Q2 2022 Neurocrine Biosciences Inc Earnings Call

August 4, 2022

Yeah.

Good day, everyone and welcome to today's Neurocrine Biosciences reports second quarter or so.

Unknown Executive: Good day, everyone, and welcome to today's Neurocrine Biosciences Report Second Quarter Results.

Operator: At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note, today's call may be recorded, and I will be standing by should you need any assistance.

At this time all participants are in a listen only mode.

Later, you will have the opportunity to ask questions. During the question answer session.

Please note todays call, maybe recorded and I won't be standing by should you need it.

Mr.

Operator: It is now my pleasure to turn the conference over to Vice President of Investor Relations, Todd Tushla.

It is now my pleasure to turn the conference over to Vice President of Investor Relations Todd to Sheila. Please go ahead.

Operator: Please go ahead.

Thank you operator.

Todd Tushla: Thank you, Operator.

Noon, everyone and welcome to our second quarter 2022 earnings call with me are Kevin Gorman, Our Chief Executive Officer, Matt Abernethy, Our Chief Financial Officer, I read Roberts, our Chief Medical Officer, Eric benefits, our Chief commercial officer, and Karl <unk>, Our Chief business development and strategy officer during our call we will be making forward looking statements. These statements are.

Subject to certain risks and uncertainties and our actual results may differ materially.

Encourage you to review the risk factors discussed in our latest SEC filings. After our prepared remarks will head into Q&A, we will try to get to everyone's questions and now I will turn the call over to Kevin Gorman.

Todd Tushla: Good afternoon, everyone, and welcome to our second quarter 2022 earnings call.

Thank you Todd and good afternoon.

Todd Tushla: With me are Kevin Gorman, our Chief Executive Officer, Matt Abernathy, 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.

As Todd said, we're going to all keep our opening remarks short to give us enough time for your questions.

I had a very good Q2, and coupled with our outperformance in Q1, we have had an excellent first half of the year Eric.

Eric is going to take you through the quarter in a bit more detail in just a moment now in addition.

I'm very pleased to say, we continue to grow our pipeline, adding two new compounds with validated mechanisms of action in psychiatry, and I read will talk a bit about those two now.

Now as you've seen in our press release are signal seeking essential tremor study did not yield the strong enough dataset to warrant any further development of this compound in E. T. At this time, while disappointing we have a rich and diversified portfolio in these resources will be rapidly redeployed.

Now finally, I'd like to say that I'm very pleased with the overall performance of the company thus far this year.

Todd Tushla: During our call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially.

And here I mean, the larger we all of business and society are dealing with the transition out of the pandemic and into an endemic situation with Covid.

Todd Tushla: I encourage you to review the risk factors discussed in our latest SEC filings.

Thankfully in 2022 COVID-19 they are much more rarely causes severe disease and death, but it is still highly disruptive to business as usual throughout the world.

Increased absences due to testing positive stretches all resources and at times, we see that in both our clinical and commercial businesses times are still uncertain, but we continue to move forward on behalf of patients and for that I am very proud I'd like to turn it over to Matt Napoli.

Todd Tushla: After our prepared remarks, we'll head into Q&A, where we'll try to get to everyone's questions.

Yeah.

Kevin Gorman: And now I'll turn the call over to Kevin Gorman.

Good afternoon, being aggressive team delivered $350 million in sales during the second quarter capitalizing on the strong new patient trends from Q1 and high levels of patient compliance with.

Kevin Gorman: Thank you, Todd, and good afternoon.

With the first half of 2022 now behind US we are raising our annual sales guidance range to $1 three five to $1 $4 billion based upon the trends we have seen so far this year.

As you consider Q3, we expect third quarter sequential growth to be lower as a result of both the acceleration of Covid cases, and the typical summer dynamics that pressure growth.

On the financial front during the quarter, we were able to retire 55% of our convertible debt to reduce potential dilution and maintain that financial flexibility, we need with over 1 billion in cash now over to Eric.

Kevin Gorman: As Todd said, we're going to all keep our opening remarks short to give us enough time for your questions.

Thanks, Matt.

Our team continues to do a great job executing on our commercial initiatives.

Q2, and graduate performance was driven primarily by continued strong persistence and compliance rates for continuing patients coupled with a record level of new patient starts.

As Matt said, given the results through the first half of the year, we've raised guidance to a range that incorporates a couple of scenarios that may play out in the second half of the year.

First as it relates to internal factors, our ongoing direct to consumer advertising campaign called TD spotlight continues to encourage patients and caregivers to help seek treatment for their T D.

Thus far we've been pleased with the response and we plan to continue the campaign through the balance of the year.

In addition, the newest members of our expanded field force have been trained and have been in the field now for about a quarter.

As we've highlighted before we anticipate the benefit of our expanded sales organization to be tangible in the latter part of the year.

Regarding what we've seen from an external perspective, new COVID-19 variance continue to provide headwinds for our customers, while telemedicine is still being utilized by psychiatrists.

With roughly half of their patients.

Kevin Gorman: Ingressa had a very good Q2, and coupled with our outperformance in Q1, we have had an excellent first half of the year.

Over the past five years of being present launch we've seen a pattern of seasonal challenges in the third quarter, which is typically soften growth a bit relative to Q2.

Therefore, given current dynamics I would characterize the low end of the new guidance range to be more impacted by Covid.

In Q3 seasonal slowdown.

In the higher end of the range to be less impacted by external factors, which we are working diligently to mitigate.

In closing, we're making steady progress improving the diagnosis and treatment rates for tardive dyskinesia in the U S.

This is still mostly underdeveloped market and we are well positioned to continue driving treatment rates higher to help even more TD patients.

Ever before.

Kevin Gorman: Eric is going to take you through the quarter in a bit more detail in just a moment.

With that I'll turn the call over to my colleague Dr. IRA Robbins.

Kevin Gorman: Now, in addition, I'm very pleased to say we continue to grow our pipeline, adding two new compounds with validated mechanisms of action in psychiatry, and Eiry will talk a bit about those two.

Thank you, Eric and good afternoon to everyone on the call.

Kevin Gorman: Now, as you've seen in our press release, our signal-seeking essential tremor study did not yield a strong enough data set to warrant any further development of this compound in ET at this time.

Kevin Gorman: While disappointing, we have a rich and diversified portfolio, and these resources will be rapidly redeployed.

I'll start with a couple of updates from our late stage clinical portfolio.

We remain on track for the NDA submission later this year about benzene as a potential treatment for Huntington's disease.

In addition, the phase III adult and pediatric studies for <unk>.

Potential treatment for congenital adrenal hyperplasia are progressing well in line with our goal of delivering data in 2023.

Moving to the earlier stage clinical portfolio, we were very pleased to announce the fda's acceptance of the IMD for MDI 568.

Bose This is Derek and full agonist for the treatment of schizophrenia.

This is the lead molecule and I'll muscarinic franchise collaboration with associated hectares, and I wanted to take a moment to thank the teams both at Neurocrine and shows the hip Torres for their hard work in successfully progressing this molecule into the phase two study, which will begin enrollment in the near future.

Sure.

Along with examining the opportunity to expand beyond schizophrenia with 568, our teams continue.

Continue to work on advancing other novel muscarinic agonist into the clinic, including a potential M. One and four dual agonist.

In addition to moving forward with MDI 568. This month, we will initiate phase one evaluation for our novel orally active small molecule <unk> 770, <unk>, which targets a potentially important mechanism for the treatment of depression.

If we are successful in progressing to phase III clinical development, we will divulge more about both the top.

But I can say that this mechanism of action has already been validated clinically by parenterally administered molecules.

If successful <unk> would provide the first oral treatment approach for this target in depression.

Kevin Gorman: Now, finally, I'd like to say that I'm very pleased with the overall performance of the company thus far this year.

Now I'd like to address the results of the signal seeking study of <unk> four in essential tremor.

Kevin Gorman: We, and here I mean the larger we, all of business and society, are dealing with the transition out of a pandemic and into an endemic situation with COVID. Thankfully, in 2022, COVID much more rarely causes severe disease and death, but it is still highly disruptive to business as usual throughout the world. Increased absences due to testing positives stretches all resources thin at times.

Kevin Gorman: We see that in both our clinical and commercial businesses.

The team completed a high quality single Center study of N V I want to call in 30 patients with essential tremor.

Kevin Gorman: Times are still uncertain, but we continue to move forward on behalf of patients, and for that, I am very proud.

The intent of this study was to identify potential signals of efficacy and determine the tolerability of N V. I went out for in this patient population.

Matt Abernethy: I'd like to turn it over to Matt now, please.

Matt Abernethy: Good afternoon.

<unk> was well tolerated at all doses studied however, topline efficacy results from the study were negative and failed to achieve statistical significance.

Matt Abernethy: The Ingressive team delivered $350 million in sales during the second quarter, capitalizing on the strong new patient trends from Q1 and high levels of patient compliance. With the first half of 2022 now behind us, we are raising our annual Ingressive sales guidance range to $1.35 to $1.4 billion based upon the trends we have seen so far this year.

Matt Abernethy: As you consider Q3, we expect third quarter sequential growth to be lower as a result of both the acceleration of COVID cases and the typical summer dynamics of pressure growth.

Matt Abernethy: On the financial front, during the quarter, we were able to retire 55% of our convertible debt to reduce potential dilution and maintain the financial flexibility we need with over $1 billion in cash.

The study produced a broad data set beyond the top line information and the team is continuing to evaluate this data with the intent to presenting it at a future medical conference.

Eric Benevich: Now, over to Eric.

Eric Benevich: Thanks, Matt.

Eric Benevich: Our team continues to do a great job executing on our commercial initiatives.

Based on the totality of data from this study at this time, we do not plan to proceed further with the clinical development of <unk> four in essential tremor.

It is important to note that these results do not impact the current phase II study of N V. I went no pool in epilepsy with continuous spiking waived during sleep.

Enrollment in this study is complete and we remain on track to disclose topline results by year end.

Finally, I'd like to congratulate our partners at the Mitsubishi Tanabe Pharma Corporation for all their efforts in getting <unk> approved we look forward to supporting the launch of this file.

The treatment of tardive dyskinesia in Japan.

With that I'll hand things back to Kevin.

Thank you very much Irene and operator, now we are ready to take questions.

Yeah.

As a reminder, at this time, if you would like to ask a question press the star.

One on your Touchtone phone.

You may withdraw your question at any time by pressing the pound.

Yeah.

Meadow with Cowen and company. Please go ahead.

Good afternoon, and thanks for taking my questions and congratulations on the strong quarter.

Just two from US first on the Q1 results for <unk>.

They are particularly impressive because.

Sorry, Q2 results from graduate they are particularly impressive because Q1 wasn't as impacted by seasonal factors and other key once in the past so.

I guess I'm curious, whether you can go into more detail as to what led to the increase in new patient starts in Q2 was that strictly DTC.

Are there any of those seasonal factors that did improve in Q2.

Maybe more than you had initially anticipated.

And were there any one time factors. It does strike is at the bottom end of your guidance.

Given your guidance, so just down quarters in Q3, and Q4 versus the Q2 run rate so.

Aside from Covid, we're curious how that could happen.

And then the second question is on <unk>.

We're just curious whether the data put into question in your mind. The T type calcium channel blockers generally do you think that this was an issue with the disease with a mechanism or simply come from specific thanks.

Phil This is Matt we're going to handle your first set of questions on the undergraduate upfront and then we'll handle each year as we get further into question because we're going to try to stick to one question per.

Eric Benevich: Q2 and graduate performance was driven primarily by continued strong persistence and compliance rates for continuing patients, coupled with a record level of new patient starts.

Youre right Q2 is an incredibly great quarter, reflecting great new patient additions and then also surprisingly very high compliance rates.

Eric Benevich: As Matt said, given the results through the first half of the year, we've raised guidance to a range that incorporates a couple of scenarios that may play out in the second half of the year.

Eric Benevich: First, as it relates to internal factors, our ongoing direct-to-consumer advertising campaign called TD Spotlight continues to encourage patients and caregivers to help seek treatment for their TD.

Eric Benevich: Thus far, we've been pleased with the response, and we plan to continue the campaign through the balance of the year.

Eric Benevich: In addition, the newest members of our expanded field force have been trained and have been in the field now for about a quarter.

I'd say the beat was.

Eric Benevich: As we've highlighted before, we anticipate the benefit of our expanded sales organization to be tangible in the latter part of the year.

Eric Benevich: Regarding what we've seen from an external perspective, new COVID variants continue to provide headwinds for our customers, while telemedicine is still being utilized by psychiatrists with roughly half of their patients.

Both internal and then obviously external.

It came from a nice step up in compliance and then also a continued trajectory of mutation addition was a fairly strong throughout the quarter.

Eric Benevich: Over the past five years of the Ingresa launch, we've seen a pattern of seasonal challenges in the third quarter, which has typically softened growth a bit relative to Q2.

Wouldn't flag any one time items, such as inventory or.

Bulk purchases by any pharmacy, so it was a very clean and straightforward.

Quarter.

If you take a step back and think about our guidance range.

Eric Benevich: Therefore, given current dynamics, I would characterize the low end of the new guidance range to be more impacted by COVID, telehealth, and Q3 seasonal slowdown, and the higher end of the range to be less impacted by external factors, which we are working diligently to mitigate.

Eric Benevich: In closing, we're making steady progress, improving the diagnosis and treatment rates for tardive dyskinesia in the U.S.

It really reflects an over or around $300 million growth here and that's a pretty incredible feet coming out of Covid and then still dealing with the environment that we're dealing with right now.

Eric Benevich: This is still a mostly underdeveloped market, and we are well positioned to continue driving treatment rates higher to help even more TD patients than ever before.

Eiry Roberts: With that, I'll turn the call over to my colleague, Dr. Irie Rovich.

Eric mentioned in his prepared remarks really the downside.

Specific to Covid I think we all see it popping up regionally and that could cause some disruption at the bottom end of the range.

And then at the top end of the range. It's all about execution on the sales force expansion. So hopefully that addresses your question Bill.

Eiry Roberts: Thank you, Eric, and good afternoon to everyone on the call.

Yeah.

Okay.

Eiry Roberts: I'll start with a couple of updates from our late-stage clinical portfolio.

And well take our next question from.

Brian .

With RBC capital markets. Please go ahead.

Eiry Roberts: We remain on track for the SNDA submission later this year of valbenazine as a potential treatment for Huntington's disease.

Hi, Thanks. This is a lean it on for Brian I just wanted to go back to one four.

Eiry Roberts: In addition, the phase three adult and pediatric studies for chronesophon as a potential treatment for congenital adrenal hyperplasia are progressing well, in line with our goal of delivering data in 2023.

Eiry Roberts: Moving to the earlier-stage clinical portfolio, we were very pleased to announce the FDA's recent acceptance of the IND for NBI568, a selective orthosteric M4 agonist for the treatment of schizophrenia. This is the lead molecule in our muscarinic franchise collaboration with Sose Heptares.

I guess.

Can you just talk a little bit about.

Why you think that might still be active in it and some of the epilepsy and I guess the decision to discontinue that.

Insufficient efficacy across all the endpoints or is there any any signal that you might be able to tease out as you continue to look at the data or was it just more bigger picture view on on the therapeutic window and then I guess.

We go back to the epilepsy, though there.

Any epilepsy, where you might continue.

Thinking about bringing this drug in as well.

Yeah. So a couple of questions in that on the first question I think the patient populations. If you look between the essential tremor epilepsy population that we're studying within DSW and so it's a very different population.

I don't think you can infer directly from one population to the other answer to answer the question I think that Phil asked as well around what do we believe about this in the context of T type calcium channel antagonists in essential tremor, it's really hard for us to comment on the other molecules in development, but what I can say about.

The trial that we ran was that it was a high quality single center trial, well controlled and.

But as we looked at the data the trial design and the way in which the trial played out actually we're not responsible for the negative result, it was not a failed trial it was a negative trial.

We saw some evidence of activity, but the signal was not sufficiently robust to hit statistical significance.

You hit clinical relevant either on the accelerometer or Tetris endpoints that we looked at and in particular the other thing I will say is that we had central assessments as well as the local assessment on the Tetris and there was high concordance between the two sets of assessment. So it was a robust data set we will continue to evaluate the data and more.

But at this point in time I think we are clear that we will not be moving forward with essential tremor.

Full.

Okay.

And well take our next question from Paul.

TS with Stifel. Please go ahead.

Hey, Thanks, so much for taking my questions and congrats on the quarter.

Over the past few years, you've been Super Conservative with.

Just the Upfronts that you bought that you've offered in business development I think you've also been clear that your pipeline is high risk on CNS is difficult, but I guess given the failure of each program given that there have been a number of setbacks I'm wondering now given your position of strength within garage, if theres any consideration that you could incorporate a bigger.

Action, if you have the capacity to do so and maybe just give us a little bit of an update on your thinking there and whether we could see something more meaningful over this year or next.

Thanks, Paul I'm going to put that question to call.

Thanks, Paul I know, we've talked about this in the past I think.

Firstly on the outset for business development versus internally discovered assets, we view them separately in terms of probability of success I think that's fair.

For all organizations to view it from that perspective, and when thinking about things that are strategic versus in licensing.

I also add that we're really agnostic to the structure and the scope of opportunities that we're looking at today.

<unk>.

The issues are that are in the CNS space, we see the yes.

The assets that are available bifurcated in either extreme in terms of being a late stage commercial higher value higher expense items and those that are higher science that are in the earlier stage development.

And I think we continue to evaluate those and see where their place would be in our own pipeline. So in a nutshell those strategic types of deals are possible and we look at those as much as we see on the licensing front.

And close if you look at the pipeline today, you'd see about a dozen assets in mid to late stage development.

Our balance there with the new program that we brought in from phase one to phase III and a balance of targets that are validated and those that are are novel and those are the types of things that we look at when we create the pipeline and manage to sustain it over time.

Okay.

We'll take our next question comes from.

Apart with Bank of America. Please go ahead.

Yes, I would like to just go back to the <unk> results from the quarter and your view for the rest of the year. So.

When you give your thoughts about what <unk> with looking like on your <unk> call you were pretty adamant.

You wouldn't expect to see.

The level of sequential growth than we've been accustomed to that.

Are you, saying that compliance improved after that time, which is about I don't know what five weeks into the quarter.

And why would compliance meaningfully change.

And I know you've talked about COVID-19 et cetera, but frankly, we have already had several COVID-19 surgeons throughout two Q and that didn't seem to impact.

On a great quarter, so I'm just trying to understand.

What part of that.

Dynamic you're most concerned about at this quarter or this half of the year that that you were still able to overcome in the first half.

Yeah, Praveen just to be clear on the compliance front I wouldn't call. It a huge surge of.

A better compliance it's something that you can only really take a look out over longer periods of time. So it's not something you clear sight on.

A couple of weeks into the quarter five weeks ended the quarter. We typically look at it on a quarterly basis to really get an understanding on what refill rate per patient looks like.

Slight changes in refill rate per patient definitely drives a large revenue contribution.

The good thing is patients are staying on medicine, and that's something that we've seen ever since beginning of launch in and I think Thats, a testament to the medicine itself and our clinicians.

You know I would say is in respect to Covid, we don't want to be a COVID-19.

And centric call, we do see sporadic.

<unk>.

Covid that they're taking.

Doctors patients down to the office.

It just has caused some level of disruption.

Our view is to always shoot as high as we can with them every quarter, but on calls give a really balanced view as to what the potential scenarios could look like.

But Eric given here.

Yes, maybe just to chime in a little bit.

Recall that for them.

The Q1 call that we said we flagged that is a quarter that had a record number of new patient starts.

And then now in Q2, we set another record and I think that the new patient starts are a huge contributor towards the results from Q2.

We carried a lot of momentum coming out of Q1 into Q2 and those new patients that started in Q1 of course.

As Matt said, we saw really good.

Persistence and adherence in Q2 and of course, you know.

When you have small changes.

In those.

Measures of of compliance.

That can really add up over it when you've got a patient base as large as ours is now so.

Yeah, I would just flag the new patient starts as an important contributor and with regards to Q3 and you know sort of the balance of the year. We have said that Q3, historically has been a slower growth quarter.

For various reasons over the five years since the launch.

So we want to make sure that investors understand that.

This year, we don't expect to be any different.

And then in years past the Covid factor.

Is relatively newer compared to the early phase of the launch but in general Q3 has been a slower growth quarter, whereas Q2 has almost always been a really strong growth quarter for us.

Okay.

And next to treat.

<unk> with Citi.

Go ahead.

Yeah.

Hey, guys. Thanks for taking my question and congrats on the quarter I was just wondering if you could talk a little bit about how much of an impact you think fee.

The new sales reps had on the Q2 number and how we should think about the impacts there moving forward I know, Matt you did talk a little bit about that earlier, but it seems like at the lower end of the guidance range, you're essentially assuming kind of no growth. The next few quarters and at the high end, you're assuming essentially a similar level of growth from a dollar person.

Active to second half of last year.

Just trying to understand how the new sales force factors and things.

Yes, So let me let me do this.

Take a step back and say that.

We've raised our guidance and what is now the bottom end of our range was the top end of the range at the time that we issued guidance at the beginning of the year.

And so we feel very good about the trajectory that we've been on thus far in 2022.

We're not expecting the second half of the year to be a no growth scenario.

But we do have a range and we wanted to make sure everyone understands where we expect to end up.

By the end of the year, so that being said with regards to the first part of your question, which was about the sales force.

What we've guided externally is that it's going to take a bit of time for all these new people to hit their stride everyone's working really hard to get integrated into their territories to meet their customers.

Et cetera, but it takes a little bit of time for folks to you know its.

You really get up to speed we've hired.

Very experienced people in.

LTC and in neurology, and the backfill and our inner site team.

But just because their experience doesn't mean that they've got experience in TD and within graduate so.

I think we're doing all the right things to set everyone up for success and we're doing a really great job in terms of teamwork and collaboration handing off customer relationships sharing best practices et cetera.

But in terms of when we start to see a more tans.

Tangible impact from the expanded field sales team, it's our belief based on our prior experience with field expansion that it would be towards the latter part of the year.

So in summary, we're doing all the right things, we think they are making a contribution but it's early yet to to.

Gage the degree of that.

Okay.

And we'll take our next question from Jay <unk>.

With Oppenheimer. Please go ahead.

Oh, Hey, congrats on the quarter and thank you for taking the question can you talk about how your 568 selected <unk> four agonist will be clinically differentiated from other muscarinic programs like Corona and <unk> and what sort of read across do you expect from the emergent <unk>.

Study of car T, which is going to read out soon thank you.

Eiry Roberts: And I want to take a moment to thank the teams both at Neurocrin and Sose Heptares for their hard work in successfully progressing this molecule into the phase two study, which will begin enrollment in the near future.

Yeah. Thank you James we're very excited about a 5568 program and that we're really pleased to be able to rapidly.

Get to a point with the FDA that they paid us to start the phase II study, which will be beginning enrollment very soon this is a phase two dose finding study in patients with schizophrenia, and I think I just to remind you 568 is a an ortho derrick are going to select.

Eiry Roberts: Along with examining the opportunity to expand beyond schizophrenia with 5-6-8, our teams continue to work on advancing other novel muscarinic agonists into the clinic, including a potential M1-M4 dual agonist.

If I can instead of and full and so it is the first molecule that nature to go into this disease area.

I think we were very.

Encouraged by the validation of the info mechanism by both Corona answer about in acute psychosis, but clearly the profile of a direct agonist.

Positive allosteric modulator. This is a non selective muscarinic agonists, it's difficult to predict right now with the differentiation between those molecules for us. The most important thing is for us to get going in that phase II study, we believe at the well design dose finding study that will allow us to answer some key questions. In this disease area and that will be progressing as rapidly as part of.

Eiry Roberts: In addition to moving forward with NBI 5-6-8, this month we will initiate Phase 1 evaluation for a novel orally active small molecule, NBI 7-70, which targets a potentially important mechanism for the treatment of depression.

Eiry Roberts: If we are successful in progressing to Phase 2 clinical development, we will divulge more about both the type of molecule, but I can say that this mechanism of action has already been validated clinically by parenterally administered molecules.

Eiry Roberts: If successful, NBI 7-70 would provide the first oral treatment approach for this target in depression.

Eiry Roberts: Now I'd like to address the results of the signal-seeking study of NBI 1-0-4 in essential tremor. The team completed a high-quality, single-center study of NBI 1-0-4 in 30 patients with essential tremor.

Eiry Roberts: The intent of this study was to identify potential signals of efficacy, and determine the tolerability of NBI 1-0-4 in this patient population. NBI 1-0-4 was well tolerated at all doses studied.

Eiry Roberts: However, top-line efficacy results from the study were negative and failed to achieve statistical significance.

About to enroll that study.

Eiry Roberts: The study produced a broad data set beyond the top-line information, and the team is continuing to evaluate this data with the intent of presenting it at a future medical conference.

Great. That's super helpful. Thank you very much.

Eiry Roberts: Based on the totality of data from this study, at this time we do not plan to proceed further with the clinical development of NBI 1-0-4 in essential tremor.

Eiry Roberts: It is important to note that these results do not impact the current Phase 2 study of NBI 1-0-4 in epilepsy, with continuous spike and wave during sleep.

Okay.

Eiry Roberts: Enrollment in this study is complete, and we remain on track to disclose top-line results by year-end.

We'll go next to Carter Gould with Barclays.

Eiry Roberts: Finally, I'd like to congratulate our partners at the Mitsubishi Tanabe Pharma Corporation, for all their efforts in getting valbenazine approved.

Please go ahead.

Eiry Roberts: We look forward to supporting their launch of Dysfal for the treatment of tardive dyskinesia in Japan.

Great guys. Thanks for thanks for taking the question.

I wanted to come to the <unk>.

Campaign.

Now over a year.

Kevin Gorman: With that, I'll hand things back to Kevin.

And I'm wondering if you can help kind of.

How do you think that's contributing.

Makes sense.

The magnitude there and if there's been any thought to expanding that or how you see that kind of evolving going forward. Thank you.

Yeah, we're really pleased with the DTC campaign is meeting our expectations in terms of the.

The behaviors that we're looking for in the target.

Patient care partner population.

We've consistently seen a high rates of people visiting the website.

Lots of downloads in page views and of course people registering to receive information.

From the company you know ultimately, it's an important contributor towards new patient starts and we continue to look.

Look at key performance indicators of SaaS. The return on investment of the DTC campaign and as I mentioned in my prepared remarks, it's.

We're pleased with it and we're going to continue through at least the end of the year end.

We will reevaluate when we get a little further down the road what the plan looks like for 2023.

In terms of how much of a contributor it is to our success you know obviously, we've got a lot of different initiatives at any given time.

But we think it's an important contributor along with other marketing programs with the expanded field force et cetera, and all of these things together.

What's really driving the strong growth that we've seen this year.

The raising of our guidance and our expectation that we've got a lot of headroom here in terms of this market opportunity and we're going to continue to.

To invest as we see appropriate.

Okay.

We'll take our next question Rob.

With J P. Morgan. Please go ahead.

Hey, guys. Thanks for taking the question and congrats on the quarter.

Kevin Gorman: Thank you very much, Irie.

Matt I am sorry, if I missed this in your opening comments, but maybe you could highlight a little bit about the R&D expense increase for the year, and what's really driving that and which programs specifically thanks. So much.

Operator: And, Operator, now we are ready to take questions.

Yeah, Hi.

Nice to hear from you on the R&D expense that is $30 million and it's a milestone associated with the surgery. The boroughs muscarinic program. So we triggered a milestone with the acceptance of behind in the initiation of the phase two so it's purely a.

A milestone related expense.

Operator: As a reminder, at this time, if you would like to ask a question, please press the star and 1 on your touchtone phone.

Thanks.

Okay.

And next to what Brian scored with Baird. Please go ahead.

Operator: You may withdraw your question at any time by pressing the pound key.

Hey, good afternoon, everyone. Thanks for taking the question. So I was hoping to get any thoughts on San.

Alright.

I know, it's about a year before you would launch.

Operator: And we'll move first to Phil Meadow with Cowan & Company.

Given the timeline.

I wondered if you started to do any work to understand how this might accelerate rate growth do you think this will be a switching market from do tougher benzene ones be targeting BRAF naive patients I'm just trying to think of that based on what the current needs in this market, where you would anticipate drawing patients from and how much of an inflection in that trough.

Okay.

Alright, well yeah.

Certainly excited about the opportunity we're very excited about the data.

Obviously, we have to see what the labeling looks like but we're pretty far along in our planning one.

One way to think about this is that this is completely incremental to our RTD market you know, there's very very little.

Off label prescribing of <unk>, and so we think that <unk> offers a.

A differentiated treatment option for patients with Huntington's disease that are suffering from choreiform movements.

As you May know.

The majority of our patients that have Huntington's chorea are not treated with <unk> two inhibitors for various reasons and so the majority of our growth opportunity is really to tap into that untreated.

Korea patient population certainly there will be some patients that are treated with.

Current treatments that may choose to switch.

Two <unk>.

But we don't view this as a primarily a switching market opportunity.

Our aim is to really address the majority of patients that arent being treated for various reasons.

And we think that the.

The profile that we have in TD.

Lends itself well.

In terms of those product attributes that make us the most prescribed preferred products and TD, hopefully will translate well into the HD market.

So we're looking forward to that opportunity next year.

And we'll move next to Chris Sheppard Tani with Goldman Sachs. Please go ahead.

Phil Meadow: Please go ahead.

Phil Meadow: Good afternoon.

Thank you very much congratulations on a very strong quarter I wanted to ask Kevin in particular your ear.

Point of view on a bigger picture topics that's come across this week, especially for.

So the commercial pharmaceutical companies and that is the potential for legislation that would.

<unk> potential for Medicare Gov pricing negotiations discussions from different companies talk about the implications on certain types of drugs small molecule versus biologics exposures to different payer groups impact on how people are thinking about investing in innovation pipeline strategy could you share your thoughts.

From your vantage point and also remind us about any implications you feel might be from Neurocrine specifically.

Phil Meadow: Thanks for taking our questions, and congratulations on a strong quarter.

Yeah.

Yeah, Chris said, it's a very timely and important question, maybe a little too timely.

There's a lot of moving parts that are taking place right now if you read the press reports as early as this morning.

As well as our own.

Washington D. C team suggest things are still appear to be very much in flux.

As such it would be premature for me to talk a talk about that or speculate on the impact on our company.

Or whatever ultimately ends up in the bell.

But when when there is clarity we will be talking about this and we will be giving specific thoughts on that I'm, sorry that I I don't want to speculate now.

Phil Meadow: Just two from us.

I think the term as the sausage still appears to be made and so we'll wait and see how that turns out.

Phil Meadow: First, on the Q1 results for Ingresa, they're particularly impressive because – I'm sorry, Q2 results for Ingresa, they're particularly impressive because Q1 wasn't as good.

Well take our next question from.

Myles Minter with William Blair. Please go ahead.

Phil Meadow: They're particularly impressive because Q1 wasn't as impacted by seasonal factors as other Q1s in the past.

Hi, Congrats on the caught up just on phosphate I E planning alongside the Phase Iia study to run a separate study monitoring cardiovascular.

The effects of that mechanism.

And maybe within the Phase Iia study do you plan to do an adjunctive therapy.

<unk>.

Phil Meadow: So I guess we're curious whether we can go into more detail as to what led to the increase in new patient starts in Q2.

We don't have plans for adjunctive therapy in the current study. The current phase two study is focused on understanding dose responsiveness and acute psychosis. We will have the extensive safety measures throughout the study, including cardiovascular assessment, but at this time, we are not planning in separate cardio.

Vascular study.

We really intend to see and what.

But the information looks like from the current ongoing phase II study and then decide how to proceed from there given that obviously this is a selective ample agonist rather than the molecules that have been in the clinic before.

Yeah.

Okay.

Yeah.

Phil Meadow: Was that strictly DTC?

Next to Danielle Brill with Raymond James Please go ahead.

Hi, guys. Good afternoon. Thanks, so much for the question I just have a quick follow up about the contribution of the new sales hires and I guess, maybe I'll ask a little differently, but has the prescribing mix shifted at all or is it still 80% contribution from psychiatrist 20% neurologists.

Phil Meadow: Were there any of those seasonal factors that did improve in Q2, maybe more than you had initially anticipated?

Thanks.

Yeah. So we're still seeing in general that the.

That the.

Our mix of prescribers is pretty similar to what it was a quarter ago like I said they've.

We've been very recently deployed.

And we are seeing positive signs in terms of both the activity and their response to the promotional efforts.

But I would caution everyone from.

Attributing the strong Q2 to the fact that that we played an expanded field sales team.

Those were essentially simultaneous events.

But ultimately we do expect that with.

The expansion of the field sales team.

Deployment into three distinct segments that we're gonna be able to go deeper in psychiatry.

Neurology and of course, our LTC is essentially an untapped market for us previously and so we'll be able to provide I think more details when we get further along in the year in terms of how things are shaping up.

Phil Meadow: And were there any one-time factors?

But we're very optimistic about the opportunity that we have with this.

Larger because the field organization to be able to support and reach more customers.

Phil Meadow: It does strike us that the bottom end of your guidance, your renewed guidance, suggests down quarters in Q3 and Q4 versus the Q2 run rate.

Okay.

We'll take our next question comes from.

Phil Meadow: Aside from COVID, we're curious how that could happen.

Laura Chico with Wedbush. Please go ahead.

Phil Meadow: And then the second question is on ET.

Phil Meadow: We're just curious whether the data put into question, in your minds, the T-type, calcium channel blockers, generally, do you think that this was an issue with the disease, with the mechanism, or simply compound-specific?

Good afternoon, and thank you for taking the question.

I guess, you know factoring president how do you think directionally about the peak run rate at this point and I guess I'm just trying to understand how the outlook may have changed in recent quarters filing not only of the adjustments to the field force, but also in terms of how you might be thinking now about the exclusivity runway foreign Kratsa Oh, Thank you very much.

Phil Meadow: Thanks.

Hi, Laurie this is Matt on the exclusivity front, we feel very confident with the strength of our patent.

Matt Abernethy: So, Phil, this is Matt.

A state that we will we will have protection into the mid twenties thirties and.

We feel very good about that as it relates to the peak, we've not given any commentary associated with what we think the peak will be.

Matt Abernethy: We're going to handle your first set of questions on the ingressive front, and then we'll handle ET as we get further into questions, as we're going to try to stick to one question per.

But I think the growth that you've seen so far this year, just really reflects how much of an opportunity. We still have been in the tardive dyskinesia market, you think theres only 25% of patients that have received the diagnosis and only half of those being treated at this point. We look at this this market is continuing to be.

Untapped and the growth is even reflective of an environment, where telehealth is still 50%, so Eric and I think the answer yes.

Matt Abernethy: You know, you're right.

Other things that I would point out is that in addition to the you know the majority of patients still being as yet undiagnosed.

About half the time when patients are diagnosed with TD, they're not offered of the amount two inhibitor and so.

There was a significant.

Amount of progress still to be made in terms of making sure that people with TD get diagnosed and they get offered effective treatment. The other thing I would point out and it somewhat relates to the last question as well.

Matt Abernethy: Q2 was an incredibly great quarter, reflecting great new patient additions, and then also, surprisingly, very high compliance rates. So, I'd say the beat was both internal and then, obviously, external came from a nice step up in compliance, and then also a continued trajectory of new patient additions that was fairly strong throughout the quarter.

Is that we've seen a.

Tremendous growth in the number of advanced practice providers that are now diagnosing and treating TD.

Matt Abernethy: We wouldn't flag any one-time items, such as inventory or bulk purchases by any pharmacies.

They are an important.

Part of the care system, both in neurology and psychiatry, when we're talking about nurse practitioners and physician assistants here.

With the expansion of our field organization, we're gonna be able to reach and educate more of those are important health care providers and so on.

Even though we're five years into the launch we feel like there's a long way to go in terms of continuing to develop the TD market tend to help as many patients as possible.

Matt Abernethy: So, it was a very clean, straightforward quarter.

Okay.

And we'll take our next question from Charles Duncan with Cantor Fitzgerald.

Matt Abernethy: If you take a step back and think about our, guidance range, you know, it really reflects an over or around $300 million growth here, and that's a pretty incredible feat coming out of COVID and then still dealing with the environment that we're dealing with right now.

Matt Abernethy: And as Eric mentioned in his prepared remarks, really, the downside is very specific to COVID.

Please go ahead its avi on a line per child. Thank you for taking our question. So we are wondering.

Matt Abernethy: I think we all see it popping up regionally, and that could cause some disruption at the bottom end of the range, and then at the top end of the range, it's all about aggregation on the Salesforce expansion side.

This past quarter's performance was primarily driven by new prescribers or or I guess, an acceleration and the.

The growth in prescriber base or if it was more from greater depth amongst current prescribers. Thank you.

Yeah. We've long said has a lot of the opportunity that we have left with the ingress and the development of the tardive dyskinesia market is really going deeper with our existing clinicians we did see new writers since quarter end, we are a start.

Any color on a new segment in LTC as well as with more focus in neurology. So overtime. We would expect that we will have a nice increase in the prescriber base, but.

I'd say by and large.

But the biggest majority of our scripts came from existing prescribers going deeper.

Yeah, and just to tack on to that.

It's it's not so much about the new writers is about the new patient starts and as Matt said.

Not just increasing the breath, but the depth of our of our business is important.

We will continue to see new prescribers get added over time, especially as we tackle new market segments like LTC.

But you know ultimately most of the patients that have the T. D are within the practices that we're already calling on and we continue to focus on helping people recognize TD.

To make the appropriate distinction between TD and other drug induced movement disorders and of course to offer effective treatment within grasp when it is diagnosed.

Matt Abernethy: So, hopefully, that addresses your question, Bill.

Okay.

Next to Evan <unk> with BMO capital markets. Please go ahead.

Matt Abernethy: Thanks.

Hey, guys coupon here forever and thanks for taking our question just wondering if you could provide any color on the inventory build and then to that end does the DTC program impact channel dynamics, where revenue recognition cadence. Thank you.

Yeah.

Brian Abrams: And I think our next question is from Brian Abrams with RBC Capital Markets.

Yes, so on the inventory front, we've been at a very stable inventory positions and nothing to flag there.

And I believe I commented on that earlier. So the results were fairly claim that's this quarter and as Eric mentioned on the direct to consumer advertising campaign. All the indicators are pointing towards a very successful DTC program at this point with what we're seeing in all of the web.

Site metrics.

Call Center metrics, and so I would say, it's performing at our expectation.

The only other thing I would add Keith is that.

In terms of does DTC impact channel dynamics no. It doesn't ultimately you know we have.

Our limited pharmacy network, it's it's a large limited pharmacy network and we think that it.

Meets the needs of our customers from our access and flexibility perspective.

But any prescriptions that are written foreign grades are going to get filled through that channel.

Brian Abrams: Please go ahead.

Well go next to Marc Goodman with SPP.

Please go ahead.

Lena Dunn: Hi.

Yeah.

Yes, Hi, I joined a little late so I'm not sure. If you actually answered. This question about gross to nets and average selling price in the quarter or if you could answer that but more importantly, I was curious I know you probably.

Finishing up on the.

Payer contracting for next year, if you can give us a sense of how youre thinking about asp's into next year as well for aggressive. Thank you.

Lena Dunn: Thanks.

Yes, so for the quarter and we saw a rebound in net revenue per script as we had expected a bit above 5400 and would still need everybody to a guide for this year of $5400 net revenue per script.

It's premature for us to cover our 2023 in terms of both coverage as well as net revenue per script, but its something that we will obviously give give give some insight to us as the year progresses, and if we did see market at this time something structurally that would change that.

Lena Dunn: This is Lena Dunn for Brian.

Give us a lot of concern over our ability to to continue to allow patients to have access to this medicine or a significant impact to our price.

When we're thinking about 2023, we would give everybody.

As much of a heads up as possible and sitting here today, that's not our expectation.

Uh huh.

Okay.

Next to David <unk> with Piper Sandler. Please go ahead.

Thanks, I'm sorry, if you addressed this but on <unk> can.

Can you just go through the extent to which you're getting contribution.

So on the long term care.

Setting I know this is an opportunity to talk about it in the past.

And maybe looking ahead.

What's your view on how big of a portion of the mix that could be over time. Thank you.

Yeah. So.

Our long term care team has been very recently.

Deployed into into that setting.

And so it's very early in the process yet in terms of being able to.

Generate that that business, we certainly feel very confident about the opportunity otherwise wouldn't have.

Built a dedicated sales force there.

And is that in nursing homes and other types of residential facilities.

And that care for patients.

That there is a significant use of anti psychotics in other medicines that could cause T D.

This is a care segment that we were very interested in and attracted to at the time that we're planning to launch.

Unfortunately, we didn't feel like we were in a position to introducing graduate into this care segment.

During the initial launch phase because really because of capacity constraint issues and.

And so we prioritized focusing our go to market approach on outpatient neurology.

With an emphasis on movement disorders, as well as private practice psychiatry and humidity mental health clinics and that's really represented.

The focus for their first few years of the launch.

And then when we got into.

Last year, we know we re visited.

Our readiness to take on long term care, we made the decision to reorganize and expand our field sales team and we felt the time was right to tackle this.

From a scale perspective, it's probably not as large of an opportunity as the other segments that I've described but its meaningful and its significant and there's a large number of patients that could benefit from and graduate which is the most important thing.

So as we get further down the road and I'll be able to provide more color in terms of how things are shaping up not just with the long term care team, but also our new dedicated.

An expanded focus in neurology with her neurology sales force so stay tuned.

Well move next to Amit <unk>.

With Needham and company. Please go ahead.

Yeah.

Hey, Thank you for taking the question. This is on for any I was wondering if you are.

He can give some color on obviously, you're creating a dedicated sales force for the neurologist I don't think go ahead David.

What are the early feedback that you are slowing down and.

How should we think about the impact of this.

This expansion with Salesforce for the remainder of the year.

Yeah with regards to neurology in particular, the feedback has been very positive.

We've said that.

Prologis has represented about 15% to 20% of our business.

Foreign grocer.

Certainly we think that it could be more.

And we you know we did the analytics support the case for expanding our focus in neurology with a dedicated sales team.

And really we've got a team that has a two.

Products within grasp on Genesis that they can bring in neurology, we think that frankly, they work well together, meaning for example that on Genesis can really help the neurology team get access to some of these movement specialists.

And so we're very pleased with the early feedback about.

About three quarters of the team we hired from outside the company.

So they're still learning the ropes so to speak but they're quick learners.

And we've started calling on a broader set of neurologists than what we were calling on previously with the smaller sales organization.

So ultimately.

We feel good about the investment.

All the early signs are very positive and as I said before we think that there's a lot of growth opportunity in neurology that we couldn't really tap into under the old structure. So as we get later in the year and into next year I'll be able to provide a lot more color in terms of how things are going really across all three of those care segments.

<unk>.

Okay.

And next to <unk> today.

<unk> <unk> with Guggenheim Partners. Please go ahead.

I have a question on a 352 could you talk about the expectation from the adult focal onset seizure study that youre running I understand that there's a dose finding study but in terms of.

The product attributes in terms of the signal of efficacy standpoint, like what would you like to see for you to that would warrant a further.

Further development.

Thank you.

Yes. Thank you yeah, we're very excited about the 352 program boats in focal onset epilepsy and rare disease epilepsy, SG&A, a and we have those two phase II programs going on in parallel for the focal onset seizures.

We did that is a dose finding study.

In adults and we are evaluating as the primary endpoint that the seizure free.

Frequency using a diary approach and so that will be the primary endpoint at the end of the of the study. We also obviously will be looking at Tolerability, the adverse event profile and exposure to the drug in that setting. In addition to the quality of life and other measures that are described I think you know in our posting.

Around this study.

Obviously, we'd be looking at the totality of the data from the phase two dose finding study in order to understand whether or not to progress, but today based on the phase one data from this program and we've been very encouraged by the profile of the molecule and we intend to read out the data from this study sometime next year.

Okay.

And it looks like you got to be.

The question now so I would now like to turn things back to Kevin.

Lena Dunn: I just want to go back to 104.

Lena Dunn: You know, I guess, you know, can you just talk a little bit about, you know, why you think that, you know, it might still be active in some of the epilepsies and, I guess, the decision to discontinue?

Thank you very much clarity and thank you everyone today, especially for the focus of your questions. It allowed us to get through everyone and I Hope you found our answers to be transparent and to be helpful.

Lena Dunn: Is that, you know, insufficient efficacy across all the endpoints?

Lena Dunn: Or, you know, is there any signals that you might be able to tease out as you continue to look at the data?

We've had an extremely good first half of the year and I'm really looking forward to continued growth in the second half of the year. We've made significant investments in grad. So over the last six to 12 months and we expect those to increase our pace to increase our reach to our patient population.

Lena Dunn: Or was it just a more bigger picture view on the therapeutic window?

Lena Dunn: And then, I guess, you know, as we go back to the epilepsy, are there, you know, any epilepsies where, you know, you might continue thinking about bringing this drug in as well?

Lena Dunn: Yeah.

As the year progresses.

Lena Dunn: So, a couple of questions in there.

I'm also very optimistic about our pipeline.

We've built to date over the next 18 months, we have a number of important clinical readouts to remind you. We had five pivotal programs. We have seven phase II programs, and we're adding a new and very interesting phase one program that we'll be talking about all of those.

Q2 2022 Neurocrine Biosciences Inc Earnings Call

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