Good day, everyone, and welcome to today's Neurocrine Biosciences Reports Fourth Quarter and Year-End 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 period. Please note this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the call over to Todd Tushla, Vice President of Investor Relations. Please go ahead.

Thank you, and a good Monday morning to everyone. Welcome to Neurocrine's fourth quarter and full year 2022 earnings call. I’m joined by 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 this 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 be jumping into Q&A after prepared remarks and as is customary, we will do our best to get to all of your questions. With that, I'll turn things over to Kevin.

Thank you, Todd, and good morning. Over the last several years, we have launched a number of initiatives to bring INGREZZA to TD patients and relieve their suffering. Many of those initiatives have been very successful as evidenced most recently by the growth of INGREZZA in 2022, as we announced this morning. We’re going to continue to build on those efforts and anticipate continued meaningful growth in 2023 into the foreseeable future. The initiatives that are most obvious to you are the expansion of our sales force and our direct-to-consumer advertising. What is less obvious but very important are all the other teams within the company that are force multipliers in ensuring TD sufferers are appropriately treated. Many of these efforts are aimed at educating healthcare professionals, their staff, payers, and their medical advisers, and importantly, for the first time, patients have groups advocating for the disease and their care. Again, these efforts have yielded significant results for sufferers of TD to date, and we will continue that momentum because the vast majority remains undiagnosed and untreated. Switching gears, we have a deep and diversified portfolio of mid and late-stage medicines that will have important readouts this year and into 2024. We've invested meaningfully in our research and development, such that multiple new molecules will enter the clinic each year on a consistent basis to ensure a product flow into the future. I'll stop there and with that, turn it over to Matt.

Thank you, Kevin. Good morning. Good to see many of you over the past month. With INGREZZA sales growth of over $350 million in 2022, a record number of TD patients helped, and in advancing pipeline, Neurocrine is in an excellent position for years to come. On the clinical side, CAH enrollment accelerated during the fourth quarter, enabling us to provide top line data in the second half of this year. On the financial front, our balance sheet strengthened in 2022, ending the year with over $1.2 billion in cash while using $280 million to retire a large portion of our convertible debt. For 2023, we expect another strong growth year for INGREZZA, with sales of between $1.67 billion to $1.77 billion, reflecting an underdeveloped TD market, supported by an expanded sales force and ongoing marketing initiatives. For SG&A and R&D expenses, we intend to invest just over $1.4 billion in 2023, reflecting an overall increase in R&D spending, primarily related to advancing our 12 mid-to late-stage clinical programs, including our muscarinic franchise, as well as expanded preclinical research efforts. Specific to 2023 SG&A expense, while our investment in INGREZZA will increase to support continued TD growth and the hopeful indication in Huntington, we do expect to show SG&A leverage of around 300 basis points. I look forward to your questions later in the call. Now over to Eric.

Thanks, Matt. INGREZZA's strong performance in 2022 was exemplified by four quarters in a row with year-over-year growth exceeding 30%. Our commercial and medical affairs teams really executed well to help more tardive dyskinesia patients get treated than ever before, and we carry this momentum into 2023, yet much work remains ahead of us. Seven out of ten of the approximately 600,000 people in the U.S. living with TD still have not been diagnosed. And half the time, those who receive a diagnosis aren't offered first-line standard of care treatment with a VMAT2 inhibitor. So the opportunity for organic growth for INGREZZA remains significant. Our 2023 revenue guidance range of $1.67 billion to $1.77 billion assumes approximately 20% year-over-year growth at the midpoint. The low end is a conservative estimate and contemplates recessionary pressure in the U.S., while the high end reflects fewer macro headwinds and accelerated new patient growth. You should anticipate the majority of growth in 2023 to be driven by our psychiatry and neurology business segments, which are the relatively more developed segments of our business. Long-term care is a completely new site of care for INGREZZA, and we are just getting off the ground there. Our long-term care team has been making great strides getting up to speed on the unique and complex operational dynamics within LTC and how that impacts TD care. While we estimate that somewhere in the range of 10% to 15% of TD patients are in an LTC setting, it will likely take a few more quarters before we see a tangible impact on overall sales given the relatively smaller size and higher complexity of that business environment. On the patient activation front, last year's direct-to-consumer campaign exceeded our expected internal metrics. So we will continue with that investment in 2023. Our newest DTC campaign, which we refer to as impressions, is now on the air via broadcast, streaming, and digital channels. The campaign highlights INGREZZA as the simple choice with proven efficacy and it's the number one prescribed treatment for tardive dyskinesia. All in all, we're well poised for growth in 2023 and beyond. With that, I will turn the call over to my colleague, Dr. Eiry Roberts, to discuss our clinical progress. Eiry?

Thank you, Eric, and good morning to everyone on the call. 2023 promises to be an important year for the Neurocrine pipeline with a number of milestones and data readouts, including the August 20 PDUFA date for valbenazine as a potential treatment option for patients with chorea associated with Huntington's disease. We were very pleased with the safety and efficacy results from the KINECT-HD study and with data from the subsequent six-month follow up, which formed the basis of our supplemental New Drug Application that was accepted by the FDA in December of 2022. On the clinical front, I'm pleased to announce that enrollment is complete in both the adult and pediatric registrational studies of crinecerfont as the treatment of congenital adrenal hyperplasia. These trials were designed with input from all key stakeholders, including clinical experts in the field, patients, advocacy groups, and regulatory agencies in the U.S. and Europe. I'd like to congratulate everyone involved in the crinecerfont program for all their hard work in getting us to where we are today. This program will provide the largest trial data set ever generated in patients with CAH. And we look forward to sharing top line results from both studies in the second half of this year. In addition to crinecerfont, we anticipate reporting studies from two Phase 2 proof-of-concept studies, NBI-352 for the treatment of focal onset seizures in adults and NBI-846 as a treatment for anhedonia associated with major depressive disorder. Both these top line data sets are expected in the second half of 2023. Turning to our growing muscarinic portfolio, the team continues to make very good progress with enrollments in the Phase 2 study of NBI-568, a selective M4 agonist for the treatment of schizophrenia. We also remain on track to initiate the Phase 1 study of a dual M1/M4 agonist from this platform, NBI-570, later this year. To complement this robust pipeline in Phase 2 and 3, we plan to continue the growth of our early-stage pipeline by advancing additional new chemical entities into Phase 1 this year. I'm very pleased with the current robustness of our clinical pipeline and look forward to further strengthening this pipeline in partnership with our Chief Scientific Officer, Jude Onyia. Under Jude's leadership of research and preclinical development, we're investing in a range of modalities, including small molecules, peptides, proteins, and gene therapy to deliver on the goal of providing symptomatic disease modifying and curative treatments for patients living with serious diseases in the field of neuroscience. As I reflect on where we are as an R&D organization, the foundation and the opportunity for our pipeline has never been stronger. With that, I'll turn the call back to Kevin. Kevin?

Thank you, Eiry. And with that, I will open it up for questions.

We'll take our first question from Paul Matteis with Stifel. Please go ahead.

Hi. Thanks so much and congrats on the quarter. I just wanted to ask about the assumptions embedded in your guidance this year. By our back of the envelope math, it seems like the high end of guidance could be met with fewer net patient adds on INGREZZA in 2022. Is that accurate? And maybe you can comment on that? And then just a quick aside, what does your guidance assume for your expectations for 1Q seasonality relative to prior years? Thanks so much.

Yes. On the new patient front, we do expect to have a very great year here in 2023, over $300 million of year-over-year growth. And I'd say the top end of the guidance range does reflect acceleration in new patients, however, with a bigger base of patients. Keeping at a similar attrition rate, you do have a little bit of pressure on what the net new patient adds are. But we overall expect very strong growth this year in 2023. As it relates to Q1, Q1 is always Q1. Patients delay their first fill as they go through the reauthorization process, and we typically have a higher gross to net. Our main mission is to make sure patients stay on medicine, and we've been very successful at that over the past five years. I think you will see a little bit slower Q1, a nice recovery in Q2, and that's going to lead to a great year here in 2023.

Thanks, Matt.

We will go next to Neena Bitritto-Garg with Citi. Please go ahead.

Hi, guys. Thanks for taking my questions. So just another question on INGREZZA. For 4Q, I think backing into the gross to net discount based off of the growth metrics that you provided on volume for the quarter, it seems like the net price per script was a little bit higher than I think what you had guided to. So I'm getting somewhere in the mid 5,600 per script range. Can you just verify if that's correct? And then also how we should think about the net price in 2023, if we should still expect about 5,600 a script? Thanks.

Yes. Net revenue per script in Q4 was in the 5,400 range, and you should expect that to be fairly consistent sequentially when you think about Q1. But year-over-year, as it relates to 2023, you should expect a net price increase of between 3% to 4%. That puts you at a place of $5,600 net revenue per script. So that's correct, Neena.

Got it. Thank you. That's helpful.

And we'll take our next question from Tazeen Ahmad with Bank of America. Please go ahead.

Hi, guys. Good morning. Thanks for taking my questions. Just one from me on I guess President Biden declaring that COVID is officially over May 11. How does that, if in any way, affect the way that I guess like psychiatrist has been getting paid with regards to telemedicine? And then maybe just a quick follow-up after that. Thanks.

Hi, Tazeen. Good morning. What we know is that the telemedicine mandates from the emergency health order will last for two years after the order expires. The emergency health order is expected to end in May, so we can expect these mandates to continue for about two years following that. There won't be any changes for '23. We hope to have more information as we move into '24.

Okay. Without that, if it does go back to in-office, would that provide you with more certainty on the upside if doctors have to go back into the office?

Our upside did not take into account any changes in the number of physicians back in the office or any changes related to the emergency health order in telemedicine.

Okay. Thanks, Kevin.

And we'll take our next question from Brian Skorney with Baird. Please go ahead.

Hi. Good morning, everyone. Thank you for taking my question. I was hoping maybe you could walk through some of your internal assumptions around the market opportunity in CAH, given the Phase 3 data reading out the latter half of this year. I know a number of years ago, you did a Commercial Day discussing this market when you had an earlier iteration of programs. It does seem like investor expectations around commercial here are somewhat muted compared to your neuro program. So just hoping to kind of get a light on how you currently think about what the commercial can look like here?

Yes. Good morning. So let me preface this by saying that, of course, we still have crinecerfont in the clinic. It's an investigational medicine not approved yet for the treatment of CAH. But certainly, we're excited about the opportunity that it presents. Just taking a step back, in the U.S. there are somewhere between 20,000 and 30,000 people living with congenital adrenal hyperplasia, a similar number in Europe as well. Standard of care today is essentially glucocorticoids that are required to replace the missing cortisol for these patients. What crinecerfont is intended to do and what we hope to see in the clinical trial is not only improvement in day-to-day control of the patient's androgens, but also the opportunity to potentially reduce the dose of the steroids that they're taking for their entire lives. We certainly see this as a significant game changer in terms of the standard of care. There are no new treatments for CAH for decades, so what it ultimately boils down to is let's see what the data look like. We're excited about the opportunity, and there is a significant unmet need in terms of being able to help these patients improve their day-to-day disease management and overall reduce the potential for long-term issues from treatment with steroids. Eiry, do you have anything to add?

No, I think the only thing I'd add is, obviously, if you think about the unmet need for patients in CAH, as Eric mentioned, there's been no new treatments that were non-steroidal in nature ever actually in this disease area. Given that our program includes both a pediatric study and an adult study, it gives us an opportunity to really understand how to serve this patient population from early childhood through adulthood. I think we're really excited about that opportunity and look forward to reading out the data later this year.

Great. Thank you.

And we'll take our next question from Phil Nadeau with Cowen & Company. Please go ahead.

Good morning and thanks for taking our question. It's a follow-on to Brian's about the CAH trials. The primary endpoint in the adult trial is change in glucocorticoid dose while the primary in the pediatric is change in serum A4. Can you remind us why you chose two different endpoints for the two different studies? And then also what the powering of the two trials are and what would be considered clinically meaningful changes in those endpoints? Thank you.

Yes. Thanks very much. It's Eiry here. Both of the endpoints you alluded to, both the androgen reduction itself and the steroid dose, are very important to patients with CAH. Both data sets will be crucial as we read out the information from both the pediatric and adult trials. We will be looking at the data holistically across all of the information. The reason for choosing the different endpoints and having the androgen level predominantly being the primary for the pediatric study is really based on how pediatric patients are managed in terms of their care and also the significant variability that you see in pediatric patients associated with some of the physiologic changes that are happening in that patient population anyway such as growth development and other important things. In terms of powering and steroid reduction for each of the trials, if you take the pediatric trial first, from our adolescent and adult proof-of-concept study, we saw a significant reduction in androgen levels after just 14 days of treatment with crinecerfont. Given the 81-patient trial that we have in pediatrics, we're significantly overpowered to see a change in the androgen levels as a primary for that study. The number of patients in the trial is more to address safety, tolerability, and give us better insight into the steroid reduction secondary. The same is actually true for the adult study. 165 patients in the adult study we believe is highly powered to address the steroid reduction endpoint. If you remember, the steroid reduction endpoint is a change from baseline in the GC dose comparing the treated to placebo. We know from a lot of our discussions with key stakeholders that long-term steroid treatment, particularly at super physiologic levels, is detrimental for patients. Any reduction in steroids that we see during the program we believe will be important for patients in the long run.

That’s very helpful. Thank you.

And we'll take our next question from Chris Shibutani with Goldman Sachs. Please go ahead.

Thank you. Good morning. For the schizophrenia-targeted indications that you have different mechanisms of complicated disease, can you talk about how you're feeling about the portfolio? And Eiry, if you could perhaps share where you think there might be some edge of positioning or probability of success with your pipeline assets?

Yes, happy to do that, Chris. We have three main assets in clinical development right now for the treatment of schizophrenia, and they all actually focus on several different aspects of schizophrenia as a disorder. If you take the furthest along, our Phase 3 program for valbenazine as an adjunctive treatment for schizophrenia, we have two studies going on as registration studies addressing that disorder right now. We're very interested in that area because schizophrenia, obviously, is one of the major disabling neuropsychiatric disorders around the world, impacting at least 3.5 million people in the U.S. What we know about schizophrenia is that it's a neurodevelopmental disorder that starts early in life, and the majority of patients do not receive full benefit from currently available therapies such as antipsychotics. What we've seen from valbenazine in the tardive dyskinesia space is that the combination of antipsychotics and valbenazine is very safe and well tolerated in patients with schizophrenia. Additionally, some preclinical information has shown synergy of effect in this patient population, along with anecdotal data from the field that made us confident to go into a program that allows us to understand whether patients with schizophrenia who are failing to get maximum response from their current treatment could benefit further in terms of both positive and potentially negative symptoms by the addition of valbenazine. The second therapy that we have is luvadaxistat, which is in Phase 2 development. That is a DAAO inhibitor, coming from our Takeda collaboration, and seeks to address the important cognitive deficit seen in patients with schizophrenia, particularly younger patients, given its impact as a developmental disorder. We believe there is an opportunity there and want to further progress in Phase 2. The third and most recent addition to our pipeline is the M4 selective agonist 568, and we're very excited about this opportunity to treat patients with acute psychosis. We started a Phase 2 study with this mechanism late last year, enrolling very well. As you know, this is now a validated mechanism for treating acute psychosis through recent trials that have read out in Phase 2 and Phase 3. Across the board, we think there's a space for all of these different approaches since they each address different aspects of schizophrenia. We do believe that there’s an opportunity for these treatments to coexist if we're successful in our clinical trials.

Thank you.

And we'll take our next question from Carter Gould with Barclays. Please go ahead.

Good morning. Thank you for taking the questions. I appreciate all the color on the long-term care segment. Maybe just to follow up there, can you give a little bit more detail on some of these operational hurdles and kind of Neurocrine's efforts to help the centers on that front? And just sort of what gives you confidence that's surmountable in the next couple of quarters as you alluded to? Thank you.

Yes. As I mentioned in my initial commentary, LTC is a new segment for INGREZZA. However, it's an opportunity that we've been looking at since before we launched back in 2017. We estimate that 10% to 15% of all TD patients are in an LTC setting. I mentioned in my commentary that it is a more complex environment. Many of these care centers function daily run by nursing staff and the prescribers, whether it's the medical directors, consultant psychiatrists, or nurse practitioners who rotate through. They aren't there on a 24/7 basis, coming through maybe every other week or every third week. This requires our folks to work closely with the staff in these facilities to educate them on tardive dyskinesia, help them recognize abnormal movements, potentially distinguish them from other drug-induced movement disorders and importantly, identify and flag residents needing further evaluation from the MD or the nurse practitioner. It takes a team approach in long-term care, and it's necessary to understand that environment not only in terms of the facility dynamics and who their prescribers are, but also the role of the LTC pharmacy. We've built our understanding of where the opportunity lies while narrowing our focus, and we're seeing good initial results. We're pleased with the progress we're making in long-term care. However, it’s still a new space for us, not as developed in education and awareness of TD compared to psychiatry and neurology. But we’re excited about the opportunity and will continue to make progress in 2023.

And we will go next to Myles Minter with William Blair. Please go ahead.

Hi. Just back on the catalyst for the adult trial, I'm curious whether these patients are well controlled in terms of their A4 levels on their current glucocorticoid dose. Given your expectations for further A4 reductions, how much emphasis should we place on that secondary endpoint?

Thanks, Myles. I think in general, patients with CAH are not well controlled. They intermittently have some degree of androgen control. Our trial is required to reflect the real-world situation, so patients not only have excess steroid dosing but also a lack of control of androgen. There’s a real opportunity to demonstrate benefit for patients in this context both from an androgen control perspective, which is the direct action of crinecerfont, and then from the ability to reduce the steroid dosing.

And we'll take our next question from Brian Abrahams with RBC Capital Markets. Please go ahead.

Hi, good morning. Thanks for taking my question and congrats on another nice quarter. I have a question on the balance of sales growth versus investment. You guys are guiding for roughly $300 million in year-over-year growth in INGREZZA at the midpoint, but only half of that or less in additional SG&A investment year-over-year. So I'm wondering, is this the right way to think about leverage going forward as you continue the successful direct-to-consumer campaign and push into long-term care facilities, or are there other factors to consider that could enable even greater operating leverage on INGREZZA's commercial franchise over time? Thanks.

Yes. First and foremost, we expect a tremendous amount of growth in INGREZZA into the future. Seven out of ten patients still have not been diagnosed with tardive dyskinesia. You must have a growing product to drive SG&A leverage. The second piece of investment this year is also preparing for the Huntington's disease launch. We do have investment associated with that, which will be leveraged in particular in 2024 when growth will kick in more holistically. I don’t want to set up an exact algorithm for how to think about SG&A leverage, but our expectation this year is 300 basis points of leverage, and we would continue to expect leverage as you look into next year.

It's really helpful. Thank you.

We will take our next question from Jay Olson with Oppenheimer. Please go ahead.

Thank you for the update and congrats on all the progress. Can you talk about the leadership role that Neurocrine played in the small biotech exception that was built into the IRA provision for Medicare price negotiations and the implications for INGREZZA as we think about long-term life cycle management? Thank you.

Yes, Jay, thank you. I think Neurocrine worked really effectively with a number of partners, including biopharma and other organizations. While there is a lot more work to be done with the legislation that passes, the fact that the small manufacturer and biotech exemptions are included is extremely helpful to companies like Neurocrine. We're going to continue our work along with others to collaborate with CMS and legislators over the years as this is implemented.

Thank you.

And we will take our next question from Charles Duncan with Cantor Fitzgerald. Please go ahead.

Yes. Good morning. Kevin and team, congrats on a great quarter and thanks for taking our questions. I had two brief ones. One is valbenazine in Huntington's chorea. I'm wondering if you could remind us, not really about pricing, but the pharmacoeconomic value of valbenazine versus Austedo. What is the target product profile that differentiates it, particularly in schizophrenia? My second question is development concerning 846. Do you see this as an adjunctive treatment in depression or as a monotherapy?

Good morning, Charles. I’ll take the first part of your question regarding the value proposition for valbenazine in Huntington's chorea. We're excited about the opportunity there and the data generated in the HD study. We're under review by the FDA, so it's not approved yet for that use. As we mentioned earlier, we're preparing for the opportunity once we get approved to promote this into the HD chorea population. We're well positioned for that given our extensive footprint in neurology, especially with movement disorder specialists. Considerably, only about 20% of patients with chorea formed movements are currently treated with VMAT2 inhibitors. There are reasons for this, and many patients are concerned about tolerability, complicated titration regimens. We think valbenazine has a differentiated profile. We’re excited about bringing it forward once we do get the green light from the FDA.

Yes. The differentiators seen for valbenazine in tardive dyskinesia hold true for Huntington's disease and are even more critical there in terms of the simple lack of complex titration, the lack of food effect, and the ability to not have some challenges in splitting capsules in patients with dysphagia. These factors are all very important for patients. As for 846, we have a Phase 2 proof-of-concept study in anhedonia and depression ongoing right now, which we anticipate will read out at the end of this year. Anhedonia is a significant symptom in depressed patients that is not addressed by currently available antidepressant therapies. There is huge opportunity for patients to gain treatment for their anhedonia element. It is early to say whether this could be an adjunctive treatment or have the potential to be used as a treatment as a monotherapy. The Phase 2 study looks at the anhedonia scales in patients on current antidepressant treatment. Additionally, we will look to see if there is any direct antidepressant effect on normal depression scales, the MADRS as well. Once we read out the data, we'll have a better understanding for the potential path forward.

Thank you.

We'll take our next question from Laura Chico with Wedbush Securities. Please go ahead.

Good morning. Thanks for taking the question. Just a quick one with respect to the diagnosed TD population that you're estimating. Approximately 30% of TD patients are now diagnosed. I'm wondering if you could speak to the typical duration of treatment that you're seeing among the diagnosed patients, how long are TD patients remaining on a VMAT2 inhibitor once they start? And just out of curiosity, how frequently are patients coming back to treatment? What drivers might be contributing there? Thank you.

Going into this launch, we expected that compliance with INGREZZA would be similar to other medicines these patients are taking for their underlying psychiatric illnesses, consistent with what you see with antidepressants or antipsychotics. We’ve been pleased with the persistency we're seeing post-launch, which is better than expected and continues all the way through Q4 of 2022. We don’t see a reason why that would change, and it has been indeed better than what we expected and also better than with psychiatric meds, though we haven't provided specific numbers on the actual persistency with INGREZZA. We estimate the overall patient population to be around 600,000 in the U.S. There’s some estimates larger, but there's been progress since the launch. It started with a very under-diagnosed, under-coded patient population, only a low single digit percent of people living with TD were given the diagnosis in their medical records. Now we estimate it's around 30%, and there remains meaningful opportunity for improvement, with seven out of ten living with TD yet to be diagnosed or provided an explanation for their abnormal movements.

Thank you.

We will take our next question from Anupam Rama with JPMorgan. Please go ahead.

Hi. Thanks for the question. This is actually on for Anupam. You previously mentioned that sales force pull-through is expected around Q3. What metrics are you tracking to better understand that? Thank you.

Hi. We look at both leading and lagging indicators. In our expansion of 2022, we hired experienced salespeople in neuroscience, both in psychiatry and neurology. They come in with significant experience and relationships. What they don't have is direct experience in the TD market, which takes time to learn. This sales role is different than selling an antidepressant or antipsychotic because of the disease education required across all these care settings. We help our customers recognize TD, educate them on the diagnostic criteria, and use videos to demonstrate the different presentations of TD in various patient types. They must assist customers with the diagnostic process and appreciate the differences in treatment options, emphasizing why INGREZZA is the preferred treatment. We’ve seen in the past that expansion teams take a few quarters to reach proficiency like the legacy team, and we believe the expansion of our field organization contributed to the strong growth we saw in 2022. However, there’s still upside from that expansion that we expect to see going forward.

Thank you.

We'll take our next question from Marc Goodman with SVB Securities. Please go ahead.

Good morning. Eiry, can you talk about the epilepsy data that's coming in the second half of the year and how you look at this product as a potential differentiator in the epilepsy market? And then, Matt, can you maybe help us just a little with expenses, just maybe anything unusual about how they'll be spread throughout the year and just update us on tax rate and how you're thinking about that this year and the next couple of years? Thanks.

Thanks, Marc. The epilepsy study underway right now in Phase 2 for NBI-352, a selective Nav1.6 channel antagonist, targets focal onset seizures, which are the most common seizures among different types of epilepsy. This is an adjunctive trial where patients are treated with one to four antiepileptic agents and still experience a lack of control. The endpoint for the study is based on 100 patients, measuring changes in seizure frequency over a baseline period compared to the treatment period, which lasts up to 13 weeks. The differentiation stems from NBI-352 being a selective Nav1.6 antagonist. In contrast, traditional antiepileptic therapies often have broader pharmacology and unfavorable benefit-risk profiles. Thus, we aim to evaluate whether antagonizing this essential sodium channel can provide efficacy at a lower dose without significant side effects. We are on track for data readout in the second half of this year, and depending on those results, we’ll consider the next steps if successful.

On the spending front, the only item I'd highlight is the significant concentration of spending we typically see in the first quarter due to specific items that incur then. Historically, the first quarter has a larger concentration of spending. From a tax perspective this year, I expect an effective tax rate of between 24% and 25%. Having used up all our NOLs in 2022 due to tax legislation capitalizing R&D, we will be full federal cash taxpayers in 2023. I'm still hopeful for a potential hold on capitalized R&D tax legislation, but for now, expect to pay federal cash taxes this year.

Thanks.

We will take our next question from Ash Verma with UBS. Please go ahead.

Hi. Thanks for taking my question. Congrats on the quarter. For the 568 muscarinic Phase 2 trial, you previously mentioned it's a dose-finding study. Can you share if it's a once-daily or twice-daily molecule? How much does dosing frequency matter for competitive differentiation?

Thanks for the question, Ash. We haven't shared too much detail about our program. It is indeed a dose-finding study. It started late last year and involves up to 200 patients with acute schizophrenia/acute psychosis. Enrollment is going very well, and we are eager to see both the impact of this M4 selective agonist on psychotic symptoms and the safety and tolerability profile.

And we'll take our next question from David Amsellem with Piper Sandler. Please go ahead.

Thanks. On the muscarinic portfolio, you're building the selective M4. 568 is offering the potential for an improved safety profile. How are you thinking about the value proposition of the dual M1/M4 and its role in the pipeline from a competitive perspective? Beyond schizophrenia, what are your views on muscarinic and mood disorders, say, bipolar mania, and how are you thinking about development there? Thank you.

There's a lot to unpack there. Thank you. We're very excited about the assets resulting from our collaboration with Sosei Heptares. This collaboration is one of our main strengths. M4 agonism is a validated mechanism for acute psychosis treatment, confirmed by recent Phase 2 and Phase 3 clinical trials. Beyond direct agonism, we have the pan agonist and the positive allosteric modulator, which requires the presence of acetylcholine to work effectively. It's still early to clarify differentiation around safety. Our Phase 2 trial is designed to assess initial benefit-risk, safety, and tolerability. We will have better information on differentiating these aspects once we read the data from the study. As for a broader scope with the M1/M4 dual agonist, there is significant opportunity in cognitive impairment diseases ranging from Alzheimer's to neuropsychiatric disorders facing cognitive deficits. Your point on bipolar is valid and aligns with the mechanisms involved.

I want to add that we have been conducting deep research regarding muscarinic areas for several years. Our collaboration with Sosei Heptares places us uniquely in the muscarinic space, allowing us to test hypotheses in human studies with distinct compounds: an M4 specific agonist, an M1/M4, and an M1. We’ll parse these pathways to select the right compound and mechanism for the corresponding disease.

We will take our next question from Evan Seigerman with BMO. Please go ahead.

Hi, guys. Thank you for taking my question. I'd love to know some of the puts and takes of tardive dyskinesia in the long-term care setting. This could be a significant driver given population dynamics. What is your plan for reaching these patients to providers or patients, assuming that DTC is possibly not an option here?

Thanks for your question. I agree this presents us an exciting opportunity we’ve been looking forward to for years. How do we leverage LTC? As I mentioned earlier, these facilities are essentially run by nursing staff, and the prescribers rotate through. We have to closely understand local dynamics in these facilities: who the rotating providers are and the relationship with the LTC pharmacies. Our team is building an account management approach to engage with providers, impacting a more extensive number of facilities. We perform education and in-service programs for nursing staff and the care team to help them recognize TD movements, flagging residents needing more thorough evaluations by the MDs or nurse practitioners. It’s a collaborative effort. It’s a more complex environment than outpatient clinics, akin to hospital dynamics requiring careful account management. We’re excited about the opportunity; we’re seeing solid progress in long-term care. But it remains in its infancy for us, as education and awareness of TD in this space aren’t as advanced as psychiatry and neurology. Still, we're optimistic about making strides in 2023.

And we'll take our next question from Ami Fadia with Needham. Please go ahead.

Hi. Good morning. Thanks for taking my question. Can you discuss Huntington's disease chorea? Considering the physician awareness with INGREZZA in TD, how do we think about the ramp-up of the launch in that indication? And in CAH, can you address where patients are being treated? Are there differences in how and where patients are treated in Europe and the U.S.?

I'll address the second question first, Ami. CAH patients are generally treated in expert endocrinology clinics. These clinicians know their patients well, and there are no diagnosis issues. Our global trials show treatment consistency here. With regards to the Huntington's community, we look forward to the data generated and anticipate our approval from the FDA later this year. Our existing neurology sales force provides coverage of the movement disorder community. Introducing trial data and the label to neurologists treating these patients doesn’t require a significant change in our commercial footprint. This presents another opportunity to leverage our infrastructure, and we’re excited to introduce what we believe will be a differentiated product to a population in need.

And we'll take our next question from Yatin Suneja with Guggenheim Partners. Please go ahead.

Hi guys. Thank you for taking my question, a two-part question. First, you have three major catalysts this year: focal onset, CAH data, and anhedonia. Can you articulate how you think about these three distinct catalysts? Is there one with a higher probability of success, especially with the focal onset and CAH given their mechanistic rationale? How do you think the agonist might be more sensitive in these patients? What endpoints are you looking at in Phase 2? Thank you.

Yatin, you asked a number of questions in there. We could probably spend the better part of an hour going through all of them. I look forward to conducting deeper discussions regarding each of these programs as we get closer to the data, so I’d like to keep your questions on hold until we have a better forum where we can talk about each.

We will take our next question from Sumant Kulkarni with Canaccord. Please go ahead.

Good morning. Thanks for taking my question, which pertains to expense management. Given the timing of your recent new gene therapy collaboration with Voyager, do you see your stake in Voyager as a longer-term strategic one? Does the timing of your transaction allow for tactical moves to defray some SG&A or R&D expenses related to the GBA1-associated program in the near to mid-term, especially if Novartis opts into its collaboration with Voyager in this current quarter?

Yes. From an expense management viewpoint, this was not done for expense management reasons. We don't anticipate burning through much in 2023, but it places us in a strong strategic position with an expansive gene therapy preclinical portfolio aimed at providing disease-modifying or curative medicines over the next decade. This collaboration enhances our financial flexibility, allowing us to make bigger or different investments beyond gene therapy.

Thanks.

We will take our final question from Mohit Bansal with Wells Fargo. Please go ahead.

Great. Thank you for squeezing me in. I have another question on crinecerfont. While speaking with doctors, they're excited about the profile of the drug, but believe payers might pose a challenge. What potential challenges do you foresee there given glucocorticosteroids are cheap? How can you help payers understand the profile of the drug? Is there a clinical efficacy bar that would help them make decisions?

Yes. I want to make a quick comment regarding payers: this is a disease area where we need to educate them, similar to our experience with tardive dyskinesia. The focus will be on the inadequate management of these patients. Steroids are essential for survival, yet many patients are either overtreated or undertreated, leading to disease instability. This is at the heart of the value proposition for crinecerfont: enhancing disease control while potentially lowering steroid doses. We are looking forward to the data, and we have plans to educate not just the healthcare providers and patients but also to engage with payers to clarify the overall value of crinecerfont.

I want to thank you all for your questions. A couple of final remarks here: we look forward to a very strong 2023, evidenced by our guidance for INGREZZA, and we're eager for the possibility of adding Huntington's disease to our label in August, our PDUFA date. Our goal is to be the leading neuroscience company in the world. The three data readouts we have this year—CAH, FOS, and anhedonia—cover all three areas of neuroscience. Thank you for your questions, and I look forward to connecting with you in the coming months.

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