Neurocrine Biosciences, Inc. (NBIX) on Q2 2021 Results - Earnings Call Transcript

Operator: Good day, everyone, and welcome to today’s Neurocrine Biosciences Reports Second Quarter Results. At this time, all participants are in a listen-only mode. Later, you’ll have the opportunity to ask questions during the question-and-answer session. Please note, this call may be recorded. And I will be standing by, should you need any assistance. It is now my pleasure to turn the conference over to your Vice President of Investor Relations, Todd Tushla. Please go ahead. Todd Tushla: Thanks, Chloe. Good afternoon, and thank you for joining us on our second quarter 2021 earnings call. On today’s call is Kevin Gorman, our Chief Executive Officer; Matt Abernethy, our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, our Chief Business Development and Strategy Officer. During today’s call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. After our prepared remarks, we will then head into question-and-answer session, where we ask you to please limit yourself to one question, so we can get to as many questions as possible. At this point, I’ll hand the call over to Kevin Gorman. Kevin Gorman: Thank you, Todd. Good afternoon, everyone. As you saw in our earnings release just a little bit ago, we had a very good second quarter with INGREZZA prescriptions bouncing back strongly from the Q1 levels. We attribute this to two main factors: A lessening of the pandemic during Q2 and the very good work of our sales, marketing and medical teams in utilizing new tools to educate and engage with health care providers. Now, we are still in an environment where greater than 50% of psychiatric -- psychiatry visits are telemedicine. But, I think as you can see, we are adapting well to this. Now, we exited Q2 strong and this bodes well for Q3. However, we do face headwinds. You are all aware I’m not telling you anything you don’t know. The pandemic has worsened in the past several weeks with the spread of the Delta variant. Now, in those pockets of the country that are less vaccinated, we are seeing clinics closing and offices are starting to restrict access to us. Also, while Q3 has -- there’s a seasonality where growth is not as strong as Q2 and Q4, we’ve said that now for four years, but we do anticipate sequential growth, acknowledging that the Delta variant adds more unpredictability versus prior years. But, I want to emphasize, the bottom line is this: In the short term, we have adapted to this new environment and are showing record prescriptions. In the long term, the fundamental opportunity to help more patients remains unchanged. Only 2 out of 10 tardive dyskinesia patients are diagnosed, and only 1 out of 10 are being treated consistent with APA guideline, that is with the VMAT2 inhibitor. We continue to invest substantial resources on INGREZZA, and the rest of the team will go into this in greater detail on this call. Switching over, I’m very pleased with the progress of our pipeline. At the beginning of the year, we set out to start 9 mid- to late-stage clinical trials this year, and we are on track to initiate all 9 by year-end. This is no small feat, considering a number of these clinical studies are in Europe, where the region continues to be seriously impacted by COVID, far more than the U.S. Crinecerfont and CAH, our precision medicine approach in various epilepsy indications and movement disorders and our psychiatry programs are all moving forward nicely. So, I’ll turn the call over to my colleagues, starting with Matt. Matt Abernethy: Thank you, Kevin. INGREZZA’s second quarter sales of $265 million with underlying demand of $269 million reflects the dedicated efforts across our commercial and medical affair team. In addition to record TRx levels, we achieved our highest quarterly NRx performance since last March, driven by increased sales force activity. As we head into the second half of the year, we expect some near-term bumpiness, keeping a close eye on both telemedicine and the impact of the Delta variant on society. Telemedicine still accounts for greater than 50% of visits in psychiatry, and we see restricted access to clinics in pockets of the country due to the recent rise in COVID cases. We do expect INGREZZA growth will continue into the third quarter and anticipate sequential growth will be near past third quarter trends of around $15 million, driven by strong commercial execution, tempered somewhat by normal seasonal dynamics. Regardless of the near-term variability in telemedicine and the pandemic, our long-term optimism remains, given the growth we’re seeing in this current environment, and we’ll continue to adapt accordingly. Turning to costs. We continue to make investments, advancing our programs in R&D, and our P&L reflects the first full quarter of investment in branded INGREZZA DTC, which we anticipate will more fully contribute to sales as we progress into 2022. Finally, with over $1.2 billion in cash, we continue to have the financial flexibility to execute our strategy. With that, I will now hand the call over to Eiry Roberts, our Chief Medical Officer. Eiry? Eiry Roberts: Thanks, Matt, and good afternoon to everyone on today’s call. I’ll keep my prepared remarks focused this afternoon on INGREZZA, valbenazine, beginning with an update on our valbenazine franchise which serves as a prototypical example of Neurocrine’s commitment to a pipeline within the program. I’m pleased to announce that our Phase 3 registrational study in Huntington’s disease, KINECT-HD, is now fully enrolled, and we remain on track to deliver top line results by year-end. Many thanks to the team at Neurocrine, our incredible partners at the Huntington Study Group and the University of Rochester, CTCC, to all the KINECT-HD investigative staff, and especially the patients and families for their collaboration and perseverance in completing enrollment, even in the face of all the challenges posed by the pandemic. For INGREZZA, our medical focus this year has remained heavily on education. In the second quarter, we presented data from several studies, focused on educating clinicians on the impact of tardive dyskinesia on patients and care partners on how to recognize and effectively assess TD through telemedicine, and further education on the differentiated pharmacology of VMAT2 inhibitors in TD. In addition, the Journal of Clinical Psychopharmacology awarded our RE-KINECT paper with the Mitchell B. Balter award in pharmacoepidemiology. We’re pleased that the editors recognize the importance of the RE-KINECT study in seeking to document the presence and impact of tardive dyskinesia by using innovative assessment techniques in real-world outpatient practice settings. Although tardive dyskinesia has been extensively studied in controlled clinical trials, there remains a pressing epidemiologic and public health need to understand the extent and burden of tardive dyskinesia experience by patients, caregivers and clinicians in routine practice. The RE-KINECT study remains the largest such study conducted to date in this field and the ongoing analysis of data from this program continues to inform our support of patients suffering with TD. Thank you to the team at Neurocrine and all our external partners who have contributed to the ongoing data generation and education from the RE-KINECT study. In addition, today, we announced we are investigating two new potential indications for valbenazine with the intent to initiate registrational studies for each indication before the end of this year. The first program in psychiatry will study valbenazine as a potential adjunctive therapy for the treatment of schizophrenia. Antipsychotic medications alone are often inadequate to address all the symptoms and functional limitations experienced by individuals with schizophrenia. In addition, about 30% of people living with schizophrenia who take antipsychotic therapy experience relapse in their psychotic symptoms, which creates a significant need for effective adjunctive medications to treat these debilitating symptoms of psychosis. The second program in neurology will study valbenazine as a potential treatment for dyskinesia due to cerebral palsy. Cerebral palsy is the most common cause of motor disability in children, affecting about 3 and 1,000 children in the U.S. Dyskinesia due to cerebral palsy presents in early childhood, but persists into adulthood and affects approximately 15% of those with cerebral palsy. There are currently no approved treatment for dyskinetic cerebral palsy. Many patients end up taking multiple medications off label with low efficacy rates and unwanted side effects. New therapies are therefore significantly needed in this patient population. So, why these indications and why now? The collective combination of valbenazine’s mechanism of action as a highly selective inhibitor of VMAT2 with a differentiated pharmacological profile, together with the extensive safety database that exists in patients with tardive dyskinesia treated with INGREZZA, coupled with positive anecdotal clinical evidence generated in the field, provide a compelling reason for investment in both of these new indications. We know you may have many questions regarding study design and other details, which we’re unable to address right now. However, we look forward to sharing more information with you, once these studies post to clinicaltrials.gov later this year. In closing, I’ll comment briefly on the remainder of our R&D portfolio. I’m proud of the team’s work in steadily expanding the Neurocrine portfolio. The team is currently supporting a portfolio of approximately 50 ongoing clinical trials, including the adult and pediatric studies of crinecerfont for the treatment of classical congenital adrenal hyperplasia. I’m also pleased with the steady progress we are making in study initiation and enrollment this year across our newer programs. Importantly, we remain on track to initiate 9 mid to late-stage studies in 2021, which will in turn lead to important data readouts over the course of 2022 and beyond. With that, I’ll turn things back to you, Kevin. Kevin Gorman: Thank you guys, and very much, Eiry and Matt. So, at this point, we’re done with our prepared remarks. And operator, I’d like to open it up for questions. Operator: And we will take our first question from Tazeen Ahmad from Bank of America. Please go ahead. Tazeen Ahmad: Okay. Good afternoon. Thanks so much for taking my question, and congratulations on a great quarter. We knew you could do it. We knew it was just a matter of time. So, as it relates to the dynamics, Kevin, can you just clarify, did you actually see more doctors going back to in-person visits in 2Q, and are you seeing, based on what you commented on about the impact of Delta, might be decreasing that, or was your ability to draw these results more based on the changes that you’d been talking about related to adopting to pitching more virtually versus in-person? If you can clarify, that would be great. Thanks. Kevin Gorman: Yes. Thanks, Tazeen. I appreciate the question. So, I’m going to put it over on Eric, other than to just say kind of quickly. As I said in the opening remarks, it continues to be the case where psychiatrists are -- about 50% of psychiatric visits are still through telemedicine, different from neurologists, the movement disorder specialists we call on. They’re virtually a 100% in-person. But, while they -- the 50% of their practices are in telemedicine, more offices opened up during Q2. And so, there was more access to other healthcare professionals than the opposite, if the psychiatrist was not available there. But, for more color on what you’ve been asking about, Eric, could you answer that? Eric Benevich: Yes. Hi, Tazeen. I think it’s a little bit of everything, what you described there. Over the course of exiting Q1 and throughout Q2, we did see that more of the practices, we’re seeing more of their patients in-person, so a bit of a shift. And of course, more of these practices were opening up and allowing access to our people. So, it’s a combination of all these things. And then, as we mentioned in the prepared remarks, more recently, we have seen with the recent surge in the coronavirus, some pockets in some areas of the country, wherever there is starting to be some new restrictions imposed, including restrictions on patients coming into clinics and restrictions on our ability to see our customers in-person. So, we’re monitoring this very carefully. But certainly, improving conditions on the ground are part of the story in terms of our performance in Q2. Todd Tushla: Chloe, let’s take the next question. Operator: We’ll move next to Phil Nadeau with The Cowen and Company. Please go ahead. Phil Nadeau: Yes. Thanks for taking my question. Let me add my congratulations on a productive quarter. This is actually kind of a follow-on to Tazeen’s question. On the last quarterly call, you mentioned that, I believe, overall volumes of psychiatrists were 70% in normal. And then, as you reiterated, this time around, telemedicine was 50% of those visits. Where does it stand today for total volumes for psychiatrists? Have they recovered above 70% in normal? And if so, where are they? And then, kind of part two of the questions is, where do you think ultimately volumes in telemedicine will level off, once COVID’s in the past? It seems reasonable to think that we’ll never get back to 100% of level of in-person visits in the future. But, based on the math from last quarter, in-person visits are 35% in normal. It also sounds far too low. So, where do you think ultimately that number could go to, once COVID is behind us? Kevin Gorman: Yes. Phil, thanks for the question, a bit of a crystal ball type of question. I think, a lot of it is going to be determined about how reimbursement takes place with -- and CMS will tell us that towards the end of the year for telemedicine versus in-person calls. You’re right. It’s never -- it’s never going to go back to what it was pre-pandemic. Where it settles out, whether it’s going to be somewhere between 20% and 50% is the best guess and range that I can give you. Eric, would you like to talk about where total volume of patients are at this point, in your views? Eric Benevich: Yes. So, total volume of reimbursement, whether it’s through telemedicine visit or a face-to-face, is still below what it was pre-pandemic. Based on the most recent data that we’ve seen, which are still a couple of months old, it appears that still it hasn’t especially in psychiatry bounced back to the pre-pandemic levels. And as we said, over half of the total reimbursed visits are a telemedicine visit. Where it ends up ultimately, once we get past the pandemic and the public health emergency declaration is lifted, it remains to be seen. And certainly, there’s a lot of conversation happening from a public policy perspective about which of the waivers that were enacted last year in response to the pandemic, should carry forward. Certainly, we recognize that telemedicine has played an important role, especially very early in the pandemic and allowing patients to have access to the providers. But, we also recognize that there are some limits in terms of where it can and should be used. And certainly, for a movement disorder like tardive dyskinesia, there are some challenges that virtual visits represent, especially as it relates to recognizing and diagnosing new patients. So, as Kevin said and as Matt said, we continue to adapt to the environment, and I think that the results that we described here for Q2 are testament to that. But, we also recognize that things are going to continue to evolve. Likely, the proportion of total visits in psychiatry that are virtual or telehealth will decrease over time. But no, I don’t think anyone expects that it’s going to go back to what it was pre-pandemic. But for comparison’s sake, in neurology, the proportion of telehealth visits has gone down a fair bit and is close to, not exactly, but close to what it was pre-pandemic. So, there’s a meaningful difference, I think, in terms of the degree to which psychiatry versus neurology has embraced telehealth and continues to expect to utilize telehealth going forward. So, this is an important variable for us, but we recognize it’s not going away. It might be less in the future. But, for us to be successful ultimately in growing our INGREZZA franchise and helping as many patients as possible, we need to continue to make TD recognition and diagnosis and initiation of treatment with INGREZZA as straightforward and accurate as possible for our ECT customers. Operator: And we’ll move next to Paul Matteis with Stifel. Please go ahead. Paul Matteis: Great. Thanks so much for taking the question. And let me add my congrats as well. I wanted to ask one question about net price. It looks like this second quarter didn’t have the same cadence as prior years’ 2Qs, where you have a big net price improvement after kind of the whole 1Q contracting dynamic. Is there anything to that? Should we expect gross to net to remain elevated throughout the rest of this year? And is there anything behind that? And then, I have one quick follow-up. Thanks. Kevin Gorman: Go ahead, Matt. Matt Abernethy: Yes. Hey Paul, nice to hear from you. Yes, we did not see the step back up, like you have in previous years from a net price perspective. You did see some step up, however, as we walked out of the donut hole exposure that we typically walk through in Q1. What I’d say is that the elevated gross to net is something that you would likely see stick with us for some period of time, and that really reflects some of the access investments that we’ve made and then also a bit on the patient mix side with the heavier skew towards Medicaid. Where I would guide for the rest of the year is similar to what I’ve said in the past that you should expect our net price to be around $5,400 to $5,500 per TRx. Paul Matteis: Okay, great. And then, I just wanted to ask quickly, if you could comment on business development. A few of the transactions you’ve done have had some setbacks, which obviously is the norm for neuro. But I guess, in the context of that, what’s sort of your appetite for taking on risk going forward? And where do you see kind of the best opportunity or need to backfill your pipeline? Thanks. Kevin Gorman: Thanks, Paul. Kyle, go ahead. Kyle Gano: Yes. Thanks for the question, Paul. Yes. So, I think what you’ve heard here on the call this afternoon is that our first priority, looking at the pipeline, is to support the needs of INGREZZA, both commercially and then also from a pipeline perspective with the new indications that we’re looking at, so developing in too. Beyond that, it is looking at building up a pipeline that’s going to come from internally-driven research programs to go into the clinic as well as being active business development-wise. And to that end, we continue to be active there, although you haven’t seen any deals recently. We continue to review a lot of different types of programs and technologies that might play in our interest in neurology, neuropsychiatry and neuroendocrinology. And in terms of what we’re looking for, it’s primarily mid- to late-stage assets. I know it’s an area that most companies are looking to fill. But, we see opportunities in that space that may help us in the near term as we look to add things and be aware that with the risk in neurology and psychiatry, we always would like to have programs to augment over time. So, here’s where we look at adding to the pipeline as these programs mature and see what those cards look like as they are turned over in the coming years. So, the take-home is that, we again look at driving programs or searching for programs that have this innovative science platform technologies, as we’ve seen in our epilepsy franchise with Xenon and Idorsia to help us look at programs that have the opportunity for multiple disease states for development. Kevin Gorman: And the only thing I would add is that, obviously, Kyle and his team look for very strong intellectual property position, so that we can -- whatever we bring in, just as with our internal programs, we’re going to be able to invest in it over the years. Operator: And we’ll move next to Brian Abrahams with RBC Capital Markets. Please go ahead. Brian Abrahams: I was interested to hear about the new indications you’re pursuing for valbenazine. So, I was wondering if you could maybe speak a little bit more about the mechanistic rationale there and any of the data that guided your decision? Is there any, I guess, formalized data collection or investigator study, small investigator studies in those settings, I’d be curious to hear about. And any additional IP protection with those additional -- at those additional indications may confirm for INGREZZA. Thanks. Kevin Gorman: Eiry? Eiry Roberts: Yes. Thanks, Brian. Well, the mechanism really, as we speak to VMAT2 inhibition, I think we’ve always been interested in that mechanism in the context of both, obviously, dyskinetic cerebral palsy as a movement disorder, somewhat akin to tardive dyskinesia and other movement disorders. And then, in the context of the ATS program adjunct to treatment of schizophrenia, the mechanism lends itself well to that in terms of being potentially obviously in effect to currently used antidopaminergic therapies. And in addition to that, I would say that we’re also obviously encouraged by the extensive safety database that we have for the use of valbenazine, INBREZZA in tardive dyskinesia. Beyond that, we haven’t talked directly about the data that we have in hand or particular studies. And we are actually moving into registration-based studies. And the reason for that is that we know that smaller studies in schizophrenia can lead to signals that are difficult to interpret. And so, we clearly want to test this hypothesis fully, and that’s the reason for going into this registrational program at this point in time. Kevin Gorman: And Brian, I will say that we have, at this point, about 19 Orange Book patents listed. So, I think, from an intellectual property position, we’re appropriately covered. Operator: And we’ll take our next question from Brian Skorney with Baird. Please go ahead. Brian Skorney: Hey. Good afternoon, guys, and congrats on a nice quarter. I guess, I want to kind of jump off of Brian’s question a little bit, too, and just I understand you don’t want to really disclose sort of what you’re evaluating here in either of these indications until the clinical trials are posted. But, I guess, I just want to kind of think of the commercial experience with INGREZZA, I would think that a lot of INGREZZA patients aren’t schizophrenics to begin with. A lot of it -- so effectively might have a lot of commercial experience with what is -- could kind of technically be considered an adjunctive test therapy anyway. So, I’m just wondering if you kind of discuss at all in the commercial experience, what you’re hearing from providers and patients in terms of any additional benefits beyond sort of just the dyskinesia benefits that you see that might be applied to powering and designing a study? And I guess, could you characterize that as sort of a benefit on negative symptoms? It seemed like maybe antidyskinetic drug would have a hard time getting over some of the positive symptoms, but certainly maybe you see a rebound in socialization for patients who aren’t exhibiting movement disorders. So, any sort of comment on the commercial experience and how that kind of reads to a schizophrenia indication? Kevin Gorman: Yes. It is one where you get anecdotal feedback, but anecdotal feedback is just that. It’s anecdotal feedback. I really think what drives our decision to go into these indications is more from the mechanistic aspect of this. And as Eiry said that we have embarked on Phase 3 study here because we want to get a clear cut on ambiguous answer into these as we explore both of these indications. We’ve learned our lesson in Tourette, if you will, that anecdotal information or small clinical studies that have been done at single sites or things like that can really mislead you. So, do good, well thought out clinical study to give you that unambiguous answer as you explore new indications to go into. And as Eiry said, the mechanistic underpinnings of going into these two is very good. And so, that truly is what draws us in there. Eiry, do you want to add any more to that? Eiry Roberts: So, I think, you said it very well, Kevin. And maybe the only thing I’d add is that, obviously, one of the other reasons for doing smaller Phase 2 studies is in the face of needing to generate safety or tolerability information. Brian, to your point, I mean, I think there is a lot of tolerability and safety data that we already have in schizophrenic individuals. And so, that gives us a level of confidence in being able to go into those well-designed, well-powered Phase 3 programs. Operator: And we’ll take our next question from Jay Olson with Oppenheimer. Please go ahead. Jay Olson: Hi. Yes. Thanks for taking the questions. And maybe to continue on the theme of the new indications, could you maybe just comment on any potential spontaneous non-promoted use you might be seeing in those new indications? And, since you are going to be initiating registrational trials, could you maybe talk about the time line that you would expect to potentially submit regulatory filings for those new indications? Thank you. Kevin Gorman: Yes. On the second half of that, Jay, it’s too early to say what the time lines are going to be. As always, we say let us get into the studies, let’s get enrollment going. As we have a good uptake in enrollment, then we can give you an intelligent answer about exactly what the time lines are going to look like for these. So, stay tuned for that. And again, when we do not promote to anything other than tardive dyskinesia, we don’t support in any other -- in any manner in this company, the use of INGREZZA in anything other than adults with tardive dyskinesia. So, again, I would reiterate that anecdotal data is only anecdotal data, and we don’t put a whole lot on that at all. So, again, I just reiterate that. Mechanistically, the VMAT2 mechanism looks likely to be involved in these disease states. And so, that’s why we’re going to explore the use of INGREZZA in them. Operator: And we’ll take our next question from Neena Bitritto-Garg with Citi. Please go ahead. Neena Bitritto-Garg: Hey, guys. Thanks for taking my question. Congrats on the earnings. So, just following again kind of on this line of questioning around the new indications, I guess, kind of to Brian’s earlier question around schizophrenia, just given that a lot of patients who are on INGREZZA today may already have schizophrenia. Can you just help us kind of walk us through how we should think about kind of the differentiated kind of commercial potential as an adjunctive therapy in schizophrenia versus the current tardive dyskinesia indication? Thanks. Kevin Gorman: Well, as far as differentiation, again, we’re getting a bit ahead of ourselves. We just now are talking about embarking on a study into the adjunctive treatment of schizophrenia. So, it is known and well-known that patients -- schizophrenic patients cycle through a number of different antipsychotics. And so, it’s clear that you need more choice, you need more different mechanisms. Antipsychotics all work postsynaptically in order to inhibit dopamine signaling. And as you know, INGREZZA is working presynaptically in order to decrease the amount of dopamine that’s available in the synapse. And so, that’s what we are going for here. As far as how will that translate into a differentiated product, you need the data in order to be able to say exactly how that would differentiate. There’s completely different safety and tolerability profiles between antipsychotics INGREZZA for one. I don’t know if Eric and Eiry would want to add anything more. Eiry Roberts: Well, I would just make a couple of comments, Kevin. I think, the first thing is that there is obviously currently no approved adjunctive treatment for schizophrenia. And so, the unmet need there is very significant. Also, to your point, a significant proportion of patients suffering from schizophrenia and living with schizophrenia do not get a full response in terms of their psychosis symptoms to currently available treatments. And so, with that in mind and given the mechanistic rationale that Kevin described and articulated, that’s why I think we were very keen to be able to test this hypothesis in going to a registrational study. Operator: And we’ll take our next question from Anupam Rama with JP Morgan. Please go ahead. Anupam Rama: Hey, guys. Thanks for taking the question, and congrats on the quarter. Matt, on the 2Q call, there were a lot of -- on the 1Q call, there were a lot of moving parts, and you kind of gave us some directional guidance with -- a range of where you thought INGREZZA was going to land and where you were comfortable. And again, we have a lot of moving parts here with scripts inflecting here a little bit and then offset by some 3Q seasonality and Delta variant. So, any possibility you might be any comfortable with giving us a little bit more directional guidance on how you’re thinking about 3Q and just to keep numbers going wild or anything like that? Thanks so much. Matt Abernethy: Yes. No, happy to shed some color. And we tried to be pretty specific in our prepared remarks today and as to what we would expect. We did see nice momentum exiting Q2. And that’s actually continued through most of July, thus far. So, we’re very encouraged by what we’ve seen thus far, but we also acknowledge the Delta variant has stepped up over the last several weeks, and that’s starting to limit access in certain regions around the country. So, when we look at our numbers, based upon what we have in Q and then look back over history, how has INGREZZA performed in 2018, 2019 sequentially, where that puts us is around a $15 million sequential increase is what we’re anticipating somewhere around there for Q3. And so, with all the moving parts, Anupam, like you said, that’s why we’ve chosen to give a bit more specific guide to the coming quarter, just like we did in Q1 regarding Q2, and in Q2 regarding Q3. But for me, personally, I was quite encouraged to see the step-up in growth in Q2. Just the promotional responsiveness of our sales force going out, engaging with customers and seeing the response on the NRx side, I think it really helps paint the picture and confirm that there’s a significant opportunity ahead of us for developing the TD market and helping many more patients. Operator: And we’ll take our next question from David Amsellem with Piper Sandler. Please go ahead. David Amsellem: Hey. Thanks. So, I just wanted to switch gears and ask about your thoughts on the exclusivity runway for INGREZZA. You recently initiated litigation against, I believe, it’s four ANDA filers, and wanted to get your thought process on initiating litigation in Delaware and also in one case in New Jersey, if there’s anything to read into there? And then, secondly, can you talk about any patent term restoration or extensions that we should be aware of that’s coming down the pike? And just in general, how you’re thinking about overall exclusivity runway? Thank you. Kevin Gorman: Yes. Thanks for that. We have a very strong patent position. We feel very confident in it. These days, having generic manufacturers file ANDA is just a normal course of business and then our defending those is also a normal course of business. As I said a little bit earlier, we have 19 patents in the Orange Book. And so, we have a very long runway of exclusivity that we’re confident in with INGREZZA. And some of these patents can even extend that runway, well into the future. We are not going to comment in any more detail, because it is ongoing litigation, but it is just the normal course of business in pharmaceuticals these days. Operator: We’ll move next to Chris Shibutani with Goldman Sachs. Please go ahead. Chris Shibutani: Great. Thank you for the questions. During the last quarter, you announced your plans to invest in your direct-to-consumer, DTC campaigns. Can you talk about what your metrics are for determining what kind of effectiveness that’s having? And if we were to think about kind of the arc of how long you’re going to sustain that level of investment, how should we think about it, particularly as we look at 2022? Kevin Gorman: Eric, why don’t you take that? Eric Benevich: Yes, happy to. And thanks, Chris, for the question. So, it’s early days, yet you may recall that the brand did DTC campaign, which we call Spotlight -- TD Spotlight, was launched effectively in mid-May, so about halfway through the quarter. And thus far, we’re very pleased with what we’re seeing in terms of the leading indicators. So, for example, we look at things like traffic to the website, especially immediately after the ad has run. We look at the number of page views, we look at the amount of time that visitors are spending on the website, downloading content, registering to receive information and so on. And all of those indicators are in line with or perhaps in some cases, better than what we expected. And certainly, we have high expectations for this campaign, based on the way that it tested. So, we feel very good about the direction that we’re heading. We intend to continue to invest in DTC. Certainly, we have said in the past that this is a disease area where the vast majority of patients that suffer from TD are yet to be diagnosed. 8 out of 10 people with TD haven’t received the diagnosis, haven’t received an explanation for their abnormal movements. And certainly, we feel like this ad campaign, both educate people about TD and the fact that there’s an improved treatment option with INGREZZA. So, we would expect that as we progress through the year and get towards the end of ‘22, and more importantly, more pronounced in next year, in 2022, that we’ll start to see a more tangible benefit from the ad campaign in terms of patients having seen the ad a number of times, and been activated and motivated to talk to their provider, ask about TD and specifically for INGREZZA. So, we’ll continue to invest in DTC, because we think that -- it’s going to benefit patients and it’s going to benefit our INGREZZA franchise. Matt Abernethy: And this is Matt. I’ll just chime in on the question as to the investment as we look into 2022, given where the development of the market is that as Eric alluded to, 8 out of 10 not being diagnosed at this point. You would expect if we see success through the first half of next year, it would be something that we would likely be continuing for the foreseeable future. But, we’ll keep you apprised. And we’re looking forward to seeing the ultimate results showing up in our sales performance later this year and more fully into 2022. Operator: And we’ll take our next question from Charles Duncan with Cantor Fitzgerald. Please go ahead. Charles Duncan: Okay. Thank you. Hi. Kevin and team, congrats on a good quarter. I had a pipeline question, but it has two parts. And I wanted to start -- first part is relative to the candidate luvadaxistat that you are looking at for starting a CIAS study in the second half of the year. I’m wondering if you could provide a little more color on the mechanistic rationale, especially relative to, say, M4 positive allosteric modulation? And that’s part 1. And part 2 is actually going back to valbenazine. No one’s asked about Huntington, chorea. And I guess, I’m wondering, given the challenges in Huntington this year, how do you feel about patient heterogeneity? And could a win in that study enable an sNDA filing next year? Thanks. Kevin Gorman: So, I’ll let Eiry, and then Kyle, if you have any further comments on the questions by Charles. Eiry Roberts: Yes, absolutely. So, thanks for that. Firstly, on the luvadaxistat question. I mean, I think, the mechanistic rationale supporting the potential for luvadaxistat as a DAAO inhibitor, in treating the cognitive impairment associated with schizophrenia is actually pretty strong. It actually goes back to both, the preclinical data, also to the biological mechanism of schizophrenia itself, the behavioral neuro developmental issues that are associated with schizophrenia. And so, in addition to that, I mean, we saw in our Phase 2 INTERACT study, although it was not the primary endpoint for the study, we saw a pretty impressive signal against both, the cognitive assessment and the functional assessment of the impact of cognition in schizophrenia. And so, with all of that, rationale in hand, we actually were very keen to test that hypothesis fully in a well-powered and well-designed Phase 2 study. And that study is currently in the final stages of being prepped and designed, and we’re on track to start that Phase 2 study by the end of this year. And so, I think in that regard, that’s what I’d say about luvadaxistat. Obviously, there are other potential mechanisms including muscarinic mechanisms that may be valuable in treating the negative symptoms or cognitive factors that are a part in schizophrenia. But I just wanted to share with you the rationale that we believe quite strongly supports the potential role of luvadaxistat in treating those symptoms. With respect to HD, actually, I think we -- in the course of our trial, we actually made several changes to accommodate the challenges associated with the COVID pandemic. And so, we actually were very confident in those changes that were made to support more of a telemedicine type environment for assessments in that program. We actually have a very extensive data set that is generated in the context of HD KINECT program. And we were very pleased with the completement of enrollment of that study and, obviously, on track to deliver data by the end of the year. Kyle, I don’t know if you have anything to add there? Kyle Gano: I think, you covered the majority on luvadaxistat. I would just add that there is some interesting work going on in the field now on compound molecules that potentiate an NDA pathway and their relevance and the negative symptoms. And it’s nice to have a compound like ours here that’s well behaved and that we understand things like target engagement and occupancy. So, we’re really just drilling into the mechanism of the disease state as a next step for the Phase 2 trial that we’re envisioning. Operator: And we’ll move next to Vamil Divan with Mizuho. Please go ahead. Vamil Divan: So, maybe just following up on some of the questions earlier on the new indications for valbenazine and also the question on business development. So, it feels like there may be a little bit of a shift, you did a number of external deals in the past year or two, and now maybe investing a little more in valbenazine line extensions, highlighting that as a pipeline in the product beyond just TD and HD. So, I’m wondering if that is a natural intentional shift. And if so, why these two indications now as opposed to previously or maybe later in the future, or maybe does it signal in any way sort of less attractive external opportunities based on what you’ve been looking at from a BD perspective. So, any further insight there would be helpful. Thanks. Kevin Gorman: Yes. No, Vamil, I appreciate the question. But no, there not been any shift at all. I would say that our use of capital remains the very same and it has for quite some time now. The next best dollar we always said could be -- is spent on INGREZZA and the VMAT2 mechanism. So, that’s what you see us doing here. We also invest in our internal resources, internal research, and then, we also invest in looking externally. The goal here is to build a world-class pipeline. And I believe that’s exactly what we’re doing here, using internal and external resources. Kyle, do you want to add some more to that? Kyle Gano: Yes. There was a good question about our BD interest previously. And just wanted to clarify and touch on some of the points that Kevin mentioned. Firstly, as it relates to valbenazine in terms of our interest in disease states, we’ve always had a longer vision of where the program could go over time. It was a functioning more or less of sequencing and see how we could get things to roll out, first with disease states that had good data to support those initially and then move into these disease states that may require additional work, and that’s what’s led us to DCP and the ATS programs. And in terms of business development and our interest there, I think everything complements exactly what we’re trying to do across the areas of neurology, psychiatry and endocrinology. And if you look at our efforts the past couple of years is building out neurology to support the interest there of movement disorders in INGREZZA. That’s what led us to epilepsy and some of the programs there in precision medicine. And then, pivoting to our interest in psychiatry, you see our collaboration with Takeda and be able to augment our portfolio there. So, I think you’ll see much of the same moving forward, looking at programs that bring in innovative science, technology, and work that’s been done by other companies that we can leverage with our team here and our capabilities and resources. Operator: And we’ll move next to Josh Schimmer with Evercore. Please go ahead. Josh Schimmer: As you think about moving into the adjunct treatment approach for schizophrenia for INGREZZA, how are you thinking about reconciling the likely price point for an antipsychotic compared to the current application of tardive dyskinesia? Would that be under a separate brand or a separate kind of formulation? How are you thinking about managing that? Thank you. Kevin Gorman: Yes. Josh, again, what I would say is that we are just exploring these two new indications for valbenazine. And so, it’s too early and it’s too premature to be able to talk about things such as differentiation, what ultimate clinical benefit is going to be there, and therefore, what pricing would look like in any of these indications. So, I would -- let’s hold that question. Let’s keep that there, until we’re much further along in actually the exploration of these. It is something that we have a very large and diverse pipeline here that covers neuroscience, neuroendocrinology and neuropsychiatry. We go into indications led by the science and also led by unmet medical need. And so, you see us in taking multiple shots in the schizophrenia population because we feel that they are completely underserved there. So, it is our intent to try to serve patients. And then, we will -- as we see what we are bringing to the patients, the value of the medicine, and we’ll make other decisions based on that. Operator: And we’ll take our next question from Myles Minter with William Blair. Please go ahead. Myles Minter: Hey, guys. Congrats on the quarter. I don’t think anyone has asked about ONGENTYS yet, so, maybe I will. You mentioned that there was sort of a pickup in interest during the quarter. Wondering if you can get a little bit more granular on the metrics that make you think that. And also, with the whole investing in telemedicine, what specific aspects are you looking to bolster there? And is that more INGREZZA specific, or is that more bringing in the whole commercial expertise here? Any color there would be great. Thanks. Kevin Gorman: Eric, why don’t you handle this? Eric Benevich: Yes, happy to. With regards to ONGENTYS, certainly, we were heartened to see that there was improvement in Q2 versus Q1. And I have to reinforce that it’s still very early in the launch process. This is the first once-a-day C O M T or COMT inhibitor in the U.S. And we’re still reaching many of our neurology HCP customers, introducing them to this new medicine and essentially reintroducing them to the idea of COMT inhibition. And so, the feedback that we’re getting has been very positive from the providers in neurology that have started to utilize this in their first patients. In fact, one of the maybe surprising elements for me is that many providers have said that it exceeded their expectations in terms of how potent it is, what a strong treatment effect they’re seeing in these patients, which is a great thing to hear. So, we’re continuing to execute against our plan, introducing ONGENTYS to movement disorder neurologists as well as general neurologists that treat Parkinson’s disease and certainly continuing to encourage providers to consider using it early in the treatment paradigm. Right now, or going into this launch, I should say, COMT inhibitors were essentially a third line option for many of these patients on adjunctive treatments. And we’re encouraging providers to think about using ONGENTYS earlier, especially as an alternative to a dopamine agonist, or when a patient and the provider -- their provider are having a conversation about potentially increasing the dose of levodopa. So, we’re seeing good progress there and feel good about the progress that we’re making. And then, with regards to the telehealth, yes, certainly, the investments that we’re making in telehealth are primarily related to the TD opportunity for INGREZZA. For the most part, we’re seeing much less use of telehealth in neurology. And neurologists would tell you that they need to do a physical exam to make a diagnosis of Parkinson’s. For example, most of the patients with tardive dyskinesia are under the care of psychiatrists or advanced practice providers in psychiatry. And so, everything we’re doing in telehealth is really related to trying to make TD a little easier to recognize and diagnose virtually as well as helping providers to understand how they can advance that diagnostic process, whether they can do the entire diagnosis remotely or whether they’re going to encourage the patients to come in for a follow-up for a physical exam. But, I think that the progress that we’re seeing in terms of return to growth in Q2, can be attributed both to better conditions on the ground related to the pandemic, but also adapting, as Kevin said, in getting better at helping our customers to recognize, diagnose, and treat TD really. Operator: We’ll move next to Danielle Brill with Raymond James. Please go ahead. Danielle Brill: Just a quick one from me. In your guidance for 3Q, the sequential growth of $15 million, is that on an inventory adjusted basis? Thanks. Kevin Gorman: Matt? Matt Abernethy: Yes. That’s on an underlying basis on an inventory adjusted basis. I think, where that would put you is somewhere in the 280ish range. And I think as we commented on earlier, that’s drawn based upon history and what we’ve seen going from Q2 to Q3 and then also some of the other variables that we are keeping a close eye on associated with Delta variant. Operator: We’ll move next to Laura Chico with Wedbush Securities. Please go ahead. Laura Chico: One more on guidance. It certainly seems like you’re providing a great framework for the outlook on a quarterly basis. And I guess, I just wanted to ask -- apologies if I missed this earlier, but how are you thinking about providing longer-term guidance? And I guess, what are some of the considerations? Obviously, pandemic a little bit of a wild card, but again, certainly seems like you have a good fix on things. So, just wondering how we should think about potential for longer term guidance to emerge? Thanks. Kevin Gorman: Yes. So, I’ll take that first, and Matt can jump in here, is that giving guidance is something that we constantly talk about. The reason why we’ve been more forthcoming recently is not to try to give specifics, like here, we feel real good about this number, real good about that number. What we’re trying to do is these are pretty unprecedented times, it is very difficult, several quarters now in trying to give you without getting more detailed is to the things that we’re facing and the challenges that we’re facing. And as you can see, we’re not always getting it right, even when we’re trying to be more specific with you. And it’s because of these, and I’ll use that for work turn, these are unprecedented times that we’re dealing with and particularly in our in our universe with psychiatry, and the openings and closings of clinics and the very large use of telemedicine here, it is challenging to try to be able to nail things really well. In the future, I do see us at some point that we would go to a more annual guidance. But, right now, what we’re just trying to do is we’re trying to give you as much information as we feel comfortable and with the degree of confidence that we have. Matt, what would you perhaps add to that? Matt Abernethy: No, you covered it, Kevin. It’s something that we continue to talk about. You should expect at some point we would be providing an annual guide, and we would move away from the quarterly detail that we’re providing now during these unprecedented times. But, it is on our radar and something that will continue to think through. Kevin Gorman: And the last thing I would say is, is that even without the coronavirus, recall, we launched into a market that is extremely unusual in the fact that there’s never been a medication for tardive dyskinesia, and virtually, none of the patients were diagnosed with it. And much about tardive dyskinesia was never being taught in medical schools or even residency programs. So, recall, right from the very beginning, it is a challenging area that we got into. That’s why I’m so proud of our commercial and medical teams with what they’ve been able to do now to get up to about a 20% diagnosis rate. Todd Tushla: Let’s take one last question. Operator: Absolutely. We’ll take our last question from Yatin Suneja with Guggenheim. Please go ahead. Eddie Hickman: Yes. Hey, guys. This is Eddie on for Yatin. Thanks for squeezing me in here and congrats on the quarter. Just one quick follow-up on the ONGENTYS program and thanks for the color on sort of what could be causing the slow launch. But, do you have a sense of when it will start to pick up and what the sort of peak projections could be for that -- what the opportunity in that market would be eventually and how long it will take to get there? Thanks. Kevin Gorman: Eric? Eric Benevich: Yes. We haven’t given any specific guidance with regards to what the peak potential is for ONGENTYS. However, I will say that there is about 1 million patients in the U.S. with Parkinson’s disease, of them, about two-thirds are on levodopa and adjunctive treatment. So, that’s the addressable patient pool. Launching on ONGENTYS, there was a few things that we pointed out that were going to create near-term challenges. One was that the COMT class constitutes less than 10% market share of those adjunctive treatments. Second issue was the fact that ONGENTYS was developed entirely outside of the U.S., so there were no -- there was no clinical experience amongst thought leaders in Parkinson’s disease. And then, the biggest issue for us, frankly, was the fact that we launched ONGENTYS at the very end of Q3 last year, very beginning of Q4 in the peak of the pandemic, which really hampered our ability to get in front of movement disorder neurologists and introduce this new medicine. So, those are all challenges that we’ve embraced, and we recognize that we have to overcome. But we feel really good about the clinical profile of ONGENTYS. It’s a great medicine with a really strong label. And certainly, the feedback, as I mentioned before, when providers start to try it in select patients, their experience has been positive. So, we’re going to continue to press forward with this important medicine. The other thing that I should mention is that ONGENTYS represents to the movement disorder community our continuing commitment to movement disorders. And certainly to movement disorder neurologists, when we come to their practice, we have now two medicines that we can talk about ONGENTYS in Parkinson’s disease, INGREZZA in tardive dyskinesia. And frankly, ONGENTYS gives additional opportunity for us to have time and attention with those movement specialists to benefit INGREZZA in the TD indication. So, we’ll continue to execute against our plan. We’ll continue, I believe, to see positive momentum in terms of new patient starts and growth for this brand. So, look forward to sharing what those -- what that progress looks like on the next call. Operator: And it does appear there are no further questions at this time. I would now like to turn it back to Kevin Gorman for any closing remarks. Kevin Gorman: Thank you. I really do appreciate all the questions that we got here today. The thing that I’m most proud of, and I would like you to take away from this call is, is that Neurocrine is adapting to the environment that we’ve been in and that we will continue to be in for probably a number of years here. We’re not going to go back to where business was as usual anytime soon or maybe ever. And so, we continue to invest in that. And I think we’ve done that quite well. Psychiatry may stay at 50% telemedicine going into the future. And that’s just fine. If we do believe that telemedicine is a very good tool for health care providers and for patients, but there is certainly no replacement for face-to-face in-person care. And so, we do see that as going more and more back to in-person care, but never to the level that it was before. But, that’s fine. We are going to -- TD is a disorder that is more and more being recognized by the medical community and by patients and their caregivers that it has to be treated. And so, we are at the very beginnings of treating TD patients, and we are going to continue to invest, and you’re going to see us continue to have extremely good growth in bringing INGREZZA to these sufferers of tardive dyskinesia and potentially other disorders. We’re also -- as you see, sticking to exactly what our mission has been of the Company, and that is to be a premier neuroscience company. And we are growing and advancing our pipeline with each passing year. And so, neuroscience means neurology; it means neuropsychiatry; it means neuroendocrinology; and at some point in the future, neuroimmunology to us. And so, you’re going to see us continuously bringing new compounds into the clinic, both from internal research and from partnering with excellent collaborators. So with that, we’ll bring this call to a close. I am still confident that at some point before this year is out, we’re going to be able to meet with many of you personally. And so, I’m hopeful that as long as we all stay safe, continue to get vaccinated that we will be able to all get back to visiting one another in person. So, with that, I will end this call. Take care. And thank you for your attention. Operator: This does conclude today’s program. Thank you for your participation. You may disconnect at any time. Goodbye.
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