Q3 2022 Neurocrine Biosciences Inc Earnings Call
During the conference today, Please press Star zero.
Yeah.
Good day, everyone and welcome to today's Neurocrine Biosciences reports third quarter results. 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. You May Register to ask a question.
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Please note that this call may be recorded and I'll be standing by should you need any assistance. It is now my pleasure to turn the conference over to Todd to Schloss Vice President of Investor Relations. Please go ahead.
Thank you operator, and good morning, everyone welcome to our third quarter 2022 earnings call on today's call, we have Kevin Gorman, Our Chief Executive Officer, Matt Abernethy, Our Chief Financial Officer, I Roberts, our Chief Medical Officer, Eric <unk>, Our Chief Commercial Officer, Karl <unk>, our Chief business development and strategy officer during our call.
We'll 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. We will go to Q&A. After our prepared remarks, and we'll do our best to get to everyone's questions with that I'll hand, the call to Kevin.
Thanks, Todd and good morning, everyone, well, another very nice quarter, congrats with sales and this sets up a white sets us up well for continued growth in Q4, I'm pleased to see that the investments that we have been making an aggressive this year and last year are starting to show results and it is our expectation we will continue to increase our ability to treat.
D patients. So they don't suffer needlessly. In addition, we are seeing clinical development activities with Bell benzene are showing good progress. This is most clearly demonstrated by our filing of the S. N da for the treatment of chorea in Huntington's disease, we continue to build and progress our pipeline, but I'm going to stop now and let Eric and I.
More detail on commercial and clinical and then move quickly to your questions, let's start with Matt.
Good morning, everyone. Another great quarter for in graduate with $376 million in third quarter sales, reflecting continued momentum in new patient additions coupled with high levels of compliance for existing patients.
With these strong results, we now expect annual and aggressive sales to be between one four and $1.4 billion to $5 billion setting us up for a nice trajectory heading into 2023.
Before handing the call over to Eric I will make a few comments specific to next year boring grades are we do not plan to provide preliminary sales in early January but we will provide our Q4 sales results in 'twenty two 'twenty three fails guidance during our earnings call in early February .
For 'twenty to 'twenty three expenses I encourage you to ensure your estimates reflect the progression of our clinical pipeline, including the muscarinic program and also reflect a full year run rate given our sales force expansion. We will continue to invest in our pipeline and also initiatives to help supporting graduate growths in both T D in Huntington's.
Now over to Eric.
Yeah.
Thanks, Matt.
Three was another strong quarter from an execution and performance perspective.
With aggressive sales of $376 million and over 68000 total prescriptions, we saw a robust 32% year over year growth versus Q3 of last year.
This marks the sixth straight sequential quarter of growth, which highlights the consistency and effectiveness of our commercial initiatives are having on improving diagnosis and treatment rates for tardive dyskinesia as well as driving preference spring <unk> as the most prescribed be Matt two inhibitor.
We believe that TD diagnosis rates are now approximately 30% and that's great news. However, there remains much work to do at seven out of 10 patients living with TD still have not received the diagnosis for their uncontrolled movements.
And when diagnosed only about half are diagnosed patients are offered effective treatment with b Mab two inhibitors. The standard of care for first line treatment.
This remains a largely underdeveloped market with plenty of room to help even more patients over time.
Our expanded sales team has now been in the field for two quarters. As a reminder, in early Q2, we reorganized and expanded our sales force transitioning from a single team structure to three distinct teams dedicated to psychiatry, neurology and long term care customers respectively.
Over the first five years of borrowing breza launch, we focused on psychiatry, and neurology health care providers.
Long term care is a new customer segment for us and essentially we are in the midst of launch mode for education around T D N and grandson in LTC.
I am pleased with the progress we've made over the past two quarters and helping our new team members to hit their stride with TD education, promoting and grasp and providing appropriate reimbursement support to their respective customers.
Activity levels are high and it appears that we are already seeing some benefit from the expanded sales force.
Based on our prior experience, we believe we will see additional upside from this investment in the coming quarters.
Matt noted you should expect SG&A expenses to be slightly higher next year as we continue to invest in and grab that and the valve benzene brand in both TD and the expected launch in Korea, and Huntington's disease.
With H D Korea in particular, we're excited about the potential opportunity to bring the leading beam at two inhibitor to the HD patient population, who deserve more and better options.
All in all I'm very pleased with the performance of our commercial team in Q3 and over the course of this year.
I'll now turn the call over to my colleague Dr. Roberts.
Thank you, Eric and good morning to everyone on the call.
I'll begin by congratulating the many people at Neurocrine colleagues at the Huntington study group and the clinical trials coordination center for all their hard work that resulted in a recent supplemental NDA submission about benzene as a potential treatment for chorea associated with Huntington's disease.
This marks the successful achievement of a critical program milestones, which we hope will lead to ball benzene availability next year as an approved treatment option for patients living with H D Korea.
I'm also pleased to report that the phase two study of N V I 568.
Dave and Bob agonist for the treatment of schizophrenia has commenced enrollment of subjects in the United States.
This shows continued progress for our high priority muscarinic portfolio of molecules and we continue to evaluate the potential for N V. I 568 in additional indications beyond schizophrenia.
Also progressing other molecules in this platform through preclinical testing.
We're currently on track to initiate phase one clinical testing for dual M. One and full agonist from the platform in 2023.
We've also initiated phase one clinical testing for N b I certain certainty as a potential treatment for major depressive disorder.
If successful we believe 770 could provide a novel oral approach to a highly validated pathway for the treatment of depression.
Phase one clinical testing is proceeding as planned and we look forward to sharing more information as we move forward with phase II clinical testing here.
The recent addition of N V I 568, and N B I five 770, now bring our pipeline to a total of 13 clinical programs with 12 studies progressing through the mid to late stage of development.
We are poised to deliver a number of kind of the readouts over the coming 12 to 24 months with the next readout occurring for N V. I went oh pool in epilepsy with continuous spike in waves during sleep.
Here, we remain on track for top line results by year end.
With our most advanced program connected funds enrolment in both the adult and pediatric Registrational studies has progressed well keeping us on track for top line results for both programs next year.
Overall I'm pleased by the progress we continue to make building and delivering the neurocrine clinical portfolio.
And I want to thank the cross functional R&D teams for all their hard work.
With that I look forward to addressing your questions during Q&A I'm going to hand, the call back to Kevin.
Thank you Larry operator, we're ready to take questions at this time.
Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pound can you. Once again that is star one to ask a question, we will pause for a moment to allow questions to queue.
Thank you. Our first question will come from Caffeine Ahmed with Bank of America. Your line is now open.
Hi, guys. Good early morning to you.
And on the West Coast.
Just wanted to get a sense about your adjusted.
Guidance for the full year for Evercore ISI.
Where do you think.
Go ahead ask the unmet need is right now and as you look into maybe next year and beyond I'm not going to provide guidance now, but how should we be thinking about.
Complementing your current indication with Huntington's and what kind of market opportunity ultimately.
Did you see for Huntington.
Post the launch.
Okay.
Matt I just wanted to add.
Yeah, sure Hi, Suzanna, Thanks, It's Matt <unk>.
Thank you we have three questions in there so.
I appreciate your time, let me let me take the full year Guide you know really when you reflect on 2022 really really significant year for the company with over $300 million in growth.
Feel really good with how we're exiting and how that sets up for.
For next year.
Eric.
Do you want to talk about the Huntington's.
Yes.
So certainly we're excited about the opportunity to bring a new treatment option to huntington's patients with Korea.
And we and we think that there's a meaningful opportunity for <unk> in there.
If you look at the <unk>.
Huntington's population there is approximately 30000 in the U S about 90% of those individuals have some degree of Korea.
70% of them actually would be considered moderate to severe and only about 20% of eligible patients.
With Korea are actually getting treated with a <unk> two inhibitor. So.
You know for various reasons.
There's a significant proportion of untreated patients you know whether it's the a complex dosing and administration, whether it's concerns about the box warning for those products.
There is still a meaningful number of patients that are untreated for their career and so we're excited about the opportunity to bring forward.
With benzene certainly the.
Profile that we have in TD and the labeling that we have in television.
Were very attractive and certainly some of those attributes would be key.
Carried over to the to the agency population so.
We're going to have to see what the labeling looks like but certainly we believe that it's important to have a new.
Different treatment option available for these patients and the one out of the thing that I'll say is that we're well positioned.
To bring Val benzene to these patients through primarily the movement disorder neurology audience switches a physician audience that we cover today with the TD indication in neurology team.
Thank you. Our next question will come from Paul Matisse with Stifel. Your line is now open.
Thanks, So much for taking my question and congrats on the quarter.
If you look at <unk>, historically, and depression or psychosis oftentimes class labeling as more of a byproduct of indication and less about mechanism. So to that point as you get ready to add Huntington's chorea to the <unk> label do you expect the FDA to employ class labeling and include a black box warning for suicidal.
Any risk.
And if so do you feel like that could be at risk of nullifying, our marketing advantage, you have and TD or more broadly versus us data. Thank you.
Thanks, Paul Thanks for the question, let me start with respect to the <unk> data.
And in terms of the data package that we have an HD. We were very pleased with the outcome of the phase III study that we completed that and in particular, the safety and Tolerability profile from that program is very similar to what we saw in tardive dyskinesia and of course, we do not have the black box warning.
Paul and Greg at this point in time in that indication.
It's difficult to predict the fda's perspective around the black box warning that exist.
Benzene and I said, Oh in and taking Huntington's disease as to whether that would be applied across to buy benzene, but we're going in very confident in terms of the tolerability and safety profile that we've generated in this disease states without benzene.
Paul the only thing that I'll add again echoing.
Irene acknowledging what you had said about the psychiatry division.
But offline, we can talk about and I am sure you are aware of the history of how the Black box warning came about that's been quite a long time ago in quite a bit of quite a bit of work and the tremendous number of patients have since been.
Treated with specific reversible b mat to antagonist.
How important is it a lack of box box warning.
<unk> positioning today.
Well I don't I think the other attributes of.
In grocer.
Probably outweigh that obviously.
We are of a mind that it is not warranted and so therefore, that's why we're making our RK strongly with the agency.
Okay. Thanks very much.
Okay.
Thank you. Our next question will come from Phil Nadeau with Cowen. Your line is now open.
Good morning, and congrats on another good quarter.
We wanted to ask about <unk> looking forward to the adult phase three trial it looks like clinical trials Dot Gov is suggesting enrollment is completed in February of 2023.
So should we expect that data in the second half of next year.
And then on the results itself.
Talk a bit about what gives you confidence that the changes in the biomarker as you saw in phase two we will reduce the steroid dose for the adults.
And what is the protocol for tapering steroids in that trial.
Yes.
Thanks, Bill happy to answer those questions are enrollment is very much on track and as we've said I think and that keeps us on track for releasing the data from both the adult study.
And from the pediatric study.
Next year.
In that regard I think the as you know the endpoint for each of the studies is out to six months in terms of the total data reporting and so that would be consistent with where we are right now with enrollment.
With respect to the adult study and the endpoints and how does that phase II data translate to phase III I think we were extremely pleased with the biomarker.
And point of fact that we saw in the phase II proof of concept study and.
And just to remind you we saw a dose related decrease in all of the hormone levels that are important in the management of CAH, including probably most importantly, the androgen levels and four patients treated for just 14 days in the context of that study on its back then.
Stable steroid dosing, we saw a substantial decrease with the majority of the patients achieving more than 50% reduction in aggregate.
And achieving normal range in several individuals and so with those data in mind I think that gives us great confidence that in the face of continued reduction of androgen levels in the context of longer term treatment that we can then taper down steroids and hopefully if we're able in at least a reasonable number of patients to get.
We gained control of the HPA access to actually even normalize those steroids to the physiologic range of treatment in terms of the tapering protocol within the study we've not actually released the information in any detail around that I will say, though that it is.
He is well controlled and and positions us for a hopefully a good readout at the end of the day on the endpoint, which is obviously the primary for the adult study.
That's very helpful. Thank you.
Yeah.
Thank you our next question will come from Nina.
Retail carts with Citi. Your line is now open.
Hey, guys. Thanks for taking my question I, just wanted to ask about in breadth of performance for the quarter. If you could give us an update on whether or not there was any inventory impact in the numbers and then also how to think about the gross to net and for Q, just given that the price increase that must be can be taken.
Yes. Thanks for the question on the inventory front, no channel inventory build or or decrease that we would call out at this time and then from a gross to net perspective, what I'd frame as the net revenue per script will be slightly below $5600 in the fourth quarter and then as you.
Look into 2023 somewhere in that 56, hundreds range is going to be what you should expect reflecting the recent price increase that we took.
So hopefully that provides some clarity.
For those who aren't as close we did take a 9% price increase that's essentially effective on November one.
And.
Think you were alluding to on the growths in upfront, we typically and we will be taking a gross to net charge or discount on her chin channel inventory for accounting purposes, but that's reflected in the slightly below 5600.
Net revenue per script.
God I just provided.
Okay. Thank you.
Thank you. Our next question will come from our new Pam Rama.
With J P. Morgan your line is now open.
Hey, guys. Thanks, so much for taking the question.
There were a couple of adjustments on timelines on the pipeline side, I think mainly Val benzene in schizophrenia and <unk>.
845, and <unk> those have been pushed out a little any color there on the timeline adjustments. Thanks, so much.
Yes, thanks, Jonathan.
Yes, I'm happy to answer that yes, we did move the timeline on a couple of our psychiatry trials.
And I think there's a couple of background reasoning, then probably fairly consistent with what you may have been hearing from other companies as well I mean, I think there's three main things that have impacted the startup phase of some of these trials earlier in the year for US. The first is obviously that each of those trials was enrolling in.
Ukraine, and potentially even in Russia, and so with the conflict in Ukraine, we have had to identify.
Elsewhere in the World and we're still working through Onboarding those sites and ensuring that we have been in the trial. The second point is that in this space and psychiatry, particularly in depression, we have seen.
Some reluctance on patients part to come back into the trial environment, coupled with the fact that many of the patients had actually fallen off treatments during COVID-19 and as a result, since one of our trials as an adjunctive treatment and that has led to some slower startup in enrollment, but I think thats actually recovering right now and then.
Third thing actually impacts the sites themselves in the site startup process many of our psychiatry sites, particularly in the U S. But also elsewhere in the world experience quite a lot of stuff to the Nova and we've heard that even in the prescribing environment.
During COVID-19 and in the immediate post Covid period, and so that did delay some of our trial startup timing.
Again, we're out ahead of that now we're seeing a pickup in those trials and so we're obviously working as hard as we can to accelerate that.
<unk>.
Some delay right now.
Okay.
Thank you so much for taking our question.
Thank you. Our next question will come from Brian Abrams with RBC capital markets. Your line is now open.
Hey, good morning, guys. Congrats on another strong quarter and thanks for taking my question going back to CAH wanted to ask about the diurnal acquisition I'm curious to learn more about what the springs with regards to our commercial footprint trial conduct capabilities on site and Kols relationships and then maybe bigger picture what international.
Utilization means for our long term operating expenses margins and the overall strategic vision for the company.
Hi, Thanks, very much let me start with that Brian . So let me I'll answer a couple of parts to that and then I think Kyle.
I'll address the remainder with respect to our clinical strategy and expertise.
We're really pleased to be able to integrate Diana colleagues into neurocrine.
Pretty well known in the rare endocrine disease space and has deep expertise, both clinically and actually in the Medicare space, which we believe will be very helpful. For us as we seek to address and CAH and subsequently in due course.
And neuroendocrine logical disorder.
From that perspective, it was really helpful. For us. In addition, obviously with them being placed in the U K, we had been thinking for a while about how to plan some position outside the United States to support the many global trials that we're doing and so I think we'll see that moving forward as well.
And then Kyle yes.
Yeah, just a little bit on the commercial front. They have two products that theyre looking at commercializing and a number of countries versus a product called out can be it's a mini tablet formulation sprinkle. If you will for patients pediatric formulation for adrenal insufficiency. In addition to that they have a time release profile release of hydrocortisone.
That's in development for both C H and adrenal insufficiency here in Europe as well as in the U S. So we'll be looking at those products in total and to optimize those in conjunction with Vanessa thought moving forward for the U S and European markets. So excited exciting opportunity for us.
Commercial organization here in Europe that we hope to learn more about and Leverages as time moves along and as <unk> moved through clinical development.
Thanks, Sharon Thanks, Harry.
Thank you. Our next question will come from Carter Gould with Barclays. Your line is now open.
Great. Good morning, Thanks for taking the question maybe focusing on 352 ahead of the data next year can you just talk a little bit around I guess, the challenges and the efforts to mitigate some of the heterogeneity in this population given sort of the.
The background anti seizure medications and.
On enrollment there are things that are on schedule to complete by the end of the year I know that data was originally planned for early next year and I believe it's only like a 13 week study. Thank you.
And just to clarify Katja youre talking about three five <unk> focal onset focal epilepsy study correct correct. Okay.
Thank you.
So let me just get to the timing question first I think we've signaled that we will have data available during next year on that for that program.
We remain on track with that.
The this is a.
Phase two.
No seeking study in 100 patients with focal onset seizures and immediate dressed as a population that has failed to respond fully from currently available treatments and so the background therapy for these patients ranges anywhere from one to four.
Anti epileptic agents and so that does take out some of the variability in the population.
When you compare that with a de novo population, having said that as well the other way in which we address the population because the primary endpoint for the study in terms of efficacy is to look for a reduction in seizure frequency is that we have a relatively long run in period to measure seizures.
Before starting treatment in the trial and that is an eight week period that allows us to look at the variability of thesis within individuals and individuals have to reach a certain threshold to be eligible for the study. So those are some of the ways in which we are have looked at.
Managing and variability there and as I said, we continue to enroll well in that study we are on track for a readout of data next year.
Yeah.
Yes.
Thank you. Our next question will come from Chris Shea with Tony <unk> with Goldman Sachs. Your line is now open.
Thank you very much on the EMCORE agonist program was so say it appears that the timeline with Quintiles Dot Gov is for readout in December 2024 might we anticipate any interim data prior to this primary completion and if you could give us a sense at all for what kind of dosing you're looking at.
Kind of efficacy on the Pan score five you might expect at the six week measuring point did it.
Clinically meaningful for this given the excitement and progress in this space overall, thank you.
Thanks for the question Chris.
So we're just starting the study actually we just initiated it.
So in terms of the guidance with respect to data availability I think you're probably referring to.
Most of the trials Gov.
That's all kind of best estimate intensive study completion right now, but that we will be able to provide more guidance as we actually go into the study.
And the reason I say that is because this is a dose finding study phase III study and it's somewhat adaptive and design in terms of the number of doses in the nature of the dosing.
It may change over time in response to.
The safety Tolerability and other findings within the study we as a company will not be.
Seeing the data on an ongoing basis. So obviously, because we are interested in understanding the efficacy in a blinded fashion by the end of the trial and so in terms of interim analysis. There is no formal planned interim analysis that we would see the results up in the interim and therefore make public.
And then in terms of the Pan score.
I mean, the the study is essentially pilot in a similar fashion to the phase III studies previously performed on.
Car T intensive the magnitude of the effect that was seen that I think people were very encouraged by that magnitude of effect.
And if we ought to see an efficacy signal that similar to that that study would be well designed to address that.
Thank you.
Okay.
Our next question will come from Myles Minter with William Blair. Your line is now open.
Thanks for taking my questions and congrats on the quarter just back on <unk>. My question is just on what proportion of <unk> patients are actually in the long term care facilities relative to the softening euro accounts that you've already have touch points on just as you're looking to penetrate that market specifically with Ingrid saw with the targeted sales force. Thanks.
Yeah. Good morning, Myles Thanks for the question so.
In terms of current patients on treatment and its a small percentage as I mentioned in my.
<unk> prepared remarks, we're still scale.
Scaling up in long term care that team just got deployed earlier this year and essentially we're in launch mode in that in that space.
However, we think that theres meaningful patient potential and Thats a segment that we hadn't focused on previously in the launch and so we're excited about the opportunity to educate providers in long term care.
And recognizing TD.
Driving diagnosis, and obviously treatment with within graduate so it's very early days yet.
I would say that compared to the psychiatry and neurology segments, it's relatively even more underdeveloped but.
Like I said, we're excited about the opportunity and we think that we're going to be able to.
To help a lot of patients in long term care segment in coming quarters and years.
Thank you. Our next question will come from Brian <unk> with Baird. Your line is now open.
Hey, good morning, everyone and thanks for taking the questions I was just hoping to get some more insight on the pace of new patients coming on <unk>. It looks like you're on average over the last year point in.
Gross somewhere north of 15000 prescriptions.
On an annual basis, given the size of the potential market in the iceberg. If you will do you think that's a pace that you can durably keep up are there considerations to think about in terms of that potentially slowing down or are there ways that we could even see this accelerate and and a quick one on any preliminary thoughts on the IRI impact.
That's why both in terms of when you might make the list of negotiated drugs and how we should think about the percentage of sales that would be explicitly impacted by Medicare in negotiation.
Yeah, Hi, Brian So in terms of the growth and sort.
Sort of our thinking here I'll go back to the overall dynamics of the TV market.
Is still a relatively underdeveloped market, we've said in the in the prepared remarks that we think about 30% or so of patients have now been diagnosed with their with their TV only about half the time when they are diagnosed so they offered treatment with a <unk> two inhibitor. So there's still a tremendous amount of upside here.
In terms of continuing to drive recognition diagnosis and treatment with an <unk> and that's really across all the segments that we're in whether we're talking about outpatient psychiatry.
Neurology and now most recently in LTC so.
You've seen that we've continued to grow robustly with over 30%.
Growth in Q3 versus the same quarter a year ago.
We've raised our guidance this year now twice essentially so we are we feel like we're in a very good place in terms of continuing to drive growth organically with this with this franchise.
Across all of the care segments, where we have where we have a presence.
Okay.
Hey, Brian on the IRA front, so we still have a lot to work through there from a legislative perspective, but the good news is that we were part of the buyouts or we should be part of the small biotech exemption and as it relates to the direct price negotiation with HHS.
Our best estimate right now is we're likely not going to be eligible for that until you know later this decade around 2029.
You know theres still a lot to work through between now and when it gets implemented in a few years and from a phasing perspective on the on the rebate.
Right now it does look like we're part of the small biotech exemption so.
We do have time before those ultimately kicks in and we'll have more clarity around what the potential impact is overtime.
Okay. Thanks, guys.
Thank you again as a reminder, if you would like to join the queue. Please press star one on your Touchtone phone.
Our next question will come from Laura Chico with Wedbush Securities. Your line is now open.
Hi, good morning, Thanks for taking the question I guess I have one kind of related to aggressive growth and I'm wondering if you could elaborate a little further on the aggressive payer mix today versus a few years ago. There's been a lot of investments you made on the sales front and expanding the prescriber base and also as Youre seeing diagnosis rates increase I'm wondering how is payer mix change.
For in graduate and where do you see that evolving over time. Thank you.
Hi, Laurence So I would say the payer mix has been remarkably stable since the early days of the launch.
We've shared that it's been majority government pay.
And given.
The fact that we're continuing to.
<unk> developed the existing outpatient psychiatry neurology markets and now LTC.
We expect that dynamic to continue.
And in terms of of coverage from a.
Reimbursement perspective.
We've been in a very good place with approximately eight out of 10 prescriptions written being filled.
Very good formulary coverage across all the all the payer segments.
And as Matt alluded to.
With the gross to net discussion, we expect that to continue into next year.
Thanks.
Yeah.
Thank you. Our next question will come from Ash Sharma with UBS. Your line is now open.
Hi, Thanks for taking my question I have two one.
First can you comment on the recent report third quarter, and keeping us I'd be quarter to quarter variability do you think the refund rates have reached a steady state or is that a significant improvement potential here.
And then just second just from a competitive standpoint, but there has been indicating that it's working to simplify the initial titration scheme for <unk>.
What kind of impact could that create an even better.
So with regards to your question about compliance we shared that.
We benefited from it enjoyed.
Very good compliance with this with this medication over the course of the launch we've looked at it throughout throughout the five years that we've been on the market and it's been very steady.
And high relative to the other psychiatric medicines that these patients take.
That continues to the present day in fact, that's one of the reasons that we've had such robust growth this year, including in Q3.
So it's a combination of getting new patient starts which were pleased with as well as having high compliance and.
Certainly I don't see a ton of headroom airport, increasing that because it's already quite high.
Okay.
Thank you. Our next question will come from Jeff hung with.
With Morgan Stanley . Your line is now open.
Thanks for taking my question for one O. Four in CSW asks can you just remind us of what we should expect to see in the top line results and what do you need to show to consider the study success.
Thanks, very much Jeff.
Wonderful.
<unk> this is <unk>.
We remain on track for completion of the 24 patient phase III study by the end of the yen, we will read out data by the end of the year.
The measure that is used as the primary in this.
Seeking study is the spike in wave index measured by the E on the EEG during.
Sleep and this looks at the first hour of non Rem sleep.
Measure as the number of spike in waves abnormal EEG signals that athene during the course of that time.
And it's.
Reported as a percentage between zero and 100 and the higher the percentage the worse the epileptiform discharged during sleep is in that individual patient.
In terms of what type of magnitude of change we would be looking for.
And.
There's very little known in the field about clinically active medications that are being studied in this type of study and so the only real comparison that we have is from steroid treatment were about a 50% reduction in that spike in wave index is seem to be very clinically relevant for these patients.
In addition to obviously looking at that reduction in the Spike in wave index, though.
Measuring seizures themselves in the study and other more quality of life measures and so we will be looking at the data into <unk> given that it is a signal seeking study, but in terms of the primary endpoint, that's actually how it how it's measured and and what we're looking for.
Okay.
Okay.
Thank you. Our next question will come from Jay Olson with Oppenheimer. Your line is now open.
Oh, Hey, congrats on the quarter and thank you for taking the question.
With regards to your plans for expanding your global footprint.
Be fair to say that connects their font is likely to be your first ex U S regulatory submission.
And as you look to broaden your ex U S portfolio do you think that will be driven more by your pipeline as it exists now or do you for business development opportunities to expand your global footprint. Thank you.
Yeah.
Thanks, Jay Yes.
I think that you're absolutely correct from Neurocrine.
Side of the business and I can say that now because we are a multinational fire with the.
Acquisition of diurnal that <unk> would be our first.
Submission to the EMA. So we're looking forward to that and as was said earlier in the call. The diurnal acquisition was made because of that and to help with that footprint, we do think that.
There will be other.
A number of other drugs, if they test out well in the pipeline that we are developing and will be developing globally. So we would see more.
Going into Europe .
In the future in addition.
Kyle and his team.
Look quite extensively throughout Europe , and I would not be surprised as we move forward as American moves, Florida over the years that will there will be other opportunities.
For both pre commercialization and commercialized drugs in Europe .
Great. Thank you.
Okay.
Thank you. Our next question will come from Marc Goodman with S. VP Securities. Your line is now open.
Yes. Good morning, I read you have an M. One you haven't had more than before I was just curious your strategy as far as development for these programs are you planning on.
Doing both all the way to the goal line or are you thinking about you know well.
You know look at phase II data for both of these projects will take the first one best one I'm just curious how you're thinking about it.
Yes, thanks Mark.
One of the things that really attracted us to the collaboration with <unk>. They have tourists was the ability to explore.
And muscarinic agonists and beyond just the lead and four agonist program.
Obviously, we're very.
Keen to see the data from the handful selective agonist in schizophrenia and have just started that phase II study.
And it clearly and full agonism alone in.
Schizophrenia appears to be sufficient to produce an improvement for patients as we've seen from validation of the target through other companies.
Beyond that though I mean, there is significant unmet need both within schizophrenia itself in terms of some of the cognitive and negative symptomatology and into other disease areas.
Predominantly cognition is impacted and so.
Regard I think the ability to pursue an appeal.
My name is four agonist becomes very interesting to us.
And then and when Agonism alone I think again provide opportunities both in that cognition space and beyond and so I think the way you described it is very often that we want to make sure. We're bringing forward the very best central molecule and exploring the space.
Across disease areas as much as possible in early phase II studies, and then ensure that we're taking the best opportunity for what's the patient the only thing I would add to that is that will be driven by data not only from the muscarinic platform, but also by all of the other clinical programs that we have therefore as data flows out we re <unk>.
<unk> our pipeline our efforts, we don't have endless funds. So we have to prioritize at neurocrine and it'll be the data that guides us.
Okay.
Thank you. Our next question will come from David <unk> with Piper Sandler Your line is now open.
Hey, Thanks, So I know you get asked this question a lot regarding business development and you've talked about.
Deal size I wanted to ask the question in a different way, which is that you.
A large neuropsychiatry commercial organization.
And obviously theres a lot of pipeline.
But what's your thinking regarding the addition of an asset that is either commercial stage or market ready or something that's has a real line of sight to much more of a line of sight into commercialization, where you can.
In the nearer term if you will leverage that commercial infrastructure, you've built whether it's in neurology or psychiatry.
Hi, This is Kyle thanks for the question. It is one that we.
Discuss a lot with.
Individuals like yourself, but because it is it is a question that.
It comes top of mind, I think for us of Neurocrine.
You look at our strategy first and foremost it's looking at programs that.
Bring with it innovative science, we do look at things across a range of of.
Development from early stage to late stage.
We look at things that have the opportunity to change the standard of care that come along with strong intellectual property with that we're agnostic really to the stage of development. So while we've had a licensing strategy that has been.
Successful to bring in programs pre proof of concept that's not an area that we restrict ourselves to we look at all things from earlier stage and to later stage I will say that and not surprising you've probably done. Your work yourself is that there is certainly a scarcity of assets that are late stage to commercial there's just a handful of those.
So it doesn't take long to see what types of programs or products might.
It makes sense for use in a commercial organization like we have here at Neurocrine.
I think the other pieces that.
It's worth mentioning here and then maybe I'll turn it over to Matt to talk a little bit about some of our thoughts around capital allocation, but we're also agnostic to deal structure. So you've seen us look at.
Traditional licensing deals that we brought into the company without cost and profit share. It really is a function of not only developing a structure that is attractive for both parties, but also we've used it to diversify risks in our portfolio. So when we think about working on neurology psychiatry and endocrinology.
We've tried to balanced by those therapeutic areas five stages, and then we risk share by deal structure in the case of our collaboration with Takeda for example.
Have programs that we shared during the most risky part of development that is phase two so I think in totality. Our strategy is one that is diverse allows us to look at things that are early that are late and it also appreciates that there is a scarcity of assets that are out there and we we assess our pipeline is such that we can build it over time.
Depending on the assets that are available let me ask Matt did you want to add anything there on the capital allocation side of things.
No I think.
We all feel like we're in a great spot with the financial flexibility that we have good profitable we have over 1 billion in cash and we have a growing product gaming browser. So we're going to continue to invest behind the browser to grow that.
As quickly as possible to help as many patients with TD and ultimately HPA as possible. We will continue to invest behind our pipeline and as Karl said, we do look across the gamut of what might make sense for us to build a leading neuroscience company. So feel like we're in a fortunate spot with the financial flexibility.
We have at the moment thanks.
Thank you.
Thank you. Our next question will come from OUI here with Mizuho. Your line is now open.
Hi, guys. Thanks for taking my question and congrats on the quarter just have a question on <unk> just wondering.
When the data readout could you just sort of help us understand what you're looking for in terms of the magnitude of reduction and.
What it means I guess.
How much reduction, which you need to see in order for it to be clinically meaningful.
And whether it would help what type of patients with Tom what this kind of reduction.
Help them with whatever the hell of a male smaller females.
Thanks.
Thank you.
And just to remind you of the design of the both the pediatric and adult connect the Pompe program looks at two important elements of controlling CAH. The first is the control of the HPA access itself and that is.
I identified by a measurement of the critical hormone levels, particularly androgen levels that are important to control in the disease and then the second is the ability to reduce the amount of exogenous glucocorticoids that patients have to take because currently that's the only way they control the androgens and so our goal.
With connect the phone is to gain control of the HPA axis, and therefore control androgen levels, while also being able to reduce the amount of exogenous steroids that patients take now in all of the discussions that we've had with external experts payers that are groups. Currently it is clear that any reduction in exogenous.
Right for the long run is beneficial.
Cause there.
Analogy to other disease areas, where high dose steroids are used for a long period of time and a lot of the issues arising from that like metabolic bone issues and others are also ones that CAH patients suffer from so our trial is designed to look at the reduction in steroid level and also the control of the androgen and.
That could be beneficial to any patient suffering with CAH and so that and most importantly, I think our goal because of having the adult and pediatric programs running in parallel is to be able to intervene for patients with CAH as early as possible in their disease during the pediatric phase such that we can.
Get better control of the disease and have that be potentially lifelong for individuals.
Okay.
Thank you. Our next question will come from Evan <unk> with BMO. Your line is now open.
This is <unk> on for Evan Thanks for taking our question.
Just wanted to touch on some comments that Matt made regarding the expenses for next year should we expect a significant step up in SG&A.
And I also wanted to get a sense as to the balance between commercial investment and R&D investment.
How much more expensive for the second billion and sales be versus the first and then also can you remind us of.
How much of it is paid for by part D. Just so we can get a better sense of the potential impact of the IRI. Thank you.
Thank you Connor for the questions on the.
Med D or the part D side of the question. We've not commented publicly on we've only said that R. R.
Our sales have a much higher government mix than they do commercial mix.
Of course, we have have exposure there, but we've not specifically disclosed that.
We will continue to make investments within SG&A to to grow in browser. So you should see a step up in SG&A spending in dollars, but the expectation that I've said previously is that we will have some SG&A leverage from a percentage of revenue in 2023, So an increase in.
Investment, but we will show leverage in SG&A. The opposite I guess is true from a leverage perspective in R&D, you'll see us increasing our capital allocation to R&D.
Next year, we will have a higher percentage.
Of revenues going into R&D, and primarily to fund the muscarinic program as well as some of our earlier research program. So.
We're enthused by the progression that our pipelines, making them when we were going to continuing to invest behind the muscarinic.
Thank you. Our next question will come from <unk> <unk> with Guggenheim. Your line is now open.
Hey, guys. Two quick questions for me first one is with regard to the price increase can you remind us how much are you able to capture.
And the second one is a pick upon.
Can you just tell us what the sales for any commentary in terms of what you're doing on the marketing front. Thanks.
Yeah on the price increase and how much do we does it ultimately flow through to the bottom.
Clearly not all 9%.
Essentially a bit less than half of that ultimately flows through to our net revenue per script. So as I provided the guidance.
For 2023.
As I said earlier in the Q&A that.
But you should expect that our net revenue per script will be in the 56 hundreds range, which does reflect a you know a.
A couple of hundred dollars increase as compared to what you saw in 2022.
Yeah.
Yes.
Picking up on the second part of your question with regards to <unk> and certainly we continue to make progress in rolling that out to the Parkinson's population folks that are suffering from <unk>.
Excess of off time and.
I mentioned earlier that we had rolled out our expanded field sales organization earlier this year, including a dedicated neurology team and so certainly that.
It's an important part of the promotional effort within neurology.
And I would highlight the benefit of having two products to be able to.
Get access to those.
Mineralogist, especially the movement disorder specialists so.
It's a part of our strategy to leverage both on <unk> and <unk> together.
In that space and certainly it's a big part of our commitment to neurology.
Okay.
Thank you. Our next question will come from Mohit Bansal with Wells Fargo. Your line is now open.
Great. Thanks for taking my question and congrats on the quarter from my side as well.
Maybe another question on congrats on growth. So you mentioned earlier.
Today that.
About 50% of patients at the time of diagnosis to not get treated with <unk>.
Could you help us understand this a little bit better why they do not get treated and how far you have come along to get those patients on the up.
On the drug and going forward do you think the growth would come from that conversion or the market expansion. Thank you.
I'll answer the last part of your question first and the answer is both.
And.
Our our goal is to make sure that no patient with TD suffers needlessly.
At the time that we launched in growth in 2017.
There were no approved treatment for TD and this was a a market that was.
Low penetration.
With treatment low diagnosis rate.
Across the board and so we've made great progress in terms of improving the rate of diagnosis and as I mentioned in the prepared remarks about we estimate about 30% now of.
People living with TD and actually have been given the diagnosis, but only about half the time or the offered treatment with a <unk> two inhibitor believe it or not that represents progress as well early in the launch that that number was zero and so if you think about the historic.
Standard of care in PD, it was either to ignore the TD unless it got really bad.
And.
In some instances.
To try and Tinker with the antipsychotic regimen to reduce replace or remove damage psychotic in hopes that that might.
Reduce the abnormal movements and so you know.
We've been leveraging the updated <unk> guidelines, which recommend we met two inhibitors as evidence based first line treatment in TD.
To encourage providers that when they do make that diagnosis to offer treatment with a <unk> two inhibitor specifically in breza.
So we.
We think that it's not just about driving diagnosis, but also making sure that people are offered effective treatment and we're making progress in both of those domains.
Despite the fact that we've made progress there's still a long way to go as I mentioned seven out of 10 people living with TD today still haven't gotten any explanation for their abnormal movements.
And so as we continue to move forward with what I consider to still be a launch we will continue to.
Yes.
<unk> higher diagnosis.
<unk> effective treatment and make sure that we have and maintain great access to treatment going forward.
Super helpful. Thanks.
Thank you. Our next question will come from Sam Article Kearney with Canaccord. Your line is now open.
Good morning, Thanks for taking my questions of course doing because I've got to be the end here. So.
So what's the key differentiator for <unk> as an adjunctive treatment of schizophrenia, I'm asking because you're a current price point for them and also because of the schizophrenia market has several genetics in it and for Madden title given your healthy cash balance can you give us any new medical pattern meters on what an absolute upper limit might be for Neurotoxins financial capacity for an acquisition.
Yes.
Thanks Amanda.
The Ats question for <unk> I think there were three main reasons why we were interested in pursuing <unk> as an adjunctive treatment in patients with schizophrenia, who failed to adequately respond to their current treatment.
The first was that in patients with schizophrenia, it's known that a proportion of patients have increased naphtha Hilton mean synthesis and that is not addressed by currently available anti Psychotics, which act post sign up particularly now.
Now in grant.
Our benzene acting presynaptic Lee on the <unk> two inhibitor.
Has the potential to decrease that piece and I'll take dopamine synthesis levels.
Particularly for patients and so in that setting that gives a good scientific hypothesis and rationale as to why it could be helpful. In addition to <unk> antagonism Secondly, obviously, we have an extensive.
50, and Tolerability database for patients with schizophrenia treated with <unk> four that tardive dyskinesia and that gave US good support to go into a phase III program and then finally, we had at both our own preclinical data looking at adjunctive treatments that showed some evidence of synergy in animal models, albeit that those are not.
Easily translatable to the clinic, but also we had anecdotal evidence from the field that patients with schizophrenia had seen some improvement in their symptoms. In addition to the tardive dyskinesia and so with all of those elements in hand, that's what made us.
Comfortable with moving into a phase III program, we have the first of the phase III studies within that program ongoing right now and we aim to start the second study.
Next year.
Yeah.
Okay.
I'll just I'll just add one one brief comment to what I already said, which is when you're talking about differentiation. There are no approved.
Treatments today indicated as adjunct of treatments and schizophrenia.
About the standard of care are most patients are treated serially with antipsychotic monotherapy.
Small proportion of patients that are on our TD trials were on more than one antipsychotic at a time, but there are no <unk>.
Currently approved adjunct of treatments since schizophrenia. So it is a paradigm shift in with.
With success, if we're able to get that indication for <unk> that in and of itself would be a differentiator.
Yes from a financial capacity perspective, clearly three buckets that you always look for as to what your upper limit your cash what kind of debt or convertible debt could you put on your balance sheet and then what about how much equity would you.
Use so you have a lot of flexibility within those three levers.
We could do a deal we've said publicly you know potentially a $3 billion to $4 billion type transaction of course, you can always go higher or or you could of.
Of course, not spend what your overall straightforward capacity would be the most important aspect is what is the right strategic.
Fit for Neurocrine, if youre going to make that large of an investment. It clearly would have to have a whole lot of synergy to our pipeline and then also.
Potentially be able to leverage our asset.
In our commercial sales team. So I think the key question is what would be the right kind of acquisition for us that could take us to the next level as a company and we do as I said earlier.
This level of financial flexibility to make those kinds of investments, but we will of course be very prudent.
Thank you.
So right at the top of the hour.
I'm, sorry, operator, I'll just throw it from here is that we're right at the top of the hour I think we got through everyone's questions. My closing remarks, I'll be very brief.
What Neurocrine is focused on right now is to finish as strong as possible.
This year in all of our in all of our business.
We look ahead to next year, which I think is going to be a very exciting and productive year for us.
Obviously, continuing all of the efforts from our commercial and our medical affairs team in order to make sure that no no TD patients continue to suffer needlessly, we're looking very forward to bringing <unk> into the Huntington's population with hopefully an approval.
In 2023, we have important readouts two phase III trials, both of them in CAH, the pediatric and in the adults and then.
And they are an important phase II readout and focal onset seizures were going to be progressing all of the pipeline this year.
We're going to really be doubling down on making sure that we are doing the best job possible operationally at Neurocrine, and then theres going to just being more with all the work that's going on in 2023 that.
You don't have a line of sight to right now I think that Theres, a many exciting opportunities for us so with that I. Thank you all for your questions today, and we look forward to talking to you later in 2000 and later in this year and also at the beginning of next year take care.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect.
Goodbye.
Okay.
[music].
Okay.
Okay.
Yeah.
Okay.