Neurocrine Biosciences, Inc. ($NBIX)

Analysts at the bank. It's my pleasure to have with me our next presenting company, Neurocrine. Sitting up here on stage, there are a couple of familiar faces, Matt Abernethy, who is, of course, Chief Financial Officer; as well as Todd Tushla, your job again, sir.

I'm still -- I'm the current Vice President of Investor Relations. .

Okay. Just wanted to clarify .

You did tell me this new title from you this morning is his favorite person. Can you confirm that?

We'll put that on your card. So maybe, Matt, for a few people who aren't as familiar with the company, -- can you just give us a quick overview of Neurocrine, and then we can go into some of the more recent updates that have been happening?

Sure. We are going to be making forward-looking statements, as you can imagine. So check out the way this SEC filing I'm sure you're excited about that update. But I was reflecting coming out here to Zen 8.5 years ago, I joined Neurocrine. In our first conversation, I remember it because you've got a good perspective on things. And if I recall, the conversation was all around elagolix and a little bit around INGREZZA -- and so when you fast forward over the last 8.5 years now, we sit here in a tremendous position. And for me personally, I feel like it's quite a fortunate position to be in as a company. We -- there's really 3 attributes that every company is striving for especially when you're in mid-cap, how do you get from mid-cap to higher mid-cap to large cap, you're really looking at your commercial franchise, first and foremost, you have durable revenue that's going to continue to grow and deliver. We have INGREZZA that was actually approved when we first talked, I think in 2017, it's been on the market for quite some time now. It's for an involuntary movement disorder caused by prolonged exposure to antipsychotics. And unfortunately, the ashes team movements, face movements, truck movements and up until 2017, there were no available treatment options, as you know. Can we continue to surprise to the upside guidance.

Very recently.

Yes. Yes. Guidance this year is $2.7 million to $2.8 million. LOE is 2038, and we still have a lot of opportunity left there. The second major product that we have is actually Crinetity, which is approved in December of 2024, and that was for classic congenital adrenal hyperplasia. It was the first medicine in over 70 years approved for CAH patients and the launch has gone great so far and continue like a surprise to the upside. And I think it's a reflection of just a great unmet need in the marketplace as well as a drug that is working and working well. We have a little bit over 10% patients on therapy within the first 5 quarters. And last -- in Q1, we had over $150 million in sales -- and then the third product, which is going to be new for Neurocrine is called Likert XR. We have an announced acquisition of Solano Therapeutics. I'm not going to be able to speak much about it today because it is in its tender offer period. But when you think about a medicine that was approved last April, it's a rare endocrine product similar to Kinect and they've had a great quarter launch, $95 million of sales in Q1 and so when you aggregate all 3 of these products together, get to over $900 million sales in Q1 alone. So the scale of the company is growing and we would expect it to continue to grow over the future. On the pipeline side, we have close on clinical stage pipeline programs at this point. And I know people always ask me to choose my favorite kids -- and I typically do say he's my favorite -- the 2 lead programs are the Phase III program. One is Osama, a major depressive disorder that reached out in 2027. And then also direct living, which is a muscarinic agonist that's being studied in schizophrenia that will also read out in 2027 and 2028. Of those 2, my favorite is Ampio for a variety of reasons, which we can get into a device later. And then on the early stage, we actually just announced entering the clinic with 2118 our CRF2 agonist. That's being studied in obesity. And that data in healthy obese people will be read out in late 2027 as well. So -- and then the last piece, the third piece you got your commercial, you got your pipeline. And then last piece is financial. We've been able to drive significant top line revenue profitability is slowing quite well right now. We had $200 million of non-GAAP net income in the quarter, and we would continue to expect that to grow, while at the same time prioritizing investment in R&D at a rate of 38% to 35%. So that's a mouthful for the company, but we have a lot going on, a lot to be proud of. And as you said, Q1 looks quite good.

Okay. So nobody can see us because we don't have video, but you have been smiling the whole time. So I'm going to take that as a sign that you're pleased with the way things are going so far this year. Let's just do 1 question on Folino. I know you're limited on what you can say, but how does this sort of fit in sort of what the other drug launches that you guys are doing? Obviously, you've demonstrated the ability to have outsized launches and you're taking over someone else's launch here. But what was it, I guess, that you thought would be particularly synergistic?

Well, these are both products between Vicat XR and consider both rare and recurrent product. So as we look in our portfolio and pipeline over the future, we would expect to have a full business around the segment. And there's a lot of valuable synergies from the sales side, not necessarily focused on the cost side right now. But to be able to go into these clinicians and be able to share about cronesaty and also then have another sales force being able to care about Bicar -- Likert XR. It was something that was a great strategic fit for us. The team is quite motivated. They care a lot about the order willi syndrome patients, a lot of talented people. So we're looking forward to getting this closed, and we'll be able to provide more color once we get that behind us. But it is going to be a durable asset for us that goes into the 2040 from an IT perspective, and it's a great strategic set.

And it's that because Eric doesn't have enough?

Eric is very good at developing markets in rare disease. He would say that the #1 most difficult market we've ever seen or underdeveloped market is actually part of dyskinesia. Because when you think about nobody being diagnosed in that marketplace, it's something that has taken a lot of effort to get from diagnosis all the way to a prescription being written. The good thing about the Prader-Willi syndrome is that there is a specific ICD code that allows you to know who the patients are, where they are at. That differs from cronesity and that there isn't a specific classic CAH code. So I think there's some good things that come from a medicine like this for Vicat. But both Vicat, ED and cronesity, there's no approved there was no approved other medications for these patients prior to the launch of these 3 medicines. So it's going to be quite special on our hands.

Okay. Great. So on the topic of INGREZZA, what quarter of the launch is it now?

For 9 years in. .

9 years in.

9 years in.

So 9 years in, you still manage beat expectations on sales. So can you talk to us about where you think the unmet demand is and how we should generally think about what to expect on not just for the rest of the year, but for the couple -- next couple of years?

Yes. I would just give another kudos to our sales team and our medical team to be able to get record numbers of new patients in the first quarter when the first quarter is typically challenged is a testament to the work that they did, but it's also a reflection of how many people with tardive dyskinesia continues to need help. It's debilitating to take an antipsychotic for your mental health get your mental health and check and then ultimately develop a movement in that movement, even if you remove the antipsychotic, it still stays there. So the big basic blocking and tackling that we have underway, it's going to sound boring because it's the exact same things we've been doing for quite some period of time. It's really ensuring that HCP is aware and thinking about tardive dyskinesia [indiscernible] level as we look at that.

So maybe let's move on to Konecny, -- so also had an outsized launch. And can you just talk about the dynamics there? -- obviously, a much new romance INGREZZA it so a more, I guess, technically smaller opportunities for disease. So what are the differences in how your commercial team is looking into gaining share there versus what needed to be done for INGREZZA?

Yes. There's really 3 things that it takes to have a successful drug launch. One is there has to be a high unmet need -- the second is the drug actually has to work. And then the third, there has to be a level of tolerability that allows them to stay on therapy, and we're checking the box on all 3. There's never been an improved medicine outside of high-dose hydrocortisone for these patients with classic CA until cranes was approved. And I think what we can see, both in our clinical data as well as our open-label extension data that we continue to put out the benefit is significant to these patients. The second piece is, I think, anecdotally, we hear feedback that the medicine is working at least as good as what was in the clinical trial, if not better, in Miami total experience with my own son on Conecta is much better than what was shown in the clinical trials. And so -- it's been quite a benefit for him and my family. And then the third piece is that the tolerability side of the equation. It seems that the patients are staying on therapy. And right now, from a persistency and compliance perspective as mirrors or looks very similar to what we saw in the open-label extension study, which is over 80%. Yes.

So we had done a survey before the quarter as we have indicated everything that you just mentioned. As you had indicated, you've now moved away from providing Lestari numbers. intra-quarter, how reliable though is to be looking at the vendors that provide scripts.

Well, first of all, I would caution when you have very low numbers, it can be skewed a lot. And I think many weeks where I would see those numbers being quoted externally, it wouldn't align with what we were seeing internally. So I don't know much about the data sources, but I also add people talking about patients not being reauthorized on therapy and getting insurance claim data. We've not seen anything like that. So I would caution you on over relines on some of the third-party data. Maybe at some point, it will get more accurate. But right now, it just -- it wouldn't be something that I would recommend. Now as it relates to Q1 performance, last year, as we went from Q2 to Q3 to Q4, you had the steady step down of a number of enrollments, which were quite significant, but they were trends down from 600 to 500 to 400. And I think there is the concern that we've tapped out the market everybody who wanted it at the KOL got it, and now it's going to be quite low. And what we saw from Q4 to Q1 is very consistent enrollment form -- from what we saw in Q4. And I think as those new patients continue to roll on medicine and by and large, many of the patients are staying on therapy. There's a compounding benefit that we would expect to continue.

And just as a reminder, there isn't the same seasonality for Krneta service for IRSA rate for 1Q?

That's right. There is on the gross to net side, an element where the commercial patients have their co-pay resets and then we cover that. But in terms of reauthorization because 70% of these patients are commercial, they go through their reauthorization that more mirrored to how long their plan had approved them to be able to continue to get clinecity. Typically, we see it a 6-month initial cycle and then at the 12-month approval thereafter. And we've not seen anything that would lend itself to thinking that reimbursement would become more challenging. That's been 1 of the upsides in the early stages of launches that we've had over 80% of our TRxs are actually reimbursed RX. And it's a testament to our specialty pharmacy cancer. They do a great job with this. And then also our field payer team and I think there's also an awareness of the impact of CAH and high-dose steroids on patients that caused the plans to want to cover it.

What does consensus sales peak?

It's growing every quarter.

It's probably now 1.3 million, 1.4 million of code.

And so how does that kind of compare to the market data research that you guys have done?

We've clearly said that this could be a lobster medicine. And I think that it sees itself up given the price point. if you do get to the range of rare disease launches, if you look at what could see penetration be for a medicine that's chronic medicine that treating more or less of symptoms or controlling the underlying disease itself. You see a range of 30% to 50% overall adoption within the marketplace. So I think if we ever get into that level of the code of 30% to 50%, I think that you can see your way to some fairly large numbers that you're referring to. And I think that is really up to us and the clinician and community to continue to help as many C patients possible. you tack on at the patent goes into the -- so you're looking at the commercial base of business that we have or we'll soon have this got a durable commercial revenue stream.

Yes. So I think our first peak sales number for INGREZZA has been like $1 billion and some to that was too high. So -- it is a bit of a tradition that people?

INGREZZA still trying to find it peak.

Yes. So on the point of like having a long runway, how do you see the competitive landscape evolving in the next several years? .

Well, I do think, going back to the runway piece, the path to peak is much quicker in a rare disease medicine like this as compared to -- we're still 9 years in for INGREZZA. I think it's about a 5-year period of time. So you think about the progress that we can make between the time we launch to that 5-year mark relative to competition, I think we're going to have a very dominant position in the marketplace. So as we look at any competition is going to have to cross a very high bar to get patients to switch therapy, let alone and disrupt the standard of care. We, of course, keep an eye on competition. But when you have a medicine that's working, a medicine that space and data that supports your claims that are going to be multiple years, multiple patient lives ahead of competition. We like that position.

And it's setting a high bar, it's not just for competition, but also for our own internally developed molecules that we're trying to take the next generation like 14.35 as the name of the product. So codes across efficacy stand tolerability has given us something to go forward, but it's not going to be easy to beat it.

Okay. so let's talk about other aspects of the pipeline. So 2027 is going to be a big year for pipeline for neuro.

Well, it's going to be the first of many data-rich years for the company the way the pipeline is set up.

Yes. So maybe let's start with recline. How are you thinking about well, remind us when that Phase III is ...

Yes. So this is the selective M4 agonist that differs from open, which Bristol has, which is a combination of a pan muscarinic agonist in a peripheral antagonist and different than emaracladine, which is a positive Altair modulator and requires endogenous acetylcholine to work. So this is a first-in-class, best-in-class approach. The Phase III studies for schizophrenia are enrolling. I was just texting semen, -- he's at a site visit, making sure that we're conducting well-run trials. There's 2 main studies in schizophrenia. The first 1 is set out to read out in 2027, the second 1 in 2028. And we also have a program in bipormania for the same drug in Phase 2. [indiscernible] Launch.

One question about FDA interactions. It does look like there's going to continue to be some staffing changes there. Does that impact any of the conversations that you're having?

No. I think actually the FDA has been quite positive and productive on all of our programs and even had some rent correspondent as of last week on our free grid ataxia program that was quite positive. So I wouldn't foresee there to be much disruption, but of course, instability string opportunity or moments of crisis. And I think that's something that all of us in the industry are getting used to at this point. So it's always disappointing to see change, but I think we're the only and we'll be able to manage through it.

Okay. And then let's maybe talk about ovampitorson, Matt, you mentioned that 1 of your favorites. So why are you excited about that one?

Well, first of all, I think the efficacy in Phase II was significant. And Osabanpator for those who aren't familiar, it's an ampotentiator and it is a mechanism that many people have tried to explore in the past, but nobody has been able to drug it without causing some untoward side effects. Thankfully, our partner, Takeda, developed this medicine tremendously well. And we're testing this in adjunctive therapy for major depressive order. And so this is a significant unmet need -- need new mechanisms beyond D2. And I think that this has an opportunity to do that. So #1, on the efficacy front, we had 2 doses, both doses work 1 milligram and 3 milligram, 1 milligram worked a little bit better than that 3 milligram. And so we, from a risk reward perspective to the lower dose. And we're taking that lower dose into -- we have 3 active Phase III trials. We have 1 randomized withdrawal study. And then we also have an open-label expansion study. So a lot going on behind those of ampatory. So why am I excited on the efficacy. Financially, it gets you to a major market quickly. And I think this major market. If you have a new mechanism and people are -- and it's safe, I think it's something that people will be trying quite quickly and with the goal of being second line. So our team is up for the challenge to get this enrolled and to get quality data, and then we'll see where we take it from there. But it could be quite transformative quick here at a time for the company within our psych franchise. So you have your rare endocrine franchise that we talked about Aldo, INGREZZA psych franchise, and that's how the company is developing right now.

You also have a leasing. So your focus on that seems to have evolved. I think initially, you started talking about metabolic disorders?

Had it coming out party in December R&D Day.

I went to obesity at Jason and now we're a full on obesity. So why does it make sense? I guess similar questions to what we have been talking about with Krones. How do you see the competitive landscape evolving there because it does seem like there's going to be a lot of options for folks. .

Yes. I think there's going to be a lot of options in terms of mechanism, in terms of administration in terms of the frequency of how often you take it. So there's going to be a lot of opportunities for others to play in this space. There is a new mechanism that we're exploring Cera II agonists -- this is obviously using the heritage that we have on the CRF pathway from when we were, I guess, born by Kevin Gorman. We were talking about Kevin earlier today. But I do think that this is a natural evolution to be able to look at the other side of the CRS. And we also hired an expert team Jud one, our Chief Scientific Officer, led large molecules at Lilly. And we also have a handful of others who are experts in some of the other obesity assets -- so I think that it makes sense because of our core capability, also the market, there are pockets of need. And this is likely something that will be combined with our own proprietary BCG over time that will give it even more potency. So our view is listicforit. Financially, it's not a big investment to get to Phase I data. And actually in Phase I data, connect form what your Phase II or Phase III data might end up looking like smartest is much more risky. And you really don't know until you get through Phase III obesity, you can get a quick read within your Phase I trial for a little amount of money, and then you can figure out strategically, where you take it from there. So I'm proud of the team and what they've been able to develop on still personally getting up the speed on the obesity space because it's so much going on. It could be a full-time job to keep up on everything. But we do like the exploration of this pathway, and I personally like to know we're going to have data next year that will tell us if there is there there.

Okay. And then last question, any people were waiting for years and years for you guys to decide what you were going to buy. And so now you've bought fully now we're buying Selena. What is your thought about business development in the nearer term? Now that this is going to be integrated?

Well, this is 1 that we can handle financially with our cash on hand and it is also EBITDA accretive immediately and non-GAAP EPS accretive immediately. So from a financial position, you could practically still do some M&A. But for us, our focus is going to be on integrating that, integrating it very well, reestablishing our cat position. And then if the right acquisition is out there, we'll, of course, look carefully at it. But when you think about INGREZZA, finacity, Vicat, picoampator, directing obesity. We have a lot on our plate right now, and it's not a necessity that we do anything. But I personally so thankful we're able to come to agreement with no provides a great foundation combined with INGREZZA and conicity for us to grow off of for many years ahead.

Okay. With that, we're out of time. Thanks, guys. It from San Diego, and thanks, everybody, for joining.

Thank you.