Good day, everyone, and welcome to today's Neurocrine Biosciences reports Second Quarter Results. Please note today's call may be recorded. It is now my pleasure to turn the conference over to your Vice President of Investor Relations, Todd Tushla. Please go ahead.

Thanks, Chloe. Good afternoon, and thank you for joining us on our third quarter 2021 earnings call. On today's call, Kevin Gorman, our Chief Executive Officer; Matt Abernethy, our Chief Financial Officer; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, our Chief Business Development and Strategy Officer. During today's call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. After our prepared remarks, we will then head into the question-and-answer session, so please limit yourself to one question so we can get to as many questions as possible. At this point, I'll hand the call over to Kevin Gorman.

Thanks, Todd. Welcome, everyone. Good afternoon. I am very pleased to see INGREZZA's continued growth. This is the second quarter in a row where we see this growth. I anticipate we'll have continued growth for the remainder of the year. Now we're not yet back to the pre-COVID growth trajectory, but INGREZZA has continued to increase. COVID's impacts are still being experienced in the field and the number of territories is not behind us, but we've adapted well. Telemedicine is still being heavily utilized by healthcare professionals. We've adapted well in growing our business, and Eric will talk about how we are investing behind INGREZZA. Now second, we started the year with an extremely aggressive goal to start several Phase 2 and Phase 3 clinical trials. We will meet that goal, growing one of the most robust neuroscience pipelines in the industry. We will highlight several of these programs. So with that, I'm going to turn it over to Matt.

Thanks, Kevin. INGREZZA's momentum continues with Q3 sales of $287 million, representing 13% year-over-year growth. We were encouraged to see Q3 new prescriptions approach pre-pandemic record levels, even with telemedicine still representing a large portion of the psychiatric patients' business. Q4 is off to a solid start, and we anticipate Q4 sales of just over $300 million, reflecting strengthening demand offset slightly by seasonally elevated Q4 gross net discounts. The progress we're seeing with INGREZZA reflects a tremendous medicine, a great team driving strong commercial execution, and most importantly, a significant opportunity to help many more patients with TD. Looking ahead to 2022, we are seeing strong growth from INGREZZA, and with it being our top capital allocation priority, we will invest an additional $100 million to expand our Field Sales Team and continue our DTC campaign throughout the year. Behind INGREZZA, we continue to invest in our growing pipeline; we expect to exit this year with 12 clinical programs with many important clinical data readouts coming over the next two years. We are well-positioned for long-term growth, and our people will be the key to executing our strategy of becoming a leading neuroscience company. With that, I will now hand the call over to Eric Benevich.

Thanks, Matt. Let's jump right into it. Our team executed well throughout the quarter, driving record INGREZZA total prescriptions, leading to all-time high sales of $287 million. From an INGREZZA perspective, we continue to see improvements in new patient starts. While the levels are not quite back to pre-pandemic levels, we have seen steady improvement since the beginning of the year. Key performance indicators such as sales call volume, sample distribution; and speaker programs were consistently strong throughout Q3, a quarter that historically is a slower growth quarter due to seasonally related challenges. In Q3, persistence and compliance rates remained at historically high levels we've come to expect with our medicine. As Matt said, we are off to a solid start to Q4. The pandemic is still impacting customer access and patient flow in regions throughout the nation. In addition, psychiatrists, in particular, are still relying on telemedicine about half the time, which presents a challenge for TD diagnosis. I'd like to provide more insight into the decision to expand our sales team. We have articulated since 2017 that this is a learning path that we continue to learn and adapt to better meet the needs of patients and healthcare provider customers. In 2018, with strong uptake for INGREZZA and market trends, we made the decision to upsize our field force to help accelerate TD diagnosis and treatment with INGREZZA. Last year, the pandemic taught us many lessons, including how to better meet the needs of our patients and healthcare provider customers, especially those who rely more heavily on telemedicine. It was also clear to us that the base of prescribers has grown larger over time as we've developed the TD market. To that end, by Q2 of next year, we will establish two new dedicated sales teams focused on movement disorder neurologists and providers in long-term care, respectively. In total, we will have three dedicated field teams across psychiatry, neurology, and long-term care, which we believe will constitute a more focused and effective sales force. When our expansion is complete around Q2 of next year, there will be approximately 350 specialty salespeople across these three teams. Along with the salesforce expansion, we've been making it easier for patients to get started by expanding our distribution network. We continue to caution you on reliance on third-party syndicated data. The salesforce and distribution expansions along with our ongoing branded direct-to-consumer campaign reflect our conviction in the TD market opportunity. The fact remains that there is much work ahead. We believe in the long-term opportunity for INGREZZA, which is evident in the investments we are making in our people and marketing initiatives to meet the needs of the many patients who still need our help. Turning to market access, we expect access to INGREZZA in 2022 to be similar to this year, and we are planning for INGREZZA's net revenue per prescription next year to be similar to 2021 rates. Access for patients remains a critically important priority. Launch to date, over 85% of INGREZZA orders have been fulfilled regardless of formulary status, and we expect to carry forward the success we've had with access and reimbursement into 2022. Feedback on ONGENTYS continues to be positive as more patients and prescribers are gaining initial experience with the only once-daily comp inhibitor approved in the US. Additionally, we continue to leverage ONGENTYS and INGREZZA together to maintain high access levels to our neurology customers. In closing, I'm very pleased with our team's performance under challenging circumstances and the impact that we're making for patients. Q3 was a strong growth quarter and represented all-time highs in total prescriptions and net sales. I'm even more optimistic about our growth trajectory. So with that, I'll hand the call back to our Chief Medical Officer, Dr. Eiry Roberts.

Thank you, Eric. Good afternoon to everyone on the call today. Building on Eric's comments regarding INGREZZA, our medical affairs organization continues to focus on education and key data generation in support of patients living with Tardive Dyskinesia. We recently expanded the portion of our field team focused on education and support of advanced practice providers, such as nurse practitioners and physician's assistants. Given the critical role that these providers play in the diagnosis and treatment of patients with TD, we know that the impact TD has on the lives of patients can often be even more important than the movements themselves. We continue to analyze data from our registrational phase studies, using the Tardive Dyskinesia Impact Scale or TDIS, a Neurocrine-developed TD patient-reported outcome. At the recent Psych Congress, we presented TDIS analyses demonstrating an improvement in patient-reported impact of symptoms, both functional and social, in subjects treated with INGREZZA. This analysis shows that questions within TDIS show promise as potential clinical assessment tools, and additional validation of the TDIS is underway. We're currently initiating the registrational study of Valbenazine for the adjunctive treatment of schizophrenia, with enrollment expected to open this month. This Phase 3 randomized, double-blind placebo-controlled study will enroll approximately 400 patients with schizophrenia who have had an inadequate response to antipsychotics. The primary outcome measure is the change in total PAN score from baseline to week 10. Key secondary measures include changes in the Clinical Global Impression Severity score, and changes in personal and social performance scales from baseline to week 10. We estimate this study will be complete in late 2023. There are several key milestones and activities to highlight for the remainder of the year. We remain on track to share top-line results from the Connect HD registrational study in Huntington's disease in December. We're also planning to initiate five mid to late-stage studies, including the registrational study for the treatment of Dyskinesia due to cerebral palsy, and the Phase 2 study of Luvadaxistat for the treatment of cognitive impairment associated with schizophrenia, among others. We anticipate having 12 programs in mid to late-stage trials entering 2022. With over 50 ongoing clinical trials and more to come, this is an exciting and potentially transformational time at Neurocrine as we look forward to delivering important clinical data readouts over the coming years. I would like to thank the teams across our organization and our partners outside the company for their continued hard work. Most importantly, I would like to thank the investigators, patients, and their families who participate in our clinical trials. I'll now turn the call back to Kevin.

Thanks, Eiry. That sums up all of our prepared remarks. So we are now ready for your questions.

And we will take our first question from Neena Bitritto-Garg with Citi.

Hey, guys. Thanks for taking my question. First of all, I want to understand a little bit more about where the growth in new scripts is coming from for INGREZZA because it sounds like you're still seeing kind of 50% telemedicine used in the psychiatry offices and similar 20% diagnosis rate. Can you just talk a little bit more about where that growth is coming from—an increase in the total number of visits regardless of whether telemedicine versus inpatient, total number of prescribers overall, or coming more from psych versus neuro offices? If you could drill down into some of those dynamics, that'd be great.

Eric?

Yes, thanks for the question, Neena. It's a little bit of everything. As I mentioned before, we are seeing significant use of telemedicine within psychiatry, and to a much lesser extent within neurology. It seems as if they have leveled off in terms of the volume of patient visits into psychiatry and the rate of telemedicine use. How we've been able to grow stems from our adaptability. It's a combination of factors; our salespeople have figured out who to see in person versus those to see virtually. We have also identified new prescribers who have not yet started utilizing the MAT2 inhibitors. Overall, we have adapted to this environment, and we continue to support providers, especially in psychiatry, seeing patients virtually to remind them to screen for TD and provide them with resources to help. For educational content from providers on TD screening and diagnosis, please visit mindtd.com for various resources we've been utilizing.

And we'll move next to Paul Matteis with Stifel.

Great, thanks so much for taking the question. So by our math, the guide that Matt provided for next quarter suggests investors benefit from price and inventory, a greater number of net patient adds was seen in 3Q, even by a small amount. Given that it is just a month into the quarter, you probably guide optimistically but also somewhat conservatively. Can you speak to your level of confidence that demand this quarter could exceed what we just saw in Q3, assuming my math is right? Thanks so much.

Sure, Paul, appreciate the question. I think your math is right. We continue to see great progress in driving INGREZZA. It was right below the pre-pandemic level, which is a testament to our team engaging with healthcare providers and keeping Tardive Dyskinesia on their radar. We have given what we're seeing; we've said that Q4 is off to a good start and what we'd expect throughout the quarter. Yes, we’re seeing good momentum, and our entire organization is rallying to help patients with TD get treatment with INGREZZA.

We will move next to Carter Gould with Barclays.

Great. Good afternoon. Thanks for taking the question. Maybe just a follow-up on some of the earlier questions in terms of how you guys are thinking about your expectations for telemedicine dynamics looking into next year, given the evolving reimbursement dynamics. Any insight on that front would be helpful. Thank you.

Yes, sure, Carter. I'll take that. There are going to be new guidelines put out by CMS on their reimbursement. We keep saying we anticipate that to come any day or any week now, and we still do. While the public health emergency is still in place, the current pricing guidelines will remain, and all current rules associated with the public health emergency will stay in place. There will probably be a transition time after the public health emergency is relieved before anything new starts. But under the current construct, we will be in the same telemedicine environment for most, if not all, of next year.

And our next question from Tazeen Ahmad from Bank of America.

Hi, good afternoon. Thank you for taking my questions. Kevin, as it relates to the decision to make the $100 million investment for neurologists and long-term care providers, why do you feel now is the right time? Earlier in the year, you spoke about efforts to try to minimize the effect of doctors working from home. Do you think those efforts have been maximized, and now you are looking for additional outlets, or will you be trying to work on all of these at the same time?

Yes, Tazeen, you brought up some interesting points there. The first point that you brought up was whether we think we've exhausted the prescriber base we've been targeting, primarily psychiatrists. Yes, it is heavily focused on psychiatrists, but we don't believe we have fully penetrated the psychiatric offices. At the beginning of the year, because Q1s are challenging, we wanted to do no harm as we approach Q1. As Eric mentioned, the rollout of these new teams will take place in Q2. We want our territories and salesforce to be intact through Q1 to avoid adding to the disruption. Eric, do you want to add anything?

Yes, I'll add to your comments here. Just to clarify, the increased SG&A by $100 million is driven by full-year spending for DTC, as this year was only partial spending, as well as the expansion of the salesforce. The bottom line is we recognize that as we develop the TD market, there continues to be an expansion of VMAT2 prescribers, and we believe there's an opportunity to reach, educate and motivate more neurologists and psychiatrists. We deferred our decision to invest in long-term care until we developed the market opportunity further. The time is now right for us to have dedicated resources to focus on that long-term care opportunity.

And we'll take our next question from Phil Nadeau with Cowen and Company.

Good afternoon. Thanks for taking my question. We have one on the pipeline; actually, you know that there are 12 programs that are likely to be in clinical trials by the end of the year. The press release mentions important data events over the next 12 to 24 months. It's a little unclear to us exactly when some of those trials are going to read out. So in particular, which trials are likely to read out next year in 2022, and which ones are more likely to produce data in 2023? Thanks.

So the first trial that will read out is in December of this year, and that's going to be the Huntington's study. The next study that will read out is the Phase 1b study for essential tremor, and then there will be another reading out later next year.

And we move next to Anupam Rama with JPMorgan.

Hey, guys. Thanks so much for taking the question. On Connect HD and Huntington's disease, how are you thinking about the market dynamics there? Is this taking share from the TD market or based on the profile of INGREZZA? Does it have the potential to expand the market for you guys? Thanks so much.

Hi, Anupam. I guess I'll take the question, and then Eiry can add on. I think the answer is a little bit of both. Many patients with Huntington's and associated Chorea with moderate to severe symptoms could benefit from a VMAT2 inhibitor. However, many do not due to concerns around tolerability and safety. So we believe there's an opportunity to grow the proportion of patients treated with VMAT2 inhibitors, as well as potentially attract some patients to switch over if they find the profile from our Huntington's trial appealing.

I just want to add that there are 30,000 patients in the United States with Huntington's disease, about 90% of whom have Chorea, and 70% of those have moderate to severe symptoms needing more aggressive treatment. Presently, only about 20% of patients receive treatment with a VMAT2 inhibitor, so we believe there is significant room for improvement. The once-daily treatment provided by Valbenazine could be crucial for these patients, particularly because they often take many medications and may have difficulty swallowing. We’re looking forward to sharing our results at the end of this year and moving forward with regulators for approval.

And we'll take our next question from Josh Schimmer with Evercore.

Thanks for taking the question. Your branded VMAT2 market share this quarter was at the low end of where it's ever been. To what do you attribute that, and where do you see this evolving? Thanks.

Actually, I think that it has stayed the same. If you take out the competitors' Huntington's sales, by dollar amount, it's still a 65:35 market share split, which is what it has been for quite a while.

And we'll move next to Brian Abrahams with RBC Capital Markets.

Hey, there. Thanks so much for taking my question. A pipeline question for me on Valbenazine and schizophrenia. Can you talk a little about the upcoming Phase 3 trial design? I wonder more about what influenced the design since a 10-week endpoint is longer than we've seen for other schizophrenia studies. Was that guided by anecdotal data regarding time to full effect for Valbenazine or other evidence of activity? Additionally, regarding the 400 patients, what are your expectations, and will there be more than one dose level?

Yes, regarding the study design—the primary endpoint choice. The onset of effects for Valbenazine in TD is rapid in many patients, and we have seen that in preclinical and other data, so we do not anticipate needing longer durations. In terms of the trial size, it is powered to detect a clinically meaningful reduction in the PAN score, making this size appropriate for that. As for dosing, we haven't talked much about that yet, but it is an active versus placebo, randomized, parallel-group study.

And we'll move next to Jeff Hung with Morgan Stanley.

Thanks for taking the question. For Valbenazine and cerebral palsy, you've indicated that about 15% experience Dyskinesia. How does that rate change from the diagnosis of cerebral palsy in early childhood versus adulthood? For the Phase 3 study starting this year, can you talk a bit more about the specific subpopulation you're focusing on, such as a specific age range? Will you divide adult and pediatric patients into different studies?

We haven't talked specifically about the trial design. We intend to include both pediatric and adult subjects. Dyskinesia due to cerebral palsy occurs in about 15% of cases and persists into adulthood. We believe it's vital to establish whether Valbenazine can be an important medication for adults with cerebral palsy Dyskinesia. We'll provide more information once the trial is posted on clinicaltrials.gov.

And we'll move next to Brian Skorney with Baird.

Hey, good afternoon, everyone. Thanks for taking my question. I'm trying to ascertain what to look for in the Huntington's Chorea data that you have upcoming. I know INEGRZZA maintains an advantage over deutetrabenazine regarding safety, dosing, and efficacy. How should we think about the outcomes here, particularly given that you're excluding patients who have a history with a VMAT2 inhibitor? Are there any considerations in the patient population that we should take into account?

The Huntington trial is designed to elucidate Valbenazine's potential benefit and tolerability. In terms of efficacy, we have to include a placebo-controlled arm to adequately detect a clinically meaningful reduction in the Chorea score compared to placebo. The exclusion of patients who have failed to respond to a VMAT2 inhibitor is to ensure we do not include unresponsive patients. We're excited about seeing the data and developing a profile for Valbenazine.

And we'll move next to Chris Shibutani with Goldman Sachs.

Thank you for the question. You mentioned a decision by CMS regarding payment reimbursements for 2022 being imminent. Can you clarify and whether you expect any particular changes impacting your commercial strategy? I understand there’s a subdivision in psychiatry for audio-only versus video services, with video being important for INGREZZA. Can you comment on what you expect?

Yes, there are several changes under the Public Health Emergency, one of which is that audio-based services are reimbursed at the same level as audio plus video and in-person visits. There are also relaxed rules regarding in-person visits and the locations from which telemedicine can be provided. These current guidelines will remain as long as the public health emergency is in place. However, there will likely be changes when that emergency is lifted, leading us to believe that we'll remain in the same telemedicine environment for much of next year.

And we'll move next to Ami Fadia with Needham.

Good evening. Thank you for taking my question. I have a quick follow-up on the Huntington's disease Chorea study. Do you anticipate the possibility of superior efficacy to existing treatments with this study? Regarding essential tremor, what specific outcomes should we be looking for as positive proof-of-concept in Phase 2?

The Huntington trial is not designed as a head-to-head comparison, so we cannot claim superiority. We aim to establish the effectiveness and tolerability profile of Valbenazine through a placebo-controlled study. For the Essential Tremor study, we have a proof-of-concept study that will be placebo-controlled, with the primary outcome being the change from baseline for amplitude at peak frequency of postural tremor, looking at both within-subject and cross-subject comparisons.

And we will move next to David Amsellem with Piper Sandler.

Given your commentary regarding the direction of net revenue per TRx in 2022 versus 2021, would it be reasonable to expect you to provide 2022 INGREZZA sales guidance?

Yes, David. We intend to provide annual guidance. We plan to do so in our February call for Q4, and we’ll provide a 2022 guidance number for INGREZZA which will include a range reflecting the environment, our latest thinking on the impact of our direct-to-consumer advertising campaign, and our salesforce expansion.

And we will move next to Kelly Shi with Jefferies.

Thank you for taking my question. Regarding the Connect HD trial in Huntington disease on the primary endpoint—the total maximum Chorea score from baseline—the previously approved VMAT2 inhibitors showed a two-to-three-point reduction. Is this the benchmark for the clinical benefit in Connect HD? What impact does this have on including patients pre-exposed to VMAT2 inhibitors, and how do you think the placebo effect will change over time? Thank you.

The primary endpoint is the total Chorea score, and the data from our study are adequately powered to identify a clinically meaningful change in that score. We do not expect significant changes in the placebo response over time. Unlike other conditions, such as schizophrenia, where placebo responses have notably increased over time, we believe our patient population will allow us to detect effectively Valbenazine’s efficacy. Regarding previous exposure to VMAT2 inhibitors, we’re focused on enriching our knowledge through this study.

And we will move next to Vamil Divan with Mizuho.

Thanks for taking my questions. Regarding ONGENTYS—though it's a smaller product and hasn't been discussed as much—it is only doing about $2 million per quarter since its launch a year ago. I’m curious about what you see as the catalysts for growth in the future, whether driven by COVID, payer access, or others, and how we should think about its trajectory.

Yes, thanks, Vamil. Launching a new medicine amid a pandemic has posed challenges. We’ve seen fluctuations stemming from COVID, particularly with the Delta variant impacting our access to important movement disorder specialists. Feedback from prescribers about their experience with ONGENTYS has been positive. We will continue building a dedicated neurology team, which should benefit both ONGENTYS and INGREZZA in neurology practices. Improved access for ONGENTYS is anticipated moving into next year. As we learn more about the market for ONGENTYS, we will refine our approach.

And we'll move next to Myles Minter with William Blair.

Thank you for taking the question. Back on schizophrenia—the pivotal trial for INGREZZA's 10-week endpoint, you mentioned the FDA wanting to see data for longer-term benefit. Is that in the absence of a need for an open-label extension with that trial? Additionally, are you enrolling patients with extrapyramidal symptoms as part of their therapy?

Yes, we are including patients who are experiencing Tardive Dyskinesia and other extrapyramidal symptoms in the trial. We are also closely examining long-term safety and tolerability data to support the new indication for schizophrenia. From our experience with Tardive Dyskinesia, we have strong safety and tolerability data, which encouraged us to enter the schizophrenia indication.

We will move to our next question from Charles Duncan with Cantor Fitzgerald.

Yes, good afternoon, Kevin and team. Thanks for taking the question. Congratulations on the new patient adds this quarter. I had a question on the pipeline surrounding Valbenazine, particularly Connect HD. If positive data emerges, could we assume that filing for an sNDA may occur next year? About the timing of the Valbenazine schizophrenia study—what are the considerations you're facing there with regard to patient enrollment?

Yes, we will read out data at the end of this year. If we are successful, we will proceed rapidly to submit our regulatory application in the US for entry. Regarding the timing for Valbenazine in schizophrenia, we are just beginning the trial and opening enrollment this month. Our estimate of late 2023 reflects our current thoughts on enrollment speed.

And we will take our last question from Yatin Suneja with Guggenheim.

Hi, guys. Thanks for squeezing me in. Regarding Huntington's, if you're successful, what other gating factors do you anticipate for filing, and how quickly could we see approval? Regarding the Xenon 352 collaboration, how will you prioritize focal versus pediatric indications, and what is the optimal regulatory path forward for both the US and the EU?

We haven't discussed the path to regulatory filing, focusing instead on data generation and interactions with regulatory authorities post-release. We'd rather not speculate on approval timing now. For the 352 collaboration, we believe there is significant unmet need across both pediatric and focal indications. We aim for an appropriately designed placebo-controlled trial to evaluate efficacy, aiming for rapid regulatory interaction.

Thanks, Chloe, we'll take one last quick question.

And we'll move lastly to Laura Chico with Wedbush Securities.

Hey, thanks very much for fitting me in here. I have a question regarding the end of filings that have come through recently related to generic competition. Can you comment on how you're thinking about your long-term pricing strategy for INGREZZA in an environment with generic competition, especially as you make various investments for future Valbenazine indications?

The end-of-filing actions are standard business occurrences. We have patent protection on INGREZZA extending several years, at least until 2032, with potential extensions beyond that. We currently do not foresee challenges to our business in the near future. In closing, thank you all for joining us today. We look forward to seeing you in person at upcoming meetings later this year and early next year. As you can see, we are making excellent progress against our goals, adapting to the challenges we face with both INGREZZA and our pipeline. We are excited about the rapid progress ahead. Thank you, everyone.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.