Earnings Call Transcript - NBIX Q4 2021

Operator, Operator

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 session. Please note today's 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.

Todd Tushla, Vice President of Investor Relations

Thank you, operator. Good morning, and thanks for joining us on our fourth quarter and full year 2021 earnings call. Joining me today are 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. I'd like to remind everyone that during today's call, we will be making forward-looking statements. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to review the risk factors discussed in our latest SEC filings. After our prepared remarks, we will open the call for your questions. With that, I'll hand the call over to Kevin Gorman.

Kevin Gorman, CEO

Thank you, Todd. Good morning. Today, we want to look back at a challenging 2021 and the lessons we learned and the progress we made. We will also be looking forward to 2022, a year that we believe will set us up for tremendous growth for the next several years. 2021 was bracketed in Q1 and Q4 by rising infections, office closures, and significant staffing shortages that constrained our efforts. However, we did make progress identifying many new healthcare professional customers and how to effectively work with them in a very challenging and changing environment. Eric will go into this in more detail in a moment. Turning our attention to the future, the items that we released this morning are founded on the lower end by a continuing unpredictable epidemic that ebbs and flows. The upper end is less constrained by COVID, anticipates reopening of clinics with sufficient staff, the impact in the second half of the year, and an expanded sales force more focused on specific points of care than previously. We believe these internal and external events will allow us to bring investors to many more patients who are needlessly suffering from TD and will lead to significant growth both this year and beyond. We have made a good start in addressing this market, and we will now reaccelerate growth. Concurrent with our commercial efforts, we have developed a neuroscience portfolio second to none. We had 12 Phase 2/3 programs addressing diseases and disorders in neurology, neuropsychiatry, and neuroendocrinology. We acknowledge the historical challenge of developing medicines in these diseases. We have designed this pipeline with multiple compounds, each having a different mechanism to treat a specific disease, such as the way we are approaching schizophrenia and the way we're approaching major depression. But on the flip side, we are developing other compounds where each one of these can address multiple diseases. By attacking diseases from these two fronts, we believe we will be successful in addressing otherwise tractable diseases and disorders. Over the next 18 months, this pipeline will have a number of significant readouts, and Eiry will go into these in more detail. At this time, I'd like to turn it over to Matt.

Matt Abernethy, CFO

Thanks, Kevin, and good morning. Since we preannounced Q4 INGREZZA sales in early January, I'm going to focus my remarks on our 2022 sales and operating expense guidance. 2022 INGREZZA net sales guidance range is $1.25 billion to $1.35 billion, reflecting our latest thinking considering current trends, environmental factors, and our ongoing business initiatives. This is our first time providing annual sales guidance, and we aim to be as transparent as possible with better assumptions. Our assumptions follow a few primary categories. The first relates to the external environment. Though this impact on our business is clear, as COVID cases go up, psychiatric patient visits decline, with a higher mix of visits going virtual. This combination directly impacts TD diagnosis and ultimately treatment rates. The good news is that COVID cases are starting to decline, and we expect site patient visits to increase throughout 2022, leading to a tailwind for INGREZZA in the second half of the year. However, it is difficult to predict how the impact of COVID will transpire. The second bucket relates to the benefits we expect from our commercial initiatives, specifically, our direct-to-consumer advertising campaign and sales force expansion, which is on track to be fully in place next month. We anticipate these initiatives will help accelerate diagnosis and treatment rates. On the payer front, access to net and revenue per script are expected to remain consistent with 2021. We assume sales seasonality to be very similar to previous years, with Q1 having the most disruption due to the typical gross-to-net dynamics and the impact on refill rates due to the reauthorization process. Now to our operating expense investment, our 2022 GAAP operating range is $1.1 billion to $1.15 billion, with investments focused on accelerating INGREZZA growth and advancing our many R&D programs. Our SG&A investments primarily reflect a $100 million increased spend in the sales force expansion and DTC. In addition, our R&D operating expense reflects advancing 12 mid- to late-stage programs in the plan and also our recently completed in-licensing of an M4 agonist from Sosei Heptares. Our strong balance sheet, durable cash flow, and P&L profile allow us the flexibility to execute our capital allocation priorities, investing in growing INGREZZA and advancing our important clinical programs to discover new innovative therapies for people who deserve better. Now, over to Eric Benevich.

Eric Benevich, CFO

Thank you, Matt. Before I begin, I want to acknowledge our commercial and medical affairs teams. Throughout last year's challenging external environment, your unwavering dedication and commitment made a meaningful difference to many thousands of patients who otherwise would have continued to needlessly suffer from TD. INGREZZA's Q4 performance marked our third straight quarter of sequential growth during the pandemic era. Total prescriptions grew 8% sequentially and grew 32% versus the prior year. While it was good to see that kind of growth, as Kevin said, we strive to improve while managing through several issues both in and out of our control. First, in Q4, changes to our distribution network were implemented. As anticipated, we saw a modest shift in strips going from some of our specialty pharmacies to CVS and Walgreens retail outlets. Recall, we expanded the distribution network in order to provide even greater ease of access to INGREZZA for patients and their healthcare providers. The transferring of prescriptions back and forth across our pharmacy network likely led to delayed prescription builds for some of those patients. Second, while difficult to ascertain how much of an impact the Delta variant and then the Omicron variant had on TRx and Intrax volume, we know the rising cases significantly impacted our customers and interfered with patient care. Staff shortages and turnover in offices, clinics, and pharmacies likely contributed to an uptick in cycle time from prescription referral to prescription sales. Our persistence and compliance remain strong, consistent with prior quarters, helping us to maintain momentum going into the New Year. All in all, despite a worsening external environment brought on by the surging Omicron variant, particularly in the second half of Q4, we estimate TD diagnosis rates have now grown to around 25% of the TD population. This is over 56,000 total prescriptions in Q4, a record level. INGREZZA continues to be the number one most prescribed treatment for tardive dyskinesia. Shifting to this year. We provided the 2022 guidance range for INGREZZA and are now over a month into the year. So what have we seen? The external environment is slowly improving, but no one is out of the woods yet. We've been encouraged by early signals and are cautiously optimistic that access to our key customers will trend positively as the external environment continues to improve. Internally, the onboarding effort of our sales force expansion is well underway. The newly expanded 350-plus strong sales force, with dedicated teams across psychiatry, neurology, and long-term care will be fully deployed at the end of this quarter. In addition, we plan to run our ongoing TD Spotlight-branded direct-to-consumer campaign throughout 2022. With improving market fundamentals and strong conviction in the commercial investments we are making for INGREZZA, the stage is set for accelerated growth in 2022 and for years to come. While we continue to receive positive feedback from patients and neurologists regarding ONGENTYS, you should not expect a great acceleration in 2022 sales, as ONGENTYS remains a non-formulary medication on most Medicare Part D plans. I reiterate, ONGENTYS opens doors to neurology practices and gives our team more time with prescribers to highlight ONGENTYS and INGREZZA. Furthermore, we strongly believe that having a dedicated neurology team will benefit both products, especially with movement disorder specialists. So with that, I'll turn the call over now to my colleague, Dr. Eiry Roberts, for an update on our pipeline.

Dr. Eiry Roberts, Chief Medical Officer

Thank you, Eric, and good morning to everyone on the call. Over the last 12 months, we have made tremendous progress across all of research and development. We have advanced a novel and diverse pipeline of 12 mid- to late-stage clinical programs, each of which has the potential to be first-in-class or best-in-class medicines. 2021 was, in many ways, a foundational year for Neurocrine R&D with the stage now set for a year of unprecedented investment and execution to advance this pipeline, with the goal of submitting the supplemental new drug application for valbenazine in Huntington's disease, initiating a Phase 2 study in schizophrenia for NBI-568, the selective M4 orthosteric agonist recently acquired through our partnership with Heptares, and delivering a significant number of registrational and Phase 2 data readouts over the next 24 months. I'll spend the balance of my prepared remarks on a brief status update across these pipeline programs, beginning with valbenazine. In the second half of 2022, we plan to submit the sNDA to the FDA for the treatment of chorea associated with Huntington's disease. We were extremely pleased with the safety and efficacy results achieved in the KINECT-HD study. These data, together with six-month follow-up data from the KINECT-HD2 study, form the basis of our sNDA submission. Continuing with valbenazine, we recently initiated registration studies for the adjunctive treatment of schizophrenia and for dyskinetic cerebral palsy. We anticipate top-line data from these recently initiated studies in 2023. Moving to NBI-104, the selective T-type calcium channel antagonist in licensed from Idorsia, we expect top-line data from two Phase 2 studies for NBI-104 this year. Somewhere around midyear, we anticipate delivering proof-of-concept data in essential tremor. Following that, in the second half of the year, we anticipate completing our ongoing trial in epilepsy with continuous spike and wave during sleep. Based on a review of the data generated for NBI-104, we will determine potential next steps for each of these indications. Shifting gears now to the psychiatry portfolio of assets in-licensed from Takeda Pharmaceuticals, we have initiated Phase 2 studies with all three lead programs, including Luvadaxistat in cognitive impairment associated with schizophrenia, NBI-845 for inadequate response in major depressive disorder and NBI-846 in Anhedonia in major depressive disorder. Top-line data for 845 and 846 are anticipated in 2023, staying within psychiatry and the lead muscarinic agonist in our collaboration with Sosei Heptares, NBI-568. This molecule is a highly selective orthosteric agonist aiming for the potential to be a best-in-class molecule against this target. We aimed to initiate a Phase 2 study of 568 in North America for the treatment of schizophrenia this year. Finally, with respect to our neuroendocrinology portfolio, we remain on track to read our top-line data for the registrational study of Crinecerfont in both the adult and pediatric patient populations in 2023. To close, we have built a strong R&D pipeline that has the potential to dramatically change lives for patients. Our focus now is on the effective delivery of this pipeline while also continuing to add innovative candidates via internal drug discovery and strategic business development, where we believe those efforts can serve the needs of our patients. I want to thank everyone at Neurocrine, our external partners, clinicians, and patients who support us in our ultimate mission to bring medicines to patients who need better treatment options. I'll now hand the call back to Kevin. Thank you, Kevin.

Kevin Gorman, CEO

Thank you, Eiry. That concludes our prepared remarks, and we are ready to open it up for questions.

Operator, Operator

We'll move first to Phil Nadeau with Cowen. Please go ahead.

Phil Nadeau, Analyst

A question on essential tremor. Can you give us some sense of what would be proof of concept for you and what would warrant further development?

Dr. Eiry Roberts, Chief Medical Officer

Thanks very much, Phil. Yes, certainly, as you know, we have a proof-of-concept study ongoing, which is a 28 patient crossover study. We have several endpoints in that study. The primary endpoint actually looks at tremor amplitude and is measured by an accelerometer. But we also have the TETRA measures in that patient population of moderate to severely impacted tremor patients. I think we'll be looking at the data in totality. Obviously, we'll be interested in seeing a statistically significant difference in the crossover design. But beyond that, we'll be looking at the data in totality, including also a CGI assessment as well. And then with those data in hand sometime around the middle of this year, we'll be considering our next steps that were successful in that regard.

Operator, Operator

And move next to Paul Matteis with Stifel. Please go ahead.

Paul Matteis, Analyst

On your INGREZZA guidance, I was wondering if you could kind of frame for us at the low midpoint and high end how demand growth in those different scenarios compares to what you were seeing before the COVID pandemic?

Kevin Gorman, CEO

Thanks Paul. As you look back before the pandemic, we had a nice growth trajectory of, call it, a couple of hundred million a year. So when you think about a 20% midpoint growth, it pretty much puts you back on track with how you have been performing prior to the pandemic. I think the two biggest items that I'd point to as it relates to the guidance range, one, the environment, as the environment cooperates, patients going back into the office and access to customers is greater. You would expect us to fall higher on the range. If the pandemic continues to have significant pressure, that would, of course, put you closer to the bottom end of the range and impacting overall demand. The second piece is then on the business initiative side, we're well underway on our sales force expansion that we expect to complete by the end of this quarter, which will benefit us in the second half of the year. We're optimistic with what we've been seeing recently, and with the case counts going down, we are looking forward to a nice year, another nice growth year for INGREZZA.

Operator, Operator

And we'll move next to Tazeen Ahmad from Bank of America. Please go ahead.

Tazeen Ahmad, Analyst

Just a point of clarification. Is your guidance with or without the impact from inventory stocking for INGREZZA? And then how much of your upper end of guidance is based on the potential for psychiatrists to continue to be reimbursed for their televisits at the same level as in person, let's say, for the rest of the year? And if there is a place for upside, would it be that particular variable? Or is there something else?

Kevin Gorman, CEO

I'll take the second part of your question first. And that is that within our full range of guidance, we anticipate that there will be no changes to telehealth throughout the entire year. Matt, do you want to take that?

Matt Abernethy, CFO

Yes. And that's on the reimbursement front. We, of course, would expect as the clinics open up from the COVID shutdown that there would be a higher mix of patients seen in person. But from a reimbursement perspective, our current census policy is likely not going to be changed this year. On the inventory front, my strong desire is to get rid of talking about inventory fluctuations quarter-to-quarter. Usually, within a year, it nets out. I would say that our guide really reflects underlying demand for INGREZZA sales. We, of course, will be continuing to update our guide at the end of each quarter, which will take into account any learnings or thinking around inventory.

Kevin Gorman, CEO

And the only other thing I would add to that is to reiterate what Matt said over a year's period of time, any inventory fluctuations net out. As we've seen over multiple quarters, the amount of inventory that's carried on rest is actually very small compared to sales.

Operator, Operator

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

Brian Abrahams, Analyst

Congrats on all the progress in an otherwise challenging year. Question on commercial investment; it sounds like investments are going to start to pull through from the expanded sales force as the year progresses. I guess I'm curious in the medium term as we exit the year, what's the right way to think about the returns that you're hoping to get there? How do the incremental dollars put towards these additional segments are going to pursue like long-term care translate to revenue compared to the current areas you're in? I'm also curious how much intrinsic growth is left in your current target areas as well beyond just the reopening benefits?

Kevin Gorman, CEO

So I think the way to think about it is that with the expansion and the reorganization of our field sales team, we are essentially going deeper into existing segments. For example, the build-out of a dedicated neurology team allows us to reach more neurologists and to see them more frequently than we've been able to do thus far in the commercial ramp. With the build-out of an LTC team, essentially, it's going into a care segment that we were always interested in from the get-go, but didn't really have the wherewithal to really put a dedicated focus against. One way to think about LTC is essentially a psychiatry space. There are providers that practice in both psychiatry clinics as well as going into residential care facilities. Essentially, this is a logical next step for us. This is obviously an expansion of our field sales team that's allowing us to tackle and reach more providers. At the same time, it's allowing us to go deeper within the existing base of providers. I think it's really a function of where we are in the commercial ramp for INGREZZA about five years now. There's certainly more prescribers than what we had in the early phase of the launch, and certainly, more high-value potential prescribers that we identified.

Operator, Operator

We'll move next to Anupam Rama with JPMorgan. Please go ahead.

Anupam Rama, Analyst

I was wondering if we could dig in a little bit into 1Q dynamics specifically. I think at the conference, you talked about 5,300 per script, which is in line with 4Q. But is there any other color you would want to provide on 1Q specifically? I think previously, you've given a little bit more color and guidance on 1Q, just kind of worried about numbers going all over the place.

Matt Abernethy, CFO

Yes. Thanks, Anupam. As you said, Q1 always has some dynamics. The gross to net discount, you have patients going through a reauthorization process that ultimately layers for fill and results in a lower refill rate per patient than the first quarter. Yes, it is always a bit noisy from a seasonality perspective. Typically, you see Q4 to Q1 a bit of a pullback in Q1 because of the net revenue per script going down and also the slight impact on the refill rate per patient. Then you see a nice recovery in Q2 and throughout the year. Since we're providing an annual guide, we're going to get out of some of the specificity that we've historically provided within a quarter. But of course, as we exit Q1, we'll be taking into account our performance in Q1, what we're seeing, and we'll modify our guide accordingly. But as we've historically said, Q1 is Q1. The goal in Q1 is to ensure that patients stay on medication, which ultimately sets us up for a strong rest of the year.

Kevin Gorman, CEO

Yes. I'll chime in here and just add that, obviously, with the surge in the Omicron variant in late Q4 and early Q1, it presented additional challenges for us to deal with. That affected our customers with a lot of clinics having staff shortages, providers falling ill, and so on. It affected a good chunk of our sales team as well with several team members needing to quarantine. The good news is that things appear to be getting better. We're cautiously optimistic that we're seeing an improving external environment, which certainly benefits our business.

Matt Abernethy, CFO

The only thing I would add to that, Anupam, is that the commercial team put a lot of prepositioned efforts in place starting actually in Q4 in order to help with what we said was looking like it was going to be a very challenging Q1. I think those efforts are going to come to fruition. Like Eric said, the best way to put it is we're cautiously optimistic and improving environment can only help.

Operator, Operator

And we'll move next to Carter Gould with Barclays. Please go ahead.

Carter Gould, Analyst

Great. Maybe one for Eiry. Just as we think about coming back to 104, think about read-through from the essential tremor study to the epilepsy data later in the year, are there specific data that will come out of the ET study that might have some positive read-through or de-risk the ET study? Furthermore, you guys have always talked about more broadly the potential for additional indications. Are there specific signals that the ET study might provide that could be insightful as you think about future indications?

Dr. Eiry Roberts, Chief Medical Officer

Yes. Thanks very much. So we know that the calcium channel, the T-type calcium channels impacted by 104 are well represented within that tremor network. That tremor network also directly links to epilepsy from a mechanistic perspective. So in terms of information that we're able to generate from the ET study, I think it is helpful in understanding the pharmacodynamic effect of medication and some of the dose-related issues in using 104. In addition, we will get initial tolerability information in a patient population from the ET study that is in some way relevant to our CSWS study, but it's a very different population. If you think about CSWS, it's a rare pediatric epileptic encephalopathy. The patients in that study will be age two upwards. Hence, it is different from the ET population, which is a significantly older adult population. In general, we will be looking at the totality of both the efficacy data from the ET profile and the initial safety and tolerability. We won't have to wait very long to understand the actual signal in the CSWS space anyway, as we will read out the data from that 24-patient Phase 2 study in CSWS in the latter part of the year as well.

Operator, Operator

We'll move next to Neena Bitritto-Garg of Citi. Please go ahead.

Neena Bitritto-Garg, Analyst

Just going back to INGREZZA guidance. I'm just wondering if you can give us a sense of how you're thinking about the proportion of in-person patient visits versus telehealth at the low, midpoint and high end of the range? And whether the CMS decision that you've talked about previously on having patients seeing psychiatrists having their first visit in person and then every year after that is likely to be a 2022 or more likely a 2023 event.

Eric Benevich, CFO

Yes. The way that we're thinking about telehealth is that certainly, it impacts different portions of our business differently. It's utilized quite a bit and has been utilized at a high rate within psychiatry. The latest data that we've seen is that it's still about half of all patient visits are virtual in psychiatry, whereas in neurology, it's less than 10%. Frankly, it's returned to pretty close to what it was pre-COVID. Telehealth is utilized to a much lesser degree in LTC, for example. Our expectation is that even after the public health emergency is lifted, there will be significant utilization of telehealth in psychiatry, and we've baked that into our planning and our assumptions. The second part of your question was around some of the guardrails being proposed, such as having a first visit requirement be in person and at least one in-person visit for subsequent telehealth visits to be reimbursed. We're certainly supportive of making sure that patients have the opportunity to see their providers in person. We recognize the value that telehealth provides in certain circumstances, but want to make sure that there are guardrails in place going forward. We'll see how things shake out, but for the duration of 2022, our expectation is status quo.

Operator, Operator

We'll move next to Brian Skorney with Baird. Please go ahead.

Brian Skorney, Analyst

This is Lou Kermann on for Brian. Could you just discuss a bit your expectations for how an approval in chorea in Huntington's disease could impact INGREZZA's growth rate? And do you expect the sequencing of uptake in that indication to be more front-loaded or for a gradual pace?

Eric Benevich, CFO

Yes. First of all, I want to emphasize that we need to finish the open-label study and get the sNDA submitted. Assuming that we're successful and we get a label expansion in 2023, we're very excited about the opportunity to bring INGREZZA to a new patient population, those patients with Huntington's that are experiencing chorea. The way to think about it is that it's all incremental to our business. We're not giving any of those Huntington patients now. The health plans, because this is a specialty product and it's a prior authorization process, are approving INGREZZA for TD but not for other uses. We look forward to the opportunity to expand the label. The second part of your question pertained to whether this would be front-loaded or a more gradual ramp. We can provide more color when we get further down the road and have a sense of what the labeling is going to look like. I will say that we view the patient opportunity within Huntington's chorea as a group of patients that have unmet medical needs. Only about 20% of the patients with Huntington's chorea are currently treated with a VMAT2 inhibitor. There is an opportunity for a differentiated product like INGREZZA to come in and potentially benefit many thousands more patients with Huntington chorea. Stay tuned for more as we make progress in pursuing that label expansion.

Kevin Gorman, CEO

The only thing I would add to that is that having a dedicated neurology sales force now with INGREZZA will help with that update, and they can start focusing their efforts on treating these TD patient bases at the time of approval.

Operator, Operator

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

Myles Minter, Analyst

Just back on the channel inventory for INGREZZA. What's the new sort of steady state that you'd be expecting moving forward with your growth projections? I think I've heard around the $10 million number, but that seems to have been creeping over time. So just wondering what the new set point is there for your inventory?

Matt Abernethy, CFO

Myles, could you clarify you're asking about what typical inventory stocking levels would be for?

Myles Minter, Analyst

Yes. And also your projections moving forward concerning your anticipated growth rates, is that going to change over time?

Kevin Gorman, CEO

Yes. No, I think from a we look at it from a days on hand perspective, which would take into account any of our volume growth you typically, in our channels, see two to three weeks of inventory on hand. As you mentioned, that have grown from, call it, two weeks to about three weeks, and we're somewhere in between there right now. Our goal is we don't influence channel stocking; we really are somewhat hands off with our distributors for a variety of reasons. But I think a two- to three-week days on hand is what you should expect. It's become, as Kevin said earlier, a less meaningful number quarter-to-quarter. Of course, if there's some major fluctuations, we'll be transparent as always. But as you think about the annual guide, it should net out for the most part throughout the year from a days on hand perspective.

Operator, Operator

And we'll move next to Joshua Schimmer with Evercore. Please go ahead.

Joshua Schimmer, Analyst

Are you planning additional business activities this year? And what is your appetite for larger deals? And then, Matt, you just indicated you're hands off with distributors with respect to inventory for a variety of reasons. Can you share what some of those reasons are?

Matt Abernethy, CFO

Yes. One of the reasons is just for purposes of causing them to have volatility in our sales performance. I think there are some practices that really incentivize stocking, whether giving incremental discounts or whatnot. They have a target number, and we just don't want to be in a place where we're overly influencing our sales results. We try to talk more towards underlying demand, which is why we've always provided TRx. I would just say that one of the primary reasons is to discourage speculative buying.

Kevin Gorman, CEO

As far as business development, I'll turn that over to Kyle Gano, our Chief of Business Development.

Kyle Gano, Chief Business Development Officer

On the BD side of things, just to recap kind of our priorities here at obviously, we are investing heavily in INGREZZA and valbenazine, and broadly would be at two franchises, and second to that, the pipeline and business development. We are still looking and active, looking to bring things into the pipeline if they make sense. I think from our mid- to long-term objectives, we continuously assess all types of opportunities ranging from traditional licensing deals and co-operations on things that are more strategic. If we can find things that make sense and work for us to look at bringing those in, I think you've seen that been over the past few years in the pipeline currently with the assets we have in late-stage development.

Kevin Gorman, CEO

We did not constrain ourselves.

Operator, Operator

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

David Amsellem, Analyst

So regarding the long-term care opportunity, you talked about this being a new opportunity, and I may have missed this. Can you just talk about what portion of the TD market is long-term care based? And how you should think about how we should think about underlying, not just volume potential here, but even sales potential to the extent that you can quantify that?

Eric Benevich, CFO

We haven't given any guidance specifically around what the sales expectations are for long-term care. The way to think about it is that long-term care really represents a few different types of residential care facilities that treat residents or patients with antipsychotics and dopamine-blocking drugs that cause TD. This would include geriatric nursing homes, facilities that treat patients with intellectual or developmental disorders, and assisted living facilities for those with behavioral health conditions. Ultimately, if you look at that roll-up, that represents several million people across the U.S. that are in those facilities. At any given time, you could expect somewhere between 15% and 30% of those individuals to be on antipsychotics, and obviously, a subset of them have TD. Where it shakes out in terms of the size of the addressable patient population with TD in LTC versus the overall TD prevalent population remains to be seen. But we feel like and believe based on the early experience we have in that space that it's a significant incremental opportunity, a segment that we are interested in going into early in the launch. We’re just getting our team hired and trained, and will be deployed as we exit Q1. For the next couple of quarters, we will aim to characterize that opportunity and set ourselves up for success as we exit 2022 and get into 2023.

Operator, Operator

Our next question is from Jay Olson with Oppenheimer. Please go ahead.

Jay Olson, Analyst

Congrats on all the progress. Since the total addressable TD market in the U.S. is now 600,000 patients, could you comment on how fast that population is growing? And with the 25% of patients diagnosed, can you talk about your goal for the ultimate level of TD diagnosis as you continue your education and awareness initiatives?

Eric Benevich, CFO

Yes. Our estimate is around 600,000 people in the U.S. with tardive dyskinesia, and that's based on a meta-analysis of the literature as well as looking at claims data, etc. We periodically reassess this. This is a growing population, and it is a function of the rapid growth of the use of antipsychotics, especially in non-psychotic conditions. If you think about it, antipsychotics are widely used to treat adjunctive treatments in schizophrenia; they are used in bipolar; they're used to treat anxiety. There are a number of off-label uses of antipsychotics. We have seen that over time, as the use of antipsychotics expands, unfortunately, so does the population with TD. We will continue to reassess the size of the population, and importantly, the progress we're making in diagnosing and helping those patients get diagnosed. At the beginning of our launch back in 2017, we estimated that single-digit percent of those individuals were diagnosed. Today, we estimate that about a quarter have been diagnosed. Only about half of patients that get a diagnosis today are even offered a VMAT2 inhibitor. There is a long way to go in terms of bridging the gap between the diagnosed population and the prevalent population, and ensuring that everyone diagnosed is offered effective treatment. To your question about the goal, realistically, we know that not everyone that has a disease will get diagnosed. But we can get a lot higher in the coming years in making sure that TD is routinely screened and diagnosed, regardless of care setting. We are leveraging the APA guidelines to reinforce this expectation and standard of care for these patients with psychiatric conditions being treated with antipsychotic medicines.

Operator, Operator

And we'll move next to Vamil Divan with Mizuho Securities. Please go ahead.

Vamil Divan, Analyst

Great. Maybe one just quick follow-up on the last question. I think you said it's a growing population. I don't know if maybe you could quantify that a little bit for us, just kind of how you see the overall TD market growth. But my question is like you on opicapone. I know there are a lot of synergies for that product and having a rep selling that along with INGREZZA. I'm just curious if you can give us a little better sense of when you think you may be able to get better commercial access and when you think you might see someone sort of be delivering more sales. I mean I'm looking at consensus numbers that do look like people are assuming a couple of hundred million in sales for that product alone out of several years from now. I'm just trying to get a sense of if you think that's realistic. Or should we think of that as a smaller opportunity as more of the synergies, again, what we just see the value.

Eric Benevich, CFO

Yes. Let me address your question about the growing population in TD and then I'll tackle your question about ONGENTYS. So the reason I said that it's a growing population is that the use of antipsychotics continues to expand. There have been 70 million prescriptions of antipsychotics over the past year. The continued expansion of uses for antipsychotics especially in this pandemic environment where more and more people are being treated for mental health disorders. Even though second-generation antipsychotics tend to have a lower incidence of TD, the greatly expanded use of antipsychotics is leading to a growing TD patient population over time. That's something we will continue to monitor and update our estimates. You might recall that five years ago, our estimate was around 500,000 people with TD. Today, we estimate it's closer to 600,000. Regarding ONGENTYS, I made a point in my prepared remarks that we shouldn't expect a great acceleration in the sales of ONGENTYS in 2022, primarily because for the majority of Medicare Part D plans, it remains a non-formulary product. That is a dynamic seen across all branded anti-Parkinson's medicines, especially within Medicare plans; they tend to treat branded medicines as non-formulary products. We will continue to help our customers to get access through the formulary exceptions process. The other thing I'll say is that we believe that having a dedicated neurology sales team will benefit ONGENTYS. As I mentioned earlier, this allows us to reach more neurologists and see our highest-value customers more frequently, benefiting ONGENTYS and of course INGREZZA in tardive dyskinesia.

Kevin Gorman, CEO

We'll take our next question from Marc Goodman with SBC Leerink. Please go ahead.

Marc Goodman, Analyst

Eiry, can you talk about why you like the selective M4 agonist? Just in the context, we have different companies pursuing M1 or M1, M4. I'm curious why you like this one? Maybe could you just clarify the comments on the press release about taxes and just so we understand what will be the tax on the income statement versus the actual cash taxes and when these NOLs are going to run off and just how we should think about tax rate going forward?

Dr. Eiry Roberts, Chief Medical Officer

Yes, certainly. We're very excited about the opportunity that we have through our in-licensing for the selective M4 agonist. Yes, you're correct. There are two modules in this space that have at least in part validated clinically the M4 mechanism in the treatment of psychosis and schizophrenia. The reason we like the molecule that we were able to acquire here is that this is a selective direct agonist of M4, which gives us a benefit in several ways. First, because it's not an allosteric modulator, which is one of the competitive small space mechanisms, it doesn't require the substrate acetylcholine to be effective in the brain in treating patients. Certainly, in many indications we might pursue with our muscarinic portfolio, this is a deficit of acetylcholine in those patient populations. The likelihood of having an effective medication that requires the presence of that substrate is in question, I would say. With the direct agonist approach, we believe we have the potential to be best in class against this target. We will be starting a clinical study in Phase 2 within schizophrenia to understand that better later this year.

Matt Abernethy, CFO

On the tax front, it's always noisy when you have low book income, and your permanent items will drive different volatility in your effective tax rate. The midterm guide I've previously provided is around 24% would be the effective tax rate when everything normalizes. On a cash tax basis, our expectation is we'll burn through the remainder of the NOLs this year. A big portion of that is just the tax legislation change that causes you to have to capitalize your R&D, which then gets taken as a deduction over time now. Hopefully, that legislation does change. I would say that this will cause us to burn through the remainder of our NOLs this year and put us in a position where we'll be paying federal cash tax here later this year, but it will be somewhat minimal. I would say for this year, the guide gives you a 4% to 5% of income cash tax for state and a little bit on the federal side. Next year will more than likely be a full cash taxpayer that would be somewhat equivalent to our effective tax rate.

Operator, Operator

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

Charles Duncan, Analyst

Yes. Kevin and team, congrats on weathering the challenges of '21. I had two quick questions, one for Eric, one for Eiry. Eric, the question is related to the new sales force deployment; you said really in the field this month, but I guess by the end of the quarter. I'm wondering if you could give us a sense of the key metrics beyond revenue that you would look to gauge that investment? For Eiry, I'm wondering about 104, essential tremor versus CSWS, very different patient populations. Could you provide color on the endpoints you're looking at for those proof-of-concept studies? Which ones have more predictive value for clinical success over time?

Eric Benevich, CFO

With regards to the new sales team members, we will be looking at what I'll call leading indicators as we get out of the gate and certainly looking to learn as we go and make adjustments going into the year. The kind of leading indicators that I'm talking about really relate to how quickly the new team members can become effective in their roles. Everyone we're hiring has considerable experience in psychiatry and neurology, with an average of about 15 years of sales experience. However, they haven't sold TD medication before or sold INGREZZA. There is a bit of a learning curve. Some things we look at include how able they are to get in front of their key customers, the ability to leverage resources like peer-to-peer programs, sampling, lunchtime in-service programs, etc. Ultimately, we will track effectiveness in terms of generating new patient starts as a key component. There has been a lot of work happening as we've been hiring and training our new team members to help them get off to a start, warm handoffs of existing customer relationships, doing right along in the field, and so on. We're really excited about having an expanded field sales team and very optimistic about the impact it will have, especially in the second half of the year. Stay tuned for more as we get further into it.

Dr. Eiry Roberts, Chief Medical Officer

Okay. So on 104, the first one I would say is that these are both Phase 2 trials, one in ET and one CSWS. They're both adequately powered to be able to detect a signal against the primary entities trial. The primary endpoint in each trial, whether it's the amplitude in the ET trial or the EEG endpoint in CSWS, although they are not the clinical aspect themselves, they are very helpful and informative with respect to the clinical impact that the medication could likely have. We do have the clinical endpoints themselves included in both trials. However, we built relatively short-term treatment trials. Whilst we'll get an indication from these initial Phase 2 trials regarding the clinical impact of the medication beyond the primary endpoint, I think it would obviously require larger scale registration to validate that.

Operator, Operator

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

Chris Shibutani, Analyst

Two questions. Eiry, if I could press you a little further on 104, maybe talk about what your expectations are for the placebo response in the essential tremor study. Others have observed a very large placebo effect. Can you quantify what you think would be the bar to hit in terms of treatment response, either perhaps in terms of the percent of patients responding or percent decrease in tremor amplitude? A second question for Matt. I appreciate the first time annual guidance. If I think back to 2021, granted an unusual period, you helped us with fairly specific guidance on revenue from a quarterly basis. As you have not provided commentary specifically beyond the general seasonality that this experience has, should we interpret this to mean that you're comfortable with where consensus currently is in terms of thinking about INGREZZA revenues as we progress, particularly in the first quarter?

Dr. Eiry Roberts, Chief Medical Officer

Okay. The 104 question. Obviously, there are two trials. In CSWS, that is an EEG endpoint in a very severely impacted patient population. We would anticipate the placebo response on EEG to be low. I haven't studied them to any great extent in that population; however, for treatments that have looked at that EEG endpoint, such as steroid treatment is material treatment, I think the placebo response we anticipate is low. In essential tremors, it's highly variable, as you said. We have designed this study to mitigate against the placebo response. It's a single-site study, a crossover design that allows us to look within a subject. We have done everything in our power to mitigate that response. With Eric's statement, we'll be able to look at the totality of data when we get it.

Matt Abernethy, CFO

Yes. As I said earlier, Chris, we feel comfortable with the ranges we provided. When you look back, there's this normal seasonality of sales being in the low 20% type range for Q1, reflecting somewhat of a pullback from Q4 to Q1. A nice recovery into Q2 is observed typically. The biggest dynamic outside of the environment is how effective we are at keeping patients on treatment and how quickly they get through the reauthorization process. As Kevin and Eric mentioned earlier, we are working hard to improve in that regard. There will be a desire for more specifics on Q1, but the dynamics are clear; these are hard to predict. The gross to net front, just a clarification, and I think Anupam raised it, we would expect our net revenue per script to be around $5,300 in Q1, and then it will improve through the year as the gross to net discount wanes coming out of the donut hole. On average, we expect our net revenue per script to be around $5,400, which is similar to 2021.

Operator, Operator

And we'll move next to Evan Seigerman with BMO Capital Markets. Please go ahead.

Evan Seigerman, Analyst

This is not the first time you've made a discrete investment in the commercial effort of the organization for INGREZZA. Can you remind us what the ROI was on the prior investment? What do you hope to drive from this $100 million incremental investment? Are there any specific metrics you're looking at here?

Eric Benevich, CFO

Yes. As you've noted, it's not the first investment. It's likely not the last as we move forward with a very long lifecycle for this product. As a reminder, we launched in 2015 with an initial salesforce of about 140 territories. We quickly learned we needed to expand the field salesforce because of the rapid update we observed exceeded our early expectations. The team in place for the last several years has been over 200 territories covering both neurology and psychiatry. As previously disclosed, with the development of the market, the fact that we've made progress in raising the diagnosis rate and the larger number of prescribers of INGREZZA has prompted us to reorganize and expand our sales team. It should accelerate growth for the brand, and aid people in getting diagnosed and treated sooner. Our aspiration is to not allow any patient to suffer needlessly with TD. Indicators will vary as we make progress, but certainly, we'll provide insights on growth sources as we move forward.

Operator, Operator

And we'll take our last question from Jeff Hung with Morgan Stanley. Please go ahead.

Jeff Hung, Analyst

For Eiry, if I could ask a little bit more on 104. I know you said that you would look at the totality of the data on essential tremors and you need to look beyond the primary endpoint. But what kind of change in amplitude of the peak frequency of the postural tremor would be clinically meaningful in this patient population?

Dr. Eiry Roberts, Chief Medical Officer

I think I'm not able to answer that precisely. I don't think there's been a correlation or enough work that if you think about this deal, there's nothing approved for the treatment since the 1970s. The only effective treatment is off-label medications that are used. We are conducting this study focused on what we believe is a well-controlled and appropriate endpoint to assess tremor frequency. We'll also be looking at the TETRA ratings, which is a more clinically relevant assessment that includes daily living activities. For this proof-of-concept study, our aim is to assess the totality of the data, not to forget the initial safety and tolerability that is crucial for a successful treatment.

Kevin Gorman, CEO

I would now like to turn the call back to Kevin Gorman for any closing remarks. Thank you very much, and thank you, everyone, for your attention this morning. As you've seen and heard today, we have quite a busy year ahead of us. What I'm looking forward to this year is returning INGREZZA to pre-pandemic growth levels. I think that's very important, and I'm confident that we'll be able to do that. I also look at a very robust pipeline with 12 Phase 2 and Phase 3 programs. They will yield multiple milestones, both this year and next year. When we look specifically at this year, we've talked about NBI-104 yielding data in both essential tremor and CSWS. We're also looking forward to submitting the Huntington's disease sNDA. We are committed to finishing enrollment in both the adult and pediatric CAH studies, then getting the submission ready for those two NDAs. So a busy year, and as I said, the following year is going to present even more milestones. Once again, I thank you very much for your attention today, and we're really looking forward to meeting with all of you in person throughout the year. Take care.

Operator, Operator

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

Dr. Eiry Roberts, Chief Medical Officer

Goodbye.