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. Please note that this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, 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; Eiry Roberts, our Chief Medical Officer; Eric Benevich, our Chief Commercial Officer; and Kyle Gano, 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. I encourage you to review the risk factors discussed in our latest SEC filings. We will go to Q&A after prepared remarks and we will do our best to get everyone’s questions. With that, I'll hand the call to Kevin.

Thanks, Todd, and good morning, everyone. Well, another very nice quarter of INGREZZA sales and this sets us up well for continued growth in Q4. I'm pleased to see that the investments that we have been making in INGREZZA this year and last year are starting to show results, and it is our expectation we will continue to increase our ability to treat TD patients so they don't suffer needlessly. In addition, we are seeing clinical development activities with valbenazine show good progress. This is most clearly demonstrated by our filing of the sNDA 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 Eiry provide 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 INGREZZA 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 INGREZZA sales to be between $1.4 billion and $1.425 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. For INGREZZA, we do not plan to provide preliminary sales in early January, but we will provide our Q4 sales results and 2023 sales guidance during our earnings call in early February. For 2023 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 support INGREZZA growth in both TD and Huntington's. Now over to Eric.

Thanks, Matt. Q3 was another strong quarter from an execution and performance perspective. With INGREZZA sales of $376 million and over 68,000 total prescriptions, we saw robust 32% year-over-year growth versus Q3 of last year. In fact, this marks the sixth straight sequential quarter of growth, highlighting the consistency and effectiveness of our commercial initiatives on improving diagnosis and treatment rates for tardive dyskinesia as well as driving preference for INGREZZA as the most prescribed VMAT2 inhibitor. We believe that TD diagnosis rates are now approximately 30%, and that's great news. However, there remains much work to do, as seven out of ten patients living with TD still have not received a diagnosis for their uncontrolled movements. And when diagnosed, only about half of diagnosed patients are offered effective treatment with VMAT2 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 our INGREZZA launch, we focused on psychiatry and neurology healthcare providers. Long-term care is a new customer segment for us, and essentially we are in the midst of launch mode for education around TD and INGREZZA in LTC. I'm pleased with the progress we've made over the past two quarters in helping our new team members to hit their stride with TD education, promoting INGREZZA, 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 variance, we believe we will see additional upside from this investment in the coming quarters. As Matt noted, you should expect SG&A expenses to be slightly higher next year as we continue to invest in INGREZZA and the Valbenazine brand in both TD and the expected launch in chorea in Huntington's disease. With HD chorea in particular, we're excited about the potential opportunity to bring the leading VMAT2 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. Eiry Roberts.

Thank you, Eric, and good morning to everyone on the call. I'll begin by congratulating the many people at Neurocrine, our colleagues at the Huntington Study Group, and the Clinical Trials Coordination Center for all their hard work that resulted in our recent supplemental NDA submission of valbenazine as a potential treatment for Chorea associated with Huntington's disease. This marks the successful achievement of a critical program milestone, which we hope will lead to valbenazine's availability next year as an approved treatment option for patients living with HD Chorea. I'm also pleased to report that the Phase 2 study of NBI-568, a selective M4 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. We continue to evaluate the potential for NBI-568 in additional indications beyond schizophrenia while also progressing other molecules in this platform through pre-clinical testing. We're currently on track to initiate Phase 1 clinical testing for a dual M1/M4 agonist from the platform in 2023. We've also initiated Phase 1 clinical testing for NBI-770 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 1 clinical testing is proceeding as planned and we look forward to sharing more information as we move forward with Phase 2 clinical testing here. The recent addition of NBI-568 and NBI-770 now brings 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 clinical readouts over the coming 12 to 24 months, with the next readout occurring for NBI-104 in epilepsy with continuous spike-in-wave during sleep. Here, we remain on track for top-line results by year-end. With our most advanced program, Crinecerfont, enrollments in both the adult and pediatric registrational studies have 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 out 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, Eiry. Operator, we're ready to take questions at this time.

Thank you. Our first question will come from Tazeen Ahmad with Bank of America. Your line is now open.

Hi, guys. Good early morning to you on the West Coast. Just wanted to get a sense about your adjusted guide for the full year for INGREZZA. Where do you think the greatest unmet need is right now? And as you look into maybe next year and beyond, you’re 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 would you see for Huntington's post the launch? Thanks.

Matt,

Yeah. Sure. Hi, Tazeen. Thanks. It's Matt. And I think you have three questions in there, so I appreciate the attempt. Let me take the full year guide. Really, when you reflect on 2022, a really, really significant year for the company with over $300 million in growth. So feel really good with how we're exiting and how that sets us up for next year. Eric, do you want to talk about the Huntington's?

Yeah, Tazeen. Good morning. So certainly, we're excited about the opportunity to bring a new treatment option to Huntington's patients with Chorea. And we think that there's a meaningful opportunity for valbenazine there. If you look at the Huntington's population, there's approximately 30,000 in the U.S. about 90% of those individuals have some degree of Chorea. 70% of them actually would be considered moderate to severe. And only about 20% of eligible patients with Chorea are actually getting treated with VMAT2 inhibitors. So for various reasons, there's a significant proportion of untreated patients, whether it's the complex dosing administration or concerns about the box warning for those products. There's still a meaningful number of patients that are untreated for their Chorea. And so, we're excited about the opportunity to bring forward a product with valbenazine. Certainly, the profile that we have in TD and the labeling that we have in TD are very attractive and certainly some of those attributes would be carried over to the HD 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 and different treatment option available for these patients. And the one other thing that I'll say is that we're well positioned to bring valbenazine to these patients through primarily moving disorder neurology audience, which is a physician audience that we cover today with the TD indication and our neurology team.

Thank you. Our next question will come from Paul Matteis with Stifel. Your line is now open.

Thanks so much for taking my question and congrats on the quarter. If you look at drugs historically in depression or psychosis, oftentimes class labeling is 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 INGREZZA label, do you expect the FDA to employ class labeling and include a black box warning for suicidality risk? And if so, do you feel like that could be at risk of nullifying a marketing advantage you have in TD or more broadly versus AUSTEDO? Thank you.

Thanks, Paul. Thanks for the question. Let me start with respect to the valbenazine data. And in terms of the data package that we have in HD, we were very pleased with the outcome of the Phase 3 study that we completed there. 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 for INGREZZA at this point in time in that indication. It's difficult to predict the FDA's perspective around the black box warning that exists for deutetrabenazine and AUSTEDO in treating Huntington's disease as to whether that would be applied across to valbenazine, but we're going in very confident in terms of the tolerability and safety profile that we've generated in this disease state with valbenazine.

Yeah. And Paul, I want to add to what Eiry mentioned and what you said about the psychiatry division. We can discuss offline the history of how the black box warning originated. That was quite some time ago, and since then, many patients have been treated with specific reversible VMAT2 antagonists.

How important is black box warning to your marketing positioning today?

I believe the other attributes of INGREZZA likely outweigh that concern. We firmly believe it is not justified, which is why we are presenting our case assertively to the agency.

Thank you. Our next question will come from Phil Nadeau with Cowen. Your line is now open.

Good morning. Congrats on another good quarter. We want to ask about crinecerfont. Looking forward to the adult Phase 3 trial, it looks like clinicaltrials.gov is suggesting, enrollment is going to complete in February 2023. So should we expect that data in the second half of next year? And then on the results itself, can you talk a bit about what gives you confidence that the changes in the biomarkers you saw in Phase 2 will reduce the steroid dose for the adults? And what is the protocol for tapering steroids in that trial? Thanks.

Thanks, Phil. I'm happy to address those questions. Our enrollment is progressing well, and as we've mentioned, we're on track to release data from both the adult and pediatric studies next year. The endpoint for each of these studies extends to six months for total data reporting, which aligns with our current enrollment status. Regarding the adult study and the endpoints, I want to emphasize how pleased we are with the biomarker endpoint results from the Phase 2 proof-of-concept study. We observed a dose-related decrease in all hormone levels key to managing CAH, notably the androgen levels. In patients treated for just 14 days under stable steroid dosing, we recorded significant reductions, with the majority achieving over a 50% decrease in androgens and several reaching normal ranges. Considering these results, we are confident in our continued reduction of androgen levels with longer-term treatment, allowing us to taper down steroids. Ideally, we hope to regain control of the HPA axis in a reasonable number of patients, potentially normalizing steroid levels to the physiological treatment range. Although we haven't disclosed detailed information regarding the tapering protocol within the study, we can assure you it is well controlled, positioning us for promising outcomes regarding that primary endpoint in the adult study.

That's very helpful. Thank you.

Thank you. Our next question will come from Neena Bitritto-Garg with Citi. Your line is now open.

Hey, guys. Thanks for taking my question. I just want to ask about INGREZZA 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 in 4Q just given the price increase that was recently taken? Thanks.

Thank you for the question. Regarding inventory, there hasn't been any significant build-up or reduction that we need to highlight at this time. In terms of revenue per script, I expect it to be slightly below $5,600 in the fourth quarter. Looking ahead to 2023, you should anticipate it to remain in the $5,600 range, which accounts for the recent price increase we implemented. For context, we initiated a 9% price increase effective November 1. Additionally, as mentioned, we will be applying a gross to net charge for accounting purposes, which is included in the slightly below $5,600 net revenue per script guidance I just shared. Thank you.

Perfect. Thank you.

Thank you. Our next question will come from Anupam Rama with JPMorgan. Your line is now open.

Hey, guys. Thanks so much for taking the question. There were a couple adjustments on timelines on the pipeline side, I think mainly valbenazine and schizophrenia and NBI-846 and MDD, those have been pushed out a little. Any color there on the timeline adjustments? Thanks so much.

Yes. Thanks, Anupam. It’s Eiry here. Happy to answer that. Yes, we did move the timeline on the three trials. And I think there's a couple of background reasons there that are 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 as a site so elsewhere around the world and we're still working through onboarding those sites and ensuring that we have them in the trials. The second point is that in this space of 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 treatment during COVID and as a result since one of our trials is an adjunctive treatment that has led to some slower startup in enrollment, but I think that's actually recovering right now. And the third thing actually impacts the sites themselves and the sites startup process. Many of our psychiatry sites, particularly in the U.S., but also elsewhere in the world, experienced quite a lot of staff turnover and we've heard that even in the prescribing environment during COVID 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 those timelines, but have to take some delay right now.

Thanks so much for taking our question.

Thank you. Our next question will come from Brian Abrahams with RBC Capital Markets. Your line is now open.

Hey, good morning, guys. Congrats 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 this brings with regards to commercial footprint, trial conduct capabilities, and site and KOL relationships? And then maybe bigger picture, what internationalization means for long-term operating expenses, margins and the overall strategic vision for the company? Thanks.

Thank you very much. Let me begin by addressing a few aspects of your question, and then Kyle will cover the rest. Regarding our clinical strategy and expertise, we are excited to integrate our Diurnal colleagues into Neurocrine. Diurnal has a strong reputation in the rare endocrine disease area and possesses extensive clinical knowledge, which we believe will be beneficial as we work on CAH and other endocrine disorders in the future. This collaboration is quite advantageous for us. Additionally, having them based in the UK has been something we've considered for a while as we strategize about establishing a presence outside the United States to support our various global trials. We anticipate progress in that area as well. And now, over to Kyle.

Regarding the commercial aspect, there are two products that are being considered for commercialization in several countries. The first is a mini-tablet formulation designed for pediatric patients with adrenal insufficiency. Additionally, there is a time-release hydrocortisone product under development for both CAH and adrenal insufficiency in Europe and the U.S. We will focus on these products and aim to optimize them alongside our other initiatives for the U.S. and European markets. This presents an exciting opportunity, as we have a developing commercial organization in Europe that we plan to leverage as we progress with crinecerfont through clinical development.

Thank you. Our next question will come from Carter Gould with Barclays. Your line is now open.

Right. Good morning. Thanks for taking the question. For Eiry, maybe focusing on 352 ahead of the data next year. Can you just talk a little bit around the, I guess, the challenges and the efforts to mitigate some of the heterogeneity in the population given sort of the background anti-seizure medications? And just an enrollment there, are things sort of 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.

I'm just clarifying Carter, talking about 352 and our focal epilepsy study.

Correct.

Okay. Thank you. Okay. So let me just get to the timing questions first. I think we've signaled that we will have data available during next year for that program, and we remain on track with that. This is a Phase 2 a signal-seeking study in 100 patients with focal onset seizures and it really addresses the 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 other antiepileptic agents. And so that does take out some of the variability in the population when you compare it 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 seizures within individuals. Individuals have to reach a certain seizure threshold to be eligible for the study. So those are some of the ways in which we have looked at managing variability there. And as I said, we continue to enroll well in that study. We're on track for a readout of data next year.

Thank you. Our next question will come from Chris Shibutani with Goldman Sachs. Your line is now open.

Thank you very much. On the M4 agonist program with Sosei. It appears that the timeline with clinicaltrials.gov is for readout in December of 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, what kind of efficacy on the pan score front, you might expect that the six-week measuring point to be clinically meaningful for this given the excitement and progress in the space overall? Thank you.

Thanks for the question, Chris. So we're just starting the study actually. We just initiated it. And so in terms of the guidance with respect to data availability. I think you're probably referring to clinicaltrials.gov. That's our best estimate in terms of study completion right now, but 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 2 study, and it's somewhat adaptive in design in terms of the number of doses and the nature of the dosing may change over time in response to the safety, tolerability, and other findings within the study. The company will not be seeing the data on an ongoing basis, though 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's no formal planned interim analysis that we would see the results of in the interim and therefore make public. And then in terms of the pan score, I mean, the study is essentially powered in a similar fashion to the Phase 2 studies previously performed on CAR-XT in terms of the magnitude of the effect that we've seen there. I think people are very encouraged by that magnitude of effect. And if we are to see an efficacy signal that is similar to that, the study would be well designed to address that.

Thank you.

Thank you. Our next question will come from Myles Minter with William Blair. Your line is now open.

Thanks for taking the questions and congrats on the quarter. Just back on INGREZZA. My question is just on what proportion of TD patients are actually in the long-term care facilities relative to the neuro accounts that you already have touch points on. Just as you're looking to penetrate that market specifically within INGREZZA with the targeted sales force? Thanks.

Yeah. Good morning, Myles. Thanks for the question. So in terms of current patients on treatment, it's a small percentage. As I mentioned in my prepared remarks, we're still scaling up in long-term care. That team just got deployed earlier this year and essentially we're in launch mode in that space. However, we think that there's meaningful patient potential in that 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 on recognizing TD, driving diagnosis, and obviously treatment with INGREZZA. So it's very early days yet. I would say that compared to psychiatry and the 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 help a lot of patients in the long-term care segment in the coming quarters and years.

Thank you. Our next question will come from Brian Skorney with Baird. Your line is now open.

Hey. Good morning, everyone. Thanks for taking the questions. I was hoping to get some more insight on the pace of new patients coming on INGREZZA. It looks like you're on average over the last year pulling in growth somewhere north of 15,000 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 a quick one on preliminary thoughts on the IRA impact on INGREZZA 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 a Medicare negotiation?

Yeah. Hi, Brian. So in terms of the growth and our thinking here, I'll go back to the overall dynamics of the TD market. This is still a relatively underdeveloped market. We said in the prepared remarks that we think about 30% or so of patients have now been diagnosed with their TD. Only about half the time when they are diagnosed are they offered treatment with a VMAT2 inhibitor. So there's still a tremendous amount of upside here in terms of continuing to drive recognition diagnosis and treatment with INGREZZA. And it'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 we've seen that we've continued to grow robustly with over 30% growth in Q3 versus the same quarter a year ago. And we've raised our guidance this year now twice, essentially. So we feel like we're in a very good place in terms of continuing to drive growth organically with this franchise across all the care segments where we have a presence.

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 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 later this decade around 2029. So there's still a lot to work through between now and when this gets implemented in a few years. And from a phase-in perspective on the rebate, right now, it does look like we're part of the small biotech exemption. So we do have time before this ultimately kicks in and we will have more clarity around what potential impact is over time.

Thanks, guys.

Thank you. Our next question will come from Laura Chico with Wedbush Securities. Your line is now open.

Good morning. Thanks for taking the question. I guess I have one kind of related to INGREZZA growth. And I'm wondering if you could elaborate a little further on the INGREZZA 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 you're seeing diagnosis rates increase. I'm wondering how has payer mix changed for INGREZZA and where do you see that evolving over time? Thank you.

Hi, Laura. 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 develop the existing outpatient psychiatry neurology markets and now LTC, we expect that dynamic to continue. And in terms of coverage from a reimbursement perspective, we've been in a very good place with approximately eight out of 10 prescriptions written being filled. We have very good formulary coverage across all the payer segments. And as Matt alluded to, with the gross to net discussion, we expect that to continue into next year.

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 on INGREZZA. First, can you comment on the refill rate for the third quarter? And keeping aside the quarter-over-quarter availability, do you think the refill rates have reached a steady state or is there significant improvement potential here? And then just second, just from a competitive standpoint, September has been indicating that it's working to simplify the initial titration scheme for AUSTEDO, what kind of impact could that create on INGREZZA?

So with regards to your question about compliance, we shared that we've benefited from a very good compliance with this medication over the course of the launch. We looked at it 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. And 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 we're pleased with as well as having high compliance. And certainly, I don't see a ton of headroom here for increasing that because it's already quite high.

Thank you. Our next question will come from Jeff Hung with Morgan Stanley. Your line is now open.

Thanks for taking my question. For 104 in CSWS, 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 a success? Thanks.

Thanks very much, Jeff. So 104 in CSWS, first of all, we remain on track for completion of this 24 patient Phase 2 study by the end of the year and we will readout data by the end of the year. The measure that is used as the primary in this signal-seeking study is the spike-in-wave index measured on the EEG during sleep. And this looks at the first hour of non-REM sleep and measures the number of spike-in-waves and abnormal EEG signals that are seen 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 discharge during sleep is in that individual patient. In terms of what type of magnitude of change we would be looking for, there's very little known in this field about clinically active medications that have been studied in this type of study. And so the only real comparison that we have is from steroid treatment, where about a 50% reduction in that spike-in-wave index is seen to be very clinically relevant for these patients. In addition to obviously looking at that reduction in the spike-in-wave index though, we're measuring seizures themselves in the study and other more quality of life measures. And so we'll be looking at the data in totality given that it is a signal-seeking study. But in terms of the primary endpoint, that's actually how it's measured and what we're looking for.

Thank you. Our next question will come from Jay Olson with Oppenheimer. Your line is now open.

Hey, congrats on the quarter and thank you for taking the question. With regards to your plans for expanding your global footprint, would it be fair to say that crinecerfont 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 look for business development opportunities to expand your global footprint? Thank you.

Thank you, Jay. Yes, I completely agree with your assessment regarding Neurocrine's operations. I can say this confidently because we are now a multinational company following the acquisition of Diurnal, and crinecerfont will be our first submission to the EMA. We are excited about this development. As mentioned earlier in the call, the Diurnal acquisition was driven by this potential and our growth strategy. We anticipate that, if other drugs in our pipeline perform well, there will be additional submissions in Europe in the future. Moreover, Kyle and his team are actively exploring opportunities throughout Europe. As crinecerfont progresses over the coming years, I wouldn't be surprised if we discover other opportunities for both pre-commercialization and commercialized drugs in the European market.

Thank you. Our next question will come from Marc Goodman with SVB Securities. Your line is now open.

Yes. Good morning, Eiry. You have an M1 and an M1/M4. I was curious about your strategy regarding the development of these programs. Are you planning to continue with both all the way to completion? Are you considering using Phase 2 data for both projects and selecting the strongest one? I'm just interested in your thoughts on this.

Yeah. Thanks, Marc. I mean, one of the things that really attracted us to the collaboration with Sosei Heptares was the ability to explore M1 agonists and muscarinics beyond just the lead M4 agonist program. I mean, obviously, we're very keen to see the data from the M4 selective agonist in schizophrenia and have just started that Phase 2 study. And clearly, M4 agonism alone in acute 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's significant unmet need both within schizophrenia itself in terms of some of the cognitive and negative symptoms and into other disease areas where predominantly cognition is impacted. And so in that regard, I think the ability to pursue and achieve a M1, M4 agonist becomes very interesting to us. And then M1 agonism alone, I think, again, provides opportunities both in that cognition space and beyond. And so I think the way you described it is very apt in that we want to make sure we're being forward the very best central molecules and exploring the space across disease areas as much as possible in early Phase 2 studies. And then ensure that we're taking the best opportunities for the patients.

The only thing I would add to that is that we'll 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 reprioritize our pipeline and our efforts. We don't have endless funds, so we have to prioritize at Neurocrine and it will be the date of the guidance.

Thank you. Our next question will come from David Amsellem with Piper Sandler. Your line is now open.

Hi. Thanks. So I know you could ask this question a lot regarding business developments and you've talked about deal sizes. I wanted to ask the question in a different way, which is that you have a large neuropsychiatry commercial organization and obviously, there's 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 has a real line of sight, much more line of sight into commercialization where you can in the nearer term leverage that commercial infrastructure you built, whether it's in neurology or psychiatry? Thanks.

Hi. This is Kyle. Thanks for the question. It is one that we discuss a lot with individuals like yourself because it is a question that comes top of mind, I think for us in Neurocrine. If 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 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 stage development. So you've seen us look at traditional licensing deals that have 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 to later stage. I will say that, and not surprising you've probably done your work yourself, is that there's 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 make sense for us in a commercial organization like we have here at Neurocrine. I think the other piece of 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've brought into the company. We've had 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 risk in our portfolio. So when we think about working in neurology, psychiatry, and endocrinology, we've tried to balance by those therapeutic areas by stages and then we risk share by deal structure. In the case of our collaboration with Takeda, for example, we have programs that we share during the most risky development that is Phase 2. So I think in totality, our strategy is one that is diverse that allows us to look at things that are early that are late and it also appreciates that there's a scarcity to assets that are out there. And we assess our pipeline as 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. We're profitable. We have over $1 billion in cash, and we have a growing product in INGREZZA. So we're going to continue to invest behind INGREZZA to grow that as quickly as possible able to help as many patients with TD and ultimately HD as possible. We'll continue to invest behind our pipeline. And as Kyle said, we do look across the gamut at what might make sense for us to build a leading neuroscience company. So feel like we're in a fortunate with the financial flexibility that we have at the moment.

Thank you.

Thank you. Our next question will come from Uy Ear with Mizuho. Your line is now open.

Hi, guys. Thanks for taking my question and congrats on the quarter. Just have a question on crinecerfont. Just wondering the data readout, could you 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 would you need to see in order for it to be clinically meaningful? And whether it would help, what type of patients would this kind of reduction help whether it be held on males more or female? Thanks.

Thank you, Uy. To clarify, both the pediatric and adult crinecerfont programs focus on two key aspects of managing CAH. The first aspect is controlling the HPA axis, which we assess by measuring critical hormone levels, especially androgens that need to be regulated in this condition. The second aspect is minimizing the reliance on external glucocorticoids that patients currently use to manage their androgen levels. Our objective with crinecerfont is to regulate the HPA axis to control androgen levels while reducing the amount of external steroids needed by patients. Discussions with experts, payers, and other stakeholders indicate that reducing external steroid use over the long term is advantageous, as similar cases in other conditions show that long-term high-dose steroids lead to various complications, such as metabolic bone issues, which CAH patients also experience. Our trial aims to evaluate both the decrease in steroid levels and the management of androgens, which could greatly benefit CAH patients. Most importantly, having parallel adult and pediatric programs allows us to intervene in the pediatric phase of the disease as early as possible, aiming for better disease control that could last a lifetime for individuals.

Thank you. Our next question will come from Evan Seigerman with BMO. Your line is now open.

Hi there. This is Conor MacKay on for Evan. Thanks for taking my question. I just want 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 want to get a sense as to the balance between commercial investment and R&D investment. How much more expensive will the second building in sales be versus the first? And then also can you remind us of how much INGREZZA is paid for by Part D, just so we can get a better sense of the potential impact of the IRA? Thank you.

Thank you, Conor for the questions. On the Med D or the Part D side of the question, we've not commented publicly on that. We've only said that our sales have a much higher government mix than they do commercial mix. And of course, we have exposure there, but we've not specifically disclosed that. We will continue to make investments within SG&A to grow INGREZZA. 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, primarily to fund the muscarinic program as well as some of our earlier research programs. So we're enthused by the progression that our pipeline is making and we're going to continue to invest beyond the muscarinics.

Thank you. Our next question will come from Yatin Suneja 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, opicapone, can you just tell us what the sales were, any comment there in terms of what you're doing on the marketing side? Thanks.

Yes. Regarding the price increase, not the entire 9% translates directly to our bottom line. In fact, just under half of that ultimately reflects in our net revenue per script. As I mentioned in the guidance for 2023, you can expect our net revenue per script to fall in the 5,600 range, which represents an increase of a couple of hundred dollars compared to 2022.

We are making progress in rolling out ONGENTYS to the Parkinson's population, particularly for those experiencing excessive off time. Earlier this year, we expanded our field sales organization, which includes a dedicated neurology team that plays a crucial role in our promotional efforts within neurology. Having two products helps us gain access to neurologists, especially movement disorder specialists. Therefore, we are strategically leveraging both ONGENTYS and INGREZZA together in this area, reflecting our strong commitment to neurology.

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. So maybe another question on INGREZZA growth. So you mentioned earlier today that about 50% of patients at the time of diagnosis do not get treated with INGREZZA. 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 drug? And going forward, do you think the growth will come from that conversion or the market expansion? Thank you.

I’ll address your question by starting with the last part. The answer is that our goal is to ensure no patient with TD suffers unnecessarily. When we launched INGREZZA in 2017, there were no approved treatments for TD, and the treatment and diagnosis rates were very low. We've made significant strides in improving the diagnosis rate. Currently, we estimate that about 30% of people living with TD have received a diagnosis, but only about half of those are offered treatment with a VMAT2 inhibitor. This is progress, as early in our launch that number was zero. Historically, the standard care for TD was to either ignore it unless it became severe or to adjust the antipsychotic regimen in hopes of alleviating the abnormal movements. We have been using the updated APA guidelines that recommend VMAT2 inhibitors as the first-line treatment for TD to encourage providers to offer treatment with a VMAT2 inhibitor, particularly INGREZZA, once they make a diagnosis. It's essential to drive both higher diagnosis rates and ensure effective treatments are offered, and we are making headway in both areas. However, there is still a long way to go, as seven out of ten individuals living with TD have yet to receive any plan for managing their abnormal movements. As we continue to advance, which I still view as an ongoing launch, we will persist in promoting higher diagnosis rates, offering effective treatments, and ensuring sustained access to treatment.

Super helpful. Thanks.

Thank you. Our next question will come from Sumant Kulkarni with Canaccord. Your line is now open.

Good morning. Thanks for taking my questions. I'll squeeze you in because we're at the end here. So what's the key differentiator for valbenazine as an adjunctive treatment of schizophrenia? I’m asking because of your current price point for INGREZZA and also because the schizophrenia market has several generics in it. And for Matt and Kyle, given your healthy cash balance, could you give us any numerical parameters on what an absolute upper limit might be for Neurocrine's financial capacity for an acquisition?

Thanks, Sumant. On the adjunct treatment for Valbenazine, I think there were three main reasons why we were interested in pursuing Valbenazine as an adjunctive treatment for 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 pre-synaptic dopamine synthesis, which is not addressed by currently available antipsychotics, which act postsynaptically. Now INGREZZA, valbenazine acting presynaptically on the VMAT2 inhibitor has the potential to decrease that presynaptic dopamine synthesis levels 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 D2 antagonism. Secondly, obviously, we have an extensive safety and tolerability database for patients with schizophrenia treated with valbenazine for tardive dyskinesia, and that gave us good support to go into a Phase 3 program. And then finally, we had both our own preclinical data looking at adjunctive treatment 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 3 program. We have the first of the Phase 3 studies within that program ongoing right now and we aim to start the second study doing next year.

I'll just add one brief comment to what Eiry said, which is when you're talking about differentiation, there are no approved treatments today indicated as adjunctive treatments in schizophrenia. If you think about the standard of care, most patients are treated serially with antipsychotic monotherapy. The small proportion of patients are TD trials. We're on more than one antipsychotic at a time, but there are no currently approved adjunctive treatments in schizophrenia. So it is a paradigm shift. And with success, if we're able to get that indication for valbenazine 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 and so we could do a deal. We've said publicly potentially a $3 billion to $4 billion type transaction. Of course, you can always go higher or you could, of course, not spend what your overall straightforward capacity would be. The most important aspect is what's the right strategic fit for Neurocrine if you're 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, have a nice level of financial flexibility to make those kinds of investments, but we'll of course be very prudent.

Thank you.

I appreciate everyone's participation today. I will keep my closing remarks brief. Neurocrine's current focus is to finish this year strongly across all areas of our business. Looking ahead to next year, I believe it will be an exciting and productive time for us. We will continue our efforts in commercial and medical affairs to ensure that no TD patients endure unnecessary suffering. We are eager to introduce INGREZZA to the Huntington's population with the aim of obtaining approval in 2023. We have significant readouts coming up from two Phase III trials in CAH, one for pediatric and one for adult patients, as well as an important Phase II readout for focal onset seizures. We will advance our entire pipeline this year and emphasize operational excellence at Neurocrine. Additionally, there's more work being done in 2023 that has not been disclosed yet, which presents many exciting opportunities for us. Thank you for your questions today, and we look forward to our next conversation later in 2023. Take care.

Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect. Goodbye.