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

Yes. I'll start off by saying that we've been really pleased and maybe delighted with the launch of CRENESSITY. And as you noted, externally, I think the expectations were more modest in terms of what the potential was for this medication. But we've always believed it can be a blockbuster, and we said that upfront at the beginning of the launch. And now we're on a trajectory to deliver on that. There's 3 things that have been really favorable with this launch. One is the rate of adoption. And as we saw, there was sort of a bolus of patients that got on treatment in the first couple of quarters. So we saw that in last spring with CRENESSITY. But then ever since then, the rate of new patient adds has been very steady and consistent from week to month-to-month and now quarter-to-quarter. So we see this as a very -- I don't want to say predictable, but reliable trend in terms of new patient starts. The other thing that's been really favorable has been the persistency. And it's one thing to see what the persistency looks like in clinical trials. It's another thing in the real world. In clinical trials, what we saw in the open-label extension was -- well, first of all, in the double-blind studies, over 95% of patients completed enrolled over into the open-label study. And even at a year, it was about 90% that were still on treatment. And then we just recently rolled out 2-year data. And once again, about 90% of those people were still on drug at the end of the second year. The real-world persistency isn't quite as high as what we saw in the clinical trials, but not that far off. And so we feel really good. This is an outlier to the upside with CRENESSITY. So that's been favorable. And then the third thing, which I think is an important contributor here is the reimbursement. So this is a rare disease drug. It's nonformulary on most plans. It's mostly a commercial and Medicaid population. But we haven't had any real challenges in terms of getting claims approved. In fact, not only have we had a really high claims approval rate, but it's been faster than what we had expected. And as a result, there's been a lower-than-expected utilization of our free trial program. So ultimately, we're seeing steady adoption. The claims are getting approved and they're getting approved pretty quickly. And then once patients get on treatment, they're able to see their androgens come down and/or start to taper down their glucocorticoids, and we're seeing really strong persistency as a result. And so there's still a lot of headroom in this particular therapeutic area. During the last earnings call, we disclosed that about 15% of the prevalent population was now on treatment. But that means the majority of people are yet untreated. And so we feel good about the progress we've made so far, but we recognize that there's a lot of work to be done to continue to build our CRENESSITY franchise.

Well, I'll tell you, I'm not surprised that Eric and team could deliver on this. They've done a great job. And I think when you take a step back and you say, why is this successful and why is it going to continue to be successful, it's a market that the only option for these patients was to take high-dose steroids for 70 years. So there is significant need. The second piece, as Eric said, you can see a dramatic reduction in androgens right after you start taking therapy within the first month. So you can see the efficacy, you can see the stabilization. And then third is the safety aspect. This is primarily a medicine that's prescribed or the majority right now, a little over 50% are pediatrics. And safety is absolutely critical to getting them to try the medicine and then ultimately to stay on the medicine. So those attributes lend itself for us to believe we're going to continue to chug away and drive meaningful revenue growth over the next several years.

And you had asked about whether we were a little bit more guarded early on. I think it helps to have more data, right? And certainly, like we saw with INGREZZA in TD, this is what I call a learning launch. We're building a new category from scratch. And you have certain assumptions that you have going into a launch like this. Many of the assumptions we were on target, and we made good choices, but you learn as you go. And the more runway we have, the more confidence we have in terms of the direction that things are going to continue to go with this franchise. So I feel very bullish about it.

Underpromising and overdelivering makes product life easier.

I'm just trying to manage upwards.

That takes a lot of work.

For sure. So in terms of paint the picture of the market for me a little bit, in terms of the sales force and all, this is not an undiagnosed patient population for the most part as well? Or is it? Or is there a promotional effort that like, let's say, 6 months down the line, you would realize that you can probably -- you need more resources or something like that? Is there anything like that here?

Yes. I'll caveat it by saying we just completed a small sales force expansion. Small, meaning you can count them on 2 hands, kind of number of FTEs. But ultimately, I wouldn't characterize it as an undiagnosed condition or an underdiagnosed condition. I would characterize it as an undercoded or miscoded population. The reason I say that is classic CAH is the more severe form versus non-classic CAH. And for every classic patient, there's 4 or 5 nonclassic patients. Unfortunately, there is no modifier to the ICD-10 code. So there is a general code for CAH. And if we just focused our patient finding efforts on those practices that have CAH, one or more of those patients in their practice, most of the time, we'd be encountering non-classic patients. And so as Matt said, we try and be smart and efficient in terms of where we focus our efforts. So in addition to having a small sales team, and when I say small, it's only about 50 or so people that are out there calling on these practices in endocrinology. We've put effort behind patient finding using different data sets. So claims data, EMR data, even lab data to help us find people that look like individuals that are already on treatment. So that's been an important part of our launch success. And that patient finding capability gets better over time, the more data that we sort of feed into it. So ultimately, we feel like this is a category that has a lot of upside potential to it. But it's still early days yet. If this was a child, I'd say it's like a toddler, right? We're 1.5 years into this launch. We're learning a lot as we go. I don't expect that we're going to have to make any -- we just completed a sales force expansion. I don't see that in the cards anytime soon. But what I do see is continued investment in our patient finding capability and making us more efficient over time. The last thing I'll say is that there's really 3 segments to our business right now or 3 focus areas on the HCP side. So there's a small number of centers of excellence. There's less than 20 in the U.S. These are typically -- these are clinics that are typically affiliated with teaching hospitals, some of which are accredited by the CARES Foundation, which is the patient advocacy group in CAH. Secondly, and importantly -- so we think that the centers of excellence account for maybe 15% of the patient potential. Another important segment for us is pediatric endocrinologists, and there's about 1,100 of them in the U.S. And typically, they have more experience managing these patients with classic CAH. They're more likely to have patients in their practice. So they're a really important segment for us. Pediatric population, we estimate at about 1/3 of the overall classic CAH population, but we do expect it's going to account for a majority of our business, and it already is accounting for more than half. And then the third segment is the largest numerically, which is the adult outpatient endocrinologists. That's where things get a little thin in terms of patient count. So 2/3 of the patients are adults. But if they see an endocrinologist, that endocrinologist might only have 1 or 2 patients, if any, right? So ultimately, for us to be successful in the long run, we have to be able to reach, educate and activate patients that are in the community, some of whom don't even have an endocrinologist. So we'll continue to evolve over time in terms of our approach. But so far, it's been very heartening to see the effect that CRENESSITY is having on these patients. And certainly, I think our business results speak volumes.

Got it. Very, very helpful. One last question on CRENESSITY. So how do you think about the competition here? Like you talked about safety here. The competition is -- like the competitor is sitting upstream of CRENESSITY here a little bit. So you have first-mover advantage. They are coming with their drug. I mean how do you think about the competitive landscape 3, 4 years down the line?

Yes, I'll chime in and then maybe you want to add. I'll start off by saying I really like our position, right? We have a substantial head start years, in fact. And I mentioned earlier that we, just this spring and summer, rolled out very impressive 2-year long-term outcomes data. And these data, I think, were very well received in the physician community because it's delivering on the promise of really what they want to see for a treatment for these classic CAH patients. So if you think about the old treatment paradigm of using supraphysiologic glucocorticoids to suppress the overproduction of ACTH and then downstream androgens, you ended up being able to control androgen excess, but at the expense of exposure to high-dose steroids, which we understand has a lot of negative effects on the brain and the heart and the bones. Now you bring in CRENESSITY, which is a CRF1 antagonist and really what it's doing is blocking the overproduction of ACTH and therefore, the downstream overproduction of 17-OHP and [indiscernible] and other precursors. So ultimately, what CRENESSITY does is to restore balance. It's allowing the dysregulation of that HPA axis to get reregulated, reduce the amount of ACTH and then therefore, the overproduction of the androgens. And as a result, now we're seeing patients being able to bring down their high-dose steroids, right? So you think about the mechanism of CRENESSITY, it's an upstream mechanism versus you're referring to atumelnant, which is an investigational medicine that doesn't reduce the amount of ACTH, it blocks it at the adrenal gland. So it's unknown, I think, what ultimately the clinical profile is going to look like for that investigational medicine. It's very early days yet. There's not a lot of patients that have been treated with it. And certainly, we don't know what the consequences might be of sustained elevated and uncontrolled overproduction of ACTH because that medicine doesn't reduce ACTH, it simply blocks it at the adrenal. So I think data will tell the story. And certainly, we feel very good about the long-term safety data that we've generated, both in adults and in pediatric patients and having a several year head start ability to penetrate the patient population to get people on effective treatment. We know from other categories that if patients are being well controlled on their current regimen, if they're tolerating it, it's really hard to move them off and displace them. So like I said at the beginning, I feel really good about where we are, but we'll continue to execute on our plan, and we'll see how things shake out in terms of data over time.

Yes. I would just say people should be cautious in trying to compare small numbers of patients, different levels of baseline. There's nothing that we've seen in their data that would make us feel like CRENESSITY would be displaced.

Got it. Moving to VYKAT. Thank you for all the details on CRENESSITY. So there has been -- so this deal has been a little bit controversial in terms of people are still trying to understand what is the peak sales, how it could look like and there are questions around persistency and all that. Can you tell us like what people are missing, which you saw in this asset and you think that this asset could be a great deal?

Yes. From a strategic perspective, it fits in quite nicely with the rare endocrine franchise. It also adds a durable growth asset, and it allows us scale, and it's already a profitable product even at a $400 million run rate. So for us, when we did the acquisition, we were eyes wide open in terms of some of the challenges that may come with it and some of the things that we could do to overall enhance the offering of VYKAT XR. And so a lot of what we're working on now or identifying or finding is very consistent with what we would have thought going through with the acquisition. We knew the most important aspect is, is there going to be steady new patients coming on to therapy? Is there a benefit? And the good thing is the last 2 quarters, there have been steady new patients coming on to therapy, and this is a devastating disease. The second piece is you could see in the data -- as we looked at discontinuation rates, you could see in the data from those who started early in launch in about month 6 to 9 after month 9, you had about a 20% to 25% discontinuation rate. And so that's something that we have indicated to the market that, that should be the base level expectation on discontinuation. So for us, as we think about executing, executing and helping identify the right patients, executing and helping ensure there's appropriate monitoring through the titration process to ensure that as many patients with PWS who are appropriate to get treated ultimately get treated. So we have had a couple of straight quarters of flattening of sales. We had $94 million this past quarter. We do know that we're working through the discontinuation from the bolus of patients. So there's a bit of a tail there. And once we're through that tail, we feel very confident that the commercial initiatives that we have underway are going to lead to sequential growth the rest of this year. So my comment is let focus on us executing, and our numbers are ultimately going to speak for themselves in terms of the deal and the value there. And we see this as a tremendous need for these patients fit strategically for Neurocrine, and we do have a lot of enthusiasm within this product group.

Thank you very much. Todd, what are we going to learn at the event you are hosting at the end of the year?

Yes. Sure. Thanks for the plug there. So in early December, we will be hosting an R&D day that will focus on our neurology and immunology strategies. Neurology, I think, is relatively well understood, some of the pipeline assets we have, less so on the immunology front. So we're looking forward to sharing some of that information with the investment community then.

Got it. So Matt, the question for you is, based on all that, do you think you have enough pipeline to work through? Or do you think there is still more -- like you could deploy more cash?

Well, first of all, I feel fortunate, like I said at the beginning, that we have 3 commercial products that are generating significant cash flow. And those cash flows allow us to reinvest back into the pipeline at a rate of 30% to 35%. That's where we believe that is the right level of reinvestment to lead to sort of a flywheel of future new products. We've been fortunate to have quality pipeline, and we have a lot that investors haven't seen, which we'll highlight at R&D Day. And so we do have a lot to invest in internally. So that is our second priority behind commercial and driving revenue growth. And then third, we do have a clean balance sheet. We do have capacity to do a business development transaction. But sitting here right now, we've got a lot in our hands right now to execute, help a lot of patients get to some Phase III trial data. So we're always looking. But right now, very much focused on executing what we have.

On that high note, thank you very much for joining us and all the best.

Thank you.

Thank you.