Neurocrine Biosciences (NBIX) Earnings Call Transcript & Summary

Well, let's kick things off. This is David Amsellem from the Piper Sandler biopharma research team. We're delighted to have Neurocrine here. We have Matt Abernethy, CFO. We have Eric Benevich, Chief Commercial Officer. We have Todd Tushla, director of Investor Relations. Thanks, gentlemen, for joining us. So it's been quite a year. So I would love to turn it over to Matt for just a few opening remarks on, I guess, a reflection on what's been to say the least, an interesting year, both for Neurocrine and for the biotech space, we're at large.

Well, I like how you said delighted to have us here. I think this year, anybody who thinks it's been a delight, I think, is fooling themselves. I was talking to investor before this, and they were reflecting on we're sitting here in a really good space -- spot from a stock performance, but getting here, man, it's been a slog, I think, for the entire industry. So I think that there's a lot going on in the industry and in the sector. And then for us, as a company, we're actually executing quite well. I think you'd agree with that. It is early. It is 6:30 a.m. back in California. And so I thought maybe I'd share a little bit about what motivated me to get out of bed this morning and what motivates us to get out of bed every single morning. The 3 things that come top of mind and colleagues, please jump in here. Number one is the patients that were in a sector to help patients. Number two is just the fact that we work with some great people. And then number three, I love the challenge of biotech, and I'll get to all 3 of these here in a minute. If you think about the patients, you think about somebody with tardive dyskinesia, and Eric was the man who launched this medicine 8 or 9 years ago. Somebody with tardive dyskinesia is dealing with an underlying mental health condition. They have depression, they have bipolar, they have schizophrenia. They develop these movements. Their mental health may be in check, but these movements won't go away in their face or in their hands or in the trunk. And up until 2017, there were no approved medicines. So Eric and team have now taken that medicine, INGREZZA, to now being around $2.5 billion alone this year, but only 10% of patients with tardive dyskinesia are being helped with the VMAT2 inhibitors today. So significant room ahead. In addition, in December of last year, a year ago, we received approval for CRENESSITY, which is for patients with congenital adrenal hyperplasia. They have not had any approved treatment option in over 70 years with the only option for them to take it very high doses of steroids every single day of their lives. And as Eric and others like to say, steroids, we all know, they're bad for your bones, bad for your brain and bad for your heart. And 1 year into launch, we've helped 10% of those patients. We're not satisfied with where we're at. We're going to accelerate that path to peak. On a personal level, it's just been a blessing. I think many of you guys might know, but I'll just say it just for some holiday spirit. My son has CAH. And he -- we dealt with CAH his entire life, and it's what brought me to Neurocrine 8 years ago. And 7 years after I joined, it was approved. And Ian, my son have been on that medicine for the last 12 months, and it's exceeded all of our expectations and really changed the trajectory of his life. So when I think about the slog of the year, at the same time, I have this blessing of my son being helped and aided, you know that, that can help to many more patients. So thanks for listening to that personal story. The second piece, really the people. Eric has a field sales team and the medical teams go up community mental health centers every single day, trying to help patients with tardive dyskinesia and then also going into endocrinologists offices. We have a great team that is kicking some butt in the field. We also have 1,000 people back in San Diego working on whatever the next new medicine is going to be to help patients with their neuro. And we're going to share more about what they're working on at our R&D Day here in a few weeks. And then lastly, let's talk about a challenge. I'm competitive. I've played Vision One Athletics and challenges are something that's part of biotech. Medicine sales, drugs readout in ways that you wouldn't expect. Competition pops up. And then most recently, we've been having the challenge of the IRA and implications of what Inflation Reduction Act is going to have on our company. And I had an investor she said to me 5 years ago. She said, "Matt, okay, IRA is hitting you in the face right now. Did you got punched? What are you going to do about it?" And what we did was we did what we could control, maximize the value of INGREZZA. We have to now have the second going to be blockbuster in CRENESSITY. And we've built a real company with an extensive pipeline and that challenge I think that we've met that quite well. And over the last couple of weeks, you've heard the data that's been read out from the government and then also our competitor's commentary, we feel like it can be very manageable from an INGREZZA perspective from 2027 to 2029. We have the substrate, I think, to take us beyond $20 billion in market cap. That's our aim to get out of this $10 billion to $20 billion market cap zone. We have the financial resources. We have $2 billion in cash, no debt. We will be looking at business development activities or opportunities. If the right ones pop up, we'll, of course, act. But it's not something we need to do to be successful, but we can do it if the right opportunity presents itself. So that's a bit of a long-winded way of giving a recap on where we're at as a company. But what's your view, David, in terms of how the year has shaken out for Neurocrine and for the industry at large?

I would say to paraphrase, a great writer. It was the best of times, it was the worst of times. And I think it right now, looks like more of the former than the latter. And let's hope that continues into '26.

You touched on a number of questions I was going to ask. But first, thank you very much for sharing your story about your son and I'm thrilled for him. That's awesome, for lack of a better term, that is awesome. So...

It really does put in perspective, we work to help patients. And when you can personalize it, and I think a lot of the diseases we work with even I'm sure we'll talk about the pipeline, treating -- working on new medicines for patients with major depressive disorder, for example, those with [indiscernible] I think people in this room might struggle with it. You also have definitely family members struggling with it. It is very rewarding to think about the patient on the other end of all of our activities.

So I wanted to pick your brain, Matt, on M&A. And we were talking in the hallway about M&A activity picking up. And you get asked the question all the time. And it's an appropriate one, particularly as the cash balance continues to grow. I guess my question here is you've built a pretty large commercial infrastructure in neuropsychiatry. And one question that I always think about is the extent to which you can leverage that, not just with your internal pipeline, but externally. So I guess my question here is, how do you think about that? And how are you thinking about what I like to call, larger scale M&A beyond -- well beyond what you've done historically?

Yes. I mean, Sky is somewhat the limit. I guess it's a blank canvas for us in terms of how we use our balance sheet, how we use our cash position. But for right now, we're very focused on maximizing the opportunity of INGREZZA as well as CRENESSITY. I would look at this man on my left, what he's created in our commercial infrastructure, you're in my left, Eric Benevich. The commercial infrastructure that he's created, our ability to engage with psychiatrists, long-term care facilities, neuro and then now with Endo. We do have a significant strategic asset that, as he would say, keep feeding me, keep feeding me with more or new products. And so I do think when we look and screen the canvas or screen the universe for potential targets, that's really where we're focused on what medicines over the next 5 years could come into the commercial infrastructure that Eric and team could maximize. So there aren't a lot of assets out there. And then -- and so you know that your strategy can't solely rely on business development. You have to have a combination of both business development and internal innovation. But of course, as we look externally, it's really thinking about a commercial product that can come to market over the next 3 to 5 years as we navigate both the IRA window, and then also the readout of our Phase III trials in major depressive disorder and schizophrenia in 2027, I think we're going to be set up for quite the transformation over the next handful of years.

And certainly, to the extent that direclidine and osavampator bear fruit, you have a readily leverageable sales organization for that. I guess my question was more on external candidates, and I know that's a harder question to answer.

Well, in psych, it is much more difficult to think about those assets outside, but you can see from an M&A prospective, you see the likes of intracellular being acquired. You had Cerevel acquired, Karuna acquired on the muscarinic categories. And so I think that for us, based upon the results that we saw in our Phase II trial and also the muscarinic portfolio that we have, we feel like we're pretty heavily loaded up in sight from an internal development perspective and likely not the category that we'd be looking at externally to potentially in-license we would be more focused in the neuroendocrine and adjacent spaces.

Got it. So you alluded to IRA. And obviously, we got more clarity from your competitor. So a lot of different pushes and pulls here. I mean you've talked to commercial contracting earlier this year. Now we have clarity on what your competitor pricing will be on Part D in '27. But I wanted to get your thoughts on how are you thinking about what it all means for INGREZZA, both nearer term, you've contracted on -- with commercial plans. So what does that mean for directionality of pricing, both near term '26? And as you think to '27, '28 and '29 and as you think about your own negotiation and being -- having the benefit of the small biotech exemption?

Yes. So I think in a nutshell, excuse me, we're -- we appreciate that the market doesn't like uncertainty and that now that the second wave of negotiated products, the government announced the MFE prices last week that essentially has lifted a little bit of the fog in terms of what the -- at least the competitive dynamics will be in '27 and beyond in the VMAT2 category. But I do think that in general, the IRA doesn't change our strategy. And what I mean by that is we're going to continue to help as many patients as possible that have either tardive dyskinesia or HD chorea. As Matt said earlier, only about 10% of people today living with TD are being treated with a VMAT2 inhibitor. And INGREZZA has exclusivity out to 2038. So about 13 more years. So there's a long runway and a lot of headroom in terms of continuing to build the market. Today, we estimate about 10% of people living with TD are currently being treated, and we ask ourselves the question, how do we get to 15% treatment rate. How do we get to 20% or even 30% treatment rate. And so we're going to continue to drive awareness, recognition, diagnosis and treatment with INGREZZA. Specifically, you asked about contracting. So I can say we're very comfortable with the position that we're in right now from a formulary coverage perspective, over 70% of the lives in Medicare, INGREZZA is on formulary. And in Medicaid, in commercial, it's over 90% coverage. So we have locked in those contracts for 2026. So you can expect that the coverage situation next year will be very similar to what it is today. And we're starting the process now of engaging in conversations with the Medicare plans for 2027. And now that the MFP price for deuterated tetrabenazine has been announced, I think that -- it will remove some of the uncertainty around what those negotiations are going to be like. Ultimately, though, as Matt said, we feel like it's a very manageable situation. And certainly, we expect to maintain coverage in '27 and '28 to be able to continue to grow our business. And in '27, we'll be entering into negotiations ourselves for 2029 or MFP implementation in 2029. And we expect to be able to negotiate with CMS, an MFP price that reflects the superior value of INGREZZA.

So you made, Eric, some interesting comments on the third quarter call about the per-milligram pricing for your competitors. So in other words, certain strengths of your competitor being more expensive and that payers are both catching on to that. I'm wondering what that means for INGREZZA in terms of access relative to your competition?

Yes. I think that, that is a part of our competitor's strategy to push doses higher. They do have a per-milligram pricing structure, the higher the dose, the more revenue per patient. And certainly, it's something that we point out to payers. You may note that some of the big health plans and PBMs, for example, are covering only the BID formulation of deuterated tetrabenazine and not the newer, more expensive XR formulation. So I do think it is one of the factors that allowed us to significantly increase our formulary coverage this year in 2025. We had a couple of plans that came to us earlier in the year and said they'd like to add us for '26 and if possible, even pull that forward into 2025 because they could see that the costs were escalating for the competitor. And certainly, one of the things that they value about INGREZZA besides the clinical profile is the cost certainty. We have relatively flat pricing. And so regardless of what dose, and by the way, all the -- all 3 doses are clinically effective doses. So no matter what dose the patient is on, like the health plan or the PBM understands that they're not going to experience dose creep and cost escalation.

But in general, our contracting strategy is to ensure that patients have access. And then also, we believe in patient choice and clinician choice. So as we're engaging with these plans, it's not in a spirit of trying to become a preferred physician product. We truly want just parity, and that's what we've had, and we'll allow the plans and the clinicians to pick which medicine works best. And I think that our team has done a tremendous job between access as well as our expanded sales force. We've seen this year the share of new-to-brand patients shift in a positive way towards INGREZZA, which is ultimately the lifeblood of what we're hoping to achieve in maximizing the value of INGREZZA.

How would you contextualize the latest sales force expansion? I guess what I'm trying to better understand is the audience. I mean you've been calling on psychiatrists but is this latest expansion with an eye towards APNs, PAs, nurse practitioners or even primary care practitioners. I mean, just help us understand what you're trying -- who you're trying to reach with the latest expansion?

Yes. And just taking a step back on our Q3 earnings call, we announced that we'll be expanding our -- actually both our INGREZZA and CRENESSITY teams in 2026. We expect those expansions to be completed and implemented by early Q2. So we're in the process right now of executing on that plan. So what's the rationale for it? Essentially, it's investing in growth and it's really investing in the momentum that we're seeing in the marketplace. The VMAT2 category, we're talking about INGREZZA here. The VMAT2 category is 8 years in for both ourselves and for our competitors from Teva. And we're seeing double-digit growth -- volume growth in the VMAT2 category, which is amazing for a category that's 8 years in. And INGREZZA is growing faster than the VMAT2 category. We implemented an expansion in 2024, and we saw pretty quickly that it was paying off. In the meantime, the number of VMAT2 writers continues to grow. And I mentioned on the Q3 earnings call, that today, the number -- the size of the VMAT2 base of writers is 30% larger than it was just 2 years ago at the same time. So this is a rapidly expanding category and a rapidly expanding base of prescribers. So you hit the nail on the head when you said a lot of them, the majority of them are advanced practice providers. So we're talking about psychiatric nurse practitioners and physician associates. They really are filling the gap in behavioral health, and they're providing today the majority of behavioral health services. And for both ourselves and for our competitors, advanced practice providers are now the largest group of prescribers of VMAT2. So we're going to continue to make the investments where we see that it's going to make sense. But this is, once again, investing in growth and investing in momentum.

So let's switch gears to CRENESSITY in the few minutes we have left. I mean there's lots to touch on. But in terms of CRENESSITY, obviously, a strong early ramp. But one thing I did notice and wasn't lost on anyone is that patient enrollment forms were down sequentially in 3Q versus 2Q. So just help us contextualize that and -- help us understand if you think there's any pent-up demand effect. I mean, certainly, when you have a drug where nothing has been approved historically and enters the market, there's going to some pent-up demand. So how should we think about that?

Yes. Well, first of all, I'll say that we're really very pleased with the pace of the launch of CRENESSITY. This is the first year. We got approved late in 2024, effectively launched right around the turn of the year. And so as Matt said, this is a learning launch. Congenital adrenal hyperplasia, there's never been a specific approved medicine for it. Standard of care for 70-plus years has been glucocorticoids. And certainly, as we go, I think we're going to learn a lot about the dynamics of this CAH category. I think there was a little bit maybe of, I wouldn't call it pent-up demand, but certainly, there were patients and there were providers that were aware of CRENESSITY at the time that was approved and were hand raisers is what I call them, people that were excited to get started on therapy. And certainly, the pace of enrollment and new patient starts exceeded our early expectations. There has been a little bit of a lower rate of weekly adds in Q3. So I would say it's not that different really than Q2, and it's been very steady and consistent from week to week. So not a lot of volatility or variability. We did wind down the open-label extension study in adults in Q2. And so the adults that were on study drug, transitioned over onto commercial product late in Q2, so that did bump up the numbers a little bit. But other than that, we're seeing discontinued very steady and strong adoption and we're certainly very excited about the opportunity to help this patient population. Matt said, we think that we've reached now about 10% of the overall CAH population, that means that we have a long way to go in terms of helping the majority of people with CAH get better control of their disease and also reduce their exposure to glucocorticoids.

So I think -- a couple of comments because you get -- we get questions about the nuances of quarter-to-quarter patient enrollments and I would just say, it's the drug working. I think the feedback that we get, and I would be curious if you hear this from your KOL checks, but the drug seems to work. Is it safe? Yes. I think the feedback that we've gotten and I think that KOL said, "Yes, it's safe." So ultimately, if it benefits patient and it's safe and patients are staying on therapy and that's the piece that is compounding. The persistency is quite high, very consistent with what we saw in the open-label extension rollover over 90% of patients stayed on therapy. So you have a great drug that's helping patients and the patients are staying on therapy. This is going to be a significant launch.

And everything you're saying is dovetailing with what we are hearing from KOL checks. A longer-term question though, is the competitive landscape. I mean I'm sure you get asked about Crinetics and atumelnant, their ACTH antagonist. Big picture, how do you think about a space where it's not just CRENESSITY is the only game in town?

It's a big enough market to have multiple products, but how I would just frame it, show me a drug that works for patients that's very safe that's been displaced. You really would have to work hard to think about a better drug that would cause you to shift off of CRENESSITY. So we operate in a way to maximize and accelerate the path to peak. And we'll deal with competition over the long run. But we really like the results that we're seeing so far.

Okay. Well, we're out of time. Looking forward -- very much looking forward to your R&D day in San Diego on the 16th. And so we'll certainly have a lot of opportunity to ask about the psychiatry pipeline, but we'll leave it here. Thanks, Matt. Thanks, Eric, and thanks, Todd.

That and the R&D transformation that's been underway at Neurocrine for the past 5 or 6 years. So we're going to be happy to host you.

Terrific. Looking forward to it. Thanks, everyone.

Thank you.