Neurocrine Biosciences, Inc. ($NBIX)

Welcome, everyone joining today's Neurocrine to acquire Soleno Therapeutics conference call. [Operator Instructions] Please note, this call is being recorded, and we are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

Good Monday morning, everyone. Thanks for joining the Neurocrine Biosciences call to discuss our planned acquisition of Soleno Therapeutics. On the call with me are Kyle Gano, Chief Executive Officer; and [ Samir Sedante ], Vice President of Strategy and Business Development. Kyle and Samir will provide opening comments, and then we'll move to a Q&A session, where we'll also be joined by Matt Abernethy, Chief Financial Officer; Eric Benevich, Chief Commercial Officer; and Sanjay Keswani, our Chief Medical Officer. Note that we posted today's slides to the Investors section of our website at neurocrine.com that you can follow along with for the discussion. During today's call, we will be making forward-looking statements about the proposed tender offer for all shares of Soleno Therapeutics and subsequent merger and the business prospects of Neurocrine, including expectations regarding the tender offers anticipated occurrence. Manner and timing, satisfaction of the required conditions to the tender offer and subsequent merger, its potential benefits and financial impact for Neurocrine, our integration plans, the development and potential expansion of Soleno's commercial product, VYKAT XR and other statements that are not historical facts. These statements are subject to certain risks and uncertainties, and our actual results may differ materially depending on whether the transactions are completed as anticipated, if at all, the number of Soleno stockholders that will tender shares in the offer, the possibility of competing offers or acquisition proposals, Neurocrine's ability to realize the anticipated benefits of the proposed transactions Neurocrine's ability to leverage its capabilities to extend the reach of VYKAT XR to more patients and additional factors set forth in the press release issued today and Neurocrine's filings with the Securities and Exchange Commission. Further, we will be filing documents related to the tender offer, and we encourage you to read them since they will have important information about the tender offer. With that, I'll hand the call to Kyle.

Thanks, Todd, and good morning, everyone. We're pleased to announce that Neurocrine has entered into a definitive agreement to acquire Soleno Therapeutics. This is an important and exciting day for our company, our shareholders and employees, and most importantly, for the Prader-Willi Syndrome patients and the Prader-Willi Syndrome community. Let me begin with the key takeaways on Slide 4 of today's presentation. First, Soleno is an exceptional strategic and financial fit with Neurocrine, and this acquisition reinforces Neurocrine's commitment to delivering therapies that are transformative for patients. The Soleno team has done an outstanding job advancing VYKAT XR, demonstrating strong efficacy in a complex disease with a clean and straightforward label that enables broad utilization. Importantly, both organizations share a deep commitment to patients we believe this unique alignment will enable seamless integration grounded in a patient-first mindset. Second, the acquisition of Soleno will accelerate Neurocrine's revenue growth and portfolio diversification strategy continuing Neurocrine's evolution and transformation to a leading biopharmaceutical company with multiple first-in-class medicines. The addition of VYKAT XR, a first-in-class treatment for hyperphagia and Prader-Willi Syndrome represents a highly competitive example of our strategy to bring forward novel medicines that are transformative for patients and their families. Third, the transaction will position Neurocrine to deliver sustained growth and value creation. Soleno immediately increases our top line revenue growth, enabling us to continue to innovate and deliver more medicines for patients. With a strong intellectual property estate, VYKAT XR supports continued innovation, development and long-term value creation. Slide 5 outlines the attractive financial terms of the transaction, under which Neurocrine through a subsidiary, will commence a cash tender offer to acquire all the outstanding shares of Soleno at a price of $53 per share, representing a total enterprise transaction value of approximately $2.9 billion. The transaction is not subject to any financing condition and will be funded with cash on hand, and we plan to optimize our capital structure by taking on a modest level of prepayable debt. We expect the acquisition to deliver meaningful financial benefits including accelerated revenue growth and enhanced cash flow generation through greater commercial diversification. On Slide 6, you see an overview of Soleno in their product VYKAT XR. We believe VYKAT XR has blockbuster potential given the size of the patient population, the unmet need and Prader-Willi Syndrome and supported by a strong intellectual property estate. We are excited to build on the strong foundation established by the Soleno team and will look to educate an increased awareness in order to help more patients living with Prader-Willi Syndrome access effective treatment. With this addition, our high-growth portfolio now totals 3 first-in-class medicines, INGREZZA, CRENESSITY and VYKAT XR, we expect the transaction to be immediately accretive to revenue growth in 2026. The I'll now turn the call over to Samir [ Sedante ], Vice President of Business Development and Strategy, who led the acquisition process.

Thanks, Kyle, and good morning, everyone. Over the next few slides, I'll briefly cover the product, the disease and the opportunity. Staying on Slide 6. VYKAT XR was approved by the FDA in March 2025 and launched in the U.S. in the second quarter. The launch has been strong, generating $190 million in 2025 revenue to Soleno including $92 million in the fourth quarter alone. This early performance reflects strong physician adoption and more importantly, the meaningful impact by VYKAT XR is having on both patients and caregivers. We greatly admire what the Soleno team has accomplished and look forward to building on this foundation to reach more patients. Turning to Slide 7. In Prader-Willi Syndrome is a rare genetic neurodevelopmental disorder, affecting approximately 10,000 people in the United States. The disease is characterized by neurological, behavioral and metabolic dysfunction. It's defining features hyperphagia, a chronic and life-threatening condition marked by a persistent hunger that drives compulsive food-seeking behavior and significantly impacts quality of life for both patients and their families. This insatiable hunger is often accompanied by serious behavioral challenges and comorbidities, which can increase mortality. Given the severity of the condition, there remains a clear need for effective treatments like VYKAT XR. Turning to Slide 8. VYKAT XR is the first and only FDA-approved treatment for hyperphagia in patients with Prader-Willi Syndrome. By directly addressing the core and most life-threatening symptom of the disease, VYKAT XR is positioned to play a central role in treatment. Given this profile, we see a significant opportunity in the U.S. with a well-defined patient population and high unmet need, Neurocrine's capabilities addressing diseases at the intersection of neuroscience and endocrinology position us well to expand access and reach more patients. Alongside CRENESSITY and our growing endocrinology pipeline, including NBIP-'1435 for CAH and NBIP-'2118 for obesity, VYKAT XR will be an important addition to Neurocrine's portfolio. I'll now hand the call back to Kyle.

Thanks, Samir. Turning to Slide 9. Neurocrine is well positioned to expand adoption of VYKAT XR by leveraging our commercial infrastructure and therapeutic expertise across the full spectrum of symptoms experienced by individuals with Prader-Willi Syndrome. With continued growth from INGREZZA, a strong early launch trajectory for CRENESSITY and now the addition of VYKAT XR, we are excited to have three growing medicines that have achieved or we believe will achieve blockbuster status. Slide 10 reflects our continued enterprise-wide momentum and disciplined approach across commercial, R&D and financial priorities as well as the key pipeline milestones in 2026 and that will build on the strong foundation we've established across the business. Lastly, Slide 11 outlines how this acquisition strengthens our leadership position in endocrinology and rare disease and enhances our ability to deliver sustained growth and value. With that, let's open up the line for questions.

[Operator Instructions] And we'll take our first question from Paul Matteis with Stifel -- apologies, we'll move to Brian Skorney with Baird.

Congratulations on the deal here. This is Charlie on for Brian. So we were just wondering, as you think about the landscape out there, there are a few competitive assets in development for Prader-Willi, it's a growing area of interest. So could you just talk to us about your confidence in the competitive profile here and where you see the landscape going in the next few years?

Thanks, Charlie. I appreciate the question this morning. I think I'll let Samir field this question.

Charlie, thanks for the question. Let me just start by saying that we're really excited about this transaction. We've been following this company in space for some time. And this sits right at the intersection of Neuro and [ Endo ], so it really couldn't be a better strategic fit for us here. . We had a thorough diligence process that included evaluating the competitive landscape. We've been tracking that very closely. There's unfortunately been some setbacks in the space over the last 12 months. We feel good about where this asset is positioned to be a best and first-in-class treatment for PWS.

We'll move next to Paul Matteis with Stifel.

Not sure what happened there. Two quick things. One, can you guys talk about the diligence you did that made you confident on VYKAT persistence on a go-forward basis? And two, does the deal value here credit anything in Europe? And what are your thoughts on approval prospects there?

Thanks, Paul. Appreciate the questions here. Maybe just to catch up on the diligence piece. This was a rigorous diligence process that we undertook. We are well situated to review programs and assets and endocrinology space. given our team that developed CRENESSITY and brought that to that patient population in congenital adrenal hyperplasia. So we're well skilled here in experience when it comes to looking at programs in this space. And likewise, on the commercialization side of things. And we've heard -- you've heard from us over the past couple of years, and we've talked about the launch of rare disease medicines. There's always ebbs and flows, when it comes to start forms as well as patients coming in and off of therapy. And what we've seen thus far across our diligence is all the profile aspects of a potential blockbuster in the making with VYKAT XR. So very pleased overall with the data that we've seen through launch and leading through all the information that we reviewed thus far in the data in 2026. So a very good view there overall. In terms of Europe, we have no plans for bringing this medicine into Europe at the moment. Our deal value and model only contemplated the U.S. opportunity. And this was deliberate and intentional and very much the same way we've talked about CRENESSITY. You only get one time to launch a medicine in a rare disease that's even more important. Each patient is important as you think about the early years of the launch. So right now, the focus is just on the U.S. opportunity, creating are continuing to leverage the momentum the team developed in 2025 for 2026 and beyond.

Is that because of [ MFN ] risk, Kyle?

No, that's certainly just looking at making sure that we continue focusing on the U.S. launch in rare disease, each patient is important. You want to make sure that you're able to leverage all the things that you started at the beginning of the launch without missing a beat. So it really is just the continuity of what the team has created on the side of Soleno and continuing that momentum in 2026.

We'll take our next question from Tazeen Ahmad with Bank of America.

This is Jeremy on for Tazeen. I just wanted to ask a quick question on once the VYKAT XR launch is fully in Neurocrine's hand, what are the key focuses that the sales team will look to key in on in order to continue a strong launch? And then maybe just a follow-up on the prior question, just with regards to how you guys are thinking about long-term persistence of the therapy. Just how that factors into your peak sales expectations?

Thanks, Jeremy. Maybe I'll pass this question to Eric. Eric, would you like to share your thoughts.

Yes. So I just want to reiterate how excited we are about the opportunity to build on the great work that the Soleno team has done launching VYKAT XR. And certainly, it's still very early in its commercial ramp. We're excited with what we saw in 2025 in terms of the receptivity and the uptake and recognize though that there's still a long way to go, given the size of the PWS patient population and the significant unmet need. One of the things that we've seen is that there's still need for ongoing education in the endocrinology community to help the providers really understand, I think, the full range of impact of hyperphagia. It's not just the insatiable hunger that these patients experienced. But really the behavioral aspects that need to be fully appreciated, the preoccupation with food that drive to consume food, all the behavioral problems that come from this and then, of course, the overeating and all the way to the point of morbid obesity or even gastric rupture or choking. So we recognize that the Soleno team has done a great job thus far, but there's still a lot of people to reach and educate in the community. And so I think that will be one of the focuses as we go forward for sure.

Phil Nadeau with TD Cowen.

Congratulations on the deal. Two questions from us. So first, following up on the last question. It's our impression that most patients here are diagnosed and either treated at an expert center or institutionalized in your prepared remarks, you talked about reaching additional patients. So can you give us some sense of where those additional patients are and what proportion of the market do you think Neurocrine can reach that perhaps no couldn't? And then second, maybe more question, I think Soleno has got a 2,000 patient start forms within the first 12 months of launch. What's your confidence that, that number will be hit?

Eric, do you want to comment on this?

Sure. Yes. Let me take the second part of the question first. Our confidence is high. Obviously, we did substantial diligence and looking at all aspects of the commercial opportunity here and we recognize that, as I mentioned earlier, it is still early in the commercial ramp. We see some similarities to our experience with CRENESSITY in the sense of there are some centers and some practices that have a concentration of these PWS patients, but there also is what we call a long tail of patients that are being cared for in community practices. And certainly, those are -- the majority of patients are sort of outside of these centers of excellence or of these more concentrated practices. So it takes time to reach them all. And we also see that similar to what we see in the opportunity with CRENESSITY in CAH that these patients aren't necessarily seeing the providers frequently over the course of the year. So there might be only one or two times per year that they're seeing their endocrinologists and so we have to make sure that VYKAT XR is top of mind when they do have those interactions. So certainly, there's a lot of opportunity here. And in terms of reaching the patients and reaching that opportunity. We'll be continuing to look at how VYKAT XR is resourced. But obviously, we feel like the Soleno team has done a great job thus far of getting out there and driving the awareness and the education in those community practices and in those centers of excellence. And we think that certainly, we can build on the work that the excellent work that the Soleno team has done to be able to reach the vast majority of these patients that need treatment over time.

Maybe just to comment here real quickly to tie a bow on this. There's going to be a lot of things that we're not going to be able to talk about near-term views on the opportunity just because we don't -- we haven't officially acquired the company yet. But our diligence uncovered that we have a very good view on the long-term opportunity here, and we do believe VYKAT XR has all the hallmarks of a blockbuster medicine, and that's what we're keeping our eye on.

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

Maybe building on the last question, just wondering if you can talk a little bit more specifically on how much overlap there is on the call points between CAH and Prader-Willi, maybe quantify the potential for synergies there. And then I guess I'm also curious how this transaction might affect your future capital deployment strategy, whether it changes your plans to reinvest about 35% of your revenue in internal R&D?

Maybe I'll start the question, and then I'll turn it over to Matt to share a few of his thoughts here. Just on the synergy piece, just to point out, our view right now, just to frame it is this is less of a cost synergy play as it is, as much as it is about adding an additional first-in-class medicine to accelerate our revenue growth and diversification objectives. But of course, there is synergy here when it relates to two organizations working in the endocrinology and rare disease space. And I'll just call out here, I think what Neurocrine brings and what Soleno brings when we combine the companies, is certainly commercial scale. I think Neurocrine also offers medical capabilities across endocrinology and rare disease that we'll be able to leverage moving forward. And then if you think about some of the areas that we've excelled in, at least in my view, for INGREZZA and CRENESSITY, these are both, I would say, similar disease states in terms of being first-in-class. Things like patient finding activities, diagnosis, education for health care providers as well as patients and then access these are things that I think 1 plus 1 is going to be greater than 2, bringing our medicines together and we'll be able to leverage moving forward. Now we haven't gone through the overlap here exactly on the prescribers. That's something that we'll get into over the coming weeks and certainly post close. Matt, do you have any thoughts?

No. This is a great transaction and our capital deployment strategy is not going to change as a result of this highly profitable immediately from day one. And we all feel really fortunate to have this product in our hands.

We'll move next to Corinne Johnson with Goldman Sachs.

Maybe you could speak to the confidence that you have in the patent protection. And I think you've said the 2040s, I think Solenoid 2035. So could you just speak to kind of your confidence?

I appreciate the question. This is Kyle. One of the things that I was pleasantly surprised when we got into diligence, is how like-minded both our organizations are in protecting intellectual property and discoveries that have come out of the program. In the course of our diligence, we were able to uncover a pretty robust patent estate and that gives us confidence that we believe that we'll have exclude out to the mid-2040s. So very excited to see that, and it's very consistent with what we've seen across the robustness of their program ranging from clinical, et cetera. They've done a really excellent job there.

We'll move next to Cory Kasimov with Evercore ISI.

I know you said the deal is immediately accretive to the top line, but over the short to intermediate term, how are you thinking about accretion dilution with regards to the bottom line here?

It's immediately accretive post-close in 2026. It's already generating cash, and we won't be diluting shareholders by issuing shares here. This is an all-cash transaction with a modest level of prepayable debt. So I do feel like this is going to generate nice bottom line growth. But as Kyle said, this is all about revenue. This is about helping more patients and that's what our main focus is going to be on.

We'll move next to Anupam Rama with JPMorgan.

This is Joyce on for Anupam. If I could follow up on the EU for. I understand you guys have no plans for the EU, but are you looking specifically to partner out the EU Rest of World opportunity?

Yes, we'll evaluate that as time moves along right now. It really is about focusing our team's effort on continuing the momentum from 2025 moving forward. And we'll have plenty of opportunity to understand the opportunities to bring this important medicine to other jurisdictions down the road.

We'll move next to Josh Schimmer with Cantor.

First, how do you get comfortable that the safety profile of VYKAT XR is going to remain adequate to support meaningful adoption going forward, considering some of the issues that have been very permanently discussed? And then while you've noted that the European launch is not a focus for the company? Do you expect European approval on this review? And if so, will you be launching in Europe or not?

First, thanks, Josh. Appreciate the questions here. This is Kyle. Maybe I'll start with your first question. Obviously, we had a very large team diligence the program just as we would for any clinical commercial stage asset. And we had the luxury here to be able to review over 50 years of diazoxide safety, tolerability and efficacy data. And all those elements are pretty well characterized over the many decades of use. Really the focus then from our view on perspective was looking at the placebo-controlled as well as the open-label extension data. And with that leading up to the NDA review, we had patients or Soleno had patients on medicine for over 4.5 years. So we have a pretty good feel for this medicine versus if it was another one that was first entering the marketplace, and it gives us great confidence in the safety and tolerability as well as the efficacy that we see in the Prader-Willi syndrome patient population, which is quite robust. So overall, the risk benefit profile is quite favorable for patients with Prader-Willi Syndrome. And as we've discussed here in a couple of different question. This is a very complex serious disease. And we think that this medicine fits nicely and will serve as a nice foundational medicine for patients for many decades. We're excited what we have here in VYKAT XR. In terms of your EU question, I think we'll continue to evaluate what happens with the current review in Europe. But right now, it really is making sure that we continue the good success that the team has generated on the side of Soleno last year and making sure that we're doing all that we can for patients here now, especially as we move through what we will call your typical integration. We don't want to have any efforts that would dilute the good commercial success that the team has seen thus far.

Take our next question from Mohit Bansal with Wells Fargo.

Congrats on the deal. So when we did our due diligence, there were a couple of topics which came across. So number one was that it takes a while for patients to realize the BMI benefit here and that could impact persistence. And then number two, the monitoring requirement with edema official refinement monitoring of edema, could be important given that this is a very complicated disease. So keeping those two things in mind, how do you think about the expansion of this drug beyond the KOL centers and then going into community? Because that seemed to be a challenge when we spoke to KOLs last week or so.

Thanks. This is Kyle. I'll take the question here a bit, and I'll see if Sanjay has a couple of remarks to add. I think when it comes to diazoxide and what we've seen thus far from the data set, I think it's important to appreciate that this is not a medicine for weight loss. This is a medicine that treats the hyperphagia that's associated with Prader-Willi syndrome. So as such, we're not looking for necessarily the opportunity to have patients lose weight here, although if you start patients younger at a lower BMI, you can maintain their weight over time, and that would be something that we would look at moving forward. So I think that's point number one. On the other point, in terms of safety, if you will, we're talking about fluid retention in hyperglycemia primarily, these are things that are [ monitable ] and also reversible if needed, by discontinuing or lowering the dose. So these are things that we'll be looking at moving forward. Certainly, there's going to be a very significant education component here. Soleno has done a great job of starting that process, and we'll look to continue to evolve that. And when you're working in these rare disease spaces, you have to make sure that you're open to continuously learning and adapting your education over time, and these are things that we'll do to optimize messaging and hopefully allow us to reach even more patients as time moves along. Let me ask Sanjay if he has anything to add.

I just want to emphasize that this medication impacts a defining symptom of the disease, which is hyperphagic behavior or food-seeking behaviors. And this has enormous impact on both the patient and the family completely independent of weight. What was interesting when we looked at the clinical data was that weight was actually prevented in terms of increase. So that was actually very reassuring as well. And then obviously, when thinking about a safety profile, we're looking at efficacy and also the severity of the disease. So we're very comfortable with the risk benefit profile that we've seen.

We'll move next to David Amsellem with Piper Sandler.

So can you comment on overall access, the mix between Medicaid and commercially covered patients? And how you're feeling based on your diligence regarding access and the extent to which you think there needs to be more improvements in the access paradigm once you take over the asset.

I appreciate the question. Eric, would you want to comment on this?

Yes. This is -- so far, what we've seen is that access has been really great in terms of getting prescriptions reimbursed. The majority of these patients are either commercially insured or via Medicaid. That is a similar payer mix to what we see with CRENESSITY in CAH and similar to what we've seen with CRENESSITY, they've had a very high rate of reimbursed prescriptions in 2025. So we feel good about the reimbursement. Certainly, it appears that payers recognize the severity of hyperphagia and PWS. And thus far, they've been reimbursing these claims, initial fills as well as reauthorizations. And so that's something you have to monitor closely as you go forward with the launch. But so far, so great with VYKAT XR. So that's part of the enthusiasm that we have and why we feel like this certainly has blockbuster potential.

And at this time, I would like to turn it back to Kyle Gano for any additional or closing remarks.

Thanks, again, everyone, for joining this morning. It's really been an exciting time here at Neurocrine to talk about VYKAT XR, a first-in-class medicine for the hyperphagia associated with Prader-Willi syndrome. It really sits nicely with what we've done with CRENESSITY and INGREZZA, also first-in-class medicines and our commitment to bring transformative medicines forward for patients and their families. If I could just leave you with a couple of thoughts. We believe that VYKAT XR is well on its way to become a blockbuster medicine. It has durable revenue that will continue, we believe, out to the mid-200s and it is an excellent strategic fit, as you've heard from many of us here this morning. So we're excited to continue this dialogue with you all as we move through this period of time as we close on this transaction. But it's exciting day for Neurocrine, the Prader-Willi Syndrome community and shareholders. We look forward to catching you catching up with you all in the coming weeks. Goodbye for now.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.