have a higher POS? Like do you like the dual more?

Yes. No. So we are very excited, obviously, for direclidine. We wouldn't be investing in it in the way that we are if we didn't think it had a lot of redeeming qualities over the current competition in the space, which is Cobenfy, but what we want to answer ourselves and we'll see here in early 2028, but the dual molecule that we have in a Phase II trial and now for schizophrenia is NBI-570. And there's been, as you've heard from us and others, this concept that M1 is for cognition and in-force for psychosis, but can they benefit each other in a complementary way in either one of those areas if you're looking at a single indication. So by that, I mean, would you get more efficacy by adding M1 on top of them for into a disease of psychosis like schizophrenia. Or would be adding M4 on top of an M1 give you some benefit in a patient population with Alzheimer's. So these are things that we're going to be able to answer. And we see that from our Phase I studies all of our agonists have completely different profiles. I mean one of the things that's nice to see is that all of them are going to be able to be dosed in Phase II and Phase III without any formulation work once a day, but different profiles overall, we'll be able to see what those look like in the different patient populations. The dual is a little bit ahead of the other molecules. So it's in that Phase II trial. Now for schizophrenia, we also have another type of dual different ratios of M1 and M4 in NBI-569 that we've earmarked for Alzheimer's disease psychosis and then we have a more traditional M1 agonist in development for Alzheimer's disease cognition.

How fast could you move Kyle with the dual in ADP, assuming this -- we see a signal from Cobenfy or something like that?

We'd be able to move into a broader Phase II trial probably beginning of next year. What we're doing right now in Phase I, which we think is going to be a differentiator in and of itself is show good safety and tolerability in the elderly population with 569. That will also help us triangulate to dose in dose selection for our larger Phase II trial next year.

Yes, yes. Okay. Anything else you want to highlight that you feel like everyone's overlooking or not appreciating that you are enthusiastic about?

I'd highlight probably 2. You captured one here, the next-generation VMAT2 program. I'd also highlight our next-generation program for CAH, which is NBIP-1435. That's another program that's going to move rapidly through the clinic, given our experience in CAH. It's in Phase I now, but we're moving into Phase II/III later this year, and that's something that could be a near-term commercial opportunity over the next 4-, 5-year period and offer something different over CRENESSITY in much the same way.

What's the mechanism of that?

It's a CRF1 antagonist, but it's a long-acting injectable. So it is offering something completely different than oral and we're excited about that one. And then related to CRF, we also have our diversified view of moving from R1 as an antagonist to R2 in CRF in metabolic disease, in particular, BC, that will deliver data in patients in the next year as well. So we'll see how that approach works and some things that I know that people are interested to see.

Yes. Well, great. Well, thank you, guys. I really appreciate it. It's always good to see you, Kyle, and Todd. You always make me chuckle. So it's good to see you too, man.

Don't forget about the strong financial profile. So if somebody is out there. It's time to invest now.

There you go. There you go. I think our story is simple, Paul. It's a growing blockbuster, one in the making, an expanding diversified pipeline, a lot of data in 2027, sustainable innovation engine and a strong financial profile position just like Todd mentioned.

Yes. Yes. Okay. Well, great, guys. Thank you so much. Have a good rest of your day, and we'll talk to you soon.

You as well.

Thanks, Paul.

Thanks, everyone, for listening.